On 5 July 2021, Eurex Exchange and Eurex Clearing AG initiated a consultation for the EURO STOXX 50® Index Total Return Futures (TESX) transitioning the reference Funding Rate euro short-term rate (€STR) plus the ECB provided EONIA transition spread (0.085 percent or 8.5 basis points) to €STR flat (see Eurex Circular 066/21 and Eurex Clearing Circular 060/21).
After having analysed the feedback, Eurex Exchange and Eurex Clearing decided to make an amendment of the Contract Specifications and implement the methodology and operational steps as proposed in the above-mentioned Eurex Circular and Eurex Clearing Circular.
Eurex Clearing will apply a conversion methodology designed to mitigate the valuation impact due to this change in Contract Specifications for all open positions held as at the opening of the implementation date and based on calculations performed as at the close on the immediately preceding trading day.
This Eurex Circular lays out the details of the transition to the extent they relate to Eurex Exchange.
Calculation Date: 15 October 2021
Implementation Date: 18 October 2021
Learn more about this project on our dedicated initiative page under the following link: Support > Initiatives & Releases > Project Readiness > EURO STOXX50 Index Total Return Futures – Transition to €STR flat
2. Required action
Trading Participants are requested to pay close attention to the attachments and prepare for the transition to €STR flat which might have an impact on Trading Participants’ internal processes, trading and open positions. Therefore, it might be necessary for Trading Participants to update their internal processes and technical interfaces to adapt for these changes.
Please check whether you have subscribed to Eurex Circulars and Newsflashes on the subscription website under the following link to remain updated, as any communication will only be distributed via circulars and Newsflashes:
Find > Subscriptions
3. Details of the initiative
A. Background information
In September 2018, the ECB working group on euro risk-free rates recommended to replace EONIA by €STR as the new euro risk-free rate. It was also determined to recalibrate EONIA’s methodology to effectively become €STR plus a fixed spread of as determined by the ECB. The ECB working group on euro risk-free rates also recommended that trading participants gradually replace EONIA with €STR for all products and contracts, establishing €STR as the standard reference rate.
In a first step and in line with ECB’s working group recommendation, Eurex amended the Contract Specifications of the EURO STOXX 50® Index Total Return Futures (TESX) on the transition date on 2 October 2019, such that the referenced funding rate became €STR plus the ECB provided Spread to EONIA (i.e. Funding Rate (%) = €STR(%) + 0.085%). More details are available in Eurex Circular 087/19. This amendment had no impact on the valuation of outstanding contracts.
Now, in a second step of the transition from EONIA to €STR, Eurex Exchange amends the Contract Specifications applicable to the EURO STOXX 50® Index Total Return Futures to rebase the reference funding rate as €STR flat, i.e. by removing the ECB fixed spread referencing EONIA. The amendment of the Contract Specifications shall be accompanied by a conversion approach, such that holders of open positions in these contracts as at the implementation date are not economically impacted by the contractual change to the funding rate.
The amendment to the Contract Specifications for Futures Contacts and Options Contracts at Eurex Deutschland and accompanying changes to the Clearing Conditions of Eurex Clearing AG, the determination of the conversion levels, their application to open positions and the determination of required inputs are all detailed in the attachments to this circular.
B. Implementation methodology
EURO STOXX 50® Index Total Return Futures (TESX) were introduced at the Eurex Exchanges as at 2 December 2016 and were amended in 2019 to update the reference funding rate to €STR+8.5 basis points. The Funding Rate is used on each trading day to calculate the Accrued Funding used in the determination of both traded prices and settlement prices in index points for each expiration on that day. Adjustment of the Funding Rate impacts both traded and settlement prices from the implementation date.
Adjustment to the settlement prices will impact the valuation of all open positions held at Eurex Clearing, which resulted from trading activity on the premise of the Contract Specifications and Funding Rate, applicable up to and including the Calculation Date (15 October 2021). Eurex Clearing therefore will apply a conversion methodology to holders of open positions, as at the date of implementation (18 October 2021) of the Funding Rate change, to mitigate the valuation impact of such an amendment.
The details of the implementation are laid out in the following documents:
C. Publication of amendments to the Contract Specifications
The full version of the updated Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland will be published on the Eurex website www.eurex.com as of the implementation date under:
All Trading Participants of Eurex Deutschland and Vendors
Front Office/Trading, Middle + Backoffice, IT/System Administration, Auditing/Security Coordination
Stuart Heath, Equity & Index Product Design, tel. +44 20 7862 72 53, firstname.lastname@example.org
Support > Initiatives & Releases > Project Readiness > EURO STOXX50 Index Total Return Futures – Transition to €STR flat
The market status window is an indication regarding the current technical availability of the trading system. It indicates whether news board messages regarding current technical issues of the trading system have been published or will be published shortly.
We strongly recommend not to take any decisions based on the indications in the market status window but to always check the production news board for comprehensive information on an incident.
An instant update of the Market Status requires an enabled up-to date Java™ version within the browser.