Frankfurt builds up clearing volumes as EU seeks to pull business from London

By Huw Jones

LONDON (Reuters) – Deutsche Boerse’s derivatives arm said on Tuesday that it has been building up volume in its Euribor futures contract in Frankfurt as the European Union vies with London for the multi-billion-euro market post Brexit.

The EU wants to significantly relocate the clearing of Euribor futures and euro-denominated interest rate swaps (IRS) out of London, which is now largely cut off from the bloc’s financial market and rules since its 2020 exit from the EU.

Matthias Graulich, executive board member at Deutsche Boerse’s Eurex Clearing said its share in Euribor futures trading and clearing had reached 10% on Nov. 20 since it relaunched the contract on Nov. 1, backed by incentives for customers.

The market had previously been dominated by U.S. rival ICE, with its operations based in London.

“It’s a very good start in trying to build an alternative liquidity pool. Though it’s early days,” Graulich told Reuters. ICE had no immediate comment.

EU states and the European Parliament are thrashing out a deal on a draft law that would require banks and asset managers in the bloc to have an “active account” with an EU-based clearing house.

It is likely that in the initial phase there will be no mandatory minimum clearing volume set for an account, but this could change if not enough clearing shifts.

“Ideally the currently discussed softer phase 1 active account requirement would be followed by some substantial transfer of euro derivatives exposures into the EU until phase 2,” Graulich said.

“In this situation a phase 2 with potentially hard thresholds would not be needed anymore.”

London Stock Exchange Group’s LCH dominates clearing of euro IRS, a market in which Eurex is also slowly building up clearing volume, and which is being targeted by the Madrid Exchange too.

Brussels has allowed clearers in London to continue serving customers in the bloc until June, 2025, though LSEG CEO David Schwimmer said last week he was “optimistic” that EU customers will still be allowed to clear in London after that deadline.

(Reporting by Huw Jones; Editing by Sharon Singleton)