Putting the fun back in funding

Minimize your funding costs in the changing rates environment

In times of higher market volatility, banks and buy-side clients face rising margin levels for clearing EUR-denominated listed and OTC interest rate derivatives. At the same time, funding costs for high-quality collateral also increase due to the changing rates environment. You can reduce these impacts with our integrated funding service. Our offering provides access to liquidity in euro ETDs, OTC IRDs and repo, all under a single legal, risk and collateral regime. 

Derivatives funding: smart solutions for a complex environment

This article explores how market participants can deal with the challenges of a significant transition in the funding environment.

How can you reduce funding costs? 

1. Reduce your margin requirements 

Reduce your margin levels with Eurex Clearing Prisma. This offers portfolio margining across all products in the same liquidation group and with the same holding periods (Margin Period of Risk), such as Euro-Schatz Futures and EURIBOR Futures. Furthermore, market participants can benefit from Eurex Clearing’s cross-product margining service and take advantage of margin offsets between OTC IRD and our listed fixed income Futures and Options. Find more information here Eurex Clearing Prisma

Eurex Clearing Prisma calculates risks across all derivatives markets cleared by Eurex Clearing. Cleared products with similar risk characteristics and aligned default management processes are assigned to the same liquidation group and its splits, resulting in more comprehensive risk calculations and enabling portfolio margining across positions within a split in the same liquidation group. 

Our enhanced cross-product margining algorithm allows us to better capture the offsetting relationship of holding long and short positions in correlated fixed income asset classes. The examples below show that the strategies applied on the OTC IRS side and the fixed income listed futures side are always offsetting in DV01 terms. The new enhancements allow our algorithm to recognize the DV01-neutrality of these structured trades and calculate an initial margin reflective of the reduced risk embedded in their offsetting nature. These capital charge reductions are not exclusive to structured trades but are also seen in real-life portfolios of hundreds of long and short positions across OTC swaps and listed fixed income futures. 

2. Get one of the best returns on euro cash margin collateral among CCPs 

Eurex Clearing’s reference rate for remuneration of euro margin collateral is ECB Deposit Rate minus 10bps. Eurex keeps a handling fee of 20bps to manage the cash exposures. The net return on euro cash is superior compared to other globally relevant CCPs. Read more here: Interest Rates with respect to Eligible Margin Assets and Default Fund Contribution in form of Cash.

3. Minimize financing costs of Futures CTDs 

Maximize your funding efficiency with Eurex's Repo CTD Baskets — designed specifically to minimize the costs associated with the physical delivery of futures. This secure, ring-fenced basket streamlines financing for Cheapest-to-Deliver (CTD) obligations … eliminating the need for internal “boxing” and unsecured funding.  Read more here: GC Pooling Baskets (eurex.com)

4. Experience positive alpha on cash investments via Reverse Repos 

Eurex cleared reverse repos offer the potential for positive alpha on your cash investments, outperforming other money market instruments. In, Q1 2024, the average overnight rate in the GC Pooling ECB basket was 5-6 basis points above the €STR rate. For further information go to GC Pooling Repo (eurex.com) 

5. Take advantage of our broad collateral range  

Benefit from the broad collateral range reducing your funding opportunity costs: We accept approximately 10,000 securities / ISINs that are admissible as collateral by the European Central Bank or the Swiss National Bank. On top, approx. 850 government bonds from non-EU countries (AU, CA, JP, US), selected equities (constituents of the DAX®, SMI® and EURO STOXX 50® Index) and selected ETFs complete the admissible collateral spectrum. For further information go to Collateral management.

6. Re-use collateral to cover margin requirements arising from any product cleared by us 

Invest cash securely via CCP-cleared reverse repo at attractive rates and re-use received collateral to cover derivatives as well as repo margin requirements, provided that both products use the same clearing license. This is true for purchases of specific securities and collateral received in GC Pooling® Baskets transactions. This allows participants to simultaneously improve their rate of return of their cash holding and meet their margin obligations more efficiently. Find more information here: Collateral management.

7. Consider funding intra-day VM with securities 

Intra-day variation margin (VM) requirements can be funded with cash collateral or securities. If there is a margin shortfall on a client account under a Clearing Member, we will issue and process individual margin calls for the collateral pool in which the margin shortfall has occurred. Participants can instruct us to process a direct debit in any eligible currency or deliver security collateral to the collateral pool in shortfall. Read more at Margin settlement.

Eurex Clearing Prisma

Eurex Clearing Prisma calculates combined risks across markets and venues cleared by Eurex Clearing for products sharing similar risk characteristics. This allows us to provide higher capital efficiencies and a stronger risk management framework to our customers.

Home of the euro yield curve

Eurex covers the entire euro yield curve. From overnight to long dated financial products covering repo, listed interest rate derivatives, both short-term and long-term, as well as cleared OTC interest rate derivatives across short to long dated tenors.

EurexOTC Clear

Eurex Clearing offers a liquid EU-based alternative to clear EUR-denominated interest rate derivatives. Benefit from high-quality execution prices, a robust risk management framework, operational and capital efficiencies and risk reduction.

Cross-product margining

Benefit from high margin efficiencies and take advantage of our deep Euro liquidity pools for listed fixed income and OTC interest rate derivatives.

Collateral management efficiencies

As a leading clearing house, Eurex Clearing offers best in class, diversified collateral management services. Take advantage of our broad eligible collateral spectrum.


FIC Derivatives & Repo Sales