As of 7 August 2015, GMEX will provide a Euro-denominated IRS Constant Maturity Future (CMF) for trading and clearing on Eurex. Both parties agreed on this cooperation at the end of 2014.
The cooperation will facilitate the electronic arranging of CMF contracts on GMEX’s platform with trade confirmation and central clearing taking place at Eurex.
“The regulatory reforms have spurred market demand for our CMF contract as it brings the benefits of futures trading closer to OTC products, while delivering the efficiencies of centralised order execution, standardised central clearing and effective hedging of interest rate exposure. Launching a unique product is very much a process, not an event, with momentum continuing to build beyond the initial go-live date,” says Hirander Misra (pictured), CEO and Co-Founder of GMEX Group.
“Offering this highly innovative contract to our market participants further increases the range of interest rate derivatives they can trade and clear. Users will immediately benefit from the capital efficiencies we can offer as our interest rate product suite comprises both listed and OTC instruments covering the entire Euro denominated yield curve,” says Brendan Bradley, Chief Innovation Officer and member of the Eurex Executive Board.
For the market launch, both partners expect a diverse range of active participants from the existing Eurex trading and clearing member base. This includes large sell-side banks, buy-side firms, futures trading houses and derivatives brokers such as RJ O’Brien Limited, formerly The Kyte Group, a UK-based affiliate of Chicago-based RJ O’Brien & Associates. David Mudie, CEO of RJ O’Brien Limited, says: “We’re delighted to be among the first to offer execution and clearing services for the GMEX CMF contracts at launch. We’ve seen strong client demand for access to this product from day one.”
To help facilitate market launch, key software vendors will provide services from the first day of trading. Additionally, Eurex Exchange members can trade and clear the GMEX IRS CMF under their current membership. As of April 2015 onwards, market participants have had access to Eurex’s trading and clearing simulation environment to test internal systems and processes.
GMEX CMF is based on the Interest Rate Swap Index Average (IRSIA) and accurately tracks the interest rate exposure at each point on the yield curve by removing the expiry date and marking the contract to market against an IRSIA Constant Maturity Index on a daily basis. Thereby the contract facilitates the management of interest rate exposure without a constant need to re-adjust and maintains the liquidity of a given maturity from two to 30 years.
