Margin Process

Our margining process is a complex and time critical process that takes into account a variety of factors in order to calculate margins that adequately protect the marketplace, while simultaneously setting appropriate levels that do not tie up excess capital.

Margin is defined as the funds or securities which must be deposited by clearing members as collateral for a given position. Margining encompasses the entire process of measuring, calculating and administering the collateral that must be put up for coverage of open positions. The provision of collateral is intended to ensure that all financial commitments related to the open positions of a clearing member can be offset within a very short period of time.

The speed at which Eurex Clearing performs the margining process is defined by market characteristics and trading speed of the different asset classes cleared as modern risk management needs to cope with the speed positions can change and markets can move. Therefore Eurex Clearing calculates real-time the margin requirements for derivatives products by any position or price change. Margin information for equity and fixed income cash products are provided every ten minutes.

Intra-day Margin Process

Eurex Clearing has established an industry leading intra-day margining process to safeguard and strengthen the Lines of Defense of the Clearing House ensuring the continued integrity of the markets cleared by Eurex.

Intra-day margining is an important feature of our risk management framework as it directly reduces the counterparty credit risk of the CCP. The intra-day margin call allows us to quickly respond to increased price volatility or the growing positions of members which in turn allows us to take action to lower the exposure to the CCP. The intra-day margin call also allows us to take into account day trading clients.

The benefits to Eurex Clearing of the intra-day margin call are clear. How does it help you?

Intra-day margining gives you important value added services - especially in the Direct Market Access and algorithmic trading environment by giving you permanent risk assessments of your and your clients' exposure based on current market conditions during the trading day. Features include:

• Real-time position updates
• Real-time price update
• Real-time intra-day risk evaluation for positions using current underlying prices/volatilities
• Real-time provision of detailed risk data via the Enhanced Risk Solution
• Information to allow forecasts of overnight requirements for cash and collateral management
• Risk reports that are delivered with an approximate time interval of ten minutes
• The possibility to break down margin requirements on customer and margin class level

Risk-based Margining

It is obviously advantageous for the investor if he or she must only provide coverage for the risk of the positions in his or her account rather than paying the full value of the contracts themselves. The amount of collateral which must be deposited is calculated on the basis of the total risk exposure of the entire account. The total risk exposure is determined from the price risk of the derivate and cash positions held in the account. The risk reducing effect of combinations of positions is taken into consideration in this calculation, in that equal but opposite risks within the account are offset against each other. As a result, an optimal degree of security is achieved with a minimum amount of collateral having to be provided by the market participant.

There are different types of margins. Premium, current liquidating and variation margin cover the liquidation risk at the current point of time. Additional and future spread margins cover the potential liquidation risk for the following business day. Margins are calculated on an intraday basis and the Clearing House reserves the right to debit Clearing Members directly (intraday margin call).

The basic principles of Risk-based Margining and the calculation methods that we use to determine Eurex margin requirements are explained in detail in the Eurex Risk-based Margining brochure.