09 Oct 2020

Eurex Clearing

EurexOTC Clear: Production launch announcement of EurexOTC Clear Release 11.0

Eurex Clearing Circular 082/20 EurexOTC Clear: Production launch announcement of EurexOTC Clear Release 11.0


1.    Introduction

With this circular, Eurex Clearing would like to announce the production launch of EurexOTC Clear Release 11.0 (OTC Release 11.0) on Monday, 19 October 2020

All EurexOTC Clear Members are affected by the introduction of OTC Release 11.0.

Production start: 19 October 2020

2.    Required action

The functions and services introduced with this release (such as reports and FpML messages) might have an impact on the report and FpML processing of EurexOTC Clear Members. In order to be prepared for the start of production, please update your systems with the newly created schemas (e.g. report XSDs, XSDs for the FpML Interface and the Margin Calculator Interface), valid for the OTC Release 11.0. 

After the batch processing on Friday, 16 October 2020, reports are created based on EurexOTC Clear Release 10.1 formats. Intraday and End-of-Day reports that are created on Monday, 19 October 2020, start of business, will be created based on OTC Release 11.0 formats.

3.    Details of the initiative

A. Documentation for OTC Release 11.0

As announced with Eurex Clearing circular 057/20 and documented in the Functional Release Notes, there are enhancements and changes relevant for OTC IRS and OTC FX/XCCY Swap Participants.

Further details on the above-mentioned enhancements and changes can be found in the functional and technical documentations, which are updated with OTC Release 11.0. The following remaining documents contain essential information und updates regarding OTC Release 11.0:

  • EurexOTC Clear Procedures Manual
  • EurexOTC Clear Product List

The documents are available in the Member Section on the Eurex Clearing website www.eurex.com/ec-en under the following paths respectively:

Technology > EurexOTC Clear > System Documentation > Functional Documents & Guide 

Technology > EurexOTC Clear > System Documentation > Overview

B. FedFunds to SOFR discounting switch

With OTC Release 11.0, as part of the transition from FedFunds to SOFR as the new US dollar risk-free rate, Eurex Clearing will implement for its EurexOTC Clear service the switch across the weekend around 16 October 2020. This means that Friday, 16 October 2020 will be the last day with FedFunds PAI (PAA) and Monday, 19 October 2020 the first day with SOFR-based PAI (PAA) calculations. 

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

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

C. IRS Product Extension

Eurex Clearing currently clears nine currencies, which span a variety of tenors from 2 years to 50 years. With EurexOTC Clear Release 11.0, the following product extensions are planned:

Tenor extensions

  • 1-year tenor extensions, for example EUR IRS from 50 years + 10 business days to 51 years
  • >1-year tenor extensions, for example GBP OIS from 30 years + 10 business days to 51 years

Enhanced eligibility

  • Variable notional for OIS & OIS-Libor Basis Swaps
  • Simple spreads on OIS and negative spreads on IRS/ZC/Basis and FRA

New products

  • GBP and JPY OIS-Libor Basis Swaps

For further details of the OTC IRS Product Extension, please check the relevant ECAG newsflash from 2 October 2020.

D. Netting Functionality Changes 

Eurex Clearing will introduce a switch allowing for suppressing accumulation (off/on) only during Level 3 netting on account level. The functionality to accumulate positions of the same direction will be optional for Level 3 netting. With EurexOTC Clear Release 11.0, the default value will be “No accumulation”.

EurexOTC Clear Members who wish to have accumulation of netting in their setup, have to contact the respective Key Account Manager. Charges will apply as per the Price List of Eurex Clearing AG, Chapter 10.5.1, which is available on the Eurex Clearing website under the following link:

Rules & Regs > Rules & Regulations > Price List

Two swaps which use different compounding methods will still be netted if the spread value is equal to 0 (zero) and the netted remnant trade will have a "Flat" as a compounding method of the trade. This functionality will be allowed for the following products: Single Currency Fix-Float Swaps (Including ZCFA) and Single Currency Basis Swap.

E. Synchronisation of non-economic amendments with MarkitWire

The MarkitWire Post Trade Event Synchronization became available for EurexOTC Clear Members in February 2020. This ensured that for any trade created at Eurex Clearing, as a result of a post-trade event, a corresponding trade record is also created in MarkitWire. With EurexOTC Clear Release 11.0, technical readiness of the synchronisation of non-economic amendments with MarkitWire will be achieved.

The goal is that MarkitWire users can update the internal trade ID or the netting string of a record in MarkitWire, which leads to an automatic update of the corresponding trade record at Eurex Clearing. This enhancement does not require additional setup. The service launch of this functionality is rescheduled to 14 November 2020. On the following Monday, 16 November 2020, customers can start using the functionality.

F.  GUI enhancements to improve usability for customers

  • New Portfolio transfer tab to handle large transfers with calculating the risk on a portfolio level will be introduced (The service launch of this functionality is rescheduled to 23 November 2020)
  • Trade/Portfolio Upload Window will be redesigned
  • Product description in the OTC GUI for FX Trades will be enhanced

G.  Introduction of the new clearing currency U.S. dollar for the LSOC OTC IRD clearing model

Until now, U.S. dollar has been recognised as margin and product currency, but not as clearing currency. Based on client demand, U.S. dollar will be introduced as clearing currency for OTC LSOC Clearing Members with EurexOTC Clear Release 11.0 (FX, XCCY and NDF products are not affected).
 

Report changes are explained as usual in the Report Manual for EurexOTC Clear Release 11.0, which is available in the Eurex Clearing Member Section under the following path:

Technology > EurexOTC Clear > System Documentation > Reports > Production

In connection with the introduction, please consider as well the “EurexOTC Clear Release Known Limitations” list which has already been updated and published in the Eurex Clearing Member Section under the following path:

Technology > EurexOTC Clear > General question log & Known limitations


Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or FCM Clearing Conditions of Eurex Clearing AG, as applicable.
 

Further information

Recipients:

All Clearing Members, Basic Clearing Members, Disclosed Direct Clients of Eurex Clearing AG, vendors, all FCM Clearing Members and other affected contractual parties

Target groups:

Front Office/Trading, Middle + Backoffice, IT/System Administration, Treasury

Related circulars:

Eurex Clearing circulars 044/20, 057/20, 076/20

Contact:

Your Key Account Manager or client.services@eurexclearing.com

Related Newsflashes:

SOFR Simulation info
IRS Product extensions

Web:

EurexOTC Clear Release 11.0 initiative page

Authorised by:

Dmitrij Senko