Eurex expands FX Futures offering to emerging markets currencies

Dan Barnes
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Eurex will start trading new FX Futures contracts covering Brazilian Real (BRL), Mexican Pesos (MXN) and South African Rand (ZAR) on 10 October 2022. The launch of the three most heavily traded currencies outside the G10 will support growth of Eurex’s FX liquidity hub.

In total, five new contracts will be listed covering the following Emerging Markets currency pairs: BRL/USD, MXN/USD, MXN/EUR, ZAR/USD, ZAR/EUR. An accompanying liquidity scheme will help to support pricing and liquidity. The new contracts will be cash settled in US dollars or euros upon expiry. That will allow clearing members to use their existing infrastructure and will not be required to open new cash accounts in these emerging markets currencies.

Eurex FX Futures are similar to over the counter (OTC) FX forwards but have significantly lower counterparty credit risk (CCR) because financial obligations are guaranteed by Eurex Clearing as the central counterparty (CCP). The bilateral margin requirements in OTC trading under the uncleared margin rules (UMR) or the revised capital requirements under SA-CCR, can potentially lower the cost of trading centrally cleared FX Futures over OTC FX forwards in terms of margin, funding, and operations.

Jens Quiram, global co-head FIC derivatives and repo sales at Eurex, says, “We see more and more firms coming into the scope of the UMR who are looking for solutions to reduce their average aggregate notional amount and bilateral margin requirements. Listed FX futures can address these challenges while reducing the overall risk of a portfolio due to Eurex Clearing’s multilateral netting capabilities.”

Eurex FX’s offering includes now listed FX futures on 25 currency pairs. When calculating margins, the entire portfolio is accounted for, which is designed to create efficiencies in the collateral to be deposited. Eurex also offers clearing of OTC FX non-deliverable forwards (NDFs) in Asian and Latin American currencies.