Eurex Clearing boss warns of negative rates hit on sec finance unit

Clearstream’s global securities finance (GSF) could face continuing declines in revenue as a result of negative rates in Europe, according to the head of Eurex clearing. 

Speaking during Deutsche Boerse’s earnings call, Erik Muller also suggested that a reduction in demand for its GSF products, such as securities lending and collateral management has affected the division. 

“On the GSF business, what we are seeing is that really the negative rates have been affecting our product set in that area and the Central Bank funding has become the primary source of market influence.” 

“The demand for some of the secured products that we have including the GC pooling product, or the repo products that we have out there has been on the decline,” said Muller. 

The suggestion comes after Deutsche Boerse revealed in March that its GSF average outstanding had decreased by 16% to €530.2 billion compared to €628.4 billion in the same period last year. 

Muller also said that such changes may have a permanent effect on Clearstream’s GSF business in the market. 

“We are seeing also that once you would expect those policies to go back to normal and that the money market and the secured money market in particular will not go back to how it was before,” he adds

“So before you had a situation where many banks and also the corporates were very comfortable to put their money into other institutions on an unsecured basis. 

“So definitely deploying the collateral and the products that we have on the GSF are the way forward in our view and the money market once it goes back to normal will be more of a secured money market… But I think we should expect further cyclical pressures on that line item for the foreseeable future until those policies change back.”