First CCP in Europe to offer margin offsetting within asset classes and across OTC and listed derivatives/ Entire euro-denominated yield curve covered for the first time in a portfolio margining approach
Eurex Clearing, the clearing house of Deutsche Börse Group, has introduced its second release of the new risk system Eurex Clearing Prisma. With the new development, clearing members and clients are able to benefit from portfolio margining capabilities within an asset class as well as cross-margining between listed fixed income products and the OTC IRS business. Eurex Clearing is Europe’s first and only CCP to offer this highly user-requested approach.
Since the end of May, clearing users can realize margin offsets between listed fixed-income (Schatz, Bobl, Bund, Buxl) and money market derivatives (Eonia, Euribor), i.e. the entire euro-denominated interest rate curve. Simultaneously, they can also use their existing portfolios in these interest-rate derivatives traded at Eurex Exchange to offset their margin requirements for their interest rate swaps cleared via EurexOTC Clear.
Nick Chaudhry, Head of OTC Clearing at Commerzbank C&M commented: “Cross margining solutions allow clients the potential to secure capital efficiences, and it is likely to be a powerful driver of clearing flows and liquidity going forward as the OTC clearing market matures.”
“Clients are increasingly focused on the complete front to back clearing experience, from ease and quality of execution to the optimization of collateral and other post-trade processes. We expect that the ability to provide meaningful margin offsets will become a key differentiator amongst clearing platforms going forward. We are pleased to be working with Eurex Clearing to offer cutting edge cross margining solutions to our clients”, said Silas Findley, EMEA Head of OTC Clearing at Citi.
“As exchange traded and OTC products converge, we see the ability for clearing houses to offer cross product margining as a key differentiating factor. Clients will need to select a clearing broker that has strength in both asset classes and cross product margin. Morgan Stanley is committed to offering segregation and margin solutions for our clients”, said Andy Ross, Europen Head, Listed & OTC Clearing, Morgan Stanley.
“Our portfolio-based risk management methodology Eurex Clearing Prisma is an innovative way to maintain accurate counter-cyclical margin levels, while in parallel providing considerable capital efficiencies. As the first European CCP we are enabling our customers to cross-margin within listed asset classes and across OTC and listed derivatives markets. Eurex Clearing Prisma incentivises holding balanced portfolios which represent lower risk and have lower capital and funding requirements thus creating a win-win situation for the markets we clear,” said Thomas Laux, Chief Risk Officer of Eurex Clearing.
Eurex Clearing Prisma calculates combined risks across all markets for products that share similar risk characteristics within customer or proprietary positions according to liquidation groups resulting in more accurate risk calculations. Depending on the nature of individual portfolios, Eurex Clearing expects potential margin efficiencies of up to 70 percent.