Eurex derivatives business gains ground as Euro-clearing battle heats up

Deutsche Börse’s derivatives-focused exchange, Eurex today said its total traded derivatives contracts grew by 26 percent in March, from 195.0 million to 246.2 million compared to the same month last year.

Eurex’s profit sharing scheme continues to win clearing business from rivals in the UK even as the battle for euro-clearing continues. Since Britain fully left the EU in December, clearing euro derivatives has become a Brexit battle as Brussels seeks to build up the bloc’s own capital market and end reliance on London.

Equity index derivatives was again the standout sector with 36 percent year-on-year growth, from 93.8 million traded contracts to 127.9 million. Interest rate derivatives also increased by 23 percent, from 66.1 million traded contracts to 81.3 million a year ago. Total contracts traded in equity derivatives grew by 6 percent from March 2021.

Eurex disclosed that notional outstanding volumes in OTC Clearing grew strongly in March, climbing 28 percent overall compared to the same month last year – from €21,226 billion to €27,162 billion. Additionally. interest rate swaps and overnight index swaps posted growth of 34 percent and 147 percent, respectively. Average daily clearing volumes fell by 9 percent overall, with interest rate swaps remaining stable and overnight index swaps (up 39 percent) again outpacing overall growth.

At Eurex Repo, the electronic marketplace for secured funding and financing, overall average monthly term-adjusted volumes increased by 16 percent year-on-year, up from €135.7 billion to €157.5 billion.

The Eurex FX offering of classic FX futures and options, in combination with the rolling spot futures, allows traders to manage their FX exposures with listed products.

The pan-European exchange has made efforts over the past year to expand its FX trading business, most recently signing major banks to support their FX futures, from clearing to trading.

Eurex’s currency trading desk currently offers various FX derivatives products, including FX futures available in 19 currency pairs, all with quotation and tick sizes in-line with existing OTC FX standards. A liquidity scheme caters for tight pricing and competitive liquidity, it says.

However, London remains the pre-eminent in FX and OTC derivatives, which are used by investors to hedge their portfolios, but market participants are concerned that the Brexit deal will cause disruption in the cross-border derivatives market.

UK clearinghouses must decide whether to shift derivatives trades worth billions of euros from Britain. For instance, LCH, the LSE-controlled clearing house that processes around 90 percent of euro-denominated derivatives, is now outside the bloc’s legal system. The LSE said its pan-European platform Turquoise would shift trading in shares of companies based in the bloc to its new Dutch hub if it loses access to the single market.