(Adds more detail, context)
By Huw Jones
LONDON, Nov 3 (Reuters) - Deutsche Boerse said on
Tuesday it was increasing the incentives for banks to shift
clearing of euro-denominated derivatives from London to its
Frankfurt operation, the latest salvo in a market battle fuelled
by Brexit.
Britain has left the European Union and access to the bloc
under transition arrangements ends on Dec. 31, with talks on a
free-trade agreement continuing.
Brussels is allowing derivatives clearing houses in London
to continue serving EU investors for a further 18 months to give
banks time to shift billions of euros in positions from the
London Stock Exchange's LCH unit that clears the bulk of
euro denominated interest rate swaps.
Deutsche Boerse's Eurex Clearing had already introduced an
incentive program to encourage banks to move swaps from LCH to
Eurex in Frankfurt, and said on Tuesday it would be strengthened
and extended to June 2021.
"With the expansion of our central counterparty Switch
Incentive Program, we want to make it easier for market
participants to comply with the demands of the regulators and
transfer swap business into the European Union," Matthias
Graulich, a member of Eurex Clearing's executive board, said in
a statement.
A complete waiver in booking fees on portfolio transfers
would mean a Eurex clearing member realising an "economic
benefit" of up to 1.5 million euros ($1.75 million) by moving a
250 billion euro swaps portfolio from London to Frankfurt, Eurex
said.
LCH declined to comment on Eurex's announcement.
More than 500 banks and buy-side firms have been
"on-boarded" for swaps clearing, Eurex said.
"Market share in euro denominated OTC interest rate
derivatives in terms of outstanding volume has been continuously
growing and currently stands at roughly 19%," it added.
LCH Group CEO Daniel Maguire told Reuters in September that
forcing banks to shift euro clearing from the City of London
would prompt a backlash among cost-consious banks.
LCH's market share has hardly budged since Britain voted in
2016 to leave the EU, Maguire said.
($1 = 0.8552 euros)
(Reporting by Huw Jones; Editing by Edmund Blair and Louise
Heavens)