Eurex Clearing Readiness Newsflash | EurexOTC Clear: Simulation preparation and test of the mandatory conversion of EurexOTC Clear transactions referencing USD LIBOR Index

Dear Client,

With this Newsflash, Eurex Clearing provides further information on simulation preparation and test of conversion of EurexOTC Clear IRS and basis swaps referencing USD LIBOR. Eurex Clearing will actively convert EurexOTC Clear IRS and basis swaps referencing USD LIBOR starting on Friday, 21 April 2023 and lasting over that weekend in the production environment. An important milestone for testing is performing the conversions in the simulation environment. Hence, to allow Clearing Members multiple testing possibilities, Eurex Clearing will perform two dress-rehearsals on the following dates:

• First dress-rehearsal on USD LIBOR trade conversion process: from 28 February - 2 March 2023
• Second dress-rehearsal on USD LIBOR trade conversion process: from 21 - 23 March 2023.

Eurex Clearing notes that after the first dress-rehearsal, clearing of USD LIBOR referencing trades will be eligible in the simulation environment until the second dress-rehearsal is completed. This system behavior deviates from the conversion go-live where after end of day process on 21 April 2023 trades referencing USD LIBOR index will no longer be eligible for clearing in the production environment.

Clearing Members who participated in the first dress-rehearsal but want to participate in the second one as well, and also the ones who just want to participate in the second dress-rehearsal need to upload test portfolios in the Simulation environment between 2 - 21 March 2023.

Please find the necessary information for simulation described below (for the avoidance of doubt, first date is always relevant for the first dress-rehearsal and second date is always relevant for the second dress-rehearsal):

1. Test portfolios should be cleared in Simulation latest on 28 February 2023, 18:00 CET and 21 March 2023, 18:00 CET. Cut-off time for the backloading of trades, which need to be novated on the same day, is 15:00 CET. Simulation will be closed on Wednesday, 1 March 2023 and 22 March 2023. In particular, the OTC GUI/MC GUI will not be available, MC API and FpML-API requests will not be processed, and no new trades can be submitted to the OTC Clearing system.
2. 28 February 2023 and 21 March 2023 (both are batch days) will be the last days for transactions referencing USD LIBOR benchmark.
3. Eurex Clearing will convert intraday all affected trades referencing USD LIBOR Index to transactions referencing its dedicated fallback rate USD SOFR on 1 March 2023 and 22 March 2023 (both are batch days). 
4. On 1 March 2023 and 22 March 2023, customers will receive intraday the one-off reports CC350, CD200, CB201 and CB202 with the timestamp of Saturday, 4 March 2023, and 25 March 2023 (e.g. 85RPTCD200MEMBERID20230304.XML.ZIP and 85RPTCD200MEMBERID20230325.XML.ZIP). Details on trade mapping, transparency reports and cash compensation reconciliation can be found in the LIBOR Trade Conversion Booklet on page 9.
5. The EOD reports on 1 March 2023 and 22 March 2023 will be generated for the first time for newly generated novated replacement trades, and all the netting reports will be created with an empty content.

The compensation fees will be respectively calculated on 28 February EOD and 21 March EOD 2023. Conversion will take place on Wednesday, 1 March and 22 March 2023, and settlement of the compensation fees will be on Thursday, 2 March 2023 and 23 March 2023. This information is aggregated on the below table:

Reports

The Trade Conversion Transparency Report CC350 and LIBOR Conversion Replacement Trade Shadow Report CB301 will be created specifically to provide transparency for the trade conversion and are available in CRE until 21 March 2023 EOD (simulation reports) and 21 April 2023 EOD (production reports). We note that all reports that will be generated as one-off versions of existing daily reports on Saturday, 22 April 2023 will have the same XSD Schema as their daily versions.

A detailed explanation of the LIBOR transition including a description of the aforementioned reports and reconciliation thereof can be found in the “USD LIBOR Trade Conversion Booklet”. The document is available in the Member Section of Deutsche Börse Group, under the following path:

Resources > Eurex Clearing > Documentation and Files > Benchmark Transition Information > LIBOR Trade conversions

Additionally, sample broadcast messages for terminated trades and verified trades, which will be created on conversion days, have been uploaded to the Member Section. When the trades are converted, Eurex Clearing will send the Broadcast messages informing that new trades are verified.

Afterwards, for MarkitWire Netting Synchronization enabled Members, Eurex Clearing will send a second version of Broadcast messages for newly created trades with added information of Trade IDs used at MarkitWire, and the relevant tag is srcSysTradeId.

Hence, MarkitWire Netting Synchronization enabled Members will receive two versions of trade notification messages. The compressed ZIP file, including the sample for terminated trade and two versions of verified trades, is available in the Member Section, under the following path:

Resources > Eurex Clearing > Documentation and Files > Benchmark Transition Information > LIBOR Trade conversions

Eurex Clearing strongly recommends that Clearing Members and clients should, proactively and prior to testing, upload the portfolio that they want to test in the simulation environment.

If you have questions or comments, please contact your Clearing Key Account Manager or send an e-mail to client.services@eurex.com.

Kind regards,

Your Client Services Team

Visit the Next Generation ETD Contracts webpage for all your Clearing and Trading content!