Eurex Clearing
1. Introduction
With this circular, Eurex Clearing announces the production launch of EurexOTC Clear Release 15.0 on Monday, 3 July 2023. In this context, functional, GUI and report changes are expected as highlights of the release. In addition, a simulation environment clean-up will be performed. Please see a detailed list of the changes that are part of EurexOTC Clear Release 15.0 in section 3.
The timeline for the new release is as follows:
Simulation start: 17 May 2023
Production start: 3 July 2023
Learn now more about the EurexOTC Clear Release 15.0 on our dedicated initiative page on the Eurex Clearing website www.eurex.com/ec-en/ under the following link: Support > Initiatives & Releases > EurexOTC Clear Releases > EurexOTC Clear Release 15.0. Circulars, timeline and much more information will be available there for you.
2. Required action
Functions, services and technical changes to be introduced with this release will have an impact on the internal processes of Clearing Members, FCM Clearing Members, and their clients who clear EurexOTC Clear products (hereafter: EurexOTC Clear Members).
Therefore, it might be necessary for EurexOTC Clear Members to update their internal processes and technical interfaces (e.g. XSDs for EurexOTC Clear Reports, Eurex Clearing FpML Interface).
In order to improve the quality of the OTC simulation environment in advance of its upcoming release, Eurex Clearing will perform a structured clean-up of old trades in the simulation environment on Monday, 24 April 2023. Therefore, all trades captured before Monday, 21 November 2022 will no longer be available in the simulation environment.
3. Details of the initiative
A. Changes to be introduced with EurexOTC Clear Release 15.0
Eurex Clearing has provided a description of the above-mentioned changes in the Functional Release Notes of EurexOTC Clear Release 15.0. The document is attached to this circular and may also be accessed via the Member Section under the following path:
Resources > Eurex Clearing > Documentation & Files > EurexOTC Clear > System Documentation > Overview
All changes will be reflected via documentation updates as well which will be published according to the Eurex Clearing Member Communication Calendar. The updated documents as part of EurexOTC Clear Release 15.0 will be available in the Member Section under the path mentioned above, under “System Documentation”.
B. Overview of functional changes
Removal of sub-sampling from initial margin calculation
The Initial Margin (IM) calculation methodology for OTC trades will be changed by replacing the current five non-overlapping risk factor sub-samples by a single overlapping risk factor sample for each Liquidation Group in order to calculate the components of the IM (Market Risk Component, Liquidation Risk Adjustment and Time to Expiry Adjustment – TEA is applicable only for NDF).
Changes in reports, in the MC GUI and in the MC API are expected as well. For details, please refer to the relevant sections in the Functional Release Notes.
Introduction of Package Trade Clearing
With EurexOTC Clear Release 15.0, Eurex Clearing will expand its service by offering a new feature for loading and clearing grouped trades called package trades. The new feature will initially be offered for the in-house trade loading interface (Trade Entry API). The Package Trade Clearing feature allows clients and Members to load a group of IRD or NDF trades from an Approved Trade Source system in a single execution (up to 200 bilateral trades sent as a single package trade submission request) and have them cleared in the Eurex system. Clearing of the grouped trades takes place at the package level, where the margin is calculated for the entire package and all trades are novated within ten seconds.
With EurexOTC Release 15.0, Eurex Clearing will technically support the package clearing functionality. Members can employ this functionality only if the Approved Trade Source (ATS) through which the Member is submitting the package for clearing is connected to Eurex Clearing via its Trade Entry API and supports this functionality from their end, through this channel. After the required ATSs are able to support this functionality and successfully submit package trades for clearing, Eurex Clearing will inform Members of its availability in the simulation environment. Members are recommended to contact the ATS through which they would like to submit package trades for clearing to learn about the ATS's readiness for testing and productive package trade loading on their end.
The following ATS entities are connected to Eurex Clearing via the Trade Entry API:
Further details about the functionality will be provided in the EurexOTC Clear Procedures Manual at a later stage.
Maximum Maturity Extension from 30 to 50 years for EUR-HICPxT
The maturity of Euro HICPxt (Non-revised Eurozone Harmonized Index of Consumer Prices excluding Tobacco or relevant Successor Index) is being extended from a current eligibility of 30 years + 10 days to 50 years + 10 days.
Please note that the details on the trade eligibility criteria enhancements will be reflected in the product list of OTC Release 15.0, which will be available in the Member Section in April 2023.
Offsetting IR risk from IRS and Inflation Swaps in LA calculation
This change is relevant for the Liquidity Add-On (LA) calculation within the Initial Margin (IM). Currently, the Interest Rate risk (IR) of Interest Rate Swaps is not netted with the Interest Rate risk of Zero-Coupon Inflation Swaps (ZCISIR). From EurexOTC Clear Release 15.0 onwards, the offsetting/netting effects between those two sources of IR risk are recognized by aggregating them and by thus treating them as a whole.
FpML upgrade from version 5.6 to version 5.7
With EurexOTC Clear Release 15.0, Eurex will upgrade the FpML version from 5.6 to 5.7. This upgrade of FpML will not affect the process of loading a single IRS or NDF transaction via existing interfaces such as via Trade Entry API, TradeServ or MarkitWire. However, it will affect the generation of new trade notification messages and Member reports as well as the simulation of the margin for a given portfolio via the MC-API interface. From EurexOTC Clear Release 15.0 onwards, all EurexOTC Clear xsd schema will be in FpML 5.7 standard.
Clearing Members that want to utilize the Package Trade Clearing functionality will need to be required to update to FpML 5.7, since the package id field is supported in the new version of FpML.
Improvement of ZCIS handling for sensitivity-based Margin Calculator requests
With EurexOTC Clear Release 15.0, a more sophisticated formula will be used for the handling of Zero-Coupon Inflation Swaps (ZCIS) within sensitivity-based Margin Calculator requests. As before, the Initial Margin contribution of ZCIS will be estimated based on the sensitivities with respect to the break-even inflation rate (as provided by the user). Within this estimation, the Margin Calculator internally uses a slightly adapted formula for the transformation of the break-even rate sensitivities to risk factor sensitivities. The new formula is more accurate, especially for the case of large inflation rates (as observed in the recent years).
The change of the formula will happen automatically with deployment of Release 15.0. There is no action required by Clearing Members, and the sensitivities are to be provided in the same way as before.
There is no impact on productive margins, and there is also no impact on the “regular” (i.e. trade-based) Margin Calculator requests.
Report changes
The following changes will be done in the reports of EurexOTC Clear:
For further details on the report enhancements, please refer to the EurexOTC Report Manual for OTC Release 15.0 which will be published in April 2023 in the Member Section.
GUI enhancements
The following enhancements will be implemented in MC GUI:
The following enhancements will be implemented in OTC GUI:
API changes
The API modules of EurexOTC Clear will be enhanced due to the following changes:
Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or FCM Clearing Conditions of Eurex Clearing AG, as applicable.
Attachment:
Further information
Recipients: | All Clearing Members, Basic Clearing Members, FCM Clearing Members, Disclosed Direct Clients of Eurex Clearing AG and vendors | |
Target groups: | Front Office/Trading, Middle + Back Office, IT/System Administration, Auditing/Security Coordination | |
Contact: | client.services@eurex.com | |
Web: | Support > Initiatives & Releases > EurexOTC Clear Releases > EurexOTC Clear Release 15.0; Member Section | |
Authorized by: | Dmitrij Senko |
