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PGGM Is The First Pension Fund Manager To Centrally Clear Repos At Eurex

Date 22/01/2019

Eurex welcomes Dutch PGGM as the first pension fund manager to its centrally cleared repo markets using the central counterparty’s ISA Direct service.

With this direct clearing connection, Eurex addresses repo market liquidity concerns as well as the regulatory-driven challenges of asset owners, in particular pension funds. The European Markets Infrastructure Regulation (EMIR) requires over-the-counter derivatives to be cleared through central clearing counterparties. Pension funds have been exempted as the requirement of CCPs to post Variation Margin in cash might pose liquidity challenges.

Using Eurex Repo’s centrally cleared, liquid repo markets, PGGM’s clients can trade with more than 140 Eurex participants including commercial banks, central banks, government financing agencies or supranationals. They are able to invest cash securely or raise short-term funding reliably utilising more than 13,000 ISINs. In this way, PGGM expands its spectrum of available liquidity providers significantly, minimizes counterparty risk, and reduces costs. PGGM utilises SimCorp Dimension to process all Eurex repo trades and support the margin process.

In particular, Eurex Repo’s integrated GC Pooling repo market with straight-through processing across trading (Eurex Repo), central clearing (Eurex Clearing) and Tri-party settlement (Clearstream) allows for an operationally robust and secure management of cash variation and initial margin requirements.

Paul van de Moosdijk, Investment Manager at PGGM: “PGGM continues to voice concerns about the adverse effect that cash variation margin requirement has on pension funds. Through Eurex Repo’s offering PGGM is enhancing its access to cash liquidity and market infrastructure to further address these concerns.”

Societe Generale Prime Services acts as a clearing agent for PGGM. Frederic Colette, Global Head of Prime Brokerage & Clearing: ”We believe that the central clearing of repos via ISA Direct is very compelling for both the buy side as well as Societe Generale as clearing agent and execution counterpart. It allows our clients to get a direct connection to the cleared repo market on Eurex for the first time, securing access to a large liquidity pool through a streamlined process at a very competitive price.”

Eurex Clearing’s ISA Direct Model is currently offered for repos as well as OTC IRS. Matthias Graulich, Global Head of Fixed Income, Funding and Financing Strategy and Development at Deutsche Börse Group: “The successful onboarding of PGGM validates our efforts to open up the centrally cleared repo market to the buy side. We anticipate that other pension funds and buy-side entities with large directional derivatives portfolios will appreciate the significant benefits of combining centrally cleared repos with OTC IRS under ISA Direct in the near future.”