Eurex Clearing, a unit of Frankfurt-based Deutsche Boerse AG, started its new clearing service for over-the-counter interest-rate swaps as it seeks to compete with LCH.Clearnet Group Ltd.
Ten dealers, including Deutsche Bank AG, JPMorgan Chase & Co., Barclays Plc, BNP Paribas SA, Citigroup Inc., Credit Suisse Group AG and Morgan Stanley, backed the new EurexOTC Clear service when it went live on Nov. 13, the company said in an e-mailed statement today. Six more dealers, including Goldman Sachs Group Inc., are preparing to join, Eurex said.
Regulators globally are pushing for more OTC derivatives to be processed by clearinghouses, seeking to limit the risks that the $648 trillion of outstanding swaps pose to the financial system. In the U.S., banks are preparing to implement the 2010 Dodd-Frank Act that Congress passed to limit risks while in Europe, financial service providers are gearing up for the European Market Infrastructure Regulation.
“To deliver the full benefits to buy-side clients the industry needs to have client clearing documentation finalized,” Hester Serafini, head of Europe and Asia over-the-counter clearing at JPMorgan, said in the statement. “Launching the service in mid-November allows clearing brokers and clients to get ready for the start of the European clearing obligation that we expect to begin in the second half of 2013.”
LCH.Clearnet, the largest clearinghouse for interest-rate swaps, and Deutsche Boerse’s Eurex Clearing operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat in the event of a trader’s default.