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Hedging

Hedging

Any Clearing Member, Non-Clearing Member or Registered Customer, who would be interested to be contacted as potential hedging counterparty for a particular Liquidation Group, is encouraged to register here.

 
Hedging is an important component of the Default Management Process, and aims to stabilize the defaulted Clearing Member’s portfolio to enable a portfolio based liquidation. Hedging can be conducted either by closing out certain concentrations within the defaulted Clearing Member’s portfolio, or by Eurex Clearing entering into additional, one-sided transactions, which are added to the defaulted Clearing Member’s portfolio and will in the following be liquidated jointly.

When defining hedging strategies, Eurex Clearing is supported by the expertise provided by each Liquidation Group’s Default Management Committee. As a back-up solution Eurex Clearing maintains internal hedging tools, which are used if a Default Management Committee fails to be convened for whatever reason.

The final decision of what hedging transactions are executed remains with the executive board of Eurex Clearing, so that no DMC member is liable for the economic success of the strategies proposed.

Defining the instruments

Eurex Clearing does not define any hedging thresholds to be met, as hedging requirements will largely depend on detailed portfolio specifics and market conditions. In fact, it might even be possible to liquidate certain portfolios without any hedging being conducted. 

  • Potential hedging instruments are usually products cleared by Eurex Clearing which form part of the Liquidation Group for which the hedging strategy is being defined.
  • Hedging counterparty can be any Clearing Member, Non-Clearing Member or Registered Customer who is able to trade and clear the respective products.
  • Hedging will never be mandatory for any member contacted by Eurex Clearing; in each respective situation a member can decide whether they want to enter into respective transactions with Eurex Clearing and at what price.
 

What is portfolio hedging within the Default Management Process all about? Find out about when and how it is executed and why Eurex Clearing’s experience proves the necessity of having its own traders: watch our interview with Marat Kadir and Michael Kraft, traders from Eurex Clearing’s Default Management Team, sharing their insights on hedging activities required to “stop the bleeding” in default scenarios.