Chicago-based Clearing Corp. and the European clearinghouse for Eurex AG unveiled details of a global clearing link for trades of futures contracts Tuesday, but federal regulators said the plan needs their approval before it can be implemented.
However, officials at Eurex and Clearing Corp. insisted that no such action is needed before they start providing a link between traders in the U.S. and Europe, and the European and U.S. versions of Eurex.
Eurex US, a Chicago-based version of Eurex, hopes to begin operating Feb. 1, with the global link starting March 28.
But Mike Gorman, director of the Commodity Futures Trading Commission’s division of market oversight, said the commission must sign off on the plan.
“The bottom line is we will have to take some action, and it’s just too early to say what that will be,” he said.
Gorman said it is not clear what type of action would be needed because details of how the link would work have not been submitted to the commission.
The CFTC still is considering Eurex’s application to begin operating Eurex US.
Rudolf Ferscha, Eurex AG’s chief executive, said there is no reason for Eurex Clearing to seek certification by the CFTC.
“It is our opinion that this is not necessary,” Ferscha said. “We will certainly answer any of the questions that the CFTC may have. We are already in conversations with them.
“The Clearing Corp is the U.S. clearinghouse that introduces the clearing functionality. So it’s primarily a conversation between the Clearing Corp. and the CFTC on these questions.”
Dennis Dutterer, Clearing Corp. president, also believes that launching the link would not require special action by regulators.
“It does not require a special application or unique approval process that might be present for other activities or possibly in other jurisdictions,” he said.
But Gorman said federal regulators are insisting the global link not be put into place without their blessing.
A global clearing link will require that Eurex Clearing be registered with regulators in the U.S., or “there would have to be some sort of affirmative commission action … for them to do this,” Gorman said.
For traders, the link is potentially among the most attractive elements of Eurex’s planned arrival in the U.S. A clearinghouse is a middleman in the trading process, guaranteeing both sides of a trade before money changes hands.
Ultimately, the global clearing link would allow the two clearinghouses–Clearing Corp. and Eurex Clearing–to cross-list products. For traders, it would be like dealing with a single clearinghouse, making their transactions cheaper.
European regulators also will take a close look at the plan, Ferscha said.
According to Eurex’s plan, the global link would launch on March 28, and another phase would start on Sept. 12, when Eurex’s European products would be cross-listed on Eurex US.
