Euronext Clearing and LCH RepoClear SA have announced the adoption of a new Value at Risk (VaR) margin methodology. CH RepoClear SA is the cash bond clearing subsidiary of LCH Group while Euronext Clearing is the multi-asset clearing arm of Euronext. Both companies announced the deal in separate press statements.
The new VaR framework was launched on both platforms earlier this week, according to the separate statements of both companies.
VaR margin is usually used to measure the risk of the possibility of a loss in value of a portfolio or a share. It is always based on the analysis of historical price trends as well as the volatility history in the market.
The New Technology Will Improve Efficiency
LCH stated that it applied the VaR risk technology across its 13 Euro debt markets. On the other hand, Euronext said it applied the framework to its Irish, Spanish, Portuguese, and Italian government bonds. Additionally, Euronext disclosed that the new technology will be applied to government bonds on repo and MTS cash platforms.
As a professional and comprehensive cash securities platform, MTS provides a secure trading environment for the interdealer market. The technology will come in handy for bonds that are traded BrokerTec, a trading platform that allows dealers to trade directly with each other anonymously.
Euronext stated that the VaR framework is the first important step for its expansion of Euronext Clearing across Europe. Additionally, the integration is significant for the exchange’s “Growth for Impact 2024” strategic plan.
Euronext To Meet Clients’ Needs Efficiency Through The Framework
The new framework comes under the next-to-come market best practice, which follows state-of-the-art parameters and risk principles.
Global Head of Primary Markets at Euronext, Anthony Attia, stated that the new VaR technology comes after the re-evaluation of over 4,000 risk factor scenarios at portfolio levels. Euronext Clearing wants to support the needs of clients, ensuring that they continue to operate safely and effectively across all markets, Attia added.
LCH RepoClear SA stated that the VaR technology will come in handy to enable the company to improve margin efficiency. The new framework supports predictability and stability and provides better recognition of diversified portfolios.