Eurex Clearing rolls out new OTC derivatives system ‘Prisma’
07 September 2012 Frankfurt
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Eurex Clearing plans to introduce a new risk methodology for calculating initial margin for both listed and over-the-counter derivatives called Eurex Clearing Prisma, to be launched on 12 November 2012.
“At Eurex Clearing, we are continuously shaping the standards of risk management,” said a statement from the firm. “By raising the benchmark for an adequate risk calculation for our members, we are improving the safety and integrity of the marketplace.
Eurex is replacing its existing margin methodology (Risk-based Margining) with a new portfolio based margin approach, which will allow for cross margining for listed derivatives business and between listed and OTC derivatives business cleared through the firm.
The default management process is the basis of the new portfolio based margining method. Both the new margining method and the revised default management process will be implemented along a newly introduced 'liquidation group' set-up.
In this set-up, each product cleared by Eurex Clearing will be assigned to a liquidation group. The groups compile products which can be liquidated jointly at the same point in time.
For each of the groups a Default Management Committee (DMC) will be implemented to assist the clearing house with regards to any relevant matter of the default management process, each DMC consisting of representatives of pre-selected clearing members with sufficient trading and risk expertise to manage the liquidation of a specific group.
DMCs will assist and advice Eurex Clearing in developing group specific hedging strategies, and executing the respective transactions.
The statement concludes that hedging is an important component of the DMP, as it “enables the clearing house to reduce the market risk and stabilize the defaulted clearing member’s portfolio prior to and during the Liquidation Group specific auctioning process, which is considered to be the core component of the DMP.”
“At Eurex Clearing, we are continuously shaping the standards of risk management,” said a statement from the firm. “By raising the benchmark for an adequate risk calculation for our members, we are improving the safety and integrity of the marketplace.
Eurex is replacing its existing margin methodology (Risk-based Margining) with a new portfolio based margin approach, which will allow for cross margining for listed derivatives business and between listed and OTC derivatives business cleared through the firm.
The default management process is the basis of the new portfolio based margining method. Both the new margining method and the revised default management process will be implemented along a newly introduced 'liquidation group' set-up.
In this set-up, each product cleared by Eurex Clearing will be assigned to a liquidation group. The groups compile products which can be liquidated jointly at the same point in time.
For each of the groups a Default Management Committee (DMC) will be implemented to assist the clearing house with regards to any relevant matter of the default management process, each DMC consisting of representatives of pre-selected clearing members with sufficient trading and risk expertise to manage the liquidation of a specific group.
DMCs will assist and advice Eurex Clearing in developing group specific hedging strategies, and executing the respective transactions.
The statement concludes that hedging is an important component of the DMP, as it “enables the clearing house to reduce the market risk and stabilize the defaulted clearing member’s portfolio prior to and during the Liquidation Group specific auctioning process, which is considered to be the core component of the DMP.”
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