I take a look at Euronext’s ClearSim margin simulation tool. How easy is it to use for Futures? What’s good, what’s bad and what needs improvement.

Introduction

Returning to work after time away, it takes some effort to decide what to write about in the weekly blog. My inspiration usually comes from consuming content (reading blogs, listening to podcasts, watching Youtube channels) and talking to colleagues and contacts.

After ruminating on a few ideas and a couple of false starts, I decided to write this blog post based on the below that appeared in my LinkedIn feed.

A new and public risk simulation tool.

Great to see CCPs taking concrete steps following the proposals on margin simulators from BCBS-CPMI-IOSCO, see Transparency and responsiveness of initial margin in centrally cleared markets (pg14).

Let’s try it out.

Getting Started

On clicking the link in the post, I was taken to the Euronext ClearSim page.

And clicking on the Direct Access button:

Viola, direct access to the tool.

No sign-up, no waiting for approval.

That is nice to see.

And I like the “Become a Clearing member” tooltip on the top right, a nice touch.

A User Guide is available and I scanned that quickly, all looked simple enough to use.

Adding New Positions

Ignoring the Download Sample CSV and Download Ref Data buttons, ( a mistake with hindsight) I clicked on Next, Add new position and then selected Future.

A very slick looking UX.

However being asked to enter an ISIN is far from ideal.

Particularly when Product Code is greyed out below.

Humans can remember product codes but not ISINs, well 99.9% of humans can!

So I turned to ChatGPT and asked.

What are the ISINs for the Top 10 Futures contracts at Euronext

The response was:

I’m sorry, but I couldn’t locate a reliable full list of the Top 10 futures contracts on Euronext along with their ISINs.

If you like, I can attempt to gather a more comprehensive list (for example, the most-liquid 20 or 30 futures) and pull together all their ISINs that are publicly available.

Fair enough, but I replied with “Sure”.

Then with lots of steps, effort and thought, after 3m 35s it came back with:

So not exactly what I asked for, as when I tried to enter the first ISIN in the list, “FR0003…”, I got “No results found” in the UX.

Only then, like most humans, I read the Quick Notes at the end, where the first bullet mentioned “reference underlying index ISIN”.

So the ISIN given was for the CAC 40 index itself and not a Futures contract on the index.

However the nice links in the output “Euronext Live” took me directly to the Euronext Markets page for “CAC 40 Index Future” and clicking on the front contract, Nov 25, I got price and volume information as well as the ISIN.

I could now enter “FREX01594…” into the ISIN box, which presented an auto-complete type list as I typed.

After selecting my required ISIN, with Product Code shown, the form then made me again select Product code from a list with one entry and then Expiration Date from a list with one entry, which are un-necessary time wasting clicks.

Still I could now enter 1 as the Long Qty and then Add New Position.

Run Simulation

With a single position, long one FCE contract in the front month, I now had my portfolio and could click on Run Simulation.

This opened up a Results Panel.

And I waited and waited and waited…..

Eventually closing the panel, thinking I must have done something wrong and deleted the position and tried again with a different ISIN.

Same result.

After a few attempts and still no results, I gave up and turned to something else.

Infact, the Eurex Cloud PME tool, which I was able to re-familiarise myself with (more than a few years since I last used it), before trying out a few portfolio simulations for DAX Futures and Options.

20 minutes or so later, I returned to the Euronext ClearSim tab and was surprised to see there were now results.

Total Margin of Eur 6,150 for my 1 contract position, which is approximately 7.5% of nominal and ballpark what I would expect.

Nice to see Add-ons broken out, but surprising to see a Liquidity Add-on, albeit small, for a position of 1 contract!

Back to performance.

I ran further simulations, and the time varied between 8 to 16 minutes.

Far too slow to be usable.

So either the ClearSim is being flooded with requests (unlikely) or there is deliberate throttling of requests (why?) or the software and infrastructure needs a lot of performance improvement (likely).

As a comparison, I used Eurex Cloud PME to enter one Future and one Option on the DAX and the calculation of Margin was instant.

Both Eurex and Euronext use Historical Simulation VaR, so there should be little computational difference in their methodologies and margin calculations should be near instant for Exchange Traded Derivatives.

Thoughts

While the Euronext ClearSim tool works, it takes far too long to return results, which is detrimental to effective use.

The form based capture of positions also needs to end with ISIN and not start with ISIN; so enter product code and then be shown list of delivery months and so on, to get to the specific ISIN.

Granted that the more common use will be to load positions from CSV files, where ISINs can be found from the the provided reference data files.

Still performance is the major issue.

I would expect this to be tackled first, before adding new functionality or more asset classes.

And of course there should be an API.

Eurex Cloud PME has both a Web UI and an API and is good standard to emulate.

Summary

Euronext have released ClearSim, a public tool for margin simulation.

It is easy to use with a slick UX.

However performance needs to be massively improved.

Eurex CloudPME, a more mature tool, shows what is possible.

BCBS-CPMI-IOSCO policy proposals are a guide to functionality such tools should provide in future.