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Proposed Global Clearing Link Open for Comment

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WASHINGTON (–The Commodity Futures Trading Commission requested public comment on a request from The Clearing Corp., Chicago, that it be permitted the first stage of a link with Eurex Clearing AG.

Phase one of this new link, a move that follows up on the CFTC’s designation earlier this year of Eurex U.S. as a designated contract market, will mean if approved that U.S. customers of Eurex U.S., also known as the U.S. Futures Exchange LLC, would be able to clear through Clearing Corp. futures and options traded on Eurex Frankfurt AG. That would give them access to derivatives on the German Bund, Bobl and Schatz, as well as on the German stock market index DAX and Dow Jones Euro STOXX 50.

The Clearing Corp. made its formal request for approval on April 26 in a letter prepared by its counsel, Mayer, Brown, Rowe & Maw, LLP, Chicago. The letter contended that the CFTC has in other instances “granted relief comparable to that which is being requested” now, and cited a mutual offset system established between the Chicago Mercantile Exchange and the Singapore International Monetary Exchange, which was approved by the CFTC staff in an interpretive letter, 1984.

The Clearing Corp. wants CFTC approval so that it and participating futures commission merchants will be able to establish and maintain combined original margin and variation settlement accounts for both dollar denominated contracts traded on Eurex U.S. and euro-denominated futures and options traded on Eurex Frankfurt AG. Absent CFTC authorization, such commingling of accounts would violate section 4d of the Commodities Exchange Act.

On May 3, when the CFTC requested public comment, it set a May 14 deadline. The following day, Eurex issued a statement saying that what it calls “phase one” of the link would be available for implementation as soon as the CFTC approves. “With this phase of the Global Clearing Link, we deliver to our customers trading on Eurex the benefits of global reach with local clearing and clearing choice,” said Rudolf Ferscha, chief executive of Eurex, in the statement. No date has yet been set for phase two.

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