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Default Management Committees and Market Advisors
Default Management Committees and Market Advisors
We implement one Default Management Committee per Liquidation Group and each committee consists of 2-4 DMC members. DMCs are continuously defined, so both Clearing Members and individual DMC members are aware of their assignment prior to any default situation.
Please note that Eurex Clearing might not implement a DMC for a particular Liquidation Group, if the overall exposure in such Liquidation Group does not require such measure from a risk perspective.
Scope of a Default Management Committee's mandate
Main task of each Default Management Committee is to help Eurex Clearing to define hedging strategies and to support the subsequent liquidation of respective positions. Ideally, DMC members are traders or former trades at their respective Clearing Members, who facilitate a successful Default Management Process by leveraging their professional expertise.
- Default Management Committees are convened in case of a Clearing Member’s default and in case of Default Management Process simulations, which are intended to take place at least once per year. In an actual default situation, DMC members need to be present at Eurex Clearing’s premises (either in London or in Frankfurt) within two hours after being informed of the default situation. DMC members have to remain at Eurex Clearing’s offices until the Default Management Process has been finalized. For a Default Management Process simulation, DMC members are asked to make themselves available for a few hours on a previously communicated date.
- Due to the confidential nature of information received during a Default Management Committee convention, it is prohibited for DMC members to share such information with their employer or any other third party. Legal basis for such confidentiality obligation is an agreement entered into between the nominating Clearing Member and Eurex Clearing, the Agreement for the Participation in a Default Management Committee. Individual DMC members do not have to enter into any contractual relationship with Eurex Clearing.
- As the ultimate decision regarding all Default Management Process-related matters remains with the executive board of Eurex Clearing, neither Clearing Members nor DMC members are liable for the economic success of their proposed hedging strategies or advice at any time.
Nomination of DMC members
- New DMC members are assigned once per year, whereby each assignment is personal and for a period of two years. Rather than re-assigning all Members of a particular Default Management Committee in the same year, Eurex Clearing uses a rolling approach to guarantee continuous knowledge of the Default Management Committee’s procedures and tasks.
- All Clearing Members are invited to volunteer to participate in any Default Management Committee for the Liquidation Groups they are active in.
- Only in case of an insufficient number of Clearing Members volunteering to participate in a particular Default Management Committee, Eurex Clearing would assign additional Clearing Members to serve on such Default Management Committee. The assignment would be based on Clearing Members’ relative cleared volume (proprietary) in the three months prior to the Default Management Committee assignment phase.
- No Clearing Member has to participate in more than one Default Management Committee at a time. If a Clearing Member has been appointed by Eurex Clearing to participate in a particular Default Management Committee, and such Clearing Member evidences towards Eurex Clearing that it participates in a Default Management Committee or similar committee at another CCP for the same asset class during the same term, such Clearing Member is not obliged to participate in the Default Management Committee at Eurex Clearing.
- Once assigned to participate in a Default Management Committee, each relevant Clearing Member nominates one of its employees as DMC member and a second employee as DMC deputy. Amongst others, nominated DMC members have to be employed by the nominating Clearing Member or an affiliated company of such Clearing Member and be able to demonstrate relevant product knowledge and expertise with respect to Default Management Committee-related matters.
Market Advisors for Bond Liquidation Group (LG)
- To account for the idiosyncratic market structure in the Bond Liquidation Group, in addition to a Default Management Committee, Clearing Members are invited to nominate one or more of their employees as so-called Market Advisors.
- Market Advisors are contacted by Eurex Clearing via telephone to provide market intelligence in a default situation, during default simulations or for regular evaluations by the CCP. However, Market Advisors will not be provided with the actual positions to be liquidated.
- The nomination of Market Advisors takes place on a voluntary basis. Interested Clearing Members are invited to nominate employees by sending an e-mail to DMP_Inbox@eurexclearing.com, specifying the identity and contact information of the relevant individuals.
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