Amendments to the legal framework of Eurex Clearing AG: Introduction of Optimized Trade Date Netting Service for C7 Securities Clearing Service (C7 SCS)

1.  Introduction   

This circular contains information with respect to the service offering of Eurex Clearing AG (Eurex Clearing) and introduces amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions) and to the Price List of Eurex Clearing AG (Price List) regarding the following topics:

The amendments under items A. – E. will become effective as of 1 November 2022. 

Production start: Optimized Trade Date Netting Service (item A.) shall go live on 7 November 2022 

Learn now more about C7 SCS 2.1 on our dedicated initiative page under the following link: Support > Initiatives & Releases > C7 SCS Releases > C7 SCS Release 2.1. System documentation, circulars, timeline and much more information will be available there for you.

2.  Required action

There is no required action.

3.  Details

A.    Optimized Trade Date Netting for FWB Transactions

As announced in Eurex Clearing Circular 063/22, Eurex Clearing will introduce Optimized Trade Date Netting (OTDN) as a new optional service for FWB Transactions with C7 Securities Clearing Service (C7 SCS) Release 2.1.

Currently, C7 SCS performs Trade Date Netting (TDN) as its basic netting model per transaction account with the consequence of a separate transaction netting per DC Market Participant.

OTDN will enable Clearing Members to apply transaction netting across transaction accounts of several DC Market Participants. Under OTDN all FWB Transactions of the participating DC Market Participants are then rededicated to an A1-Account of the Clearing Member qualifying as a net omnibus transaction account (NOSA UDC) Account. The main objective of OTDN is to achieve a higher netting efficiency by enabling a transaction netting across several DC Market Participants resulting in a reduced number of delivery instructions towards Settlement Locations.

To reflect the introduction of the Optimized Trade Date Netting service, the following provision will be amended as outlined in Attachments 1 and 2:

• Chapter V Part 2 Number 2.5.5 of the Clearing Conditions
• Number 8.2.6 of the Price List

B.    Obligation to provide Italian Tax Identification Number (TIN)

Revenues of the final economic beneficiary arising from the settlement of Italian debt securities are subject to Italian withholding tax. Under certain conditions, a settlement party can apply for tax-exemption at the Settlement Location. In this case, the relevant holder of the settlement account has to register the Italian Tax Identification Number (TIN) of the final beneficiary at the Settlement Location for the respective settlement account. 

Therefore, Eurex Clearing introduced in 2009 the obligation for Clearing Members to provide its own Italian TIN and the Italian TIN of all of its Trading Members as pre-requisite for the clearing of

• Euro-BTP Fixed Income Futures at Eurex Deutschland (only if settled via Clearstream Banking AG) and
• Italian debt instruments at Eurex Repo.

This was communicated to Clearing Members in Eurex Clearing Circular 075/09. 

To reflect the obligation in the Clearing Conditions, the following provision will be amended as outlined in Attachments 3 and 4:

• Chapter II Part 2 Number 2.3.1 (4) of the Clearing Conditions
• Chapter IV Part 2 Number 2.10 of the Clearing Conditions 

C.    Maximum prices for Cash Settlements and Buy-Ins

In response to the introduction of CSDR penalties in February 2022 and in order to achieve harmonization with other European markets, Eurex Clearing decided to reduce the additional fee in case of the occurrence of a cash settlement after a non-delivery of securities (besides fixed income securities) or rights under FWB Transactions from 100 percent to now 10 percent of the settlement price as determined by Eurex Clearing.

In addition, Eurex Clearing deleted several redundant provisions regarding the determination of the maximum offer prices for buy-in auctions as such provisions are already included in the Auction Terms. 

To reflect these changes, following provision will be amended as outlined in Attachment 1 and 3:

• Chapter V Part 2 Numbers 2.2.1 (2), 2.2.1 (3) and 2.2.3 of the Clearing Conditions
• Chapter II Part 3 Number 3.6.7 (1) and (2) of the Clearing Conditions

D.    Clarification on Fractions Handling for Corporate Actions

Since the introduction of C7 SCS Release 1.0, the processing of corporate actions events occurring with respect to non-delivered securities is fully performed by and in accordance with the rules of the relevant Settlement Location. This includes the handling of fractions in securities resulting from the market claim and transformation processing. Depending on the market and the corporate action event, the Settlement Location either compensates fractions in cash or disregards any fraction.

In addition to the fractions processing by the Settlement Locations, Eurex Clearing does not take any additional action to compensate such fractions in cash. 

To reflect this in the Clearing Conditions, the following provision will be amended as outlined in Attachment 1:

• Chapter V Part 2 Number 2.3 (2) of the Clearing Conditions

E.    Clarifications on Corporate Actions and related Contractual Penalties

Settlement Locations process corporate action events occurring with in respect to of non-delivered securities in accordance with their market-specific calendars. These calendars may deviate from the TARGET2 calendar which is used by Eurex Clearing for securities clearing in C7 SCS. 

Thus, it may happen that the record date of a corporate action event falls on a TARGET2 holiday, e.g. Labour Day, and the Settlement Location generates instructions for a market claim or a transformation on that day, while C7 SCS is closed. Therefore, all outdated passages relating to corporate actions which states that “assignments and payments shall be performed [by Eurex Clearing] on the next following Business Day” are removed in Clearing Conditions.

In specific cases, it may occur that a Settlement Location cancels an already processed corporate action event and reverses the related market claim compensations (“cancel run”) up to 280 business days after the original payment date of the corporate action. In such case, Eurex Clearing shall also be entitled to rewind any penalty payment Eurex Clearing charged due to the non-delivery of securities on the record date of the related corporate action event. For the avoidance of doubt, this is an existing process, which was not implemented in the Clearing Conditions.

To reflect the above clarifications in the Clearing Conditions, the following provision shall be amended as outlined in Attachments 1 and 3: 

• Chapter V Part 2 Numbers 2.1 (7) and 2.2.1 (6) of the Clearing Conditions
• Chapter II Part 2 Numbers 2.3.1, 2.3.5 (7), 2.5.1 (1) and 2.7.1 (3) of the Clearing Conditions

Publication of amendments to the Clearing Conditions and the Price List

As of the effective date, the full versions of the amended Clearing Conditions and the Price List will be available for download on the Eurex Clearing website www.eurex.com/ec-en/ under the following link:

Eurex Clearing > Rules & Regs > Eurex Clearing Rules and Regulations

The amendments to the legal framework of Eurex Clearing AG published by this circular are deemed accepted by each affected contractual party of Eurex Clearing AG, unless the respective contractual party objects by written notice to Eurex Clearing AG within prior to the relevant effective date(s) as stipulated in this circular. In case of an objection by the respective contractual party pursuant the preceding sentence, Eurex Clearing AG is entitled to terminate the respective contract (including a Clearing Agreement, if applicable). Instead of submitting an objection, the respective contractual party may submit in writing to Eurex Clearing AG comments to any amendments of the legal framework of Eurex Clearing AG within the first 10 Business Days after the publication of the amendments. Eurex Clearing AG shall assess whether these comments prevent the published amendments from becoming effective taking into account the interests of Eurex Clearing AG and all contractual parties.

Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or FCM Clearing Conditions of Eurex Clearing AG, as applicable.

Attachments:

1. Amended sections of Chapter V of the Clearing Conditions
2. Amended sections of the Price List
3. Amended sections of Chapter II of the Clearing Conditions
4. Amended sections of Chapter IV of the Clearing Conditions

Further information