LONDON Nov 15 Sixteen of the world's top banks
are backing a new interest rate swap clearing service from
Deutsche Boerse in an early show of support for a move by the
German exchange to tap derivatives reform.
The Frankfurt-based exchange said on Thursday 10
banks including Barclays, Credit Suisse, JP
Morgan and the Royal Bank of Scotland began using
the service, called Eurex Clearing, after its launch on Tuesday.
The exchange said a further six banks, including Goldman
Sachs, Morgan Stanley and Societe Generale
, are set to use the service, while funds will be able
to join from the "second half of 2013".
"The Eurex Clearing platform offers our clients additional
choice for clearing over-the-counter (OTC) products, which is
especially important given the introduction of mandatory
clearing requirements," said Alex Lenhart, European head of
prime services listed derivatives at Credit Suisse.
Interest rate swaps are complex derivatives that allow
companies to hedge their exposure to interest rate moves.
Deutsche Boerse has timed the launch to coincide with
planned reforms in the United States and Europe that will
overhaul the vast OTC derivatives market, including interest
rate swap trading.
Global regulators want to force swathes of the OTC markets
to start using clearing houses to make these complex products
easier to monitor and regulate.
Clearing houses sit between banks and other trading firms,
back-stopping their trades by holding capital that can be used
to bail out any firm left out of pocket by the collapse of a
trading partner, like that of Lehman Brothers four years ago.
"The new service, which will be further expanded in 2013, is
one important element of Eurex Clearing's comprehensive roadmap
in preparing for the changing regulatory environment," said
Deutsche Boerse in an emailed statement.
The Boerse and its rivals, including the CME Group,
the IntercontinentalExchange, the London Stock Exchange
and NYSE Euronext, are working to position
themselves ahead of the reforms that are set to take effect from
The Boerse's launch of interest rates clearing, the largest
group of derivatives traded off-exchange, pitches the German
exchange into direct competition with the main supplier of rates
The LSE group plans to buy a majority stake in LCH.Clearnet
before the end of this year in a deal that values the
Anglo-French provider that dominates rates clearing at about 800
The other banks using Eurex Clearing for rates are Basler
Kantonalbank, Citigroup, Deutsche Bank
, Commerzbank, HSBC and UBS
BNP Paribas, Nomura and Norddeutsche
Landesbank have also pledged to use the German rates clearing
service, the exchange said.
Investment banks are keen to support new clearing
initiatives to promote competition between providers which tends
to keep fees down and lowers the banks' costs.