Deutsche Boerse has announced plans to intensify competition with rival London Stock Exchange ahead of Brexit, saying it would expand a profit-sharing scheme. The Frankfurt-based exchange's Eurex Clearing said it will expand its "partnership" programme to include repurchase or repo agreements and foreign exchange traded among banks from the first quarter of 2019.
The more volume that users pass through Eurex, the bigger share of profit they will get. It is similar to a long-standing programme at the LSE's LCH unit, which dominates euro-denominated clearing in Europe. Financial centres such as Frankfurt and Paris are vying to win a share of London's financial market, Europe's biggest, as UK-based financial firms shift some business to new EU hubs ahead of Brexit.
The aim of the repo programme is to increase choice and efficiency for market participants in special repo and general collateral instruments, and to grow in the dealer-to-client repo business, Eurex said. LCH's Paris subsidiary clears repo-related business. Some EU policymakers want euro-denominated clearing moved from London to the euro zone after Brexit.
In the event of a no-deal Brexit, London would likely remain a clearing centre for EU customers to give rivals like Eurex time to build up capacity, an EU document indicated on Wednesday. Eurex launched its programme a year ago to capture a chunk of LCH's euro interest rate swaps business, though it is still dwarfed by its London counterpart.
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