Fixed Income Derivatives: Planned launch of Inter-Product Spread Strategies in Fixed Income Futures

1. Introduction

Eurex Clearing plans to offer clearing for Inter-Product Spreads (“IPS”) for selected Fixed Income Futures as a standardised futures inter-product spread strategy introduced at Eurex Deutschland. The initial set of offering comprises IPS strategies for Euro-Bund/Euro-Buxl Futures, Long-term Euro-BTP/Euro Bund Futures and Euro-Schatz/Short-term Euro-BTP Futures.

This circular contains preliminary information on the proposed implementation of IPS in C7, which is envisaged to come into effect on 16 September 2019 and subject to the final admission of IPS to trading.

Please refer to Eurex circular 067/19 for detailed trading-related information as well as the draft amendments of the relevant rules and regulations of Eurex Deutschland.

A Eurex Clearing circular containing the final launch announcement as well as the amendments to the Price List will be published at a later stage.

2. Production launch preparation

Inter-Product Spread Strategies will be available for all members and traders that are set up to trade both futures products from which a given IPS draws its leg instruments.

Maximum order size restrictions maintained on a clearer, member and trader level for the futures contracts that comprise leg instruments of an Inter-Product Spread apply under consideration of IPS ratios of leg instruments.

3. Overview

Inter-Product Spreads (IPS) for selected Fixed Income Futures at Eurex Deutschland are a standardised futures inter-product strategy (e.g. Bund-Buxl Spread) and represent a combined instrument consisting of a defined number of instruments of two different futures products and a corresponding leg ratio that do not differ in maturity.

4. Products in scope of IPS

The initial IPS offering includes inter-product spread strategies comprising the leg instruments Euro-Bund/Euro-Buxl Futures, Long-term Euro-BTP/Euro-Bund Futures, and Euro-Schatz/Short-term Euro-BTP Futures. Please refer to the table in Attachment 1 for an overview of initially offered IPS products.

5. Clearing-related features

The planned launch of IPS will not require any technical adjustment to the C7 clearing system:

• IPS are set up in T7 as complex instruments and do not have an own trade type
• IPS trades will be directly booked in C7 as transactions in the decomposed futures legs and can only be distinguished from trades in outright futures by the instrument subtype of decomposed futures legs
• The C7 field RelatedProductComplex reflects the Instrument Type with value “6” representing IPS (FIXML tag 28587)
• The C7 field StrategyLinkID reflects the Product ID and can be used for bringing all individual legs together across products (FIXML tag 1851)

Further technical details are available on the Eurex Clearing website www.eurexclearing.com under the following link:

Technology > Eurex Clearing's C7 > System documentation

6. Simulation

Since 14 June 2019, IPS strategies are be available in the Eurex simulation environment for testing purposes. For further information, please refer to the simulation calendar on the Eurex website www.eurexchange.com under the following link:

Technology > Simulation calendar

7. Risk parameters

Margins for the product are calculated in Prisma based on the respective positions in the underlying leg products.

8. Trading hours (all times CET)

Please refer to Attachement 1 of this circular for the table with the trading hours.

IPS order books become available in trading as soon as both legs instruments are in trading.

Terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions.
 

Attachment:

• IPS in Fixed Income Futures as of 16 September 2019 (table) and Trading hours (table)

Further information