Amendments to the Clearing Conditions of Eurex Clearing AG – Consultation

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) regarding the following topics:

• A.  Introduction of Euroclear SA/NV (Euroclear) as an additional securities collateral location.

• B.  Extension of appropriation right with respect to pledged margin securities of defaulted Clearing Members’ CASS pledged client collateral, as well as to additional collateral location Euroclear.

The amendments under items A. and B. are subject to a consultation process (Consultation). The Consultation will end with the expiry of 14 January 2024 (Consultation Period). The planned effective date for the amendments is 12 February 2024, depending on the outcome of the Consultation which will be communicated in a separate Eurex Clearing circular.

2.   Required action

Clearing Members, ISA Direct Clearing Members, Disclosed Direct Clients of Eurex Clearing AG, vendors and other affected contractual parties should take the amendments to the Clearing Conditions into consideration.

The amendments of the Clearing Conditions with respect to topics A. and B. are subject to a Consultation which will end with the expiry of 14 January 2024.

Eurex Clearing herewith invites all Affected Customers to submit comments on the proposed changes and amendments within the Consultation.

3.   Details

A.  Introduction of Euroclear as an additional securities collateral location

Eurex Clearing will enhance its established Security Collateral Locations network by adding the International Central Securities Depository (ICSD) Euroclear Bank SA/NV in Belgium to Clearstream Banking AG, Clearstream Banking S.A. and SIX SIS in Switzerland.

Euroclear is an existing business partner of Eurex Clearing as its settlement location and it is a global provider of Financial Market Infrastructure (FMI) services.

In the first implementation phase (Pledge model only, bilateral accounts), both margin and Default Fund Contributions will be available under the Pledge regime. Customers can deliver collateral for Default Fund Contribution, satisfy the Own Funds requirement as well as coverage of Margining requirements related to their proprietary and client business.

In terms of functionality, Eurex Clearing will leverage its proven existing infrastructure, the same Swift messages and processing flows for delivery and withdrawal will be in place as today.

The very same scope of eligible ISINs will be supported, and Eurex Clearing will apply the same risk and valuation parameters without any changes to the risk methodology. This will allow for smooth integration of Euroclear as an additional securities collateral location.

To reflect the change, the following provisions of the Clearing Conditions will be amended as outlined in Attachments 1, 2 and 3:

• Chapter I Part 1 Numbers 2.1.2, 2.4.1, 3.2.2, 6.1.2, 7.4, 13.3.1 and 17.2.4; Part 2 Subpart A Numbers 4.3.2.1 and 4.6.2; Part 4 Numbers 6.3.2.2, 6.5.2 and 6.5.3; Part 6 Subpart A Number 7.6.1
• Appendix 7
• Appendix 11

B.  Extension of appropriation right with respect to pledged margin securities of defaulted Clearing Members’ CASS pledged client collateral, as well as additional collateral location Euroclear

During a Default Management Process (DMP), Eurex Clearing is entitled to execute its appropriation right and access the defaulted Clearing Member’s margin collateral before the Difference Claim is determined to contain losses and liquidity pressures resulting from the default of the relevant Clearing Member.

The appropriation right can be currently applied to Proprietary Eligible Margin Assets as well as Client related Eligible Margin Assets in the form of securities pledged in favour of Eurex Clearing at CBF and CBL.

During a DMP, Eurex Clearing, in certain cases, has the interest to transfer, lend or liquidate margin collateral before the Difference Claim is determined beyond the current scope.

Therefore, the proposed amendments address the extension of the appropriation right to the CASS pledged client Eligible Margin Assets in the form of securities pledged in favour of Eurex Clearing. Further, the appropriation right is extended to the additional collateral location Euroclear. The reasoning is harmonization for the sake of consistency and flexibility.

To reflect the changes, the following provisions of the Clearing Conditions will be amended, as outlined in Attachments 1, 2 and 3:

• Chapter I Part 2 Subpart A Number 4.3.2.5 and Part 4 Number 6.3.2.4
• Appendix 7
• Appendix 11

Consultation with respect to the amendments to the Clearing Conditions (topics A. and B.)

Pursuant to Chapter I Part 1 Number 17 of the Clearing Conditions, proposed amendments to the Clearing Conditions are subject to a Consultation which will end with the expiry of 14 January 2024.

Eurex Clearing herewith invites all Affected Customers to submit comments on the proposed changes and amendments within the Consultation Period.

During the Consultation Period, comments on proposed changes or amendments shall only be submitted through a web-based commenting service for which a registration form is available on the Eurex Clearing website under the following link:

Find > Forms: Consultation Form

The form has to be duly signed and returned to Eurex Clearing via e-mail to SpecialProvisions@eurex.com in order to obtain a User ID and Password together with a link for accessing the web-based commenting service.

To the extent that Eurex Clearing decides to implement any comments received during the Consultation, the so-amended version of the Clearing Conditions will be published after the Consultation.

The currently envisaged effective date of the changes to the Clearing Conditions is 12 February 2024. However, after the Consultation Period, Eurex Clearing will issue a separate circular to announce the concrete date on which the proposed changes (as the case may be, implementing comments received during the Consultation) will come into effect. 

This announcement will be made with at least 15 Business Days’ notice (Regular Notification Period). However, if Eurex Clearing should receive a request for a Prolonged Notification Period from more than two Affected Customers during the Consultation Period, a Prolonged Notification Period as set out in the Clearing Conditions will be applied and Eurex Clearing will notify all affected parties accordingly.

Publication of amendments to the Clearing Conditions

As of the effective date, the full version of the amended Clearing Conditions will be available for download on the Eurex Clearing website under the following link: 

Rules and Regulations > Eurex Clearing Rules and Regulations > 1. Clearing Conditions

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 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 I of the Clearing Conditions
• 2 – Amended Appendix 7 to the Clearing Conditions
• 3 – Amended Appendix 11 to the Clearing Conditions

Further information