International derivatives exchange Eurex has announced that it will extend its OTC Wholesale Facility, which together with the launch of Eurex Release 11 on November 10, will enable custom
International derivatives exchange Eurex has announced that it will extend its OTC Wholesale Facility, which together with the launch of Eurex Release 11 on November 10, will enable customers to reference equity index swaps in the existing exchange for swaps functionality.
Eurex says the new features will allow trades that combine all available Eurex index futures with related OTC equity index swaps. The facility can be used for OTC interest rate swaps and swaptions, credit default swaps and inflation swaps in combination with Eurex’s fixed-income futures, credit futures and inflation futures respectively.
‘In the last couple of months, we have seen growing volume transferring from the OTC equity index swap market into the exchange environment,’ says Eurex executive board member Peter Reitz.
‘By offering this extension of our functionality, we will enable the migration of more OTC volume to central clearing with all its advantages. Foremost, we eliminate counterparty and credit risks through our central counterparty.’
So far this year a monthly average volume of more than 70 million contracts has been cleared through Eurex Clearing’s OTC facility, including an average of around 1.5 million interest rate futures per month processed via the exchange for swaps functionality.
An exchange for swaps trade is defined by the simultaneous exchange of a long/short futures position against a payer/receiver swap position, for instance a Eurex sector index future against a related sector index swap.
Exchange for swaps belongs to a set of OTC wholesale functionalities available for index products. Currently, participants can enter block trades, enter futures and options with individually defined contract specifications, using Eurex’s flexible contract facility, as well as simultaneously trade equity index futures and related cash baskets using the exchange for physical index facility.
