Eurex Launches FX and FI Portfolio Margining

Eurex has reached what it says is an “important milestone” in the evolution of its FX ecosystem by launching portfolio margining between FX and fixed income derivatives to support FX futures execution via exchange for physical (EFP) workflows.

BNP Paribas and JP Morgan are the first two banks to support the new service, meaning clients can offset FX futures and options exposures against eligible fixed income positions held at Eurex Clearing. The service was developed in close collaboration with Union Investment as a buy-side partner, Eurex says, meaning “this market-led solution reflects client demand for greater funding and collateral efficiency”.

The move also means that bank-led EFP execution services enables clients to access OTC FX liquidity, Eurex says that on the first day of the service, clearing members and their clients realised margin offsets reaching 60% of the total FX initial margin.

“The combination of portfolio margining and EFP-based FX futures execution is an important development for our FX trading activity,” explains Rico Milde, head of FX trading at Union Investment. “It enables us to access established OTC FX liquidity through our banking relationships while benefiting from the risk management, transparency and capital efficiencies of cleared listed derivatives.

“The ability to offset FX exposures against our fixed income portfolios at Eurex is a game changer for our collateral efficiency and supports our holistic approach to portfolio management,” he adds.

Asif Razaq, global head of Cortex and FICC algo execution services at BNP Paribas observes that “clients can achieve meaningful reductions in trading and funding costs” through the bank’s EFP workflow, while Till Arkenau, head of continental Europe FX sales at JP Morgan, highlights “the continued convergence of OTC and listed FX delivers tangible benefits for our clients”.

Terence Saayman, head of risk methodology for ETD at Eurex Clearing, concludes, “By aligning margin requirements more closely with the true economic risk across FX and fixed income instruments, Eurex Clearing’s margin methodology optimises capital requirements for clients, while supporting regulatory objectives. Enhanced bank participation further boosts market liquidity, benefiting all clearing members and end users.”