Fixed Income Listed Derivatives in Europe: Incumbents Face New Threats

Industry Trends


Regulatory uncertainty and the evolving market structure are providing a unique opportunity for exchanges that have not yet operated an interest rate futures or options market in Europe.

In the report Fixed Income Listed Derivatives in Europe: Incumbents Face New Threats, Celent analyzes the entry of new players into the listed interest rate derivatives market. Currently, the leading European exchanges are NYSE Liffe and Eurex. With the introduction of the European Market Infrastructure Regulation (EMIR), the current balance between listed and OTC derivatives is going to be affected, and the clear line between the two will blur. Besides EMIR, Basel III and Capital Requirements Directive implementations in Europe around capital requirements are expected to push some of the OTC flow into listed derivatives.

Changes in the market structure mean that the OTC derivatives trades that currently occur in interest rate swaps (IRS) will be electronically directed in the future to: 1) a request for quote (RFQ) IRS trading venue, and executed bilaterally when the product is extremely customized; 2) an RFQ IRS trading venue, and cleared when the product can be standardized by the sell side; or 3) to an order book IRS trading venue, and cleared when the product is easily standardized.

"Providers are trying to maximize their competitive advantage through their OTC derivatives clearing strategy,” says Anshuman Jaswal, PhD, Senior Analyst with Celent’s Securities & Investments Group and coauthor of the report. “Simultaneously, the new regulatory framework is going to involve the use of very large amounts of collateral, and trading firms are going to struggle to meet their collateral management needs in the next few years. The result will be leading exchanges working on their collateral management and cross-asset netting procedures.”

"Regulations have provided a window of opportunity for entrants in the listed fixed income derivatives market to challenge the leading exchanges," adds Joséphine de Chazournes, Senior Analyst with Celent’s Securities & Investments Group and coauthor of the report. “We are looking forward to seeing if the new competitors will be able to move entrenched liquidity.”

In this report, Celent provides insight into the potential evolution of the fixed income derivatives market in Europe. It provides an overview of current status, discusses the new initiatives that have already been announced, and finally provides potential scenarios of new developments in this market for the next few years.

This 28-page report contains seven figures and three tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary




Status of the European Fixed Income Listed Derivatives Market



European Listed Fixed Income Market Size



Main Players and Offerings


New Competitors Coming Into Play



Other Potential Entrants


Potential Developments



Clearing Is Key



Futurisation of Swaps



Order Book OTC Trading Offerings







Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


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