UPDATE 1-CBOT urges US regulators deny Eurex clearing link
Tue May 18, 2004 02:25 PM ET
(Adds CFTC, Eurex comments, details, byline)
By Ros Krasny
CHICAGO, May 18 (Reuters) - The Chicago Board of Trade has asked U.S. regulators to reject the proposal for a futures clearing link between Frankfurt-based Eurex Clearing AG and The Clearing Corp. of Chicago.
German-Swiss Eurex, the world's largest derivatives mart, hopes the link will jump-start its presence in the United States. Eurex has barely made a dent since starting to trade U.S. Treasury futures in February that are identical to those at the CBOT.
In an 11-page letter to the Commodity Futures Trading Commission, the No. 2 U.S. futures exchange said the clearing link would create risks to investors, especially related to the jurisdiction over funds in Germany should a bankruptcy occur.
The Clearing Corp. processes futures trades on the Eurex US exchange and seeks approval for it and participating trading firms to hold accounts combining U.S.-dollar positions on Eurex US with Euro-denominated positions on Eurex in Frankfurt.
Combining money between Eurex in Germany and The Clearing Corp. would expose those funds to "far greater risks than any of the circumstances where the Commission has previously permitted such commingling," the CBOT said.
The largest U.S. futures exchange, the Chicago Mercantile Exchange (CME.N: Quote, Profile, Research) , sent a two-page letter to the CFTC that cited a lack of clarity in the Eurex-Clearing Corp. proposal.
"While CME does not object to the general notion of cross-border clearing, we believe TCC's application contains many generalities and fails to address several important issues," the CME said.
CFTC staff continue to examine the clearing proposal and could ask Eurex and the Clearing Corp. for further input, an agency spokesman told Reuters.
Once the review is complete the CFTC's Division of Clearing and Intermediary Oversight will draft a recommendation for the agency's commissioners. There is no deadline for completion of the process, the spokesman said.
Eurex has said it will launch the first phase of the clearing link upon regulatory approval.
The second phase, subject to further CFTC review, would allow U.S. customers to clear German interest rate and pan-European stock index futures traded at Eurex AG on the Chicago-based Clearing Corp.
Eurex US opened with a bang in February but volume has dwindled from an average daily trading volume of 8,116 contracts to just 2,398 contracts so far in May.
"The global clearing link, once it is fully implemented, will add substantial value to our customers with a positive impact on trading volumes both on Eurex and Eurex US," exchange chief executive Rudolf Ferscha told Reuters last week.
Clearing is an essential step in the derivatives trading process, guaranteeing both ends of a transaction before money changes hands. |
