Auction

Auction process for Fixed Income Liquidation Group (LG)

Auction type for OTC IRS and Listed Fixed Income Futures (ETD)

For OTC IRS each Clearing Member can choose which currencies it wants to clear, and consequently it has to participate only in those auctions, which relate to the Clearing Member’s chosen currencies.

With regard to OTC IRS one single unit liquidation auction for each currency will be conducted. Eurex Clearing discloses the auction portfolio to all auction participants who are required to show one price for the entire portfolio, the best price wins the liquidation auction.

For listed fixed income derivatives (FI ETD), Eurex Clearing conducts a multi-unit auction (this auction format is also used for the Equities Derivatives LG) to allow for the broadest possible range of auction participants. 

FI ETD can be either options or futures. All futures and future style options (i.e. all listed derivatives in the Fixed Income Liquidation Group) have a value of zero at the beginning of each business day. The relevant cash flow relating to these products is the variation margin resulting at the end of the auction day. As such, when pricing futures positions or future style option positions in a default management auction, it is essential that Clearing Members do not price-in the face value of such positions. Rather, the price provided by a Clearing Member needs to reflect the Clearing Member’s expectation of variation margin payments that will become due for the respective positions at the end of the auction day.

Depending on the CCP’s hedging strategy, listed Fixed Income Futures can be used as hedging instruments for IRS and therefore included in the OTC IRS auctions for hedging purposes. Participation in the auction in this case is only required from Clearing Members with Clearing Licenses for both FI ETD and OTC IRS.

OTC IRS
To determine the relative quality of Clearing Members’ prices, Eurex Clearing classifies each Clearing Member’s auction price as "sufficient", "medium" or "insufficient". A price is "sufficient", if the difference between the winning auction price and this price is less than 0.5 times the initial margin requirement for the auction portfolio. A price is "medium", if the difference between the winning auction price and this price is between 0.5 and 1.5 times the initial margin requirement for the auction portfolio, and a price is "insufficient", if it is anywhere above 1.5 times the initial margin requirement for the auction portfolio. Default Fund contributions of Clearing Members who submitted "insufficient" bids are juniorized, and Default Fund contributions of Clearing Members who submitted "medium" bids are partly juniorized and partly seniorized. 


FI ETD

To determine the relative quality of Clearing Members’ prices, Eurex Clearing uses maximum Bid-Offer Spread per unit, chosen in conjunction with the Default Management Committee.

Default Fund contributions of Clearing Members who submitted a wider spread than the maximum Bid Offer spread are juniorized, their Default Fund contribution might be utilized prior to those of other Clearing Members.


A Clearing Member which does not submit a mandatory bid in the Fixed Income Liquidation Group will also be subject to a monetary fine up to € 5,000,000.