Eurex Clearing has cleared the first OTC interest rate swap transaction for a Japanese securities house, Deutsche Börse Group announced today.

This is an important step as client demand from one of the world’s largest fixed income markets will support the strong momentum of Eurex Clearing’s EU-based liquidity pool for euro swaps, according to the announcement.

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The transaction was executed by SMBC Nikko Securities Inc., and Citibank Global Markets Inc. acted as their Clearing Member. In March, Eurex Clearing received “foreign financial instruments clearing organization” status from Japan’s Financial Services Agency (FSA). This allows Japanese financial institutions to directly access Eurex Clearing for swap clearing and combine their listed and OTC euro yield curve business in one place.

Markus Georgi, Eurex’s head of fixed income sales Asia said that adding Japan as an eligible jurisdiction for Eurex’ OTC Clearing offering, followed by the first transaction cleared for SMBC Nikko Securities, marks a very important milestone for Eurex Clearing on its way to become the home of the euro yield curve.

Rohit Verma, Citi’s APAC head of OTC Clearing and FXPB added that Eurex’s connectivity will provide our Japanese clients with a holistic clearing solution, encouraging competition.

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Commitment to Japan: Citi

“Citi is proud to bring the largest share of customer flows for onshore Yen clearing. With this step targeting Euro swap clearing from Japan, we further cement our market leading position in Japan and underline our commitment as an innovator and leader in the industry,” Verma said.

“Citi is strategically committed to Japan, and we are pleased to extend our industry-leading offering by providing Japanese clients the ability to clear swaps via the ‘agency’ client clearing model on Eurex. Our comprehensive clearing house connectivity allows our clients to access the deepest pools of liquidity while navigating the challenges of CCP basis,” Shun Yanagisawa, Citi’s Japan head of futures, OTC Clearing and FXPB, noted.

Masataka Okumura, SMBC Nikko Securities’ head of derivatives business promotion, believes that ensuring access to a clearing house that is determined to develop an attractive alternative for the clearing of OTC interest rate swaps, should help provide their clients with better investment opportunities.

Eurex Clearing

Eurex Clearing has developed a strong liquidity pool for clearing euro-denominated interest rate derivatives, largely through its partnership program launched in early 2018.

This market-led initiative is designed to further accelerate the development of a liquid, EU-based alternative for the clearing of OTC interest rate derivatives.

Outside of Japan, Eurex Clearing is recognized as a derivatives clearing organization and permitted to serve clients in the U.S. under the associated LSOC model. Since recognition in February 2019, Eurex has onboarded over 20 clients with over 3,500 registered funds under the LSOC model.