Eurex Credit Clear: Meeting the needs of the buy-side

On 30 July 2009, in response to the industry commitment on 17 February to introduce central counterparty clearing in OTC CDS in Europe by the end of July 2009, Eurex Credit Clear successfully started CDS clearing.

Eurex Credit Clear offers immediate access to asset managers to its central counterparty clearing platform in CDS.

Novation of OTC CDS to the central counterparty at Eurex Credit Clear is delivered through its interlink with the DTCC Trade Information Warehouse (TIW) giving asset managers a seamless, straight-through processing integration between the existing OTC market infrastructure and the central counterparty, Eurex Clearing.

Eurex’s OTC CDS clearing solution offers clear benefits to the buy-side:

•  Credit Clear is the only CDS CCP that currently offers the European product suite of iTraxx® indexes and single names – the 17 single-name iTraxx® constituents from the utilities sector2.

•  Transaction netting of CDS centrally cleared at Eurex Clearing allows greater flexibility of CDS traded across several counterparties. Netting at Eurex Credit Clear can be on a gross basis or at a specific fund level.

•  Margin offset between Eurex listed derivatives and CDS is centrally cleared.

•  State-of-the-art CDS specific risk management model reflects the ‘jump to default’ nature of credit with asymmetric margining supported by deploying industry-proven modules from Calypso Technologies Inc.

•  New Registered Customer facility for asset managers segregates client positions from the client omnibus and proprietary accounts increasing portability of positions in the event of a credit clearing member default.

•  Back-loading of outstanding legacy trades available to the buy-side – mitigating counterparty risk3 in CDS with savings in terms of collateral management with one point of delivery to meet the clearing of CDS.

•  Connection of Eurex Credit Clear to Bloomberg’s multi-asset class trade  affirmation platform VCON (see VCON DERV on Bloomberg) allows the buy-side to trade CDS with the sell-side through Bloomberg, affirm the trade and send the transaction straight through to Eurex Clearing via DTCC TIW considerably streamlining the trade to central counterparty process.

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