Eurex to build an EU-based liquidity pool for Euro short-term interest rate derivatives

• Eurex will expand its Partnership Program for interest rate swaps to include short-term interest rate (STIR) derivatives segment.
• By combining an EU-based liquidity pool for STIR derivatives with its leading long-term interest rate (LTIR) derivatives segment and its OTC interest rate offering, Eurex further enhances margin efficiency.
• With this market-led solution to create an alternative liquidity pool for STIR derivatives, Eurex supports the EU’s systemic risk management and strategic autonomy agenda.

Eurex plans to expand its Partnership Program to include short-term interest rate (STIR) derivatives. With this latest step, Eurex strengthens its interest rate derivatives suite, enhancing its cross-product efficiencies while also supporting the European systemic stability and strategic autonomy agenda.  

In addition to euro interest rate swaps and euro credit default swaps, euro STIR derivatives clearing has been identified by ESMA as being of substantial systemic importance for the EU’s financial stability. It therefore falls within the scope of measures proposed by the European Commission in December 2022 to reduce overreliance on certain third-country CCPs.

Viable alternative to trade and clear EURIBOR futures and options

Against this regulatory backdrop, Eurex’s Partnership Program together with major market participants aims to establish a viable alternative liquidity pool for trading and clearing EURIBOR Futures and Options within the EU. This will enable global clients to benefit from a comprehensive product offering including Eurex’s leading LTIR segment, the clearing of OTC interest rate swaps as well as repo transactions. At the same time, it will build out Eurex’s value proposition for euro-denominated derivatives and repo, delivering efficiencies to a global client base.

Matthias Graulich, Member of the Executive Board at Eurex Clearing: “The extension of the Partnership Program is the latest step in Eurex’s efforts to provide the market with greater choice and bring more systematically relevant business into the EU. 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 program also includes Three-Month Euro STR Futures referencing €STR. Their launch in January marked an important milestone in establishing the new benchmark risk-free rate. The switch from the former short-term rate EONIA to €STR is part of the broader IBOR reform. Eurex’s Three-Month Euro STR Futures are supported by a dedicated group of market makers providing pricing in the order book as well as a few banks providing off-book from launch date.

Partnership Program shares governance and economics

The design of the program extension is complementary to the interest rate swaps segment, which started in January 2018. The performance-based program aims to build a balanced ecosystem where responsibilities and benefits are fully aligned between all participants in terms of economics and governance.

The STIR Partnership Program as well as the re-launch of EURIBOR Futures and Options are planned to go live in Q4 2023.

Market participants can now register their interest to join the new program components. BNP Paribas, Deutsche Bank, Goldman Sachs, J.P. Morgan and LBBW have already expressed an early interest to join. Clients who fully register for the program until 31 July 2023 will benefit from an extra reward within the Partnership Program performance framework.

Guillaume Bioche, Head of European rates automated market-making at BNP Paribas: “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.”

David Feldmann, Head of Markets D/A/CH at Deutsche Bank: “We are very excited about the creation of an alternative liquidity pool for EURIBOR! The new expanded program complements Eurex’s comprehensive offering of Euro-denominated short- and long-term interest rate futures and options, OTC IRS and Repo products.”

Jan Scheffel, Co-Global Head of STIR Trading at Goldman Sachs: “Eurex is an EU-based exchange and clearing house which is EMIR authorized as ‘QCCP’ (qualifying central counterparty). We are happy to expand our long-standing partnership with Eurex into STIR futures.”

Tom Prickett, Head of EMEA Rates Trading at J.P. Morgan: “We have been an early supporter of the OTC interest rate swaps segment of the program. We are engaged on the upcoming extension to this successful program in the interests of promoting increased choice and competition.”

About Eurex

Eurex is the leading European derivatives exchange and – with Eurex Clearing – one of the leading central counterparties globally. As architects of trusted markets characterized by market liquidity, efficiency, and integrity, we provide our customers with innovative solutions to seamlessly manage risk. For more information, visit www.eurex.com