Funds managers sign with Eurex for OTC derivatives clearing
Frankfurt-based Eurex has begun clearing OTC IRS
Eurex has begun clearing OTC derivatives ahead of next month’s introduction of the European Commission’s EMIR regulation on the central clearing and reporting of the instruments.
Investment managers Insight Investment and OFI Asset Management will clear via the new EurexOTC Clear service.
EMIR is part of the European Commission’s response to the global financial crisis. In 2009, the G20 nations agreed to reduce systemic risk in OTC derivatives markets by mandating the central clearing and reporting of the bulk of OTC contracts. The aim was to increase transparency and reduce the risk arising from complex OTC trading.
EurexOTC Clear for interest rate swaps launched in November. Eurex says it will integrate the clearing and collateralisation of OTC and listed derivatives in a single clearing house under a single framework. The aim is to provide cross-margining opportunities and a single, larger pool of collateral.
The two asset managers were brought to the platform by UK bank Barclays, and are also joined by European hedge fund Whard Steward Master Fund, which is the first of its kind to use the service and is being brought by JP Morgan.
“OTC swaps are critically important to the successful management of our clients’ liability risks,” said Andrew Giles, co-chief investment officer, Insight Investment. “Insight Investment and our strategic back office provider Northern Trust have demanding clearing requirements which prioritise efficient margin management and effective asset protection for our clients. We are therefore highly motivated to support CCP models that are innovative in recognising the specific current and future clearing needs of our institutional clients and the wider long-term savings industry.”
According to the UK FSA, EMIR nominally entered force in August last year, but most provisions only apply after technical standards enter into force. The EU Commission adopted nine unchanged technical standards on 19 December; the EU Parliament and Council have until 19 February to approve or reject the standards. If accepted, the standards will come into effect 20 days after publication in the official journal of the European Union.
