FO Week recently asked a panel of
industry figures to discuss possible drivers for an
as-yet-unseen upturn in volumes on Eurex US. When asked about
the proposed global clearing link, the panel's responses gave
two key messages: firstly, that the clearing link is one of the
most important pieces yet to be dropped into the Eurex US
jigsaw; and secondly, that there was still considerable
confusion in the marketplace as to what exactly the link would
look like and how it would work. Given both these responses,
The Clearing Corporation's recent efforts to shed light on the
matter are of crucial importance.
Investing the time to explain the nuts and bolts of the
clearing link will maximise the number of firms willing and
able to get on board and breathe life into the nascent
exchange. While Eurex continues to look for ways to draw
liquidity to its US Treasury contracts, attracting new
customers for the established European products could provide
the US arm with its first measure of success. Having launched
the exchange in February, with a number of firms not fully
equipped to trade it, Eurex would do well to ensure that as
many interested participants as possible are lined up to use
the clearing link when it goes live - hence the importance of
the education exercise.
Success for the link is also important to TCC of course, having
parted company with its long-time partner CBoT and hitched its
wagon to Eurex. No surprise then that it is TCC that has taken
the informational initiative, especially when one considers
Eurex's understandable reluctance to make any statement that
could possibly put it on the wrong side of CFTC. The comments
of some FCMs - indicating that they have cooled on the
idea having seen the performance of Eurex US thus far - may
cause some concern. Ultimately, however, the phases of the
clearing link dealing with European products ought not to be
subject to the same liquidity catch-22 situation that can
hinder new contracts - people who don't currently have access
to Eurex will either want it or they won't, and there is
reasonable evidence to suggest they will. Whether the clearing
link can do anything to invigorate the Treasury contracts is
still an open question.
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