The international derivatives marketplace Eurex Exchange is to start a new initiative to increase the attractiveness of its short-term interest rate derivatives segment by offering new trading and market making incentives for its Three-Month Euribor Futures.
These measures will become effective on 1 June 2013. Euribor Futures have already been listed on Eurex Exchange for several years.
The major elements of the initiative have been discussed with relevant market participants, who approached Eurex earlier this year. As part of the initiative, Eurex will offer a completely new market making scheme starting on 1 June, which will replace the current scheme and will initially run until the end of 2013. Additionally, to increase the liquidity and gain customer flow, fee rebates for client orders will be offered relative to open interest held.
As part of the roll-out of its new trading architecture, Eurex Exchange offers new short-term interest rate functionalities which support the initiative, e.g. use of a full spread matrix as well as a time-pro-rata matching algorithm. This is the first time Eurex is able to offer such functionalities which are key to trading short term interest rate contracts.
“With our new initiative, we aim to build up a liquid and comprehensive product suite in the whole Euro denominated yield curve,” says Michael Peters (pictured), member of the Eurex executive board.
Together with the futures contracts based on French (OAT) and Italian (BTP) government bonds, Euribor futures complement the highly liquid long-term interest rate contracts based on German government bonds (e.g. Euro-Bund-, Euro-Bobl- and Euro-Schatz futures).
The new initiative is also a reflection of the upcoming regulatory capital requirements. Eurex’s new portfolio based risk management approach will enable the realisation of capital efficiencies between the full suite of interest rate contracts listed on Eurex Exchange and interest rate swap transactions cleared through Eurex Clearing.