* No Deutsche Bank jobs have moved as a result
* Helps Eurex efforts to capitalise on Brexit
* Eurex says has 8 percent of euro clearing market (Updates market shares, analyst comment)By Tom Sims and Huw JonesFRANKFURT/LONDON, July 30 (Reuters) - Deutsche Bank has moved the clearing of a "large part" of neweuro-denominated derivatives trades from London to Frankfurt, asfinancial firms ramp up their Brexit preparations.The shift by Germany's largest bank, which was confirmed bya spokesman on Monday, is a boost to Deutsche Boerse's efforts to gain ground from London in the euroclearing market. This ensures a deal completes even if one sideof a trade goes bust, as Britain exits the European Union.London Stock Exchange's LCH division has longdominated clearing of euro-denominated derivatives like interestrate swaps, which are used by companies to cover themselvesagainst unexpected moves in borrowing costs.The worry for the City of London is that if chunks ofclearing move elsewhere, other activities like trading and jobscould follow, eating away at Britain's biggest economic sector.LSE declined to comment on Deutsche Bank's largely symbolicmove, first reported by the Financial Times, which was widelyexpected given that its base is in Frankfurt and it is movingother activities there due to Brexit.The Deutsche Bank spokesman said no jobs were beingtransferred and that the bank was effectively pushing adifferent button to route the clearing to Eurex, DeutscheBoerse's clearing division, rather than LCH.International banks with European bases in London have beenopening hubs in the EU to avoid Brexit disrupting business.Meanwhile trading firm Jane Street, one of the largestplayers in exchange-traded funds, said on Monday it had openedan office in Amsterdam, giving it a location from which to serveEU clients when Britian leaves the bloc. The Dutch capital, with high-speed digital infrastructure inthe heart of Western Europe, has become a favourite destinationfor trading businesses looking for an alternative to London.And Credit Suisse is looking to shift about 50 jobsfrom London to Madrid as part of its efforts to continue doingbusiness in the European Union after Britain leaves the bloc in2019, a source close to the bank said on Monday. The European Central Bank in Frankfurt, which declined tocomment on Monday on Deutsche Bank's move, told Reuters lastweek that being connected to local market infrastructure likeclearing is a requirement for a euro zone licence. LCH has see strong growth, with interest rate clearing atSwapClear up 23 percent in the first half of 2018 at $575.8trillion, though a large chunk is denominated in dollars.A spokeswoman for Eurex said that it now has a market shareof 8.9 percent in notional outstanding euro clearing, up fromvirtually zero a year ago, though still tiny compared with 89.07percent for LCH, according to calculations from Eurex.Consultants Clarus have said the growth in Eurex has mainlycome from euro denominated forward rate agreements (FRAs) orshorter-term products, rather than the full-duration rate swapsthat LCH clears.There are also no signs that Deutsche Bank or its peers areshifting existing euro positions from LCH to Eurex, a cumbersomeprocess that would take time and customer permission, bankerssay.
BALKANISEDDeutsche Boerse has set up a clearing business model similarto that of LCH by introducing a profit-sharing scheme lastOctober to attract interest rate swap clearing.There are now 29 firms in the scheme with more to come."Our focus for the next six months will be to increase buyside activity based on the good price quality provided by thebanks participating in our partnership program," Eurex said.The ECB has long wanted euro-denominated clearing relocatedfrom London to the euro zone, arguing it should have someoversight, given that it would be called on to inject euros inthe market if a clearing house got into trouble.The EU is in the process of approving a draft law that willmean direct EU oversight of LCH in London after Brexit if itwants to continue clearing euro transactions for customers inthe bloc, otherwise clearing would have to relocate to the eurozone.Officials at the Bank of England, which regulates LCH, haveargued that splitting euro clearing would fragment markets andbump up costs for users, a view disputed by Eurex."Given the costs that such a balkanised clearinginfrastructure would incur for European corporates, we considerenhanced regulatory oversight of existing arrangements to be themost likely outcome," Berenberg analysts said last month.But industry officials say a shift in some volume could evenhelp LCH by making forced relocation less pressing.Some LCH euro repo clearing has already moved from London toLCH's Paris subsidiary, but this may not be enough to satisfythe ECB.
(Reporting by Tom Sims and Huw JonesEditing by Edward Taylor/Louise Heavens/Jane Merriman/AlexanderSmith)