OTC FX and cross currency swaps made available by Eurex

Alan Sayer
July 27, 2021 12:08 pm

After an initial testing period was completed, Eurex has made cross currency swaps and over-the-counter FX a deliverable service. Eurex Clearing, a subsidiary of Deutsche Börse, will have three members for the clearing services. Morgan Stanley, J.P. Morgan, and Commerzbank will all join up to be involved with the final testing phase to ensure the service can be provided effectively in a live situation.

The cross currency swaps and over-the-counter FX aim is to reduce the amount of capital needed to measure the credit risk of a trade. Eurex Clearing is aiming to complete swaps with guaranteed liquidity. This is through a guaranteed settlement through CLSClearedFX, which is provided by CLS.

The over-the-counter FX aspect of Eurex Clearing will use the Deutsche Börse worldwide FX unit, 360T, to match the three services it will offer. FX Swap, FX Spot, and FX Forward will all be matched with 360T. The service is expected to be delivered in the second or third quarter of 2021 and will allow both deliverable and non-deliverable FX clearing. 

Eurex

Using CLS means that Eurex Clearing has support from a well-known settlement provider. This is expected to ensure that the services are able to run smoothly as soon as they are officially launched to the public. 

Erik Müller, the CEO of Eurex Clearing said:

Erik Müller, Eurex

Erik Müller

Central clearing and guaranteed settlement for cross currency swaps in CLSClearedFX is a world first. We are pleased to have launched this together with CLS to deliver capital, liquidity and settlement benefits – providing further resilience to the market.

All three of the partners for the new clearing service have reacted positively to the news. Commerzbank, J.P. Morgan, and Morgan Stanley have all released comments expressing the belief that a central clearing system will increase efficiency for currency swaps. 

It’s expected that the new system will increase the efficiency of the market and have a positive impact on the growth of the market. With more efficient swaps able to take place, it could encourage more traders to use the service.

LeapRate Analyst

Having gained a degree in economics, Alan entered the world of financial services starting his career in London and then moving to New York for a number of years. His first post at a City bank saw him establish a reputation as an forex trader. Having recently returned from New York after eight successful years, Alan is now a prosperous trader in his own right concentrating on commodities and forex.
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