Risk Management

We guarantee every trade made in any of the markets for which we provide our services. We stand between the buyer and seller as Clearing House and are the counterparty for both contractual partners when a trade is executed. By doing so, we enable the parties to a transaction to make decisions fully independently of each other and eliminate counterparty risks to a single contractual partner.

In order to ensure this high degree of security, we protect against the risk of default by any of our Clearing Members. The mainstay of this security system is margin, which are the funds or securities which must be deposited by Clearing Members as collateral for a given position.

The amount we specify for margin should not be excessive, nor should it be set at a level that is too low. Over-securing a position would tie up liquidity of the exchange participant unnecessarily, while an under-secured position could represent a potential threat to the guarantee of contract fulfillment. We at Eurex Clearing use an innovative Risk-based Margining system, which was designed to calculate margin levels that are "just right" - neither too restrictive nor too lax.

Risk-based Margining, like SPAN margining, uses scenario matrix simulations to calculate margins. Where it differs from SPAN is that where SPAN calculates underlying price and volatility combinations in three self-designated levels (three up and, three down), Risk-based Margining calculates a much greater number of underlying price levels (up and down). Risk-based Margining uses price levels that are based on the strike prices of listed equity options, which is where we see the highest market risk.

We have a wide variety of robust risk management tools at our disposal to protect the marketplace. In addition to our margining system, we have been a trailblazer in the implementation of pre-trade risk tools.