Euronext and LCH adopt new VaR-based margin framework

Euronext Clearing, the multi-asset clearing arm of Euronext, and LCH RepoClear SA, the French repo and cash bond clearing subsidiary of LCH Group, have both adopted a new margin methodology Value at Risk (VaR).

The two entities announced the development in separate press releases issued on Tuesday.

The VaR margin is a measure of risk used to estimate the probability of a stock or portfolio losing value. This is usually based on statistical analysis of historical price trends and volatilities.

The new VaR framework went live on both platforms on Monday, they revealed in statements.

While Euronext said the framework was applied to its Italian, Portuguese, Spanish and Irish government bonds, LCH revealed that its enriched VaR risk methodology was applied to its 13 euro debt markets.

Learn more about Euronext’s VaR margin

Euronext Clearing, formerly known as CC&G, noted that the new methodology applies to government bonds traded on its MTS cash and repo platforms.

MTS Cash is a comprehensive and professional cash securities trading environment for the interdealer market.

In addition, the framework applies to bonds traded on BrokerTec, an anonymous broker-to-dealer electronic trading platform for the fixed income markets, Euronext said.

MOT, EuroTLX and Hi-MTF platforms are also included, the company said in the release.

Meanwhile, Euronext explained that the VaR framework is a “first major step” towards its expansion of Euronext Clearing across Europe.

On top of that, the move marks an important milestone in the exchange group’s “Growth for Impact 2024” strategic plan, he said.

“The introduction of the new methodology falls within the best practices of the market to come, following the principles and parameters of the leading risk”, added Euronext in the press release.

Anthony Attia, Global Head of Post-Trading and Primary Markets at Euronext, further noted that the new VaR-based margin methodology is based on a reassessment of more than 4,000 portfolio-level risk factor scenarios.

“Euronext Clearing is committed to meeting the needs of its customers to ensure that they continue to operate efficiently and securely in all markets,” Attia said.

Learn more about LCH’s VaR margin

For its part, LCH RepoClear SA explained that its VaR risk framework is part of its efforts to improve the efficiency of margins.

The framework, he explained, provides better recognition of diversified portfolios and supports the stability and predictability of the margin requirement.

Additionally, it supports an increased ability to adapt to market volatility, he said.

Olivier Nin, Head of Frontline Risk, RepoClear, Collateral and Liquidity at LCH SA, explained that the new margin framework provides the market with stability and predictability in times of market volatility thanks to its anti-procyclical characteristics.

“The model, based on both historical and theoretical events, also allows LCH SA members to materialize the diversification of their portfolios when trading and clearing across multiple debt markets,” Nin explained.

In addition, LCH announced that the VaR model will apply to the €GC+ segment of LCH SA following its integration with RepoClear SA in the fourth quarter of this year.

Euronext Clearing, the multi-asset clearing arm of Euronext, and LCH RepoClear SA, the French repo and cash bond clearing subsidiary of LCH Group, have both adopted a new margin methodology Value at Risk (VaR).

The two entities announced the development in separate press releases issued on Tuesday.

The VaR margin is a measure of risk used to estimate the probability of a stock or portfolio losing value. This is usually based on statistical analysis of historical price trends and volatilities.

The new VaR framework went live on both platforms on Monday, they revealed in statements.

While Euronext said the framework was applied to its Italian, Portuguese, Spanish and Irish government bonds, LCH revealed that its enriched VaR risk methodology was applied to its 13 euro debt markets.

Learn more about Euronext’s VaR margin

Euronext Clearing, formerly known as CC&G, noted that the new methodology applies to government bonds traded on its MTS cash and repo platforms.

MTS Cash is a comprehensive and professional cash securities trading environment for the interdealer market.

In addition, the framework applies to bonds traded on BrokerTec, an anonymous broker-to-dealer electronic trading platform for the fixed income markets, Euronext said.

MOT, EuroTLX and Hi-MTF platforms are also included, the company said in the release.

Meanwhile, Euronext explained that the VaR framework is a “first major step” towards its expansion of Euronext Clearing across Europe.

On top of that, the move marks an important milestone in the exchange group’s “Growth for Impact 2024” strategic plan, he said.

“The introduction of the new methodology falls within the best practices of the market to come, following the principles and parameters of the leading risk”, added Euronext in the press release.

Anthony Attia, Global Head of Post-Trading and Primary Markets at Euronext, further noted that the new VaR-based margin methodology is based on a reassessment of more than 4,000 portfolio-level risk factor scenarios.

“Euronext Clearing is committed to meeting the needs of its customers to ensure that they continue to operate efficiently and securely in all markets,” Attia said.

Learn more about LCH’s VaR margin

For its part, LCH RepoClear SA explained that its VaR risk framework is part of its efforts to improve the efficiency of margins.

The framework, he explained, provides better recognition of diversified portfolios and supports the stability and predictability of the margin requirement.

Additionally, it supports an increased ability to adapt to market volatility, he said.

Olivier Nin, Head of Frontline Risk, RepoClear, Collateral and Liquidity at LCH SA, explained that the new margin framework provides the market with stability and predictability in times of market volatility thanks to its anti-procyclical characteristics.

“The model, based on both historical and theoretical events, also allows LCH SA members to materialize the diversification of their portfolios when trading and clearing across multiple debt markets,” Nin explained.

In addition, LCH announced that the VaR model will apply to the €GC+ segment of LCH SA following its integration with RepoClear SA in the fourth quarter of this year.