London’s grip on clearing continues as Frankfurt’s progress slows
Deutsche Boerse’s Eurex Clearing said its euro clearing division had grown less quickly than expected, demonstrating that London will remain the centre of the industry for some time after Brexit.
Eurex said it accounted for €19 trillion (£17 trillion) of the enormous €100 trillion notional outstanding value in euro interest rate derivatives and forward contracts. London Stock Exchange’s clearing division LCH made up the rest.
Clearing is the procedure by which financial deals are settled. It is vital to ensuring the correct payments reach the right parties, even if a counterparty goes bust.
London dominates the European clearing business. But other financial sectors such as Frankfurt saw Brexit as a chance to make inroads into the market.
Deutsche Boerse’s Eurex Clearing has been touted as a strong candidate to nick market share off London.
However, its board member Matthias Graulich yesterday told Reuters: “There is a slower growth path than we initially had expected for the second half of this year.”
He said the slow progress was “primarily due to COVID-19 and its implications”. But he said that “everything is going in the right direction to achieve our goals”.
Eurex remained well behind London in swaps, with 14.3 per cent of the market or €7.3 trillion compared to €45.8 trillion at LCH.
The EU is poised to decide in the next few weeks on how long it will allow the bloc’s customers to use LCH’s clearing after the end of the Brexit transition period in December.