UPDATE 1-Deutsche Boerse steps up clearing fight with London ahead of Brexit

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LONDON, Oct 9 (Reuters) - Deutsche Boerse has introduced a profit-sharing scheme on interest rate swaps at its clearing business, seeking to wrest trade from the London Stock Exchange amid the uncertainty over Britain's departure from the European Union.

The German company's Eurex Clearing business said on Monday it would launch a partnership programme in November, where members will get a share of profits from clearing interest rate swaps (IRS) depending on the volume of business they provide.

An IRS is a popular derivatives contract used by companies to insure themselves against adverse moves in borrowing costs. The clearing of IRS in Europe is dominated by the LSE's LCH unit.

"This market-led initiative will benefit clients and the broader market place through greater choice and competition, improved price transparency as well as reduced concentration risk," Eric Mueller, chief executive of Eurex Clearing, said in a statement.

Some of Europe's biggest trading houses in swaps, Bank of America Merrill Lynch, Citi, Commerzbank, Deutsche Bank, JP Morgan and Morgan Stanley, have already registered an early interest in the programme, Eurex said.

"We welcome this market-led initiative to promote greater choice, flexibility and transparency for our global client base," said Jerome Kemp, global head of futures, clearing and collateral at Citi.

LCH roughly clears more IRS daily than Eurex has cleared in total so far, but Eurex expects volumes to increase in coming months as banks seek to "Brexit-proof" their operations.

The partnership programme mimics a set-up already in use at LCH, where banks have a large minority stake in the clearing house and a strong say in its running.

The European Central Bank, and French policymakers in particular, have long wanted IRS denominated in euros to be cleared in the single currency area, saying this was necessary to ensure financial stability in market turbulence.

After Brexit, it is unclear whether market participants in the EU will still be able to use LCH in London, because the bloc has proposed a draft law that would require clearing of euro-denominated swaps to take place in the EU under certain circumstances. (Reporting by Huw Jones; Editing by Rachel Armstrong and Mark Potter)