In February 2009, nine large trading houses committed themselves to the European Commission for clearing European CDS contracts. Eurex Clearing successfully completed the first CDS clearing cycle. During 2009 Eurex became the first European exchange to launch real estate futures contracts.
Both in the U.S. and in Europe, the political and regulatory debate is currently concerned in great detail with ways and means to ensure the stability and integrity of financial markets. Together with Deutsche Börse, Eurex issued a White Paper1 in September 2009. The study proposes a market structure which addresses the latest developments and offers solutions to the issues at hand. One of the focal aspects of current discussions regarding financial markets is the centralized clearing of credit default swaps (CDS) traded in the OTC market. Against this background, at its Pittsburgh summit, the G20 reiterated the importance of a central counterparty (CCP) for global financial markets demanding a CCP clearing for all standardized OTC derivative contracts to be introduced by end-2012 at the latest.
Eurex Clearing Setting the Standards in European CDS Clearing
Eurex Clearing, Europe’s largest central counterparty, responded to these political demands by developing and introducing Eurex Credit Clear, the European solution for centralized CDS clearing. In February 2009, nine large trading houses had committed themselves to the European Commission in the EU for clearing European CDS contracts. Five months later, on July 30, Eurex Clearing successfully completed the first CDS clearing cycle. Eurex Credit Clear supports the clearing of index and single-name CDS. The platform has been approved by three regulatory authorities: BaFin in its home market, the FSA in the United Kingdom, and the SEC in the United States. Eurex Credit Clear provides for the multilateral netting of open positions of all market participants, thus minimizing the margin requirements compared to a bilateral collateralization. The platform offers unique benefits for both buy-side and sell-side participants, banks and investors alike: besides a comprehensive product range comprising index and single-name CDS, Eurex Credit Clear is built on a state-of-the-art risk management approach designed specifically for CDS. Throughout 2009, Eurex Clearing processed total monthly gross risk exposures in excess of EUR 48 billion, about 1.8 billion transactions overall, with OTC trades accounting for 40 per cent. The number of clearing members rose by eight in 2009, bringing the total to 101 institutions.
New Asset Classes Create New Opportunities
The new futures contract on Italian government bonds (Euro BTP Future) launched in the autumn of 2009 met with great interest from trading participants. The product is designed to offer a suitable hedging tool for non-AAA European sovereign bonds, as well as for related interest rate instruments such as swaps. Since November, Eurex customers have been able to trade EEX electricity derivatives via their existing Eurex connection. And the latest initiative has been introduced as recently as 18 January, when equity options on U.K. benchmark stocks, denominated in pence and with settlement in their home market, were launched. Eurex took a pioneering role by exploring new asset classes: During 2009 it became the first European exchange to launch hurricane and real estate futures contracts. Its range of commodity products was expanded by futures and options on gold and silver, and by commodity index derivatives.
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