Stoxx and Eurex Repo have launched the Stoxx GC Pooling index family, including the migration of the existing GC Pooling Indices calculated by Deutsche Börse into the new index family.
The Stoxx GC Pooling Indices provide a representation of the secured euro funding transactions taking place on the Eurex Repo GC Pooling Market. A unique feature of this index family is the introduction of two funding rates that measure secured interbank funding rates and volumes in the euro zone.
All Stoxx GC Pooling Indices are designed to provide transparent, rules-based alternatives to unsecured interbank benchmarks such as Libor and Euribor/Eonia. The new indices can be used for benchmarking purposes in the money market, and as underlying for financial products. The Stoxx GC Pooling Index family will be calculated in euro and will be available end-of-day (CET).
“In light of the recent LIBOR scandal, market participants and regulators globally are looking for a transparent, rules-based and reliable benchmark for the interbank market, based on real transactions,” says Hartmut Graf (pictured), chief executive officer, Stoxx. “Money market trading volumes have shifted significantly from unsecured to secured markets over the recent years. Stoxx and Eurex Repo have thus teamed up to develop the Stoxx GC Pooling Indices, which are based on the daily transactions on the regulated GC Pooling market. These innovative indices can contribute to improved trust in reference interest rates.”
“Our electronic GC Pooling market is a regulated, anonymous, and centrally cleared with an average outstanding volume of more than 150 billion euros. With this new index family based on GC Pooling transactions, we can provide the transparent benchmarks that market participants, regulators and central banks are seeking. The indices fulfil major requirements expressed by the working group of 13 central banks established in March 2013 by the Economic Consultative Committee, such as real transactions as well as clear and binding rules,” adds Marcel Naas, managing director of Eurex Repo.
The Eurex Repo GC Pooling Market is used as the index universe for the new indices, i.e. Stoxx uses trade data reflecting daily trades and binding quotes on the GC Pooling Market.
The indices will be available based on two standardised fixed-income securities baskets available on the GC Pooling Market, namely the ECB basket and the ECB EXTended basket. The following standard terms will be calculated for each basket, respectively: OverNight (ON), TomNext (TN) and SpotNext (SN). Each index will have two versions – volume weighted average rate and total volume. This approach is in line with the central banks’ proposal to implement and use reference rates based on short-term transactions like repos since these exclude counterparty and credit risks. Indices that reflect the entire yield curve are expected to be introduced shortly.
In addition, two funding rates also will be calculated: The Stoxx GC Pooling EUR Funding Rate uses broadly defined GC Pooling baskets including re-usable eligible securities with instantaneous refinancing capacity within the framework of ECB/Bundesbank open market operations. The Stoxx GC Pooling EUR Funding Rate Volume has the advantage of standardised secured funding. With average daily trading volumes above EUR20bn, the Stoxx GC Pooling EUR Funding Rate Volume is comparable to unsecured interbank lending benchmarks such as Eonia.