C7 SCS Release 2.0: Impact of collateral mobility of Clearstream for Members using Xemac for provision of margin collateral and Default Fund contributions

1.    Introduction

This circular contains information with respect to the service offering of Eurex Clearing AG (Eurex Clearing) and announces settlement unavailability on Friday, 21 October 2022 due to Xemac migration that impacts:

A. GC Pooling settlement and 
B. Processing of margin collateral and Default Fund contributions provided via Xemac.

A.    GC Pooling settlement

The migration of the Repo clearing service to the new Securities Clearing platform “C7 Securities Clearing Service” (C7 SCS), Release 2.0, will take place on Monday, 24 October 2022. On the same day, Clearstream plans to migrate the collateral management system for GC Pooling from Xemac (current system of Clearstream Banking AG, Frankfurt) to CmaX (current system of Clearstream Banking S.A., Luxemburg, and future system of Clearstream Banking AG) as the common collateral management system. 

As part of the migration from Xemac to CmaX, Clearstream requires a new account structure for each Participant in CmaX. As part of the migration approach, Clearstream will automatically transfer any open GC Pooling Repo exposures to the relevant new account structure. To ensure a smooth transition, no settlement of GC Pooling Repo transactions can be offered by the collateral management system of Clearstream on Friday, 21 October 2022.

Consequently, settlement will be unavailable on Friday 21 October 2022 for GC Pooling Repo Transactions with Eurex Clearing (settlement holiday) and the trading deadline for concluding same day GC Pooling Repo transactions will be preponed to 15:00 CET on 20 October 2022.

B.    Processing of margin collateral and Default Fund contributions provided via Xemac

The migration of Xemac will also impact any Xemac user that provides margin collateral and/or Default Fund contributions in favor of Eurex Clearing via this channel. All holdings will be migrated by Clearstream to CmaX provided the relevant legal documentation is duly executed, and new accounts are set up and enabled for CmaX in due time. 

The migration will take place together with the migration of GC Pooling Repo transactions on 21 October 2022 and it will require the freeze of inventory and related exposures. This means that on Friday, 21 October 2022, no changes of exposure values will be processed, i.e. neither any release of collateral held in Xemac nor any provision of any additional collateral using Xemac will be possible. In case there is any margin shortfall, Eurex Clearing will issue margin calls in cash. Provision of securities collateral using any other collateral location (including Clearstream Banking Luxembourg`s - CmaX) will be possible as per regular procedure.

Learn now more about C7 SCS Release 2.0 on our dedicated initiative page under the following link: Support > Initiatives & Releases > C7 SCS Releases > SCS Release 2.0. Documentation, circulars, timeline and much more information will be available there for you.

2.    Required action

A.    GC Pooling settlement

Members must consider the impact due to the exceptional unavailability for settlement and exceptional changes in settlement and trading timings for GC Pooling Repo transactions. 

B.    Processing of margin collateral and Default Fund contributions provided via Xemac

Members must consider the impact due to the exceptional unavailability for settlement and exceptional limitations in Xemac processing for margin collateral and Default Fund contributions provided in favor of Eurex Clearing. 

3.  Details of the initiative

A.    GC Pooling settlement

As announced in Eurex Clearing circular 036/21, Eurex Clearing decided to migrate the Repo clearing service to the new securities clearing platform C7 SCS with Release 2.0. Mandatory adaptation to ECB rules made Clearstream decide to move to one common collateral management system latest with the implementation of the Eurosystem Collateral Management System (ECMS). Clearstream will migrate the GC Pooling Collateral Management from Xemac to CmaX as the common collateral management system. The timeline of the migration is aligned with C7 SCS Release 2.0. After migration, Xemac will not be available for GC Pooling Collateral Management.

Clearstream requires a new account structure for GC Pooling participants in CmaX. Clearstream has already published the preliminary release notes to enable customers to be prepared for these changes and are available at the following links:

Collateral Mobility: Preliminary Release Notes (CBF Legacy)

Collateral Mobility: Preliminary Release Notes (CBL)

As part of the migration approach for GC Pooling, Clearstream plans an automatic transfer of all open GC Pooling Repo exposures and booking of allocated GC Pooling Repo collateral from the current account structure to the new account structure. The collateral can only be moved on a T2S business day. After settlement cut-off in the Xemac system, a snapshot of all open exposures will be taken on Thursday, 20 October 2022 and the collateral will be moved on Friday, 21 October 2022. 

To ensure smooth migration of open exposures, Clearstream requires:

• Xemac settlement cut-off time to be preponed to 15:45 CET on Thursday, 20 October 2022
• No settlement of GC Pooling Repo transactions to be offered by the collateral management system of Clearstream Banking AG (Xemac) and collateral management system of Clearstream Banking S.A (CmaX) on Friday, 21 October 2022.

The following points must be considered in this regard for the exceptional settlement holiday and changes in settlement and trading timings for GC Pooling Repo transactions:

• On Friday, 21 October 2022, settlement of GC Pooling Repo transactions with Eurex Clearing will not be available (settlement holiday) and Eurex Clearing will hence not accept any GC Pooling Repo transactions with the mentioned date as a contractual settlement date. This condition is applicable for the opening date of the front leg as well as the closing date of the term leg. Eurex Clearing will also not perform any closing of open term GC Pooling Repo transactions on this date. Any pending (including late) GC Pooling Repo transactions will not be instructed on this date, and will be instructed on Monday, 24 October following successful migration. Eurex Clearing will take appropriate measures to enforce this within its own technical systems.
• On Friday, 21 October 2022, the trading on Eurex Repo can continue uninterrupted, but no trading and settlement of same day GC Pooling trades will be possible.
• The trading deadline for concluding same day GC Pooling trades in currencies EUR, USD and GBP will be preponed to 15:00 CET on Thursday, 20 October 2022.

The Special Repo and GC Repo markets remain unaffected by this exceptional handling. Further details on the migration procedure and activities will be provided in due time.

B.    Processing of margin collateral and Default Fund contributions provided via Xemac

The migration of Xemac will impact any Xemac user that provides margin collateral and/or Default Fund contributions in favor of Eurex Clearing via this channel. All holdings will be migrated by Clearstream to CmaX provided the relevant legal documentation is duly executed, and new accounts are set up and enabled for CmaX in due time. 

Clearstream requires a new account structure for any party that wishes to provide margin collateral and/or Default Fund contributions via CmaX. Clearstream has already published the preliminary release notes to enable customers to be prepared for these changes and are available at the following links:

Collateral Mobility: Preliminary Release Notes (CBF Legacy)

Collateral Mobility: Preliminary Release Notes (CBL)

As part of the migration approach for the existing claim exposures, Clearstream plans an automatic transfer of all open exposures and booking of relevant collateral from the current account structure to the new account structure. The collateral can only be moved on a T2S business day. After settlement cut-off in the Xemac system, a snapshot of all open exposures is taken on Thursday, 20 October 2022 and the collateral will be moved on Friday, 21 October 2022. 

To ensure smooth migration of open exposures, Clearstream requires:

• Xemac settlement cut-off time to be preponed to 15:45 CET on Thursday, 20 October 2022.
• No changes to the claim exposure value to be supported by Xemac on Friday, 21 October 2022.

The following points must be considered in this regard for the exceptional settlement holiday and changes in settlement times:

• On Friday 21 October 2022, no changes of exposure values related to margin collateral and/or Default Fund contributions in favor of Eurex Clearing will be supported.
• The deadline for changes of exposure will be preponed to 15:45 CET on Thursday, 20 October 2022.

Further details on the migration procedure and required activities will be provided in due time.
 

Further information