Eurex has launched portfolio margining between FX and fixed income derivatives, in an effort to support institutional access to OTC FX liquidity.
Terence Saayman
The new offering is also backed by BNP Paribas and JP Morgan, who will enable FX futures execution through exchange for physical (EFP) workflows.
Through this, clients will be able to offset FX futures and options exposures against eligible fixed income positions at Eurex Clearing, as well as convert spot or forward transactions into cleared Eurex FX futures.
“By aligning margin requirements more closely with the true economic risk across FX and fixed income instruments, Eurex Clearing’s margin methodology optimises capital requirements for clients while supporting regulatory objectives,” said Terence Saayman, head of risk methodology ETF at Eurex Clearing.
“Enhanced bank participation further boosts market liquidity, benefitting all clearing members and end users.”
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The move also supports institutional participants in tackling key challenges in the FX market, such as reducing margin requirements and boosting funding efficiency.
The offering was developed in collaboration with Union Investment, who acted as a buy-side partner, and aligns with growing client demand across the market for greater funding and collateral efficiency.
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“The combination of portfolio margining and EFP-based FX futures execution is an important development for our FX trading activity,” said Rico Milde, head of FX trading at Union Investment.
“It enables us to access established OTC FX liquidity through our banking relationships while benefitting from the risk management, transparency and capital efficiencies of cleared listed derivatives. The ability to offset FX exposures against our fixed income portfolios at Eurex is a game changer for our collateral efficiency.”