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Eurex scraps fee to attract euro clearing from London before Brexit

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By Huw Jones

LONDON (Reuters) – Deutsche Boerse’s Eurex Clearing arm said on Monday it was scrapping booking fees for customers that want to switch clearing in over-the-counter derivatives to the Frankfurt operator before Britain leaves the European Union.

Most euro-denominated derivatives traded off-exchange, such as interest rate swaps, are cleared by the London Stock Exchange’s LCH unit. Britain’s scheduled departure from the EU has prompted calls from euro zone policymakers for it to move to the EU.

“The incentive program of Eurex Clearing provides for a 100% discount on booking fees for portfolio switches in over-the-counter interest rate derivatives to Eurex Clearing until end of 2019,” Eurex said in a statement.

In January 2018, Eurex introduced a “partnership program” to reward customers, similar to a longstanding scheme at LCH, but so far it has not made much of a dent in LCH’s market share.

The German operator said on Monday that regulators and central banks have recently renewed their call on market participants to prepare for all Brexit scenarios.

Britain’s is due to leave the bloc on Oct. 31 but has yet to secure an agreement of the terms of its departure. In the event of a no-deal Brexit, the EU has agreed that investment firms in the bloc could continue using LCH in London to avoid disruption, but this temporary measure expires at the end of March 2020.

Without a extension, LCH may end serving notice on customers by the end of 2019 to shift positions.

“Switching existing business and conducting new business at Eurex Clearing now seems to be a no-regret move for many firms,” said Matthias Graulich, a member of Eurex Clearing’s executive board.

More than 80 clearing members and over 250 clients have been “on-boarded” for swaps clearing, Eurex said. Market share in euro-denominated outstanding volume has been continually growing, reaching 13% at present, it added.

(Reporting by Huw Jones; editing by Lawrence White, Larry King)

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