Eurex clears first inflation swap transactions
09 June 2020 Frankfurt
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Eurex Clearing has cleared its first inflation swap transactions, with initial trades submitted by BNP Paribas, UniCredit and Societe Generale.
Inflation swaps are used to transfer the risk of inflation from one party to another through an exchange of cash flows.
While one party pays a fixed rate cash flow on a notional principal amount, the other party pays a floating rate linked to an inflation index. These contracts are most commonly linked to consumer price indexes.
Besides risk efficiencies, clients benefit from operational savings by reducing fragmentation within a single currency and bundling central clearing across multiple asset classes, says Eurex.
Stephane Salas, head of European inflation Trading at BNP Paribas, says: 鈥淚f you only need to use one pool of collateral then you only get one margin call, and so on. This is going to be a big opportunity for buy-side firms to further increase efficiency.鈥�
Eurex says the new derivative launch demonstrates the 鈥渃ontinued commitment from international banks to meet end-client demand and access more over-the-counter (OTC) products at Eurex Clearing鈥�.
The Deutsche Boerse owned central counterparty (CCP) offers the clearing of zero-coupon inflation swaps (ZCIS) for the eurozone Harmonized Index of Consumer Prices excl. Tobacco, the French Consumer Price Index, and the UK Retail Price Index.
Danny Chart, Eurex鈥檚 head of OTC product and clearing business development says: 鈥淗aving these major international banks clear their first trades on our platform is a great first step for this product.
鈥淚t shows clear support for our efforts to build an alternative EU27-based liquidity pool. And it further underlines our goal of becoming the global home of the euro yield curve.鈥�
Meanwhile, Emmanuel Issman, head of structured fixed income derivatives at UniCredit, explains that the allocation of exposure across CCPs is better from a risk perspective, adding: 鈥淲e see end clients increasingly favouring a second choice and seeking to clear OTC products through Eurex Clearing.鈥�
Inflation swaps are used to transfer the risk of inflation from one party to another through an exchange of cash flows.
While one party pays a fixed rate cash flow on a notional principal amount, the other party pays a floating rate linked to an inflation index. These contracts are most commonly linked to consumer price indexes.
Besides risk efficiencies, clients benefit from operational savings by reducing fragmentation within a single currency and bundling central clearing across multiple asset classes, says Eurex.
Stephane Salas, head of European inflation Trading at BNP Paribas, says: 鈥淚f you only need to use one pool of collateral then you only get one margin call, and so on. This is going to be a big opportunity for buy-side firms to further increase efficiency.鈥�
Eurex says the new derivative launch demonstrates the 鈥渃ontinued commitment from international banks to meet end-client demand and access more over-the-counter (OTC) products at Eurex Clearing鈥�.
The Deutsche Boerse owned central counterparty (CCP) offers the clearing of zero-coupon inflation swaps (ZCIS) for the eurozone Harmonized Index of Consumer Prices excl. Tobacco, the French Consumer Price Index, and the UK Retail Price Index.
Danny Chart, Eurex鈥檚 head of OTC product and clearing business development says: 鈥淗aving these major international banks clear their first trades on our platform is a great first step for this product.
鈥淚t shows clear support for our efforts to build an alternative EU27-based liquidity pool. And it further underlines our goal of becoming the global home of the euro yield curve.鈥�
Meanwhile, Emmanuel Issman, head of structured fixed income derivatives at UniCredit, explains that the allocation of exposure across CCPs is better from a risk perspective, adding: 鈥淲e see end clients increasingly favouring a second choice and seeking to clear OTC products through Eurex Clearing.鈥�
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