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News: Will Eurex Launch Swap Futures?

24 May 2013 | Ben Larah

An article published today in Risk Magazine states that Eurex are in the process of consulting market participants around the possibility of releasing a swap-futures product similar to the CME Deliverable Swap Future (DSF) contract.

Eurex are apparently trying to figure out whether the US patent for the DSF product, currently licensed to the CME, applies only to swap-futures traded in the US. They could, however, consider launching their own swap-futures product which differs enough from the DSF product as to not infringe any patents. As I understand it, the CME patent concerns the delivery of the future into an underlying swap. If they come up with a product design whereby the contract does not deliver into an underlying swap, there shouldn't be any DSF patent concerns (this is how the Eris Exchange swap-futures contracts work). Furthermore, if they design a swap-futures contract which is creative and unique enough, they may be able to take out their own patent on it.

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Comments

Reblogged this on Carl A R Weir's Blog and commented: I definitely think Eurex will go down the DSF route

Hi Thomas- thanks for this further information. I think your point about collateral obligations is key here- if there's a significant difference in IM requirements between swaps and swap-futures in Europe, this could potentially drive demand.

Eurex has advised us also some time ago, that they are working on a product similar to deliverable swap futures offered by CME. Many treasurers in continental Europe I have been in contact with have interest to investigate swap futures as an alternative to OTC swaps, but never made it a priority to pursue that option as the existing offerings from other providers like CME and ERIS are only covering USD at the current moment. Unless collateral obligations will be less strict, I predict Eurex will be offering such products. Also, See more info about our opinion about swap futures in general here as well: http://foxeye.net/en/MarketCommentary/MarketCommentary.php?commentid=201...