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Alternative Market Briefing

Eurex’ new Euro Swap Future and cross-margining can potentially offset up to 70%

Monday, October 20, 2014

Komfie Manalo, Opalesque Asia:

Clearing house Eurex said that its new Euro Swap Future cross-margining can potentially offset up to 70%. Lothar Kloster, head of Buy Side Relations at Eurex made the statement at the recent Opalesque 2014 Netherlands Roundtable which was sponsored by ABN Amro Clearing and Eurex.

"Since both swap futures and OTC swaps are cleared by Eurex, investors have the advantage cross margining," Kloster said and added, "Positions in swap futures contracts and positions in in OTC swap contracts are margined within one margin group and you could realize margin offsets. So depending on how your portfolio is structured you could have margining offsets potentially of up to 60%-70%."

Kloster was reacting to a question from Iwan Vink, founder and managing director of WinCap Investment Management, who wanted clarification on Eurex’ collateral swaps. Kloster told Vink that collateral has to be put as initial margin for both swap futures and OTC interest rate swap positions where then daily variation margin in cash applies to both instruments.

However, exchange traded futures and OTC swaps represent different types of instruments for the purpose of clearing. He went on to say, "Consequently, EMIR regulation stipulates tha......................

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