Derivatives exchange Eurex is set to include short-term interest rate (STIR) derivatives into its partnership programme. This follows ESMA establishing STIR derivatives clearing as of significant systemic importance for the financial stability of the EU.
Eurex stated that its goal is to “enhance its cross-product efficiencies while also supporting the European systemic stability and strategic autonomy agenda”.
Matthias Graulich, executive board member at Eurex Clearing, said the extension would help bring more systemically relevant business into the European Union.He added: “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.”
The partnership programme is aiming to establish an EU-based viable alternative liquidity pool for trading and clearing EURIBOR Futures and Options. Through this, global clients will be able to benefit from an offering which includes: Eurex’s leading LTIR segment, the clearing of OTC interest rate swaps, and repo transactions.
David Feldmann, head of markets D/A/CH at Deutsche Bank, was particularly enthused with the introduction of an alternative liquidity pool for EURIBOR, he said: “The new expanded programme complements Eurex’s comprehensive offering of Euro-denominated short- and long-term interest rate futures and options, OTC IRS and Repo products.”
The programme is also complimented by the three-month Euro STR futures referencing €STR – announced last November (2022) and launched this January (2023). At the time Eurex expressed that it was an important milestone in both the establishment of the €STR as the new benchmark risk-free rate, and in expanding the exchange’s EUR-denominated fixed income product offering.
Both the STIR partnership programme and a re-launch of EURIBOR Futures and Options is planned for Q4 2023. To date, BNP Paribas, Deutsche Bank, Goldman Sachs, JP Morgan and LBBW have expressed interest to join the new program components.
According to the business, clients which fully register by 31 July 2023 will benefit from an extra reward within the framework.
Guillaume Bioche, head of European rates automated market-making at BNP Paribas, said: “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.”