Eurex Clearing is launching a new buy-side membership type to allow a direct contractual relationship with the clearinghouse, facilitated by a clearing agent, starting Q3.
The ISA Direct will initially be available for Eurex Clearing’s interest rate swaps and repo transactions of Eurex Repo’s Select Finance service.
Securities lending transactions and listed derivatives will be included at a later date.
ISA Direct alleviates the regulatory requirement to centrally clear over-the-counter (OTC) derivatives by enabling them to become a direct member of the central counterparty (CCP). This allows counterparty credit risks, clearing costs and portability of our assets to be better managed.
The new model offers buy-side firms the ability to meet regulatory requirements with reduced counterparty risk and strong protection for their assets, according to Eurex Clearing.
For clearing agents, the new service aims to ease the adaptation to the new capital rules, as it frees up equity capital currently required for client’s business, while maintaining existing client relationships.
Jason Vitale, managing director for listed derivatives and markets clearing at Deutsche Bank, commented: “The positive impact of Eurex Clearing’s new clearing models for OTC derivatives and repo is evident. GC Pooling positively influences our ability to fund business activities of our clients and tackles current liquidity constraints in the repo market.”
Matthias Graulich, a member of the Eurex Clearing executive board, added: “This new innovative CCP membership type is a win-win for all involved parties.”
“Besides higher capital efficiencies and the resulting lower costs as well as enhanced segregation and portability, ISA Direct will broaden the membership base of the clearinghouse, thereby lowering the concentration risk among existing clearing members; and subsequently strengthening the robustness and diversity of the CCP.”
