What EU CCPs must do to win euro swap clearing volume from London before 2028

Why the 2028 equivalence deadline matters for euro swap clearing share

European central counterparties (CCPs) are racing to gain meaningful market share in euro-denominated interest rate swaps ahead of the expiry of UK CCP equivalence in June 2028. Under EMIR 3.0, EU market participants must hold “active accounts” with EU-based CCPs for euro swaps, a requirement aimed at gradually reducing the region’s reliance on London’s clearing infrastructure.

London’s LCH SwapClear continues to dominate the market, clearing about 92.9% of euro interest rate swaps in Q1 2025, while Frankfurt-based Eurex Clearing has expanded its share to 6.9%, up from below 5% a year earlier. With the notional euro swap market estimated at €100–200 trillion annually, capturing even a fraction of this activity has systemic and strategic implications for the EU.

Why EU CCPs have struggled to attract euro swap clearing despite regulatory support

Despite policy backing, EU CCPs remain far behind LCH due to entrenched market dynamics. LCH’s liquidity pool, margin efficiencies, and extensive client base create strong network effects—the larger the participation, the tighter the spreads and collateral netting benefits.

Attempts to shift clearing since Brexit have delivered incremental results. Eurex has doubled its market share over the past year, but other EU CCPs such as Euronext Clearing and BME Clearing still clear negligible volumes. Regulators have acknowledged these structural hurdles, with one EU official stating earlier this year that “active accounts are a first step, but voluntary migration may be insufficient.”

This reflects a broader challenge: unless clearing houses and banks coordinate on pricing and operational readiness, migration may stall, leaving EU CCPs underutilised even after equivalence ends.

What Eurex and other EU CCPs are offering to compete with LCH

Eurex has launched aggressive commercial incentives to close the gap. Its CCP Switch Incentive Program offers up to 100% fee discounts for specific OTC interest rate derivative clearing days through end‑2025. Eurex also introduced quarterly rebates on cleared volumes, expanding its Partnership Program, which shares revenue and governance privileges with top users to encourage sustained participation.

These initiatives have delivered some results. As of June 2025, Eurex reported €43 trillion in OTC notional outstanding, a 23% year-on-year increase, with interest rate swap volumes rising 28% to €18.5 trillion. Meanwhile, Nasdaq Clearing and BME Clearing are improving margin efficiency and multi-CCP connectivity, pitching themselves as alternatives for diversified clearing flows.

Yet liquidity depth remains a critical differentiator. Until EU CCPs can demonstrate consistent bid-offer competitiveness and collateral netting comparable to LCH, many dealers may only use EU accounts to meet minimum regulatory thresholds.

How EMIR 3.0 active account rules and ESMA supervision could accelerate clearing migration

EMIR 3.0, effective since December 2024, requires EU market participants to maintain fully operational active accounts with EU CCPs for OTC euro interest rate derivatives. By June 2025, these accounts must execute a representative number of trades—at least five transactions per product subcategory per period—to meet compliance standards.

ESMA is finalising the technical standards, with stricter supervisory oversight expected from 2026. Eurex officials project 100–200 new active accounts by mid‑2025, as banks and asset managers adjust to the mandate. The European Stability Mechanism’s €74 billion euro swap clearing at Eurex is being cited as a model for other sovereign and supranational issuers considering migration.

Market participants expect that ESMA could tighten compliance by linking capital relief to active account usage levels, increasing the incentive for banks to route meaningful flow through EU CCPs.

What banks and dealers must change in workflows to shift volume to EU CCPs by 2028

Shifting significant clearing volume requires banks to overhaul their collateral and operational workflows. Tri-party agreements, connectivity with multiple CCPs, and collateral optimisation engines need upgrades to replicate netting benefits historically concentrated at LCH.

Traders and risk managers will also need to adjust pricing models to account for margin differentials, liquidity fragmentation, and cross-CCP funding costs. Some banks have begun parallel clearing strategies, testing small-ticket flows through EU CCPs to meet active account rules while preparing for larger-scale migration.

Industry consultants recommend a modular approach, phasing in operational readiness—connectivity first, then collateral netting, followed by scaled product routing—so that volume migration does not disrupt execution quality or client pricing.

Could EU CCP market share reach 20% before the equivalence window closes?

Eurex’s current growth trajectory suggests potential to reach 10–20% of euro swap clearing share by 2028 if migration continues and incentives persist. Regulatory pressure will play a pivotal role. Should ESMA link capital charges or FRTB exposure treatment to EU clearing usage, banks would have a stronger commercial rationale to shift volumes.

However, success will depend on CCPs sustaining competitive fees, collateral efficiency, and operational reliability. The risk, analysts note, is that if migration remains slow, the EU could be forced into either extending equivalence beyond 2028 or mandating abrupt transitions—both scenarios that could destabilise market confidence.

What are the broader implications beyond clearing market share?

A meaningful increase in EU clearing would enhance financial sovereignty, reduce systemic reliance on UK CCPs, and align with the EU’s post‑Brexit capital market integration goals. It would also help supervisors oversee systemic risks more directly, especially under new Basel III and FRTB capital rules, which rely heavily on accurate clearing data.

Stronger EU CCP volumes could also deepen local collateral markets, enabling cross-product margining and improving euro-denominated liquidity pools. For trading desks, greater onshore clearing could simplify regulatory compliance and potentially reduce capital costs in the medium term.

What critical regulatory and market milestones will shape EU CCP clearing competitiveness between 2025 and 2028?

The next three years will be critical in determining whether EU CCPs can translate regulatory initiatives into meaningful market share gains. By mid‑2025, active account rules under EMIR 3.0 will be fully enforced, compelling banks and asset managers to execute representative volumes through EU-based CCPs. In 2026, ESMA is expected to conduct supervisory reviews and may introduce capital-linked usage guidelines to further encourage onshore clearing. By 2027, regulators will assess clearing volume benchmarks to evaluate whether EU CCPs have achieved sufficient traction ahead of the UK equivalence deadline. Finally, in 2028, the European Commission could reassess UK equivalence entirely or impose additional onshoring measures, marking a potential turning point for the region’s financial market infrastructure.

If EU CCPs achieve even modest gains, hubs like Frankfurt and Paris could emerge as credible post-trade centres. But failure would leave the EU financially exposed, with critical market infrastructure still concentrated outside its jurisdiction.