Eurex Clearing Prisma upgrades portfolio margining

Eurex Clearing, Europe’s leading clearing house, has launched its next-generation risk management system, Eurex Clearing Prisma, into production.

Eurex Clearing Prisma applies a portfolio methodology compared to traditional product-by-product based margining approaches. In a stepwise approach, the new system will be rolled out for all products cleared by Eurex Clearing and replace the current Risk Based Margining methodology.

The launch is a key element in Eurex Clearing’s strategy to strengthen market safety and efficiency. By capturing risk reducing portfolio effects accurately, Eurex Clearing Prisma promotes hedged positions and increases capital efficiency. After full roll-out, Eurex Clearing will, as the first major clearing house, apply a single consistent methodology and system across all asset classes cleared including listed and OTC products and thereby increase operational efficiency.

“The introduction of Eurex Clearing Prisma strengthens our position as an industry leader in CCP risk management. With the launch of this next-generation risk management system, our customers will benefit from industry-leading technology which allows significant efficiencies and savings. With Eurex Clearing Prisma we set new standards in CCP risk management and contribute to market safety and integrity,” said Thomas Book, CEO of Eurex Clearing.

A CCP risk management system determines collateral requirements for clearing members and clients to cover future risks of their positions held with the clearing house. For this calculation, Eurex Clearing Prisma applies a simulation-based Value-at-Risk model which covers historical and hypothetical stress scenarios to be stable and to avoid cyclicality.

Key advantages of Eurex Clearing Prisma are:

Eurex Clearing Prisma will allow cross-margining between listed and OTC derivatives in a single methodology and thus significantly improve capital and operational efficiency.

The calculation captures multiple risk factors more accurately by applying cross-product scenarios and accounts for portfolio correlation and diversification effects.

The margining methodology factors in liquidity risks, concentration risks, and correlation risks as standard components of the model to increase robustness of the margin calculation.
Eurex Clearing Prisma is a full real-time risk management system using state-of-the-art technology, continuing Eurex Clearing’s pioneering role in real-time risk management, which has already been applied since 2009.

The migration to the new system will be implemented in a stepwise approach. The first release covers listed equity derivatives and equity index derivatives and is available for clearing members on an optional basis. The next step will cover fixed-income derivatives and cross-margining. The new methodology is already applied to Interest Rate Swaps having been offered through EurexOTC Clear since 13 November 2012.

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