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Prisma: Update of Liquidity Add-On parameters effective 16 December 2019

Release date: 09 Dec 2019 | Eurex Clearing

No. 117/2019 Prisma: Update of Liquidity Add-On parameters effective 16 December 2019

Eurex Clearing Circular 117/19

1.   Introduction

As part of a regular review of concentration risk handling in the risk methodology, Eurex Clearing has recalibrated the Liquidity Add-on. The recalibration reflects updated market volumes and behaviour of the add-on for growing positions.

The Liquidity Add-on parameter update is the second of two phases and concerns all products in Liquidation Group PFI01. The reviewed parameters will take effect on 16 December 2019

We are providing the possibility to calculate impacts on margining using Cloud PME, where an additional environment was set up with the updated parameters at https://whatif.eurexmargins.prod.dbgservice.com/.

Production start: 16 December 2019

2.   Required action

No specific actions are required.

3.   Details of the initiative

Concentration risks are covered as part of Eurex Clearing’s Prisma methodology with a dedicated Liquidity Add-on.

The Liquidity Add-on is designed to capture potential additional costs when liquidating portfolios, where the key features are:

  • The Liquidity Add-on depends on the relative size of positions as compared to observed market volumes
  • The Liquidity Add-on depends on the current level of market risk of the respective products

As part of a regular review of concentration risk handling in the risk methodology, Eurex Clearing has recalibrated the Liquidity Add-on with a focus on concentrated positions as well as observed market volumes. Model parameters affected are Market Capacities as well as the Liquidity Factor. 

Market Capacities reflect updated market volumes. The Liquidity Factor reflects updates on how the add-on increases with growing position sizes. 

The Liquidity Add-on review is structured in two phases. The first phase covered PEQ01 and smaller Liquidation Groups and now the remaining Liquidation Group PFI01 is updated. We are providing the possibility to calculate impacts on margining using Cloud PME, where an additional environment was set up with the updated parameters at https://whatif.eurexmargins.prod.dbgservice.com/.

Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions of Eurex Clearing AG.


Further information

Recipients:

All Clearing Members, Basic Clearing Members, Disclosed Direct Clients of Eurex Clearing AG and vendors

Target groups:

Front Office/Trading, Middle + Backoffice

Contact:Risk Exposure Management, T +49-69-211-1 24 52, F +49-69-211-1 84 40, risk@eurexclearing.com
Web: www.eurexclearing.com
Authorized by:Dmitrij Senko