Implementación de la propuesta seleccionada en la finca el Diviso de la vereda Santa Rita Rita.

Clearing forms the interface between trading and post-trading tasks, such as settlement and custody. Eurex Clearing is Eurex’s fully inte- grated clearing house. With around 2.3 billion transactions processed in 2008, it is the market leader in Europe.

Eurex Clearing covers a wealth of trading prod- ucts across all key asset classes, such as deriv- atives, equities, bonds, or energy. In particular, Eurex Clearing settles all derivatives market products traded via Eurex. At the same time, the clearing house is the central counterparty (CCP) for the Eurex derivatives market, the Frankfurt Stock Exchange, the Irish Stock Exchange, Eurex Bonds and Eurex Repo, as well as EEX. As such, Eurex Clearing guarantees that each trade executed on these markets is settled, even if one of the trading partners defaults. To this end, each clearing member deposits collateral (margin) with Eurex Clearing. In addition, the clearing house maintains a clearing fund to cover the counterparty risk which is funded by all clearing members under the terms of the clearing conditions. In 2008, the monthly aver- age of market risk cleared by Eurex Clearing

Algorithmic traders generate 30 percent of trading volume

44

8 52

30 The Business: Eurex

amounted to some €9,700 billion gross. By netting positions and calculating default risks the CCP reduced the total market risk to €44 bil- lion net. This remaining net risk of a clearing member defaulting overnight was collateralized by the clearing members with €52 billion on average. In December 2008, Eurex Clearing even managed collateral in securities and cash for its customers averaging €63.5 billion, an increase of 48 percent compared to the same month of the previous year.

Maximum default protection and effective risk management in on-exchange trading …

In 2008, the bankruptcy of Lehman Brothers International (Europe) demonstrated the funda- mental reality of counterparty risk and served as a vivid illustration to all market participants and regulators of how important stable financial markets are. As Europe’s largest central coun- terparty, Eurex Clearing assumes a key role, es- pecially during times of crisis, in stabilizing the financial markets and safeguarding market in- tegrity. Eurex Clearing provided fresh proof of its performance and reliability:

■ After Lehman Brothers defaulted, Eurex

Clearing transferred 99.5 percent of all out- standing customer positions to other clearing participants within one week. The market risk of any positions still outstanding was covered at all times by the collateral deposited previ- ously with Eurex. By settling open positions effectively, Eurex Clearing avoided any domino effects on other market participants and thus significantly limited the systemic risk of de- fault by other market participants.

■ Eurex Clearing’s permanent risk management

is unique. Eurex Clearing is the world’s only major clearing house to control risk continu- ously by recalculating risk positions every five minutes during trading hours. The outstand- ing positions of each clearing participant are valued at market prices. In case the risk position deteriorates, additional margins are called immediately. This is only possible

because trading and clearing are integrated under one roof. The necessary verification processes are directly built into the trading system and risk management is carried out simultaneously. In 2009, risk management will be further enhanced to real-time.

… and for off-exchange transactions

Over 80 percent of global trading in derivatives is off-exchange, or over the counter (OTC). In view of the impact of the crisis in the financial markets, OTC participants in particular have a growing need to cover their risks through a cen- tral counterparty. Regulators in Europe and the US, too, are increasingly focusing on the advan- tages of a clearing house when considering measures to stabilize the financial markets in the long term: the European Commission and the European Central Bank have explicitly en- dorsed the introduction of central clearing ser- vices for OTC trading to boost market trans- parency and integrity.

Eurex Clearing is the European market leader in OTC derivatives clearing and offers a broad range of functions and products. In 2008, it continued to extend its offering for OTC trad- ing, thus increasing the volume processed in this category by 44 percent to 854.3 million contracts:

■ The Multilateral Trade function is a recent introduction. It allows brokers to enter OTC transactions (known as block trades) involv- ing more than two counterparties on one side. Even if there are several counterparties, the transactions are processed automatically and the default risk is eliminated.

■ At the same time, all trades involving several

parties on the opposing side are subject to deal-based pricing: regardless of the number of partial executions, Eurex Clearing only charges one price for the whole block trade.

Clearing house for on-exchange and OTC trading

31 The Business: Eurex

■ In addition, Eurex has considerably lowered

the fee caps for OTC block trades in equity options and equity futures. This makes the clearing house even more attractive for very large transactions, which would previously have been traded over the counter.

■ The Exchange for Swaps function has been

extended and also includes equity index swaps since November 2008. This allows market participants to combine exchange- traded index futures with the corresponding equity index swaps, thus transferring their trading volumes to a regulated market.

Eurex and ISE: Merger strengthens

both partners

In December 2007, Eurex completed the merger with ISE. Together, Eurex and ISE are a leading global derivatives marketplace with product leadership in equity and equity index derivatives trading. The central idea behind the merger is to leverage the strengths of both or- ganizations. While it benefits from the parent company’s international standing and know-how, ISE continues to operate independently under its own brand and management team. Thus, its fundamental strengths – its entrepreneurial spirit and creativity as well as market and tech- nology expertise – have been preserved. ISE’s primary business is its all-electronic op- tions exchange, which offers US dollar-denomi- nated options on equities, ETFs, indices and fixed-income products. With over one billion contracts traded in 2008 (up 25 percent year- on-year) and a 30 percent share of the overall market for exchange-traded US equity options, ISE is the world’s largest equity options exchange. The ISE Stock Exchange, which was launched in September 2006, was acquired by Direct Edge Holdings in December 2008. ISE is posi- tioned in an optimal way to participate in the US equities market through its 31.5 percent ownership stake in Direct Edge, the fastest growing venue for equities trading in the US. Furthermore, ISE is a leading provider of com- prehensive market data products for investors.

Complementary partnership with future ambitions

Global partnerships are becoming increasingly important in today’s financial markets, and par- ticularly so when they result in a complementary customer base and joint product development opportunities. Eurex and ISE jointly have some 590 members, of whom only around 40 trade at both exchanges. Eurex, ISE and The Options Clearing Corporation have initiated a joint proj- ect to develop a transatlantic link for trading and clearing. The link allows Eurex members to access ISE’s options market using their existing Eurex connections. Customers will benefit from highly efficient access to the world’s largest equity options market – a major step ahead in transatlantic market integration on the deriva- tives side. In addition, Eurex and ISE are work- ing closely together with the US Securities and Exchange Commission (SEC) to achieve mutual recognition of regulatory standards for securities. Currently Eurex may only distribute selected futures products that fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) in US markets.

Joint initiatives focus on product range and technology

In order to continuously expand its product portfolio, ISE plans to list options on Eurex’s key

benchmark products, such as the DAX®_bench-

mark index, for example, pending approval of US regulatory authorities in charge.

A very important joint project between ISE, Eurex and Deutsche Börse Systems is the development of the next-generation trading platform. The new system will be deployed first at ISE and may subsequently also serve as a common platform for Eurex and the cash market. ISE will go live with the new trading system in 2011 (see chap- ter Information Technology for details).

Eurex and ISE: leading in on- exchange deriva- tives trading Over 1 bn contracts traded on ISE ➔ise.com

32 The Business: Market Data & Analytics

Market Data & Analytics: Ensuring Stability