The Clearing Corporation (C-Corp) has requested regulatory
approval from Commodity Futures Trading Commission (CFTC) to
implement the second phase of its clearing link with Eurex,
enabling European firms to clear Eurex US products, and Eurex
products offered on Eurex US, at either Eurex Clearing or
CFTC put C-Corp's filing out for a 30-day public comment on 14
March. However, aside from the public comment period, CFTC
officials said they do not have a definitive timetable for
ruling on part two of the clearing link. According to agency
rules for this type of filing, called a 4D, there is not a set
process like the 180-day or 90-day fast track process used for
Phase one of the clearing link, designed to allow US firms to
transact and clear Eurex products approved for trading in the
US, was finally given the go-ahead in October last year, having
originally been slated for a May launch (see FO Week Vol 9 No
CFTC officials said clearing links and cross-margining changes
are assessed on an individual basis. In the case of the
C-Corp-Eurex Clearing link, CFTC has examined complex
bankruptcy and margin requirement issues that differ between
the US and Germany.
"Our primary objective is to protect US investors," said acting
CFTC chairman Sharon Brown-Hruska. "We have to make sure the
funds they put in US markets are protected, and that raises the
complexity of it."
The development would allow Eurex to expand its product range
on Eurex US to include its full European product suite. The
exchange said that listing European benchmark products on its
Eurex US 23-hour trading platform would "significantly" improve
distribution of these products in the US and Asia during
regional trading hours.
If phase two is given the green light by CFTC, US customers
would then be able to trade for an extra four hours until 4pm
(CST), compared to 12pm currently, and Asia-Pacific customers
would be able to commence trading at 9am rather than 5pm
Eurex also claimed that there would be "substantial" cost
savings for market participants through margin offsets and
collateral pooling between US dollar and Euro-denominated
products traded on Eurex and Eurex US. With phase two in place
members of Eurex Clearing would be able to carry US dollar and
Euro benchmark products traded at Eurex US, and use one common
collateral pool to portfolio-margin European and US
The exchange said that the technical implementation of phase
two was completed last year with the release of version seven
of the Eurex trading system and is ready to go live following
The fact that C-Corp has chosen now to file with CFTC may mean
that solutions to some of the cross-border regulatory problems
thrown up by the transatlantic link have been found. According
to a Committee of European Securities Regulators (CESR)
spokesperson, the topic was brought up at a joint round table
discussion held by CESR and CFTC on 10-11 February. According
to a CFTC statement, the forum was attended by 60 market
participants and senior regulators, "to hear the issues
affecting those actively involved in transatlantic business in
exchange traded derivatives and related transactions, and to
establish key areas where improvements can be made".
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