Eurex Clearing Readiness Newsflash | EurexOTC Clear service: A. Simulation preparation and test of switch from FedFunds to SOFR; B. Introduction of USGS calendars for SOFR swaps

Dear Eurex Clearing participant,

As with the introduction of EurexOTC Clear Release 11.0 announced with Eurex Clearing circular 057/20, the simulation environment will be opened for customers on 27 August 2020. As usual, please make sure that your systems are prepared for the updated XSDs, for reports and FpML messages before the simulation starts. Starting from 27 August 2020, functionalities and changes will be available for testing.

Eurex Clearing will switch from FedFunds (EFFR) to SOFR as the basis of PAI/PAA and discounting for all EurexOTC Clear USD-denominated derivatives with OTC Release 11.0 on 19 October 2020. An important milestone for testing is performing the switch in the simulation environment.

Please find the necessary information for simulation described below:

1. Test trades/portfolios should be entered and cleared in Simulation latest on Thursday, 20 August 2020 18:00 CET. Simulation will be closed from Friday, 21 August 2020 until Wednesday, 26 August 2020. 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.  25 August 2020 (batch day) will be the last day with FedFunds discounting.

3.  The OTC Clearing system will switch to SOFR discounting intraday on 26 August 2020 (batch day). Especially the EOD reports on 26 August 2020 will be generated the first time under SOFR discounting.

4.  On 26 August 2020 (batch day), customers will receive intraday the one-off Cash Forecast Report CD200 and CD220 with the timestamp of Saturday, 22 August 2020 (85RPTCD200MEMBERID20200822.XML.ZIP) and (85RPTCD220MEMBERID20200822.XML.ZIP) containing only the cash compensation fees based on end of day results of 25 August 2020, at trade level as part of the switch process to SOFR.

Please note that the cash compensation fees will be calculated as:   

??? = ????????FFR(?−1) −???????SOFR(?−1) The time ?−1 refers

to values as of EOD 25 August 2020 and the superscripts refer to discounting under EFFR and SOFR.The fee may be recons

tructed at trade level from EOD 25 August reports by, for a given trade: Identifying ???????EF

• FR(?−1) with the value of the field MtM0_exCF in the CC203 report Identifying ???????SOFR(?−1)
• with the value of the field MtM0_exCF in the CC303 report 5.  Starting from 27 August 2020 (bat

ch day), the simulation environment will be “open” for the customers, i.e. new trades can be submitted via the ATS. Please note, from this time on the shadow reports CC303, CC333 and CC334 will be decommissioned in simulation. Production version of the reports will be still available until 19 October 2020.

On 26 August 2020, for OTC IRS Members, the one-off CD200 report with timestamp 22 August 2020 will contain only the compensation fees of house trades as well as those of their client trades. For Direct Clients, the one-off report CD200 with timestamp 22 August 2020 will contain the compensation fees of own trades only. 

Similarly, on 26 August 2020, for OTC FX Members, the one-off CD220 report with timestamp 22 August 2020 will contain only the compensation fees of house trades as well as those of their client trades. For Direct Clients, the one-off report CD220 with timestamp 22 August 2020 will contain the compensation fees of own trades only.

The table below contains an example of the fields in the one-off report CD200/CD220 with timestamp 27 August 2020 that are relevant for reconciliation:

• Mandatory cash settlements will appear with transaction types (trnTyp) “OTC FEE PAYMENT PAID” or “OTC FEE PAYMENT RECEIVED” 
• The settlement will be of type “NotSettled” 
• The compensation fee amount is found in the field setlAmnt (plus for fee received, minus for fee paid)

Additionally, for OTC IRS Members, the aggregated compensation fees will appear in the Daily Cash Account report CD710 as generated on Wednesday EOD, 26 August 2020. The transaction types (trnTyp) for OTC IRS Members in this report will be 251 (OTC ADAPTION PAID) and 252 (OTC ADAPTION RECEIVED). Fees will be aggregated for each USD cash account and Pool ID of the Member and any USD clearing clients.

Similarly, for OTC FX Members, the aggregated compensation fees will appear in the End of Day CLS Settlement report CE056 as generated on Wednesday EOD, 26 August 2020. The transaction types (trnTyp) for in this report will be 358 (OTC CCS FEE PAID) and 359 (OTC CCS FEE RECEIVED) for Cross-Currency Swaps, respectively 370 (OTC FX FEE PAID) and 371 (OTC FX FEE RECEIVED) for FX Forwards and FX Swaps. Fees will be aggregated for each USD cash account and Pool ID of the Member and any USD clearing clients.

Fully segregated Direct Clients with Member ID do not receive the CD710 report. Instead, these clients will find their aggregated compensation fees in the report CD712.

A detailed explanation of the SOFR PAI/PAA discounting switch including a description of reports and reconciliation thereof can be found in “EurexOTC Clear - process and methodology of the FedFunds to SOFR discounting switch”. The document is updated and available in the Member Section of Eurex Clearing, under the following path:

Risk & Collateral Management > Benchmark Transition Information > USD: FedFunds-SOFR Transition

A detailed information table for simulation is attached to this Newsflash.

Preparation in the Member Section

Please check whether you have registered and/or updated your Release Contacts for EurexOTC Clear Release 11.0 via the Member Section on the Eurex Clearing website, under Release Contacts.

In parallel, please subscribe to Eurex Clearing circulars and newsflashes on our subscription website under the following link in order to remain updated, as any communication regarding EurexOTC Clear Release 11.0 will only be distributed via circulars and newsflashes:

Resources > Circular & Newsletter Subscription

B. Introduction of USGS calendars for SOFR swaps 

SOFR swaps were introduced as part of Release 10.1 on Monday, 27 July 2020. SOFR swaps using USGS fixing date holiday calendars will be available in Production from Monday, 3 August 2020, with testing available in SIMU from Monday, 27 July 2020. 

The updated Product List is available in the Member Section on the Eurex Clearing website www.eurexclearing.com under the following path:

Technology > EurexOTC Clear > System Documentation > Overview

If you have any further questions or comments, please do not hesitate to contact your Clearing Key Account Manager.

Kind regards,
Your Client Services Team

Attachment: 

• Information Table for Simulation

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