We provide our Clearing Members with straightforward exercise and assignment features.

Exercise

The following exercise scenarios are possible:

When a long call position in equity options is exercised, the holder exercises his or her right to demand the delivery of the underlying against payment. When exercising a long put position, the holder uses his or her right to sell the underlying against payment.

When exercising a long call position in options on futures, the holder uses his or her right to open a long position in the corresponding futures contract at the strike price. When exercising a corresponding put position, the holder uses his or her right to open a short position in the underlying futures contract at the agreed strike price.

In the case of exercising a long call position or a long put position in index options, the holder uses his right to receive cash.

Equity options and options on futures can be exercised by the buyer on each trading day (American style). Options on an index can only be exercised on the last trading day (European style).

Assignment

Once an option is sold, there exists a possibility for the option writer to be assigned to fulfill his or her obligation to buy or sell shares of the underlying equity on any business day. One can never tell when an assignment will take place. To ensure a fair distribution of assignments, Eurex Clearing uses a random procedure to assign exercise notices to the accounts maintained by each Clearing Member. In turn, the assigned Clearing Member must use an approved way to allocate those notices to individual accounts which have the short positions on those options.

The following assignment scenarios are possible:

• In the case of equity options, the assignment of a call position obliges the seller of a call option to deliver the underlying against payment.
  
• In the case of equity options, the assignment of a put position obliges the seller of a put option to accept delivery of the underlying against payment.
  
• In the case of options on futures, the seller of a call option is obliged to take a short position in the corresponding futures contract, or, in the case of options on an index, to settle in cash.
  
• In the case of options on futures the seller of a put option has to take a long position in the corresponding futures contract or, for options on an index, settle in cash.
  
• Assignments are binding.
  
• Members receive assignment information before the batch starts. The end of the assignment process, per option product, is indicated by transmission of a product-specific "end-of assignment" message to the Eurex Members.
  

Automatic exercise

An automatic exercise facility exercising open long option positions (including flexible options) on expiration day is available to the members.

The minimum in-the-money-amount specifies the amount a contract (not the single share) has to be in-the-money to be automatically exercised. A default minimum in-the-money amount of 99.99 is defined for all Eurex option products.

The minimum in-the-money amount of Eurex products can individually be adapted per account (A1, P1, P2, M1, M2) via the Automatic Exercise Parameter Maintenance window. An absolute value of up to 99.99 or a percentage of the exercise price of up to 9.99% can be set.

The Automatic Exercise Parameter Maintenance window also supports setting automatic exercise parameters for product types. These values will be set automatically for all newly introduced products of this type.

Members can exclude individual positions from automatic exercise by using the abandon functionality of the Exercise Overview window.

Four-eye principle

A four-eye principle is optionally available to provide checks when users opt to:

• Exercise out-of-the-money options
  
• Abandon positions from automatic exercise
  

For this purpose Security Administrators can set Resource Access Levels (RAL) for each user. These RALs specify whether a given user is permitted to enter the aforementioned transactions.

Permissions can be set according to the following levels:

• Not at all
  
• Four-eye approval is required.
  
• No four-eye approval required.