Eurex is expanding its interest rate offering with the launch of three-month euro STR futures referencing €STR.
The Deutsche Borse owned derivatives exchange said that this is an important milestone in both the establishment of the €STR as the new benchmark risk-free rate, and in broadening its EUR-denominated fixed income product offering.
The new contract enables Eurex to offer a listed, centrally cleared, and cash-settled solution for trading or hedging the new risk-free rate.
The contracts are based on the compounded €STR over a three-month period. They will be available for trading on Eurex from 23 January 2023.
“Launching three-month euro STR Futures is a natural extension of our product portfolio given our liquidity in the long-term interest rate segment,” said Lee Bartholomew, global head of derivatives product R&D fixed income & FX.
He added, “It underlines our commitment to be the home of the Euro yield curve and delivering maximum margin and capital efficiencies to the market. Additionally, further product extensions are likely as the market evolves.”
The exchange said that customers will benefit from Eurex’s portfolio based Prisma margining methodology, which is designed to optimise margin offsets across OTC interest rate swaps and listed fixed income products.
The switch from the former short-term rate EONIA to €STR is part of a broader IBOR reform.
The European Central Bank (ECB) began to officially publish €STR on 2 October 2019. Eurex supported this transition and started clearing the first €STR overnight index swaps in November 2019. Complementing this offering with a listed product now would further help the market in transitioning smoothly to the new rate.
Volumes in €STR OIS have consistently grown since the launch, both in monthly volume and active members.
Notional outstanding has almost doubled in the last 12 months and stood at €2.4 trillion at the end of October.
