OTC IRD: Encouragement to get your onboarding slot and extension of the OTC IRD Client Activation Program

Encouraging to get your onboarding slot to avoid capacity constraints ahead of the likely EMIR 3.0 onboarding deadline in Q1 2024

Extension of the OTC IRD Client Activation Program introduced with Eurex Clearing Circular 080/22

1.   Introduction

After Eurex Clearing introduced the OTC IRD Client Activation Program in November 2022 to support the intentions of the European Commission to promote clearing of EUR-denominated OTC Interest Rate Derivatives (IRD) transactions in the EU, the Executive Board of Eurex Clearing decided to prolong the registration timeline to 31 December 2023 and the measurement timeline until 30 June 2024.

The EMIR 3.0 legislative proposal by the European Commission from December 2022 foresees a requirement for EU market participants that are subject to the clearing obligation to maintain an active account with an EU CCP for a to be defined proportion of their business in systemically relevant products (in the current proposal: IRS in euro and Zloty, CDS in euro, and STIR in euro). While EMIR 3.0 is still subject to the usual legislative procedure, the legislative proposal suggests that the transition shall apply in two steps:

1. Onboarding and readiness: market participants in scope are required to set up an account and ensure readiness when the final legislation becomes effective
2. Activation: market participants in scope are required to meet the target levels for activity in line with the to be defined Level 2 standards

The European Commission continues to encourage market participants to prepare swiftly before the temporary equivalence for Tier 2 CCP expires mid-2025. The proposed active account approach may thus help avoid another cliff-edge scenario and build the grounds for long-term access to UK Tier 2 CCPs.

Eurex Clearing encourages market participants to act swiftly towards the proposed timelines to avoid onboarding capacity constraints closer to the deadlines. Please get in touch with us to secure your onboarding slot to meet the likely onboarding deadline in Q1 2024. Further information can be found on the EMIR 3.0 page.

The OTC IRD Client Activation Program is specifically designed to support EU market participants during the transition and allows Disclosed Direct Clients, FCM Clients and ISA Direct Clearing Members to qualify for an attractive incentive reward of up to EUR 50,000. Registration for the incentive program is free of charge and possible until 31 December 2023.

Cornerstones of the OTC IRD Client Activation Program 2023:

• This offer is available to Disclosed Direct Clients, FCM Clients and ISA Direct Clearing Members (collectively referred to as “Disclosed Clients”), for any limitations please refer to point 3. b) of this circular
• Registration for the OTC IRD Client Activation Program is possible until 31 December 2023 using the following link to the online registration form: Registration Form
• Each Disclosed Client may only register once for the OTC IRD Client Activation Program 2023.
• Participating Disclosed Clients may qualify for a total incentive reward of up to EUR 50,000 which will be paid out directly to the client if each of the milestones defined by Eurex Clearing are satisfied until 30 June 2024 by the respective Disclosed Client (see details below)
• Registration is free of charge.

To support a timely, efficient, and swift onboarding until the finalization of EMIR 3.0, Eurex Clearing does not charge any account fees for Disclosed Direct Clients, FCM Clients and ISA Direct Clearing Members and also prolonges the CCP Switch Incentive Program until 2024.

2.   Required action

Disclosed Clients may register for the OTC IRD Client Activation Program by way of completing the following online registration form. Please proceed with the following steps:

1. Complete and submit the online registration form for the OTC IRD Client Activation Program by no later than 31 December 2023: Registration Form
   Upon registration, you will receive an e-mail by Eurex Clearing to the e-mail address provided in the online form to confirm your successful registration for the OTC IRD Client Activation Program (please note that reception of the confirmation e-mail may take up to 48 hours).
2. Provide your payment details for the payout of the incentive reward via the online registration form or, by e-mail to the following e-mail address activation.program2023@eurex.com by no later than 30 June 2024. If you send your payment details by e-mail, please include company name, Legal Entity Identifier (LEI) and your Eurex Clearing Member ID (if applicable) so that the required information can be properly attributed.
3. Become active and meet the milestones defined in the OTC IRD Client Activation Program until
   30 June 2024 to qualify for the total incentive reward of up to EUR 50,000.

