CFTC Gives Eurex the Go-Ahead to Clear for US Investors

The German exchange will be able to clear interest rate swaps for US asset managers and hedge funds.

The Commodity Futures Trading Commission (CFTC), in a gesture of goodwill, is set to give Eurex, the largest derivatives exchange in Europe, permission to clear interest rate swaps for asset managers and hedge funds based in the United States this Thursday, according to a report from Reuters.

This move by the United States swaps regulator will allow the exchange, which is owned by Deutsche Borse, to compete with the London Stock Exchange (LSE) owned LCH and CME Group.

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At present, Eurex can currently clear interest rate swaps that are executed by its member bank firms in the US. However, until today, it has not had the permission to clear swaps for the end-customers of those firms, such as hedge funds and asset managers. This is because its depository arrangments didn’t measure up against US standards.

The move from the CFTC has been interpreted as a sign of goodwill. This is because the regulator has been at odds with the European Union (EU) over proposed rules that could hamper cross-border trading between the two markets.

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Specifically, the EU is proposing new rules were “systemic” foreign clearing houses can only serve EU customers if regulators in Europe can supervise them, alongside US authorities. In response, the CFTC has said that it won’t subject the firms it regulates to comply with the conflicting and overburdensome regulation.

When speaking on the CFTC giving Eurex the go-ahead to clear interest rate swaps for asset managers and hedge funds, Eric Pan, the director of the CFTC’s Office of International Affairs, said to reporters the move was “practicing what we preach.”

Eurex Clearing Partners with Tradeweb Markets

Recently, Eurex has been expanding its clearing capabilities and operations. Towards the end of November, Eurex Clearing, a leading central counterparty clearing (CCP), announced that it has established a direct connection with Tradeweb Markets, a global provider of fixed income, derivatives and ETF marketplaces, as Finance Magnates reported.

According to the statement released by Eurex at the time, the direct connection will facilitate the clearing of over-the-counter (OTC) interest rate products. For buy- and sell-side firms using the services of both Tradeweb and Eurex Clearing, the connection will increase workflow and execution efficiencies, achieving straight-through processing (STP) benefits.

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