- Eurex will expand its partnership program for interest rate swaps to include short-term interest rate (STIR) derivatives segment.
- By combining an EU-based liquidity pool for STIR derivatives with its long-term interest rate (LTIR) derivatives segment and its OTC interest rate offering, Eurex further enhances margin efficiency.
- This market-led solution to create an alternative liquidity pool for STIR derivatives supports the EU’s systemic risk management and strategic autonomy agenda.
Eurex announced plans to expand its partnership program to include short-term interest rate (STIR) derivatives, with go live in Q4. This also includes 3-Month Euro STR Futures referencing €STR. Market participants such as BNP Paribas, Deutsche Bank, Goldman Sachs, J.P. Morgan and LBBW have already expressed an early interest to join.
In addition to euro interest rate swaps and euro credit default swaps, euro STIR derivatives clearing has been identified by the European Securities and Markets Authority (ESMA) as being of substantial systemic importance for the EU’s financial stability. It therefore falls within the scope of measures proposed by the European Commission in December 2022 to reduce overreliance on certain third-country CCPs.
Viable alternative to trade and clear EURIBOR futures and options
Against this regulatory backdrop, Eurex’s partnership program together with major market participants aims to establish a viable alternative liquidity pool for trading and clearing EURIBOR Futures and Options within the EU. This will enable global clients to benefit from a comprehensive product offering including Eurex’s leading LTIR segment, the clearing of OTC interest rate swaps as well as repo transactions.
At the same time, it will build out Eurex’s value proposition for euro-denominated derivatives and repo, delivering efficiencies to a global client base.
Matthias Graulich, member of the Executive Board at Eurex Clearing, said in a statement: “The extension of the Partnership Program is the latest step in Eurex’s efforts to provide the market with greater choice and bring more systematically relevant business into the EU. It helps customers not only to diversify risk across CCPs, but also to benefit from comprehensive cross-product margin efficiencies, lowest funding costs via the broadest range of securities collateral and attractive terms for Euro cash collateral.”
Guillaume Bioche, head of European rates automated market-making at BNP Paribas, said in a statement: “Adding EUR STIR futures and options is a logical extension for Eurex in European derivatives. We can expect benefits and efficiencies across the EUR interest rate curve and across listed and OTC markets.”
David Feldmann, head of Markets D/A/CH at Deutsche Bank, said in a statement: “We are very excited about the creation of an alternative liquidity pool for EURIBOR! The new expanded program complements Eurex’s comprehensive offering of Euro-denominated short- and long-term interest rate futures and options, OTC IRS and Repo products.”
Jan Scheffel, co-global head of STIR Trading at Goldman Sachs, said in a statement: “Eurex is an EU-based exchange and clearing house which is EMIR authorized as ‘QCCP’ (qualifying central counterparty). We are happy to expand our long-standing partnership with Eurex into STIR futures.”
Tom Prickett, head of EMEA Rates Trading at J.P. Morgan, said in a statement: “We have been an early supporter of the OTC interest rate swaps segment of the program. We are engaged on the upcoming extension to this successful program in the interests of promoting increased choice and competition.”
Thilo Rossberg, head of FICC Markets at LBBW, said in a statement: “Being among the first to trade Euro STR Futures at Eurex, we trust in Eurex to provide an alternative liquidity pool for euro short-term interest rate derivatives. Joining the STIR Partnership Program underlines the ambition to constantly strive to be among the first in new market innovations for our clients.”