Morgan Stanley has entered the listed foreign exchange (FX) business of Eurex, becoming a growing number of market participants at Eurex to move its business to the exchange.
Eurex reports that a number of participants have been combining over-the-counter (OTC) and exchange-listed FX trading by using exchange-for-physical (EFP) services.
Asset managers are increasingly seeking to combine the depth and flexibility of FX OTC markets with all the benefits of centrally cleared listed FX products, says Eurex.
By using EFP services, firms can swap OTC trades into exchange-traded and centrally cleared contracts, therefore, removing uncleared exposure, and optimising capital allocation.
Jens Quiram, global co-head fixed income certificate derivatives and repo sales at Eurex, says: "We are delighted to see Morgan Stanley expanding their FX activities at Eurex, and offering our EFP services to their European clients.
“With a standardised approach for counterparty credit risk and UMR coming into effect, these services provide a cost-effective solution to mitigate the impact of these rules.”
Richard Condon, managing director, head of FX investor sales at Morgan Stanley, adds: "Asset managers in Europe are recognising that the EFP mechanism is a simple, yet dynamic way, to enhance their workflow while deepening their liquidity pool.
“The intersection of OTC liquidity, FX-specific execution strategies, and high-quality market making all wrapped in a cleared instrument, has a powerful value proposition. Central clearing can also reduce the need for bilateral credit, settlement relationships or lengthy onboarding cycles.”
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