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In accordance with German insolvency law, upon a Clearing Member's default Eurex Clearing terminates all transactions with such Clearing Member, nets all outstanding claims between itself and the Clearing Member, and determines a single monetary claim owed by one party to the other, a so-called difference claim.
Calculation of the difference claim
The difference claim calculation is based on the liquidation prices obtained by Eurex Clearing during the Default Management Process. Costs which are related to the Default Management Process, such as hedging costs, are also included in the difference claim calculation.
For each legal framework agreement between Eurex Clearing and its members, a dedicated own difference claim is calculated. As such, a maximum of one difference claim for the Clearing Member’s proprietary business under the Elementary Clearing Model, one difference claim for each omnibus client pool under the Elementary Clearing Model, one difference claim for each omnibus client pool under the Net Omnibus Clearing Model, and one difference claim for each individually segregated Non-Clearing Member or Registered Customer under the Individual Clearing Model will be calculated by Eurex Clearing.
Margin collateral and Clearing Fund contributions are either directly included in the difference claim calculation, or secure the respective difference claim calculation. Margin collateral deposited via title transfer, i.e. cash margin collateral under all Clearing Models, and non-cash margin collateral under the Individual Clearing Model is directly included in the difference claim calculation. Margin collateral deposited via pledge, i.e. non-cash margin collateral under the Elementary Clearing Model and under the Net Omnibus Clearing Model is not included in the difference claim calculation, but rather secures the respective difference claim calculation. Clearing Fund contributions are also not included in the difference claim calculation but secure the respective difference claim calculation.
- Under the Elementary Clearing Model and under the Net Omnibus Clearing Model, any difference claim relating to client business is settled between Eurex Clearing and the defaulted Clearing Member’s insolvency administrator, on behalf of all clients within the respective omnibus pool.
- Under the Individual Clearing Model, the Clearing Member automatically pledges any difference claim relating to an ICM-Client’s business to the respective ICM-Client and vice versa. As a result, if an ICM-Client has to be liquidated the return of excess collateral (or the claim for additional funds) is directly settled between Eurex Clearing and the ICM-Client, without any involvement of the defaulted Clearing Member.
In addition to the determination of all relevant difference claims at the end of the Default Management Process, under the Individual Clearing Model the transfer of an individually segregated Non-Clearing Member's/Registered Customer's positions to a non-defaulted Clearing Member, or the re-opening of such Non-Clearing Member/Registered Customer as an interim participant, requires a close-out and re-opening of all respective positions and the determination of a difference claim. As in this case no liquidation prices are available, only in case of a successful transfer/re-opening of an individually segregated Non-Clearing Member/Registered Customer the difference claim is calculated based on daily calculated settlement prices.
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