Eurex to launch EUR STIR futures and options

Eurex has announced plans to expand its Partnership Program to include short-term interest rate (STIR) derivatives as part of its efforts to enhance cross-product efficiencies while also supporting the European systemic stability and strategic autonomy agenda.

The new addition to the interest rate derivatives suite at Eurex creates an alternative liquidity pool for STIR derivatives to further support the EU’s systemic risk management and strategic autonomy agenda.

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.

Liquidity pool for EURIBOR Futures and Options within the EU

Eurex further enhances margin efficiency 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.

The Partnership Program aims to establish a viable alternative liquidity pool for trading and clearing EURIBOR Futures and Options within the EU. The comprehensive product offering includes Eurex’s LTIR segment, the clearing of OTC interest rate swaps as well as repo transactions.

The program also includes Three-Month Euro STR Futures referencing €STR, which was launched in January, established 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 the launch date.

Diversify risk across CCPs, cross-product margin efficiencies, lower funding costs

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

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.

Matthias Graulich, Member of the Executive Board at Eurex Clearing, commented: “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.”

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