Money Market Derivatives: Introduction of Inter-Product Spread Strategies and introduction of a temporary transaction fee waiver for certain products

1.  Introduction

The Management Boards of Eurex Deutschland and Eurex Frankfurt AG took the following decisions with effect from 11 December 2023:

• Introduction of Inter-Product Spread Strategies "Euribor-Euro-STR Spread" as Combined Instrument
• Amendment of the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland pursuant to Attachment 1
• Amendment of the Annex to the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland pursuant to Attachment 2

Production start: 11 December 2023

The Executive Board of Eurex Clearing AG decided effective 1 December 2023:

From 1 December 2023 up until 31 December 2024, Eurex Clearing AG will waive all M-Account transaction fees in Futures Contracts on Three-Month Euribor (FEU3), Three-Month Euro STR (FST3), Options on Three-Month Euribor Futures (OEU3) and One- to Four-Year Euribor Mid-Curve Options Contracts (OEM 1-4) pursuant to Number 3.1 of the Price List of Eurex Clearing AG.

This circular contains all information regarding the introduction of the new products as well as the amended sections of the relevant Rules and Regulations of Eurex Deutschland for the introduction of the Inter-Product Spread Strategies.

2.  Required action

Inter-Product Spread Strategies are available to all Members and Traders set up to trade both futures leg products from which the Inter-Product Spread (“IPS”) draws its Leg Instruments. 

The maximum order size restrictions that apply at clearer, member and trader level will be maintained for the futures products that are considered as leg products of an Inter-Product Spread.

3.  Details of the initiative

A.    Introduction of Inter-Product Spread Strategies "Euribor - Euro-STR Spread" as a combined instrument

The Inter-Product Spread between the two futures contracts allows market participants to buy a contract in one futures instrument and simultaneously sell a contract in the other futures instrument that is part of the IPS. Only futures instruments with the same display month are part of an IPS whereby the display month is given by the contract date of the corresponding futures contract. Please note that the expiration of the Euro STR (Product ID: FST3) leg contract will expire 3 months later than the Euribor leg (Product ID: FEU3) (e.g. Euribor DEC contract vs. Euro-STR DEC contract with Euribor expiration in December and Euro-STR expiration in March). The IPS between Euribor and Euro-STR futures will be traded in a separate order book, with synthetic matching into the respective order books of the leg products (implied-in) and with matching of outright leg contracts in one leg product against synthetic combinations of IPS and the other leg product (implied-out). 

The buyer of an IPS between the Euribor Future and Euro-STR Future purchases a future contract on the Euribor and sells a future contract on the Euro-STR. The leg ratio between the two contracts remains constant at 1:1. Quotation is in index points with the smallest tick size being 0.0025 index points.

With effect from 11 December 2023, Eurex Deutschland will introduce corresponding IPS Strategy pairs on the first seven quarterly months in Euribor, so that the following IPS Strategy pairs will be available at the start on 11 December:

1) Euribor DEC23 - Euro-STR DEC23
2) Euribor MAR24 - Euro-STR MAR24
3) Euribor JUN24 - Euro-STR JUN24
4) Euribor SEP24 - Euro-STR SEP24
5) Euribor DEC24 - Euro-STR DEC24
6) Euribor MAR25 - Euro-STR MAR25
7) Euribor JUN25 - Euro-STR JUN25

Trading in the respective IPS ends simultaneously with the expiry of the Euribor futures leg. The generation of a new seventh Inter-Product Spread strategy will take place after the expiry of the Front-Month Euro-STR Futures contract. This means that as of 21.12.2023 - one trading day after the expiry of the current Front-Month Future contract Euro STR SEP23 (expiry on 20.12.2023) - the IPS contract with the pairing Euribor SEP25 - Euro-STR SEP25 will be available.

Market participants can test the IPS functionality already in the simulation environment with the above-mentioned features. 

For the detailed Contract Specifications, please see Attachment 1.

The full version of the updated Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland will be published on the Eurex website www.eurex.com as of start of trading under:

Rules & Regs > Eurex Rules & Regulations > 03. Contract Specifications

Special situations due to the synthetic matching of the IPS to the underlying futures contracts and consequences of transaction cancellations

Due to the synthetic matching between the Euribor (Product ID: FEU3) and Euro-STR (Product ID: FST3) order books, it is possible that an incoming outright contract is traded against a synthetic combination of an Inter-Product Spread Strategy and the corresponding outright contract of the other leg product. Under the special situation that a Transaction in the Special Outright Transactions is cancelled pursuant to the conditions set out in Number 2.9.1, Number 2.9.3 para. 2 lit. a) or Number 2.9.4 para. 1 lit. b) of the Conditions for Trading at Eurex Deutschland (“Trading Conditions”), the Management Board may, pursuant to Number 2.9.10 of the Trading Conditions, treat the discriminated business party within the meaning of Number 2.3 para. 1 to para. 3 as party of the Transaction resulting from the execution of an Order or Quote in a Combined Instrument and not being cancelled pursuant to Number 2.9.1, Number 2.9.3 para. 2 lit. a) or Number 2.9.4 para. 1 lit. b). Insofar, the benefited business party has a voting right vis-à-vis the Management Board which shall immediately be executed, such voting right stating whether the disadvantaged business party shall assume this Transaction and shall be entered as business party in the Eurex Trading System. To the extent that, with regard to this Transaction, the voting right shall be exercised insofar as the discriminated party shall assume the according Transaction, an assumption of the Transaction not to be cancelled shall take place between the original business parties of this Transaction with, as the case may be, their Clearing Members, Eurex Clearing AG and the applying business party and its Clearing Member.

In this case, it is possible that a Euribor Outright Position has to be taken over by a Euro-STR Outright Position with the same expiry month or vice versa.

B.    Temporary transaction fee waiver for M-account transactions

Starting on 1 December 2023, Eurex Clearing AG will suspend the fees for M-account transactions in Futures contracts on Three-Month Euribor (Product ID: FEU3), Three-Month Euro STR (Product ID: FST3), Options on the Three-Month Euribor Futures (Product ID: OEU3) and One- to Four-Year Euribor Mid-Curve Options Contracts (Product ID: OEM1-4) pursuant to Number 3.1 of the Price List of Eurex Clearing AG.

This fee waiver will be effective from 1 December 2023 until 31 December 2024.

Attachments:

• 1 – Amended sections of the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland
• 2 – Amended sections of the Annexes of the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland

Further information