Santander Asset Management Makes a Splash in Eurex’s FX Pool

Story Highlights

• Santander Asset Management joins Eurex to tap into the surging market for centrally cleared FX derivatives.
• Eurex’s FX market has boomed, with traded volume nearly tripling since 2020.
• Centralized clearing offers reduced risk, regulatory clarity, and optimized capital costs for market participants.

Santander Asset Management, a heavyweight in Spain’s asset management arena, has made a strategic splash by joining forces with Eurex, Europe’s dominant derivatives exchange. This move signals Santander’s deep dive into the burgeoning market for centrally cleared FX (foreign exchange) futures and options.

Eurex’s FX Market

Eurex’s FX derivatives market has been on a tear in recent years. Traded volume has nearly tripled since 2020, with a staggering 1.7 million contracts exchanged in 2023 alone. The first quarter of 2024 witnessed a further 16% surge compared to the same period in 2023. This phenomenal growth is fueled by the rising demand for centrally cleared FX instruments, which offer market participants a clear advantage.

Centrally Cleared FX

Centralized clearing acts as a life preserver in the often-volatile waters of traditional over-the-counter (OTC) FX transactions. It significantly reduces counterparty credit risk, a major concern in OTC deals. Additionally, it helps navigate the complexities of uncleared margin rules (UMR), a regulatory framework designed to mitigate systemic risk. Finally, utilizing centrally cleared FX derivatives allows for optimized capital costs, a welcome benefit for asset managers.

Santander Seeks Efficiency and Risk Management Buoyancy

By joining Eurex’s FX ecosystem, Santander Asset Management gains access to the exchange’s buoyancy aids, including low exchange fees and the regulatory certainty of the European Union. “This is a significant addition on our path to becoming the leading FX liquidity hub in Europe,” remarked Jens Quiram, the captain at the helm of FIC Derivatives and Repo Sales at Eurex.

Santander Charts a Course for FX Options

Santander’s ambitions extend beyond the calm waters of FX futures. The firm has set its sights on establishing an FX options business on Eurex. They’ve already charted a course with Deutsche Bank, collaborating to execute the first-ever FX options block trade on the exchange. “We actively collaborate with multiple FX dealers to explore the trading of FX options at Eurex,” said Imanol Urquizu, the head navigator for Derivatives at Santander Asset Management. “Integrating FX futures and FX options within the Eurex ecosystem unlocks operational efficiencies and enhances our risk netting capabilities,” he explained.

Deutsche Bank, a key partner in this venture, views the collaboration as a testament to its commitment to providing exceptional service to clients and fostering market innovation. “Trading FX on Eurex enables clients to benefit from the efficiencies of a listed derivatives market,” stated Mario Muth, the global captain of Platform and Listed Derivatives Sales at Deutsche Bank. He also emphasized the bank’s role in providing liquidity and innovative solutions in the ever-evolving FX market.