Default Management Fire Drill planned for the week 2 to 6 December 2024

1. Introduction

Eurex Clearing AG conducts annual simulations of its default management (“Fire Drills”) process to test both its internal processes and member readiness with mandatory participation requirements for selected Clearing Members.

This year’s Fire Drill will be complemented by Client Porting Simulation to test the porting process. Both Clearing Members and Disclosed Direct Clients may participate in the Client Porting Simulation on a voluntarily basis.

This year, the Fire Drill and the Client Porting Simulation are scheduled for the week 2 - 6 December 2024.

This circular provides more information about required actions (Section 2) and details on both, the Fire Drill and the Client Porting Simulation (Section 3).

2. Required action

Fire Drill: 

• All Clearing Members: Please update your “DMP Coordinator” and “DMP Deputy” contact data in the Member Section of Deutsche Börse Group to facilitate subsequent communication with the correct counterparts within your organisation. A guide and more details are provided at the bottom of this webpage on the Eurex Clearing website www.eurex.com/ec-en/ under the following path: Services > Risk Management > Default Management Process.
• Clearing Members with mandatory participation requirements: Eurex Clearing will contact all Clearing Members about their participation requirements in early Q4/24.
• Clearing Members having signed up as Hedging Auction Participants: The Fire Drill will cover Hedging Auctions for our major asset classes (Interest Rate Derivatives - PFI01, Equity (Index) Derivatives - PEQ01) at Liquidation Group level. More details will follow.
• Clearing Members interested to act as Hedging Auction Participants: If you’re considering signing up, please contact Eurex Clearing before the Fire Drill to arrange documentation. More information about Hedging Auctions and their benefits for participants can be found on the Eurex Clearing website under the following path: Services > Risk Management > Default Management Process > Hedging.
• Clients interested to participate in the Fire Drill: Please contact the Eurex DMP Team and your Clearing Member to have the appropriate participation documentation and the necessary users set up in place. 

Client Porting Simulation:

Clearing Members and Disclosed Direct Clients interested in participating in the Client Porting Simulation, please contact as of now client.services@eurex.com.

3. Details of the initiative

Fire Drill:

Preliminary scoping covers the following Liquidation Groups:

• Equity Derivatives (PEQ01): Futures and Options with Hedging Auction(s) and Liquidation Auction(s)
• Fixed Income Derivatives (PFI01): Hedging Auction and Liquidation Auction(s) for Listed Fixed Income Derivatives, OTC IRS (EUR, CHF, GBP) and OTC Zero Coupon Inflation Swaps (EUR).
• Listed FX (PFX01)
• Cash bonds and repo (PBN01)
• Centrally cleared cash market products (FWB)
• Crypto linked Derivatives Liquidation Group (PCY01)
• Corporate Bonds Liquidation Group (PCB01) 

For each asset class, Eurex Clearing nominates Clearing Members for whom participation is mandatory. Mandatory participation is detailed in Chapter I, Part 1, Number 7.5.5 of the Clearing Conditions of Eurex Clearing AG.

Details regarding the final scope, indicative auction schedule and participation requirements will be made available in early Q4/24 to the affected Clearing Members.

Please note that in case of a termination event non-compliance with mandatory bidding obligations in an auction can result in default fund contribution juniorisation and other monetary penalties. In the Fire Drill, non-compliance is reported to Eurex Clearing’s National Competent Authority.

In addition to mandatory participants, voluntary participation is open to Clearing Members and Disclosed Direct Clients. The simulation allows all participants to understand and comply with Eurex’s default management process, access the web-based auction platform, submit prices, and provide feedback.

Client Porting Simulation

Similarly, the Client Porting Simulation is an opportunity for Disclosed Direct Clients to test the necessary steps for a transfer of open positions as well as assigned collateral to another Clearing Member (the “Replacement Clearing Member”) in case their Clearing Member defaults (i.e. porting). For Clearing Members, it is an opportunity to test the process for becoming a Replacement Clearing Member.

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.
 

Further information