Eurex Clearing Readiness Newsflash | Introduction of Japanese yen (JPY) as an additional cash collateral currency

Dear Clearing Member,

With this newsflash, Eurex Clearing would like to provide more detailed information regarding the introduction of Japanese yen (JPY) as an additional cash collateral currency,  as announced with Eurex Clearing circular 062/21.

In response to requirements from our customers and to support the Eurex Asia strategy related to MSCI derivatives contracts, OTC IRD and Trading Hours Extension, Eurex Clearing is introducing JPY as an additional cash collateral currency that will allow customers to utilize JPY when trading Japanese contracts and in general to improve their collateral mix.

This will provide our Clearing Members with more flexibility, facilitate better risk management and it will further support operational efficiencies during the Asian trading and clearing hours.

This is an optional feature. The effective launch date is 1 August 2021. 

To support clearing activities, please find below additional guidance for Clearing Members that wish to provide JPY as cash collateral currency:

• JPY is already eligible as a currency for VM (variation margin) and non-cash IM (initial margin), so this extension will leverage the proven existing infrastructure of Eurex Clearing.
• The admitted correspondence banks are published on the Eurex Clearing website under the following path: Services > Collateral management > Cash collateral.

For Clearing Members who currently do not clear JPY-denominated products and would like to do so, the required action is to follow the existing onboarding procedures to set up a cash account in JPY.

Eurex Clearing will apply the standard procedures for processing of JPY cash collateral, i.e.:

• JPY deposits will be accepted based on the settlement confirmation of the correspondence bank 
• JPY withdrawals will be processed only if the remaining collateral value covers the margin requirement.

Please note that intraday margin calls will not be issued in JPY.

The type of money “TERM” will be assigned to JPY balances to ensure money is not returned overnight (similar to USD). A pre-advice for a deposit and withdrawal instruction will be required by 2 pm CE(S)T on T-2.

Due to the dependency on the settlement times of JPY during Asian daytime hours, the timing issue (release of JPY prior to collection of other collateral) is mitigated by a temporary double funding.

Clearing Members should note that there are no technical changes required.

If you have any further questions or comments, please send an e-mail to client.services@eurex.com.

Kind regards,
Your Client Services Team
 

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