Eurex is extending its Partnership Program for interest rate swaps to include short-term interest rate (STIR) derivatives.
Under this Partnership Program, the 10 most active programme participants are eligible to receive a significant share of the economic benefits generated by Eurex Clearing’s STIR facility and these clients may also play an active role in Eurex Clearing’s committee structure and governance.
Eurex aims through its partnership programme with key market participants to create a strong alternative liquidity pool for EURIBOR futures and options within the EU, embracing Eurex’s long-term interest rate segment and clearing services for OTC interest rate swaps and repo transactions offered through Eurex Clearing.
This forms part of broader plans to grow Eurex’s footprint for euro-denominated derivatives and repo transactions, supporting the requirements of a global customer base in these product areas.
Alongside euro interest rate swaps and euro credit default swaps, the European Securities Market Authority (ESMA) has flagged euro STIR derivatives clearing as being of key systemic importance for the EU’s financial stability and this segment falls within the scope of measures outlined by the European Commission in December to “reduce over-reliance” on certain third-country CCPs.
The Partnership Program for short-term interest rates is expected to go live in Q4 2023, along with a re-launch of EURIBOR Futures and Options.
The programme also includes Three-Month Euro STR Futures which reference €STR. Eurex indicates that its launch in January marked an important milestone in establishing the new benchmark risk-free rate — marking the transition from EONIA, the previous short-term benchmark rate, to €STR, as part of a wider programme of interest rate benchmark reform.
It indicates that its Three-Month Euro STR Futures are supported by a dedicated group of market makers which are offering pricing in the order book as well as a few banks providing this off-book.
Market participants can now register interest to join the new programme components. Eurex indicates that BNP Paribas, Deutsche Bank, Goldman Sachs, J.P. Morgan and LBBW have already indicated an interest to do so, with firms that register fully before 31 July 2023 being eligible for extra rewards within the Partnership Program.
Commenting on these announcements, Eurex Clearing executive board member Matthias Graulich says: “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.”
