31 Mar 2021

Eurex

FX derivatives: Amendments to the ESU Parameters

Eurex Circular 033/21 FX derivatives: Amendments to the ESU Parameters


1.  Introduction

In the beginning of March 2021, FX Options started trading on Eurex, and unfortunately it was discovered that the current ESU parameters for the type “All transactions” were too restrictive. Hence Eurex has decided to recalibrate the respective parameters for FX Options.

From 1 May 2021 onwards, Eurex will change the LP schemes for FX Derivatives from multiple local timezone schemes to one “around the world timezone” scheme with significantly lower requirements. The MM Base will be increased by a factor of approximately three to maintain similar limits as with the LP schemes for local timezones. The MM Base is an important part of determining the overall ESU Limit and is highly relevant for participants pursuing liquidity providing strategies.

The increased ESU parameters for the limit type “All transactions” will come into effect on 1 June 2021. However, to avoid undue burden on Trading Participants, Eurex will already apply the new parameters starting from 1 March 2021 onwards. Please note that for technical reasons parameters can only be changed at the first trading day of the month.

2.  Required action

For Trading Participants active in FX derivatives, we recommend to analyse the previous TR102 reports of the last months. Upon request, Eurex will provide back-testing results.

3.    Details of the initiative

When the FX Options recently started trading, unfortunately it was noticed that the ESU parameters for the limit type “All transactions” were too low. This was caused by the following two points: extended trading hours and different logic of the LP schemes to other products.

The commercial LP schemes for FX Derivatives will change on 1 May 2021 to “around the world timezone” schemes, which implies that the relevant ESU Limits for liquidity providing strategies will be lower by around two thirds. To compensate those liquidity providing strategies, Eurex will increase the MM Base significantly, resulting in similar overall ESU Limits as in previous LP schemes.

The table in Attachment 1 shows the amended parameters used to calculate the ESU Limit for the limit type” All transactions”. The parameters for the limit types “Standard Orders” and “No Market Data Impact” remain unchanged.

Due to the required lead time, the amended Price List to the Connection Agreement will become effective on 1 June 2021. To avoid any undue burden on trading participants, Eurex will already apply the relaxed parameters from 1 March 2021 onwards. Please note that this date is chosen for technical reasons.

Attachments:

  1. New ESU Parameters, applied as of 1 March 2021
  2. Updated sections of the Price List to Connection Agreement, Provider Connection Agreement and STPIP and QTPIP Connection Agreement


Further information

Recipients:

All Trading Participants of Eurex Deutschland and Vendors

Target groups:

Front Office/Trading, Middle + Backoffice, IT/System Administration, Auditing/Security Coordination

Related circular:

Eurex circular 024/21

Contact:

client.services@eurex.com 

Web:

www.eurex.com > Rules & Regs > Excessive System Usage Fee

Authorised by:

 Randolf Roth


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