Eurex Clearing is to launch a new membership type that allows buy-side participants to have a direct contractual relationship with the clearinghouse facilitated by a clearing agent.
The so-called ISA Direct service addresses changes in the regulatory landscape and will contribute to the safety, robustness and efficiency of the overall market. For buy-side firms, ISA Direct is a unique way to meet new regulatory requirements with reduced counterparty risk and strong protection for their assets. For clearing agents, the new service eases the adaptation to the new capital rules as it frees up equity capital currently required for client’s business while maintaining existing client relationships.
The new model will be available from summer 2016 onwards and will initially be offered for Eurex Clearing’s interest rate swaps and repo transactions of Eurex Repo’s “Select Finance” service. Listed derivatives and securities lending transactions are to follow. All regulatory approvals have been received.
“ISA Direct alleviates the regulatory requirement to centrally clear OTC derivatives in several ways. By enabling us to become a direct member of the CCP, our concerns regarding counterparty credit risks, clearing costs and portability of our assets are much better addressed compared to the traditional client clearing model,” says Daniel Berner, CIO Swiss Life Switzerland.
“The positive impact of Eurex Clearing’s new clearing models for OTC derivatives & repo is evident. GC Pooling positively influences our ability to fund business activities of our clients and tackles current liquidity constraints in the repo market. ISA Direct allows clearing members to continue their operational clearing relationship with clients without requiring the traditional performance guarantee. Therefore, we support a quick roll-out of both products by Eurex Clearing,” says Jason Vitale, Managing Director for Listed Derivatives & Markets Clearing, Deutsche Bank.
“This new innovative CCP membership type is a win-win for all involved parties. Besides higher capital efficiencies and the resulting lower costs as well as enhanced segregation and portability, ISA Direct will broaden the membership base of the clearinghouse, thereby lowering the concentration risk among existing clearing members; and subsequently strengthening the robustness and diversity of the CCP,” says Matthias Graulich (pictured), member of the Eurex Clearing executive board.
