The Clearing Corporation (CCorp) and Eurex Clearing AG confirmed today the immediate roll out of Phase I of their Global Clearing Link.
The Global Clearing Link is the first transatlantic clearing link to go live. It will significantly increase the efficiency of global derivatives markets. It will also facilitate low cost clearing access to Eurex from the US and will substantially reduce costs through margin offsets and collateral pooling between USD and EUR denominated products.
The Global Clearing Link provides the US clearing community with direct access to European trading, bringing new business opportunities to the US.
The Global Clearing Link builds on Eurex's remote clearing concept, first introduced in 2000. Phase I of the Link extends Eurex's immediate distribution to the US by leveraging CCorp's existing network of clearing participants. The number of clearing partners eligible to be connected to the network will increase by 66 percent.
Rudolf Ferscha, CEO of Eurex, said: "With the Global Clearing Link we are connecting the U.S. and European derivative markets and offering clearing choice for the first time. The partnership with CCorp allows us to immediately leverage connectivity to the U.S. clearing community to the benefit of our mutual customers. This substantially reduces costs of access to Eurex from the US and increases clearing flexibility".
Dennis Dutterer, President and CEO of The Clearing Corporation, said: "The benefits of Phase I of the Global Clearing Link are consistent with CCorp's long-standing model of offering clearing services on a cost competitive basis to clearing participants. The link enables us to extend our business model internationally, thereby expanding client access and increasing market efficiency".
The first phase of the Global Clearing Link is expected to bring immediate benefits to customers via cost reductions through lower clearing fees and higher capital efficiencies, as well as clearing access to European trading within the US regulatory framework.
The Global Clearing Link will result in the lowest transatlantic clearing fees, bringing the cost for small and midsize participants down to the level of wholesale pricing.
It allows more efficient use of capital through portfolio margining and the use of one common collateral pool for EUR and USD products. New products to be introduced on Eurex US will benefit from immediate offset against the European benchmark range.
Phase I of the Global Clearing Link enables CCorp clearing participants to consolidate in a single clearing account at CCorp their U.S. positions traded on Eurex US and their positions in certain European benchmark derivatives traded at Eurex. CCorp clearing participants will also be 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 will be able to keep their margin funds in a segregated environment, benefiting from US rules regarding fiduciary obligations of intermediaries and the US insolvency regime.
In Phase II, members of Eurex Clearing will be able to clear USD and EUR benchmark products traded at Eurex US, and use one common collateral pool to portfolio-margin European and U.S. products. Certain European benchmark derivatives currently traded exclusively on Eurex will be cross-listed on Eurex US, allowing for 21 hours of trading and full fungibility of these products.
Implementation of Phase II is subject to regulatory approval from the Commodity Futures Trading Commission and European regulators.