Reuters: Regulatory News: UPDATE 2-D.Boerse wins banks' backing for OTC platform

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UPDATE 2-D.Boerse wins banks' backing for OTC platform May 31st 2012, 15:15 Thu May 31, 2012 11:15am EDT * Service for OTC interest rate swaps * Roll-out planned for H2 * Boerse could fetch 150-200 mln in extra rev -analyst FRANKFURT, May 31 (Reuters) - Deutsche Boerse's Eurex Clearing unit will launch a platform for over-the-counter (OTC) interest rate swaps clearing in close cooperation with a group of banks ahead of regulation of the $700 trillion derivatives industry. The German Boerse operator, which earlier this year abandoned plans to merge with peer NYSE Euronext, said the launch of the platform would be supported by Barclays , BNP Paribas, Citibank, Credit Suisse , Deutsche Bank, J.P. Morgan and Morgan Stanley. The platform comes ahead of regulation of in-house over-the-counter derivatives which will require trading to be handled by public clearing houses backed by a default fund in case one side of the trade goes bust. This setup is designed to avoid a repeat of the disorderly unravelling of derivative trades that contributed to the global credit crunch in 2008 and 2009. "Our industry is facing far-reaching structural changes to meet the clearing mandates for OTC derivatives. We need partners to meet these challenges," said Christian Mundigo, Global Head of Rates Trading at BNP Paribas. Global regulators said on Wednesday they would issue proposals in coming weeks on rules to encourage banks to put derivative trades through a central clearing house. The move is part of a huge regulatory overhaul aimed at cutting risk in the derivatives industry. Deutsche Boerse's Eurex said it expected to be ready to launch the platform early in July, with the roll-out planned for the second half of this year, but added it was unable to give an indication for the impact on its results. "It is unclear which products will be regulated and when regulation will be put in place," a spokesman said. Analyst Christian Muschick at Frankfurt-based Silvia Quandt Research said he welcomed that the exchange managed to get the banks on board with its derivatives clearing. "It is a big thing. Boerse could secure 20-25 percent of the market with this initiative," Muschick said, adding that the exchange could fetch 150-200 million euros ($185.9-247.9 million) in additional revenues and 45-56 million euros in net profit once regulation was in place. Link this Share this Digg this Email Reprints

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