Eurex is preparing to increase access by US and Asia-Pacific customers to its global benchmark products via Eurex US and its clearing partner CCorp.
The Chicago-based Clearing Corporation (CCorp) has requested permission from the CFTC to proceed with the second phase of its Global Clearing Link.
Upon full implementation of the Global Clearing Link, CCorp's partner Eurex - through its US exchange, Eurex US - will significantly increase the distribution of its benchmark products.
Phase Two of the Global Clearing Link will provide full fungibility of products between Eurex and Eurex US, while enabling customers to retain their current clearing relationships with either Eurex Clearing AG or CCorp.
It provides the basis for increasing access to Eurex's global benchmark products via a US-regulated exchange to customers both in the US and the Asia-Pacific region.
Listing European benchmark products on Eurex US' 23 hour trading platform will significantly improve distribution of these products in the US and Asia during regular trading hours: US customers will then be able to trade until 4.00 pm CST compared to 12.00 noon currently and customers in the Asia-Pacific region will benefit from opening at 9.00 am compared to 5.00 pm (Sydney time).
It will also increase access by Eurex's European customers to these global benchmark products outside of regular European trading hours.
Furthermore, customers who are limited to trading on US exchanges will get access to Eurex benchmark products through the US-regulated platform for the first time. Benchmark products such as the Euro-Bund-Future and Futures on the DAX and Dow Jones Euro STOXX 50 currently traded exclusively on Eurex will for the first time become available on a US exchange.
Currently Eurex customers in the US trading on Eurex account for up to 35 percent in global benchmark products; up from below 10 percent three years ago.
"The Global Clearing Link is the first linkage between U.S. and European listed derivatives markets," said Rudolf Ferscha, CEO of Eurex. "It further expands Eurex's distribution into the U.S. and the Asia-Pacific region, significantly increasing access and trading opportunities. For the first time Eurex benchmark products will become available in the U.S. afternoon and Asia-Pacific daylight trading hours. This innovation only becomes possible due to the cooperation between U.S. and European regulators reaching a new level."
Brett Paulson, President and Chief Operating Officer of The Clearing Corporation, said: "Phase Two of the Global Clearing Link will further extend access to clearing services and the benefits of portfolio-margining as well as expand the array of trading products readily available to customers world-wide. We will continue to work with the CFTC to complete the regulatory process that is necessary for CCorp to more fully realize our vision with Eurex."
The Global Clearing Link will substantially reduce costs for market participants through margin offsets and collateral pooling between USD- and EUR-denominated products traded on Eurex and Eurex US.
In Phase Two, members of Eurex Clearing will be able to carry USD and EUR benchmark products traded at Eurex US, and use one common collateral pool to portfolio-margin European and U.S. products. The technical implementation of Phase Two of the Global Clearing Link was already completed with last year's Eurex software release 7.0 and will go live subject to CFTC permission.
The following European benchmark derivatives will be available on Eurex US after implementation of Phase Two of the Global Clearing Link: The European fixed income futures BUND (10 years), BOBL (5 years) and Schatz (2 years) and options on these futures as well as the equity index futures on the pan-European blue chip index Dow Jones Euro STOXX 50 and the German blue chip index DAX.
With Phase One of the Global Clearing Link, already in operation since November 27, CCorp clearing participants benefit from consolidating in a single clearing account their US positions traded on Eurex US and their positions in certain European benchmark derivatives traded at Eurex. CCorp clearing participants are able to benefit from portfolio margining between EUR and USD products and one common collateral pool, greatly reducing costs.
A further important feature of the Global Clearing Link is that traders clearing European products through CCorp clearing participants are able to keep their margin funds in a segregated environment, benefiting from U.S. rules regarding fiduciary obligations of intermediaries and the US insolvency regime.
Trading turnover in Eurex products that will be available for 23 hour trading through the Global Clearing Link has increased around 30 percent year on year (69.2 million contracts in February 2005 vs. 53.7 million contracts in February 2004). This compares with a growth rate of 14 percent for non-Link products.