Eurex Repo expands funding and financing offering
15 August 2019 Frankfurt
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Eurex Repo has introduced a new GC Pooling Cheapest-to-Deliver (CTD) Basket that aims to offer its clearing members a safe funding alternative for their CTD instruments.
The basket, which launched on 12 August, contains deliverable bonds for fixed income futures expiries and can be traded in euro in the GC Pooling Market, including Select Finance GC Pooling transactions.
The GC Pooling CTD Basket will contain German and French government bonds as deliverables of the next three futures expiries.
Commenting on the new product, Manan Wagishauser, business and product development at Eurex Repo, said it is aimed at connecting the client clearing business with 150 tier one banks and a growing buy side.
According to Eurex Repo, the GC CTD Pooling Basket is set to enable members to fund the CTD out of future delivery obligations for trades within the fixed income futures contracts.
Discussing the need for the new basket, Wagishauser highlighted that when futures expiry dates are approaching investors look out for the cheapest-to-deliver bonds on the market to fulfil their delivery obligation.
“To avoid penalties in case of non-delivery, clearing members try to get the CTD bonds already between three to 10 days prior to the delivery day. Consequently, the CTDs are warehoused and financed through their internal treasury,” he said.
“The new GC Pooling CTD Basket enables clearing members to finance the CTDs in a secure and ring-fenced environment. The CTDs will be transferred on-time on the delivery day to the right settlement account to fulfil the futures delivery obligations.”
Eurex Repo stated that since the basket went live it has seen client demand from several banks that have now started simulations to prepare for the next futures expiry date.
In a memo ahead of the launch, Frank Gast, managing director at Eurex Repo, explained: “With the new GC Pooling Cheapest-To-Deliver Basket we are bridging the gap between the futures and funding & financing markets. Our clients will be able to reduce their unsecured funding requirements while simultaneously ring-fencing the CTDs for the future delivery.”
The basket, which launched on 12 August, contains deliverable bonds for fixed income futures expiries and can be traded in euro in the GC Pooling Market, including Select Finance GC Pooling transactions.
The GC Pooling CTD Basket will contain German and French government bonds as deliverables of the next three futures expiries.
Commenting on the new product, Manan Wagishauser, business and product development at Eurex Repo, said it is aimed at connecting the client clearing business with 150 tier one banks and a growing buy side.
According to Eurex Repo, the GC CTD Pooling Basket is set to enable members to fund the CTD out of future delivery obligations for trades within the fixed income futures contracts.
Discussing the need for the new basket, Wagishauser highlighted that when futures expiry dates are approaching investors look out for the cheapest-to-deliver bonds on the market to fulfil their delivery obligation.
“To avoid penalties in case of non-delivery, clearing members try to get the CTD bonds already between three to 10 days prior to the delivery day. Consequently, the CTDs are warehoused and financed through their internal treasury,” he said.
“The new GC Pooling CTD Basket enables clearing members to finance the CTDs in a secure and ring-fenced environment. The CTDs will be transferred on-time on the delivery day to the right settlement account to fulfil the futures delivery obligations.”
Eurex Repo stated that since the basket went live it has seen client demand from several banks that have now started simulations to prepare for the next futures expiry date.
In a memo ahead of the launch, Frank Gast, managing director at Eurex Repo, explained: “With the new GC Pooling Cheapest-To-Deliver Basket we are bridging the gap between the futures and funding & financing markets. Our clients will be able to reduce their unsecured funding requirements while simultaneously ring-fencing the CTDs for the future delivery.”
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