Eurex Advances Cross-Margining Strategy for Repos and Derivatives

Eurex is expanding its approach to cross-margining, a mechanism that allows trading firms to reduce collateral requirements by analyzing multiple product types together in unified risk models. The initiative aims to make centrally cleared repositories more efficient and attractive to market participants.

The exchange is migrating bond margining from its current Risk Based Margin Methodology (RBM) to the PRISMA system, which already governs exchange-traded derivatives and over-the-counter interest rate swaps. This transition will refine how collateral haircuts are calculated for more than 14,000 securities eligible for repo trading and clearing at Eurex.

Key Changes Coming

• Starting June 2026, clearing members can elect to margin approximately 1,500 commonly used European securities under PRISMA methodology
• Daily recalibration of margin parameters replaces the previous twice-yearly schedule as of May 18, 2026
• PRISMA employs Value-at-Risk modeling to capture correlations between bond portfolios, replacing RBM's individual shock assessments

Eurex analysis indicates substantial savings potential. In single-ISIN repo markets, firms could see average margin improvements of approximately 40 percent, with some members benefiting by up to 82 percent. General collateral pooling markets show more modest improvements around 21 percent, as portfolio effects are considered differently in those transactions.

PRISMA, Eurex's proprietary risk calculation engine launched in 2013, groups equivalent risks and exposures into Liquidation Groups. This allows dealers to consolidate margin requirements across related positions rather than posting separate margins for each transaction. Dealers holding both EURO STOXX 50 Index and DAX Futures, for example, can have their positions analyzed together for risk purposes.

The exchange is pursuing regulatory approval to extend cross-margining further, incorporating bond futures, money market futures, and over-the-counter interest rate swaps. These expansions are intended to reduce dealer balance sheet costs and encourage greater participation from non-bank financial institutions in cleared repo markets.