3.   Details of the initiative

a) Overview of the OTC IRD Client Activation Program 2023

The OTC IRD Client Activation Program 2023 is designed to promote the clearing of OTC Interest Rate Swap (IRS), Overnight Index Swap (OIS), Basis Swap and/or Zero Coupon Inflation Swap (ZCIS) transactions relating to Disclosed Direct Clients, FCM Clients or ISA Direct Clearing Members (collectively referred to as “Disclosed Clients”). Participating Disclosed Clients may qualify for a swap incentive reward in the amount of EUR 40,000 as well as an inflation incentive reward in the amount of EUR 10,000 which together result in a total incentive reward of up to EUR 50,000.

The respective incentive reward will be granted if a participating Disclosed Client satisfies each of the milestones corresponding to the respective incentive by no later than 30 June 2024. An overview of the incentive rewards and corresponding milestones as well as further explanations to the milestones are provided below:

1)    Swap Incentive: 

• Incentive Reward: One-off payment of EUR 40,000
• Milestone 1: Hereby removed and no longer a requirement to qualify for the swap incentive reward
• Milestone 2 (Term: 1 Jan 2023 until 30 Jun 2024): Clearing of IRS, OIS and Basis Swap transactions with a minimum remaining maturity of two years at the time of novation and a cumulated cleared notional volume of at least EUR 2.5 billion
• Milestone 3 (Observation Dates: 30 Apr 2024, 31 May 2024, 28 Jun 2024): Initial margin requirement for OTC IRD of at least EUR 50 million

2)    Inflation Incentive: 

• Incentive Reward: One-off payment of EUR 10,000
• Milestone 1: Hereby removed and no longer a requirement to qualify for the inflation incentive reward
• Milestone 2 (Term: 1 Jan 2023 until 30 Jun 2024): Clearing of ZCIS transactions with a minimum remaining maturity of two years at the time of novation and a cumulated cleared notional volume of at least EUR 150 million

Further explanations to the milestones:

Milestone 1: Milestone 1 has been removed and is no longer a requirement to qualify for the swap incentive reward or the inflation incentive reward.

Milestone 2: For the qualification of the swap incentive reward, it is required to clear own OTC IRS, OIS and Basis Swap transactions with a minimum remaining maturity of two years at the time of novation and a cumulated cleared notional volume of EUR 2.5 billion in the period from, and including, 1 January 2023 to, and including, 30 June 2024.

For the qualification of the inflation incentive reward it is required to clear own OTC ZCIS transactions with a minimum remaining maturity of two years at the time of novation and a cumulated cleared notional volume of EUR 150 million in the period from, and including, 1 January 2023 to, and including, 30 June 2024.

Milestone 3: For the qualification of the swap incentive reward, the initial margin requirement relating to the own OTC Interest Rate Derivatives of the Disclosed Client must at least be equal to EUR 50 million (or equivalent in any other Clearing Currency) on any of the following dates 30 April 2024, 31 May 2024 or 28 June 2024, as determined by Eurex Clearing. There is no Milestone 3 which needs to be achieved for the inflation incentive reward.

If the Disclosed Client requested the performance measurement to be limited to certain own transaction accounts, Eurex Clearing will disregard any other transactions accounts in its performance determination.

b) Eligible Participants for the OTC IRD Client Activation Program

The OTC IRD Client Activation Program 2023 is only available to Disclosed Clients that have not been registered for the Discounted OTC IRD GOLD Pack or Basic Pack or any other rebate scheme offered by Eurex Clearing in relation to OTC IRD.

Disclosed Clients may register for the OTC IRD Client Activation Program 2023 regardless of whether a Member ID has been assigned to the Disclosed Client by Eurex Clearing AG, provided that

(i) if an account manager, fund manager or other authorized representative has been entered as such in the systems of Eurex Clearing AG to act for one or more Disclosed Clients, including without limitation, in case of a so-called fund manager or account manager set up, the relevant Disclosed Clients may not register individually and only a single registration for the OTC IRD Client Activation Program 2023 by the relevant account manager, fund manager or other authorized representative that has been entered as such in the systems of Eurex Clearing AG shall be permitted and

(ii) a single Disclosed Client shall only be permitted to register once for the OTC IRD Client Activation Program 2023, including where multiple Member IDs have been assigned to such Disclosed Client or where multiple transaction accounts have been set up for such Disclosed Client.

c) Payment of the OTC IRD incentive reward

The individually achieved incentive reward of up to EUR 50,000 will be paid out in full as one-off payment via bank transfer to the Disclosed Client in the second half of 2024.

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:

• Overview: OTC IRD Client Activation Program

Further information