Default Handling under ISA Direct Model

In case of the occurrence of a Termination Event or an Insolvency Termination Event regarding a Clearing Agent, Eurex Clearing will publish a Replacement Notice informing about the beginning of the Replacement Period. If the ISA Direct Clearing Member intends to continue the clearing of its ISA Direct Clearing Member Transactions, either with a Replacement Clearing Agent or as a Direct Clearing Member, the ISA Direct Clearing Member needs to fulfill the Clearing Agent Replacement Requirements prior to the expiry of the Replacement Period.

The Replacement Period begins either with the publication of the Replacement Notice or with the point in time when the Insolvency Termination Event with respect to the Clearing Agent occurs and ends at 13:00 (Frankfurt am Main local time) on the immediately following business day. Under certain circumstances, Eurex Clearing may extend the Replacement Period.

Upon the publication of the Replacement Notice, each ISA Direct Clearing Member has the choice between three options. The ISA Direct Clearing Member is asked to send the ISA Direct Clearing Member Election Notice to Eurex Clearing and to make one of the following elections until the end of the Replacement Period:: 

1. Replacement Election:
When choosing the Replacement Election, the (defaulting) Clearing Agent is replaced by a new Clearing Agent and the Clearing of the existing Transactions will be continued under the new Clearing Agent arrangement.

2. DCM Election:
Each ISA Direct Clearing Member may choose to become a Direct Clearing Member to continue the Clearing of its Transactions under the Elementary Clearing Model. In such case, the existing ISA Direct Clearing Member Transactions will be continued as Own Transactions.

3. Termination Election:
Instead of continuing the Clearing of the existing ISA Direct Clearing Member Transactions, the relevant ISA Direct Clearing Member may choose to terminate and to close-out its ISA Direct Clearing Member Transactions.  

If Eurex Clearing does not receive an ISA Direct Clearing Member Election Notice or if the relevant ISA Direct Clearing Member made the Termination Election within the Replacement Period, or the Clearing Agent Replacement Requirements are not satisfied at the end of the Replacement Period, the clearing of the ISA Direct Clearing Member Transactions of the relevant ISA Direct Clearing Member will not be continued and the respective transactions will be terminated and Eurex Clearing will calculate the Difference Claim. 

For ISA Direct Clearing Members that use their own accounts in daily business (i.e. use of their own cash collateral account, securities collateral account and - if applicable - use of their own settlement account) the replacement period can be extended until 13:00 (Frankfurt am Main time) on the fifth business day following the (Insolvency) Termination Event (T+5) if an (Insolvency) Termination Event has occurred with respect to the Clearing Agent. During this extended replacement period the eligible ISA Direct Clearing Members will generally be allowed to trade and clear risk-minimising, i.e. include new transactions into the Clearing that do not increase its margin requirements towards Eurex Clearing. 

The eligible ISA Direct Clearing Members will be transferred to a technical Clearing Agent during this period.