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Client Asset Protection

Ensuring the highest protection for our customers

As required by EMIR, clients of Clearing Members will have the option as to how their position and margin collateral (cash and securities) is held and posted by their Clearing Member at Eurex Clearing, depending on each individual client's needs. In the event of a Clearing Member's default all client positions with the defaulting Clearing Member may be transferred to another Clearing Member.

Background

Greater transparency and legal certainty on the treatment of client positions and assets in the event of a Clearing Member default are critical success factors in achieving a sustainable segregation solution. Therefore Eurex Clearing was the first CCP globally to offer full legal and operational segregation. Today, we offer a comprehensive service that complies with the regulatory initiatives and also effectively meets the requirements for Client Asset Protection.

Key benefits

Our Client Asset Protection service has been structured for Clearing Member's clients to deliver the following benefits:

Eurex Clearing's solutions

Individual Clearing Model (ICM) for Non-Clearing Members

Maximum protection is achieved for Non-Clearing Members (NCMs) and Registered Customers (RCs) who opt for our unique Individual Segregation Model offering.

Positions and margin collateral of an individually segregated NCM are held in dedicated, individual accounts and separately booked at Clearing House level. Hence, they are completely ring-fenced from the clearing member's or other client's positions and margin collateral.
Seamless and timely portability of NCM positions and margin collateral is achieved through a close-out netting mechanism in case of a Clearing Member's default. Positions against the defaulting Clearing Member will be terminated. NCMs can now choose to

Immediately re-establishment their positions and collateral with a non-defaulting Clearing Member
or
Become an Interim Participant
or
Opt for final pay-out.

Individual Clearing Model (ICM) for Registered Customers

This solution includes all the benefits of the Individual Clearing Model for NCMs and is available to customers who are not trading members* of Eurex Clearing cleared markets**.

Positions and assets of the Registered Customer are held in segregated accounts at Clearing House level. Furthermore, Registered Customers are able to monitor their positions and collateral through reports.

* at listed (on-exchange) markets
** This solution is available for Eurex Exchange, EEX cooperation products, OTC IRS

Individual Clearing Model for Fund Managers

In consultation with the buy-side community, Eurex Clearing has developed the Multi Account Client Model (an extension to its ICM) in order to support flexible account structures.

Eurex Clearing’s Multi Account Client Model supports flexible account structures, e.g. for fund managers.

Under this model, the fund manager (or RC) acts as an umbrella for all its funds and can open an unlimited number of accounts at the fund or segment level with complete flexibility in setting up account names. Margin requirements are calculated separately for each position account and there is one collateral pool at the single fund / segment level.

Members are therefore able to segregate positions on a single fund or segement level and are able to prevent cross-subsidisation between single funds.

UK CASS compliant Omnibus Model

In addition to our ICM, Eurex Clearing is also offering a UK CASS compliant Omnibus Model.

This model allows the segregation of customer positions and margin on an omnibus basis and is available for Eurex Transactions (Chapter II of the Clearing Conditions) and EEX Transactions (Chapter VII of the Clearing Conditions).

The UK CASS compliant Omnibus Model allows Clearing Members located in the United Kingdom to apply the existing UK CASS rules in relation to their omnibus customers or Non-Clearing Members (NCMs).

We will be monitoring future amendments of the CASS rules and make adaptations to the model necessary.

Segregation solutions at a glance

Overview of Client Asset Protection models

* Current jurisdictions: Germany, England/Wales, France, Ireland, Luxembourg, Netherlands (RCs/NCMs from the Netherlands can use the ICM through a CM from Germany, England/Wales and France only).
Jurisdictions under review: Italy, Scotland, Spain and Switzerland.

**Individual Clearing Model for funds is planned for March 2013.

Potential losses from a Clearing Member's default are covered by the existing Eurex Clearing lines of defense. Segregated client collateral will be completely ring-fenced and will not be set-off with losses of a Clearing Member or other clients.

Specifics of the different models

Next steps

We successfully launched the Individual Clearing Model in 2011, becoming the first clearing house in the world to satisfy NCM requirements for the highest level of segregation of portability. In 2012, we extended our ICM model to include the same legal mechanisms of title transfer, close-out netting and pledges to Registered Customers (RC). And at the beginning of 2013 we introduced our UK CASS compliant Omnibus Model for our U.K.-based Clearing Members to reflect the current market structures to allow CASS compliance for the segregation of customers and NCMs under the UK CASS rules. This was followed by the launch of the Multiple Account Client Model in April.

We will continue to further develop our Client Asset Protections solutions and extend them to further jurisdictions and entities such as buy side clients. It is our aim to create the maximum legal certainty for our customers. Eurex Clearing is taking a close look at relevant national insolvency and investment rules and backing them up with legal opinions. Our solutions will therefore be designed with a view to ensure compliance, also with upcoming regulatory initiatives.

Moreover, Eurex Clearing is working on further enhancements to improve the collateral management processes.

Looking for more information?

Please refer to our frequently asked questions and answers for our groudbreaking Client Asset Protection services by clicking on the link below.