Eurex Clearing said European sell side and buy-side firms can save at least €5bn in costs through central clearing as it is authorized as a central counterparty under the European Market Infrastructure Regulation.
Eurex commissioned consultant Oliver Wyman to calculate the impact on new regulations being implemented to support the G20 aims of shifting over-the-counter products onto exchanges where they can be centrally cleared.
“For interest rate derivatives, repo and securities lending transactions, an integrated cross-product CCP structure with a broad collateral spectrum can deliver up to €4 billion to €5 billion incremental cost benefits to the European sell- and buy-side community combined, on top of €5 billion to €7 billion cost benefits of central clearing on a baseline CCP which are to a certain degree already realized,” the study said.
For asset managers, Eurex said mutual funds incur funding costs and clearing fees when moving to central clearing but these are offset by improvements in bid-ask spreads and net cost savings could be 1.4 basis points of assets under management on an annual basis.
For hedge funds, Eurex said costs could increase when using central clearing as they already benefit from multilateral netting benefits through their prime broker.
However Eurex claimed that cost savings on an integrated CCP, such as its own model, may be up to 35 basis points of assets under management due to substantial netting benefits between OTC and listed interest rate derivatives, amplified by the hedge fund’s leverage.
Yesterday Eurex Clearing became the fourth CCP to be authorized under Emir, which mandates clearing in Europe for certain products.
The other three CCPs authorised which have been approved under Emir are EuroCCP, the Netherlands-based equities clearer; Nasdaq OMX Clearing, the derivatives clearer based in Sweden and Poland’s KDPW_CCP.
Eurex Clearing is part of Eurex Group which is owned by Deutsche Börse and also includes Eurex Exchange, the International Securities Exchange, the European Energy Exchange, Eurex Bonds and Eurex Repo.