A Clearinghouse Gained $35 Billion Thanks to Deutsche Bank’s ErrorBy
Deutsche Bank AG’s accidental payment of 28 billion euros ($35 billion) to Eurex Clearing increased the collateral held by the world’s fourth-largest clearinghouse by more than half.
Deutsche Bank’s payment, first reported by Bloomberg News, was equivalent to 55 percent of the collateral held by Eurex Clearing on behalf of the entire market. Almost every trading firm and bank uses Eurex Clearing to protect their bets on securities ranging from bund derivatives to futures on the DAX and Euro Stoxx 50 equity benchmarks.
The clearinghouse, which like Deutsche Bank is based in Frankfurt, held cash and bonds worth 51.3 billion euros at the end of 2017, according to a regulatory filing. Clearinghouses aren’t responsible for monitoring collateral payments made by their banks, and many member firms supply more than the minimum collateral -- or initial margin as it’s also known -- to cushion themselves against changes in the value of their derivatives.
Eurex Clearing, which is owned by Deutsche Boerse, spotted the erroneous Deutsche Bank transaction shortly after it was made and returned 24 billion euros within minutes, according to a person familiar with the matter, who asked not to be identified because the matter is private. The remaining 4 billion euros were returned after the long Easter weekend, the person added.
Clearinghouses ensure that traders still get paid if their counterparties default.