Eurex Clearing Adds Cross Margining Capabilities

Eurex Clearing has released the second version of its risk system Eurex Clearing Prisma, which adds portfolio margining capabilities within an asset class as well as cross-margining between listed fixed income products and the OTC interest rate swaps business.

The new system makes Eurex the first and only CCP in Europe to offer margin offsetting within asset classes and across the entire euro-denominated interest rate curve. Clearing users can also use their existing portfolios with interest-rate derivatives traded at Eurex Exchange to offset their margin requirements for their interest rate swaps cleared via EurexOTC Clear.

“Our portfolio-based risk management methodology Eurex Clearing Prisma is an innovative way to maintain accurate counter-cyclical margin levels, while in parallel providing considerable capital efficiencies…Eurex Clearing Prisma incentivizes holding balanced portfolios which represent lower risk and have lower capital and funding requirements thus creating a win-win situation for the markets we clear,” says Thomas Laux, chief risk officer of Eurex Clearing.

Eurex says that it expects potential margin efficiencies of up to 70%, and the system provides more accurate risk profiles by calculating combined risks across all markets for products that share similar risk characteristics within customer or proprietary positions according to liquidation groups.

“Cross margining solutions allow clients the potential to secure capital efficiencies, and it is likely to be a powerful driver of clearing flows and liquidity going forward as the OTC clearing market matures,” says Nick Chaudhry, head of OTC Clearing at Commerzbank Corporates & Markets, which has used Prisma to support cross-product margining for clients.

Citi has also adopted Prisma to offer these services to its customers. “Clients are increasingly focused on the complete front to back clearing experience, from ease and quality of execution to the optimization of collateral and other post-trade processes. We expect that the ability to provide meaningful margin offsets will become a key differentiator amongst clearing platforms going forward,” says Silas Findley, EMEA head of OTC clearing at Citi.