Securities Clearing: Introduction of C7 Securities Clearing Service (C7 SCS) Release 3.0

1.   Introduction

With this circular, Eurex Clearing announces the production launch of C7 Securities Clearing Service (C7 SCS), Release 3.0, on 20 November 2023. 

In accordance with the final milestone of its strategic roadmap for migration of the Securities CCP into the C7 SCS environment, Eurex Clearing proceeds with the migration of securities clearing for Eurex Derivatives (XEUR) deliveries resulting in settlement at Euroclear UK & International to the C7 SCS architecture. Thereby, the entire Clearing Services of the Securities CCP are migrated into the C7 SCS environment. 

Furthermore, Eurex Clearing will introduce functional shaping for "high volume" deliveries resulting from Eurex Derivatives business, both for bond and equity deliveries, to improve settlement efficiency.

Eurex Clearing will enhance the mapping of the Italian TIN (tax identification number) on Member and position account level, which allows Trading Participants direct assignment of the Italian bonds delivery to the end-client.

Eurex Clearing will also adjust the timing for disclosure of belated subscription rights transactions. 

Simulation start: 4 October 2023
Production start: 20 November 2023

Learn now more about C7 SCS Release 3.0 on our dedicated initiative page on the Eurex Clearing website www.eurex.com/ec-en/ under the following link: Support > Initiatives & Releases > C7 SCS Releases > C7 SCS Release 3.0. System documentation, circulars, timeline and much more information will be available there for you.

2.   Required action

Eurex Clearing encourages all participants to actively take part in the simulation for C7 SCS Release 3.0 to check how the release components are processed in customers' internal systems.

Customers currently having physically settled UK and Irish options and futures on the T7 platform in their portfolio must check their internal processing of Securities CCP reports in favour of C7 SCS reports and adapt their internal processing. The current account setup for the deliveries will be migrated, so no additional setup is needed.

With the introduction of functional shaping for the XEUR market, the process similar to Eurex Repo shaping will be introduced. The display of relation between Net Position Trade and resulting delivery positions will change in C7 SCS reports, especially in the “Net Clearing Report – XEUR”. The report structure of “Net Clearing Report - XETR and XFRA” will also be adapted. This structure change must be reflected in the Members’ internal systems.

The TIN assignment for Italian bonds delivery, currently possible on Trading Participant level, will be available with the start of C7 SCS Release 3.0 also for position accounts. Trading Participants using agency position accounts for Futures on Italian bonds (FBTP, FBTM, FBTS) for their non-disclosed clients can streamline their settlement process assigning the customer’s Italian TIN to a dedicated position account. The assigned TIN, in case of delivery, will be reported for taxation reasons to the CSD directly.

Please check whether you have registered and/or updated your Release Contacts for C7 SCS via the Member Section of Deutsche Börse Group under “Release Contacts”.

In parallel, please subscribe to Eurex Clearing Circulars and Newsflashes on the Eurex Clearing website under the following link: Find > Subscriptions.

Please note that any communication regarding C7 SCS will only be distributed via Eurex Clearing Circulars and Newsflashes.

3.   Details of the initiative

A. Migration of processing of deliveries for Euroclear UK & International resulting from the Eurex Derivatives business to the C7 SCS system

The current customers’ setup in Securities CCP used for deliveries resulting from the Eurex Derivatives business towards Euroclear UK & International will be transferred from the Securities CCP to the C7 SCS system. Therefore, no changes to the Euroclear UK & International setup are required. However, the reporting content will be included in the existing C7 SCS reports CE89x, CE86x and CE87x, so usage of Securities CCP reports becomes obsolete and the reports, i.e. CE290, CE260 or CE270, do not have to be processed in the future.

B. Functional Shaping for “high volume” deliveries

Eurex Clearing is constantly optimizing its processes with the target to increase the settlement efficiency. Eurex Derivatives customers may find themselves in a situation where they are obliged to deliver high volumes of securities. To reduce the impact in case of fail of delivery by reason, i.e. lack of securities on the seller’s side in CSDs, where partial settlement is not offered (i.e. SIX SIS) or lack of cash on the buyer's side, the original Net Position Trade will undergo a functional shaping.

The C7 SCS system will create one or more delivery positions related to the Net Position Trade and provide it as delivery instructions to (I)CSDs, which reduces the risk of failure of the total amount of the Net Position Trade. The functional shaping for XEUR will automatically apply for high volume deliveries as additional safeguard against lack of cash, as the partial settlement can be triggered in case of lack of securities only.

Clearing Members are encouraged to perform a test in the simulation environment to verify the enabled processing of settlement information between more than one delivery instruction out of one single C7 SCS Net Position Trade provided in the C7 SCS Net Clearing Report CE890/1/2 and settlement feedback.

C. Possibility to set up a dedicated Italian tax identification number (TIN) on position account level for Eurex deliveries in Italian bonds

Trading Participants willing to use a dedicated position account in the Eurex system to segregate the Italian bonds delivery for their non-disclosed customers can assign a customer's TIN on agency account level (e.g. A2, A54) via existing “Taxpayer Identification Number” form. The taxation identification is provided within the delivery instruction to Clearstream Banking Frankfurt (CBF) as for current processing.

D. Earlier disclosure of belated subscription rights transactions

Eurex Clearing will adjust the timing for disclosure of belated subscription rights transactions. The disclosure will be brought forward to the business day before the last day of the subscription period, giving buyers and sellers the opportunity to align on the buyer’s desired election before the end of the subscription period.

For cases where the last trading day is less than three business days before the last day of the subscription period (i.e. last day of the subscription period = contractual settlement date, ISD = T+2), the subscription rights will be disclosed on the last day of the subscription period as today. The further processing after disclosure will not change.

E. Miscellaneous

• Decommissioning of Securities CCP service:

With the deliveries for Euroclear UK & International, the last part of Securities CCP services will be transferred to the C7 SCS architecture and therefore the reports used for settlement reconciliation (i.e. CE290, CE260, CE270) and cash reports (i.e. CD010) will not contain any content and will be deselected from the Securities CCP system.
o   The Securities Clearing GUI currently showing the status of deliveries for Euroclear UK & International will become obsolete and be discontinued as well after the last deliveries have been finalized.

• Change of Clearing time stamp to xml-standard:

The DateTimeFormat, defined as YYYY-MM-DD HH:MM:SS in the C7 SCS Report Reference Manual will be aligned with the XML standard defined as YYYY-MM-DDTHH:MM:SS - with a capital ”T” as a constant between the day and the time parts.

• Changes to billing reports introducing new values for existing fields.

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.

Attachment:

• C7 SCS Release 3.0 Member Communication Calendar

Further information