Eurex’s international coverage continues with the proposed launch of its new clearing house, Eurex Clearing Asia, which will clear selected European benchmark derivatives listed at Eurex Exchange, traded during Asian market hours. The German trading venue reported that it had received approval “in principle” by the Monetary Authority of Singapore (MAS).
The new clearing house, which is expected to go live in 2016, will become the fifth registered unit that clears financial instruments, joining: MAS’ real-time gross settlement system (MEPS), Continuous Linked Settlement (CLS), Singapore Automated Clearing House (SACH) and NETS Electronic Fund Transfers at Point of Sale (NETS EFTPOS). Eurex’s exchange will cover its existing Asian products. Additionally, the range of products cleared will subsequently be extended to include listed derivatives based on Asian underlying assets.
Andreas Preuss, deputy CEO of Deutsche Börse AG and CEO of Eurex, commented about the announcement in a statement: “This is a further important milestone in the Asian growth strategy of Deutsche Börse Group. Eurex Clearing Asia will generate new and interesting business opportunities for our customers, and we are becoming an integral part of the financial center of Singapore. We aim to contribute to its further development and internationalization and look forward to cooperating with MAS and our business partners.”
Clearing houses have become pivotal components in the financial markets trading sphere, following the 2009 G20 summit where world leaders identified shortfalls in the way OTC instruments were traded. Hence, the emphasis on clearing facilities to safeguard the financial system.
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Deutsche Börse Group, the owner of Eurex, adds that it will also seek recognition as a third-country central counterparty with the European Securities and Markets Authority (ESMA) in Europe for Eurex Clearing Asia. After approval, the Asian clearing services will also be accessible to market participants based in the European Union.
Singapore has been spearheading developments in the clearing sector. In 2013, the country’s main cash and derivatives exchange, SGX, reported that two of its clearing houses had enhanced their governance under IOSCO rules.
Clearing houses act as intermediaries between two counterparties, thus reducing settlement risk between the two firms.
ICE had reported last November that it was planning to launch a new clearing house and exchange, following its acquisition of the Singapore Mercantile Exchange.