Next Generation ETD Contracts - Updated implementation approach

1.  Introduction   

With this circular, Eurex Clearing announces the updated implementation approach for the Next Generation ETD Contracts initiative, originally announced in Eurex Clearing circular 027/21.

With this initiative, Eurex Exchange and Eurex Clearing (“Eurex”) aim to enable a more flexible set-up of Exchange Traded Derivatives (ETD) products and therefore are introducing an enhanced ETD contract identification concept to allow for more than one expiration per month on product level (sub-monthly contracts). These changes also create the basis for the introduction of several new product initiatives.

The roll-out of the initiative includes mandatory implementation efforts for Trading Participants, Clearing Members and vendors. Given the mandatory nature of the changes, Eurex conducted a broad market consultation over the past months to fully understand the impacts on its Trading Participants and Clearing Members. 

As a result of the outreach, the planned business initiatives were endorsed by the Trading Participants and also Clearing Members appreciated the consistency of the new concept and expressed their support. In response to concerns regarding the proposed timeline that were raised during the consultancy period, Eurex has decided to revise the implementation approach and timeline as outlined below, to grant an extended implementation timeline, so that Trading Participants, Clearing Members and vendors have sufficient planning and implementation time:

Simulation start: early December 2021 (layouts, reports)
Full scope simulation: end of January 2022 (incl. sub-monthly contracts)
Production start: June 2022 
Launch of business initiatives: July 2022
End of grace period: latest November 2022

In the context of the Next Generation ETD Contracts initiative, new contract attributes will be introduced and available via the T7 reference data interface RDI/RDF with T7 Release 10.0 (as initially planned). Therefore, these contract attributes will be available in the T7 participant simulation starting in September 2021 and with the launch of T7 Release 10.0 in the production environment in November 2021.

Learn more about Next Generation ETD Contracts on our dedicated initiative page under the following link: 

Support > Initiatives & Releases > Projects > Next Generation ETD Contracts

System documentation, circulars, timeline and much more information will be available there for you

...and on the go via the personalized Eurex App.

2.  Required action

Eurex strongly requests all Trading Participants and Clearing Members to take appropriate actions in time with respect to ETI adaptation, new contract attributes and GUI changes in the trading layer as well as changes regarding reports, GUIs, Transparency Enabler files and FIXML interface in the clearing layer.

All Trading Participants and Clearing Members are also requested to participate in the simulation phase. Further details about the simulation availability will be provided in due course.

Trading Participants and Clearing Members should target readiness to support the new functionality with the production go-live in June 2022. 

Please note:

With the launch of the new business initiatives in July 2022, Clearing Members and their Trading Participants, that are not compliant with the new contract identification approach, will no longer have access to weekly options and will not be able to support the new business initiatives.

With the end of the grace period in November 2022, Clearing Members and their Trading Participants that are not compliant with the new contract identification approach will no longer have access to any ETD products. 

Eurex will continue to conduct bilateral consultations with its participants and vendors to ensure a stable and smooth project introduction.

Please prepare for the launch and make sure that all your Release Contacts have subscribed for Eurex Clearing Circulars and Newsflashes on the Eurex Clearing website under the following path:

Support > Information Channels > Circulars & Newsflashes > Subscription page

3.  Details of the initiative:

The introduction of the Next Generation ETD Contracts initiative will take place in the following manner:

Introduction of technical changes: 

From a clearing and risk management point of view, technical changes will become available in the production environment with the C7 and Prisma releases planned for June 2022. Corresponding activities in the simulation environment are planned for the beginning of December 2021. These technical changes are the baseline for the handling of sub-monthly expiring contracts in C7 and Prisma and are mandatory for all participants using the FIXML interface, reports, and C7 GUI and the Prisma transparency enabler files.

From a trading point of view, the contract identification approach of T7 is not affected by this step, i.e. the T7 instrument ID is still valid for identifying instruments on T7. Adaptations on the trading side will be introduced with T7 Release 10.0 in November 2021 which are technically independent from and functionally aligned with the changes planned to be introduced in June 2022 in the clearing and risk management area. For more information regarding the T7 changes, please refer to the T7 Release 10.0 documentation, particularly to the T7 Release Notes.

Introduction of business initiatives:

In July 2022, the following business initiatives (subject to their respective regulatory approval) requiring sub-monthly expiring contracts will be launched (available as of end of January 2022 in the simulation environment):

• Integration of Weekly Options
• Daily Expiring Single Stock Futures for Options Volatility Strategies 
• T+X basis trading for all MSCI Futures

Please note that contracts with sub-monthly expirations (i.e. daily and weekly expiries) can only be traded and cleared if both the Trading Participant and its corresponding Clearing Member have switched to the new contract date identification approach. 

Eurex Clearing will ensure that Clearing Members which are not ready to handle sub-monthly expiring contracts will not have access to these sub-monthly expiring contracts in C7. Similarly, Eurex will also ensure that Trading Participants associated with a Clearing Member which is not able to handle sub-monthly expiring contracts will not be able to trade sub-monthly expiring contracts.

Therefore, as of July 2022, weekly expiring options contracts which have been accessible without limitations before July 2022 will only be available to the Clearing Members and their Trading Participants which are able to handle sub-monthly expiring contracts.

End of grace period:

During the grace period, starting in July 2022 and ending latest November 2022, Trading Participants and Clearing Members, which are not yet able to handle sub-monthly expiring contracts, will still be able to trade and clear contracts expiring on a monthly, quarterly and/or yearly basis.

After the grace period, the usage of the new contract identification approach becomes mandatory for all market participants across all ETD products. It is important to note that trading and clearing will no longer be possible with the currently valid contract identification approach based on contract month/year after the cut-off date in November 2022.

The grace period is limited to this time frame because of increased operational efforts and added market inefficiencies created during that time.

It is strongly recommended for Trading Participants and Clearing Members to switch to the new contract identification approach with the production go-live in June 2022 to be able to trade and clear the full ETD product spectrum and to ensure that trading and clearing can continue post-November 2022.

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