The full story of the OpenGamma/Eurex clearing partnership

The full story of the OpenGamma/Eurex clearing partnership
8th October 2015 OpenGamma

Many of you will have seen the news yesterday that we have enhanced our OpenGamma Margining product to include full support for Eurex Clearing’s margin methodologies; and at the same time Eurex Clearing has announced the Eurex Clearing Prisma Margin Estimator (PME), based on OpenGamma Margining.I thought it would be helpful to provide some further context on how we’re working together on these two offerings and how they’re related.

Why Eurex? Why us? Why now?

OpenGamma has extensive experience working with market structure related risk management. Several of our largest customers are CCPs using the OpenGamma Platform for internal risk management and margin calculations. When we launched OpenGamma Margining, a solution for dealers and buy­side to run cross­CCP margin calculations, this included support for the two largest OTC Rates CCPs in the world: LCH.Swapclear and CME. But our goal has always been far larger than just those two: we want to cover every CCP in the world, so that anyone trading derivatives has a single place to go for software covering all their collateral calculations. We’ve since expanded this list to support CDS clearing at ICE and CME as well.

Our expansion plans are based on three key factors: support from CCPs for our efforts, CCP market share, and demands from our existing customers. On all three fronts, Eurex was the logical next choice.

When Eurex began supporting our replication efforts, they realized that what we were producing was something that their customers had consistently asked them for: an on­premise solution that covers their full range of asset classes (both OTC and ETD) as well as the cross­margining that is a major benefit of clearing at Eurex. Rather than Eurex producing their own library, both Eurex and OpenGamma decided that it was better for their customers that we combine our efforts.

How This Helps Eurex Clients

Working closely with Eurex Clearing staff, OpenGamma has produced a completely independent, clean­room implementation of all three major Eurex Clearing margin methodologies: Eurex PRISMA for ETD, EurexOTC, and Eurex Cross Margining. This is the first and only Eurex validated implementation of EurexOTC and Eurex Cross Margining on the market, adheres strictly to the published specifications produced by Eurex Clearing, and meets tight and contractually committed numerical tolerances.

Much like OpenGamma’s existing CCP modules, it provides complete transparency into the inputs to the final margin numbers (allowing complete numerical drill­down), and supports every major use case necessary for house or client account margin calculations.

This has been packaged into two distinct offerings.
  • The Eurex Clearing PME is a stand­alone Java library with no external dependencies that can be obtained by any Eurex client or member and integrated into existing applications or used as the basis for new application development. Similar to libraries provided by other CCPs, it utilizes market and scenario data provided as part of the Eurex Transparency Enabler package to perform margin simulations on­-premise (thus satisfying tight compliance and latency requirements). It is available directly from Eurex and comes at no license cost.
  • The OpenGamma Margining Eurex Clearing Module is a component that plugs into the OpenGamma Margining solution. Like the Eurex PME it uses the Eurex Transparency Enabler package for input data, and performs all the same calculations. However, it integrates into the rest of our solution to enable cross CCP analysis and support use cases including cheapest­-to­-clear analysis. It is available directly from OpenGamma as part of an OpenGamma Margining subscription.

Both are based on the same validated implementation, subject to the same numerical tolerances, and OpenGamma is contractually committed to keep both updated with any future changes in Eurex Clearing methodologies.

Wait a second, I’m confused. Which do I need?

If you only clear through Eurex Clearing, the two offerings are broadly functionally equivalent. The advantage of a direct commercial relationship with OpenGamma is:

  • Additional guarantees and IP indemnification;
  • Strict Service Level Agreements on support beyond what Eurex Clearing provides;
  • Access to our consulting services to help you integrate the library into your software infrastructure;
  • Source code for the full OpenGamma Margining implementation (including the Eurex Clearing Module);
  • Access to forthcoming functionality supporting high volume, low latency use cases that require additional hardware and infrastructure investment to utilize.
In addition, while Eurex customers can utilize the Eurex Clearing PME, other software vendors or service providers require a commercial license from OpenGamma (which we’re happy to discuss).
If the above aren’t necessary for you, you should use the Eurex Clearing PME. It isn’t a cut­down or limited version of OpenGamma’s implementation; it has the same API as our full commercial offering, uses the same implementation, and performs all the same calculations.
And because it shares the same API, if at some later date you decide that you do need access to multiple CCPs, or additional functionality or offerings only available to OpenGamma customers, it’s a seamless upgrade: any integration work you’ve already done will stay the same.

We’re excited about these offerings coming to the market, and look forward to continuing to collaborate with Eurex Clearing to ensure that its members have access to the types of tools that they need, whether directly from Eurex Clearing or provided by OpenGamma.