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21 Nov 2024

Eurex

Eurex Circular 117/24 Equity and Basket Total Return Futures: Introduction of Calendar Roll Strategies and Basket Optional Early Termination

Eurex Circular 117/24 Equity and Basket Total Return Futures: Introduction of Calendar Roll Strategies and Basket Optional Early Termination

1. Introduction

The Management Board of Eurex Deutschland took the following decisions with effect from Monday,  
25 November 2024:  

  • Introduction of Calendar Roll Strategies for Basket Total Return Futures (BTRF), 
  • Introduction of Optional Early Termination for Basket Total Return Futures (BTRF), 
  • Amendment to the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland as outlined in the Attachment. 

Production start: 25 November 2024

This circular contains all information on the trading-related updates as stated above and the updated sections of the relevant Rules and Regulations of Eurex Deutschland. 

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 


2. Required action

Participants are recommended to completely analyze the potential impact in their internal systems and procedures of the above changes.  


3. Details

I. Calendar Roll Strategies for Basket Total Return Futures:

The new feature in T7 Release 13.0 in November 2024 has introduced a Calendar Roll functionality which allows the unwind of the existing basket and opening of a new basket with the same specifications but with a longer maturity in one go, simplifying the handling with pre-filled data, and a parent basket ID field to facilitate the tracking of an initial basket that undergoes multiple basket rolls, in addition to other features.  

II. Optional Early Termination (OET) for Basket Total Return Futures: 

  • OET is a combination of functionalities that allow a Basket TRF to be terminated prior to the underlying expiry of the BTRF (its individual ETRFs). 
  • New flag implemented in T7 GUI in Release 13.0 for Basket Trades functionality. 
  • Allows market participants who require longer term funding to have the right (but not the obligation) to close a BTRF to seek other funding options. 
  • The original Buyer has the right (but not the obligation) to request the early termination only at predefined dates at the initial traded spread when the basket was first created. The Seller is obliged to accept the termination request, except in certain circumstances as provided for in the contract specifications.  
  • OET rights, as per Substitution rights, only apply to the Basket TRF and do not apply to standalone ETRF (therefore by definition unbreakable to expiry). 
  • Both parties must agree that the BTRF is subject to OET prior to the execution of the trade, by marking the trade as OET through the specific flag. 
  • The exercise of the right must be done using the trade type, Termination, which is only available to OET flagged BTRFs to comply with Eurex rules as defined in the Contract Specifications. 
  • As per BTRFs generally – upon default of one counterparty the BTRF is unwound to a set of ETRFs (with no Basket ID) and hence all OET rights are revoked and the individual ETRFs are term (to expiry) products. 

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 

Attachment:  

  • Updated sections of the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland 

Further information

Recipients:

All Trading Participants of Eurex Deutschland and Vendors

Target groups:

Front Office/Trading, Middle + Backoffice, IT/System Administration, Auditing/Security Coordination 

Contact:

Stuart Heath, Equity & Index Product Design, tel. +44-207-862-72 53, stuart.heath@eurex.com;  Elena Marchidann, Equity & Index Product Design, tel. +44-207-862-72 65, elena.marchidann@eurex.com  

Web:

Equity and Basket Total Return Futures 

Authorized by:

Randolf Roth

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