Euro Clearing in Frankfurt – continued progress amid difficult conditions
The world has changed a great deal since my last update, in January, on our Euro Clearing initiative at Eurex. Of course, the last month or so has been exceptionally difficult for many of us – both in the financial services sector and beyond – and I hope that you and your families are all well. Circumstances have been exceptional over recent weeks – working from home these days is the norm rather than the exception, volatility has been extremely high, and Central Banks and politicians have initiated many deals to support troubled businesses.
Not really a great situation to build out an alternative liquidity pool for Euro Clearing in the EU27 and some even suggested that, during times of financial stress, participants may move back towards the larger marketplace. However, our latest data shows that this has not been the case. We have proved our robustness in this area and shown that our liquidity is deep enough to withstand periods of stress in the financial markets. We are very grateful for the continued support we are getting from our partners in the Eurex Partnership Program.
Let’s have a look at the long-dated swap volumes and the basis.
The figures show that our alternative EU27-based solution has proved robust, providing clients with a viable alternative for their risk management needs even in time of severe market stress.
Looking at developments in the Eurex-LCH basis, this has slowly moved into positive territory after being negative for the 2nd half of last year – there is no doubt that the basis fluctuates but, importantly, we are still seeing a very balanced flow in the amount of business from fixed receiver and payer end-clients - see green line below indicating a fairly stable balance.
This situation offers potential arbitrage opportunities for some receiver clients, while natural fixed receivers will be able to find themselves a bargain.
So the overall Euro clearing picture remains, from our perspective, extremely positive.
I hope to continue to bring you positive news throughout the year, as our offering in this area goes from strength to strength. Until then, stay safe and healthy.
Corporate Governance Expert, social entrepreneur
3yGiven the uncertainties around Brexit negotiations Euro Clearing should clearly gain market share.
Head of Supervisory Affairs & Regulatory Change
3ymany thanks for the update