Frankfurt-based derivatives exchange Eurex has yet to secure bank support for its credit derivatives clearing platform ahead of dealers' self-imposed July 31 deadline to begin clearing European trades.

The race among exchanges to capture over-the-counter business in Europe mirrors the competitive picture in the U.S.

The backing of dealer banks has been key to the success of a U.S. platform run by IntercontinentalExchange Inc. (ICE), while a rival service from CME Group Inc. (CME) has languished and has yet to launch.

Though Eurex has offered a 90% equity stake in its European clearing platform to banks that sign on as members, along with a say in business decisions, no agreements have yet been signed, and exchange officials acknowledged that dealers are in the driver's seat.

Eurex, co-owned by Deutsche Boerse AG (DB1.XE) and SWX Swiss Exchange, remains in discussions with potential stakeholders as more than 20 market participants run simulations on the Eurex Credit Clear platform, which has been operational since late March.

The exchange plans an official launch in conjunction with the July 31 deadline that dealers identified in a February letter to the European Commission.

However, officials warned that dealers may wait until the final days before indicating whether they will join the Eurex platform.

"We don't expect the decision of market participants will come very much ahead of this timeline," said a Eurex spokesman.

Eurex Clearing is licensed and supervised by the Bundesbank and German Financial Supervisory Authority, or BaFin, giving it approval to launch credit derivatives clearing across the European Union.

CME and ICE are also targeting the European market, working with the U.K. Financial Services Authority to gain approval for their regional offerings.

The ICE service is operationally ready ahead of a late July launch, while CME continues to develop its offering.

LCH.Clearnet Group Ltd., the European clearing entity, also plans to launch credit derivatives clearing by the end of the year.

Major banks are the biggest drivers of trade in over-the-counter derivatives like credit default swaps, and their support has emerged as the key factor in the viability of exchange-backed clearinghouses for OTC instruments.

A host of such facilities has sprung up as regulators in the U.S. and Europe push central counterparty clearing as a remedy for systemic risk in bilateral over-the-counter trades, but only one - the ICE Trust - has seen any business.

CME, despite getting the regulatory go-ahead for its U.S. platform in March, has yet to launch as it tries to win support from a handful of major banks.

In London, NYSE Euronext's (NYX) credit derivatives clearing service has been placed under review; though the service was the first CDS platform to market in late December, it failed to draw business and could be wound down as the exchange looks to its New York Portfolio Clearing venture to provide an entry to interest rate swaps clearing in the U.S.

Eurex Credit Clear will limit direct membership to dealer banks, but buy-side participants like hedge funds will get protection via separate booking and margining of positions, according to officials.

The minimum contribution to the guaranty fund is set at EUR50 million, or about $70 million - well above the $20 million minimum required by the ICE facility.

A spokesman said Eurex has no plans to pursue the interest rate swaps market, where LCH.Clearnet already controls nearly half the business worldwide, with the support of major banks.

Instead, the exchange will consider equity swaps as it moves toward a planned "second release" of Eurex Credit Clear later in the year that could expand the product range to U.S. dollar-denominated instruments.

Eurex is also pursuing U.S. regulatory approval to allow American investors to clear over-the-counter trades through its European clearinghouse.

The company said it does not expect OTC clearing to be a significant revenue source this year.

ICE has estimated that its ICE Trust venture will earn $30 million in revenue for 2009, with $24 million in expenses.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com