In order to increase settlement efficiency, we have developed robust solutions for dealing with failure handling. These include measures to accommodate late delivery processing as well as a buy-in and cash settlement models.

Late delivery processing

As a central counterparty, Eurex Clearing has the obligation to buy from the original seller and to deliver to the original buyer. If the original seller fails to deliver, Eurex Clearing starts a fail process in order to fulfill this obligation.

Depending on the markets and products cleared, different fail processes apply. The general contractual penalties are defined in chapter 1 part 1 of the clearing conditions.

Frankfurt Stock Exchange (Xetra^®):

• Buyin and cash settlement model is applied
  
• Penalties are charged for late deliveries over dividend reference days (35.8 percent on net dividend)
• Late settlements over corporate actions may cause claims and disclosure of counterparts
  
• For equities that fall under the EU Short Selling Regulation daily fines for late deliveries will be charged from the first day of non-delivery onwards (0.2 bp of the undelivered equities’ value.
  

Eurex Exchange

• Deliveries out of exercises/assignments for equities:
  • Buyin and cash settlement model is applied
    
  • For equities that fall under the EU Short Selling Regulation daily fines for late deliveries  will be charged from the first day of non-delivery onwards (0.2 bp of the undelivered equities’ value)
• Deliveries out of notifications/allocation for bonds:
  • German government bonds:
    • 0.04 percent fines on volume not settled in the first Same Day Settlement run of the day (SDS1), or 0.40 percent fines on volume not settled in the second Same Day Settlement run (SDS2) on the contractual settlement day. Otherwise 0.40 percent fines on volume per subsequent calendar day.
      
    • Additional charge of interest of delay (1 percent + ECB main refinancing rate on outstanding amount).
      
    
    
  • Swiss government bonds:
    • 0.85 percent fines on nominal value
      
    • Additional charge of interest of delay (1 percent + SNB main refinancing rate on outstanding amount).
      
  • Other bonds:
    • 0.40 percent fines on volume not settled on the contractual settlement day per calendar day
      
    • Additional charge of interest of delay (1 percent + ECB main refinancingrate on outstanding amount).
      

• For shares that fall under the EU Short Selling Regulation daily fines for late deliveries  will be charged from the first day of non-delivery onwards (0.2 basis points of the undelivered shares' value)
  

Eurex Bonds

• German government bonds:
  • 0.04 percent fines on volume not settled in SDS1, or 0.40 percent fines on volume not settled in SDS2 on the contractual settlement day. Otherwise 0.40 percent fines on volume per subsequent calendar day.
    
  • Additional charge of interest of delay (1 percent + ECB main refinancing rate on outstanding amount).
    
  
  
• Swiss government bonds:

  • 0.85 percent fines on nominal value

  • Additional charge of interest of delay (1 percent + SNB main refinancing rate on outstanding amount).
    
• Other bonds:
  • 0.40 percent fines on volume not settled on the contractual settlement day per calendar day
  • Additional charge of interest of delay (1 percent + ECB main refinancingrate on outstanding amount).
    

Eurex Repo – Fines

• Euro Market:

  •  0.025 percent  of failed value, but not less than EUR 2,500 per day

  • if failed value exceeds EUR 100 Mio, contractual penalty is calculated based on the effective overnight interest rate applicable to the relevant clearing currency, but not less than EUR 25,000 per day.
    
  
  
• GC Pooling (via Xemac/CmaX):

  • Intraday default resulting from failure to comply with obligation at SDS1, Eurex Clearing may charge EUR 2,000 for each defaulting GC Pooling transaction.

  • Eurex Clearing may also invoice any interim financing costs incurred, up to the value of the GC Pooling Overnight Index („GCPION“) plus 50 basis points p.a., in relation to the value of the underlying GC Pooling transaction or the due cash amount respectively.
    
  
  

Eurex Repo Euro Market & GC Pooling (via Xemac/CmaX) – Default handling

• Default on the delivery day of the front Leg:
  Eurex Clearing is entitled, or on request of the Clearing Member

  • to set present business day as advanced repurchase date of the term leg

  • to offset obligations and settle the repo rate amount only
  
  
• Default on the delivery day of the term Leg:
  Eurex Clearing is entitled, or on request of the Clearing Member

  • to buy-in as from the fifth day following the delivery date of the term leg

  
  
• Default on the cash leg:
  Eurex Clearing will assume the Clearing Member’ default according to chapter 1, part 1(7) of the clearing conditions

  • only if a technical default can be excluded

  • consequently, the Clearing Member will be set on hold

  • positions will be closed out and remaining obligations will be covered by the margin collateral

  
  

Buy-in and cash settlement model

The late delivery management model includes two components:

• Buy-in: Eurex Clearing has implemented an auction process where offers are made. The new buy-in seller replaces the original seller.
• Cash settlement: In case a buy-in is unsuccessful, the failed seller is debited and the buyer is credited with a cash settlement price. There is no delivery of securities.
  

The following figure displays the schedule for Frankfurt Stock Exchange (FSE) and Exercise & Assignments from Eurex Exchange derivatives transactions for products that do not fall under the EU Short Selling Regulation:

The following buy-in schedule applies for securities that fall under EU Short Selling regulation, i.e.

• Rules published and supervised by ESMA
  
• Applicable only for equities having their principal trading venue inside the European Union
  
• Buy-in: Eurex Clearing has implemented an auction, where offers are given. The new Buy-in seller replaces the original seller
  
• Cash settlement: In case a Buy-in is not successful the failed seller is debited and the buyer is credited with a cash settlement price. There is no delivery of securities
  
• All other procedures remain unchanged