Euronext eyes equity, commodity, debt derivatives after clearing migration

Euronext eyes equity, commodity, debt derivatives after clearing migration

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Euronext has said it plans to expand its existing equity, commodity and fixed income derivatives markets after the European group launches its derivatives clearing house next year.

Speaking after Euronext rolled out its equities clearing service last week, Anthony Attia, Euronext’s global head of derivatives and post-trade, said the exchange group’s focus has now turned to the launch of derivatives clearing, scheduled for the third quarter of next year.

Attia said: “Our next milestone for our pan-European clearing project, in the framework of our “Growth for Impact 2024” strategic plan and further contributing to build the backbone of the EU Capital markets union, is in Q3 next year for the derivatives market. Euronext Clearing today clears Italian listed equity derivatives, and in Q3 next year we will migrate the listed financial derivatives from the other Euronext markets as well as the commodity futures.”

Euronext plans to migrate before the end of September next year the clearing of the equity and commodity derivatives traded on Euronext markets to Euronext Clearing from their incumbent clearer LCH, part of LSE Group.

Attia said: “We plan to move the derivatives in two steps. The first stage will be the commodities and then in the following weeks we will migrate the financial derivatives.”

Euronext is insourcing clearing to enable the group to be more agile in delivering new products, particularly derivatives, and Attia said his team is already thinking about new derivatives for launch after Q3 2024.

“In terms of derivatives, we have great ambitions around our existing product range. We already offer a solid set of equity options on our Euronext markets and we plan to become pan-European.

“In commodities, Euronext is the market-leader in milling wheat futures in Europe, and we will be able to innovate, building on this strong franchise.”

Attia added: “We also have a solid base in fixed income, notably with the recent announcement that the European Union has nominated MTS as a recognised interdealer platform for the implementation of electronic market making on European Union issued debt instruments, in the framework of the EU’s NextGen sovereign debt recovery programme. So, together with indices, we have solid ambitions to push more European products in fixed income.”

Attia said the test platform for derivatives clearing was made available to clients on Monday November 27.

“We have various end-to-end tests that are going to take place for the upcoming expansion of our Euronext Clearing activities for derivatives, over the next six months and then we have communicated some provisional operational dates for the migrations in Q3.”

Attia said, as well as enabling Euronext to deliver products more effectively, the new clearing house offers clients post-trade efficiencies that result in material savings.

“Our pan-European clearing house creates significant economies of scale for clients. This is why they have supported this programme. There are savings from reduced clearing and settlement fees, and efficiencies through collateral deployment from the VAR model which reduces collateral needs. Besides, all these products will be in the same default fund which creates additional efficiencies.”

Attia added: “We are also offering cross-margining between cash and derivatives which represents an improvement from the previous offering through LCH SA.”

Euronext said the cash equity clearing migration was completed successfully over the weekend of November 25-26, combining Euronext’s six markets in a single central counterparty.

Attia continued: “Before that, the clearing of our cash markets was fragmented: Euronext Clearing for the Italian market, LCH SA for French, Dutch and Portuguese markets and Cboe Clear for Dublin. We have achieved a consolidation with our new best-in-class technology and a new risk framework delivering efficiency to clients in terms of margin and the default fund.”

Euronext chief executive and chairman of the managing board Stephane Boujnah said last month the clearing migration is a core part of the group’s plan “to build a new value proposition in Europe”.

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