Eurex Clearing to bring digital bonds into cleared repo
Deutsche Börse unit says native digital instruments will also be accepted as margin collateral
Eurex Clearing, the central counterparty (CCP) of Deutsche Börse Group, will clear digitally native bonds alongside traditional securities under one rulebook and risk model, allowing firms to trade and finance them through their existing clearing relationships.
A CCP stands between the buyer and seller in a trade, guaranteeing that it settles and managing the fallout if a participant defaults. Eurex describes the move, announced on Monday 2 November, as making it the world’s first hybrid CCP, covering both traditional and digital business.
Native digital instruments, including bonds issued by the European Stability Mechanism (ESM), will become tradable in the GC Pooling segment of Eurex Repo, cleared by Eurex Clearing and accepted as margin collateral. They will also become eligible for the European Central Bank (ECB) GC Pooling basket. The repo market is where banks borrow and lend cash against securities, usually for short periods.
“Instead of creating isolated digital islands that fragment liquidity and trap capital, Eurex Clearing is building a bridge between both ecosystems,” said Laura Bayley, chief executive of Eurex Clearing.
The firm said clients would not need to build new connectivity, manage separate risk models or put new legal agreements in place to take part in digital markets. Trading in digital and traditional instruments would draw on the same liquidity pool rather than splitting it.
The initiative connects with Clearstream, Deutsche Börse’s post-trade business, which manages traditional and digital assets through its Clearstream Digital Infrastructure. Clearstream allows clients to move securities and cash between traditional and blockchain systems, including settlement in central bank money through the Eurosystem’s Pontes platform.
That infrastructure supported the ESM’s first digitally native bond, a €1bn issuance settled through Pontes last week.
Deutsche Börse said Clearstream and Eurex together aim to cover the full digital post-trade lifecycle, from issuance and cleared repo trading to settlement, custody and the reuse of collateral.