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Additional information on Final Settlement Price Determination for Equity and Index Derivatives

Release date: 17 Mar 2020 | Eurex Clearing

No. 026/2020 Additional information on Final Settlement Price Determination for Equity and Index Derivatives

Eurex Clearing Circular 026/20

1. Introduction

In light of the current developments with respect to COVID-19, Eurex Clearing received inquiries from market participants. The Executive Board of Eurex Clearing AG decided to provide further guidance on the anticipated procedure for determination of the Final Settlement Prices for equity and equity index derivatives in case of potential market disruptions.

The term “Market Disruption” shall comprise, closures, suspension of trading or other forms of interruption of trading or unavailability of a market that continues or can be expected to continue at the relevant time or time period for the determination of Final Settlement Prices at the relevant reference market (“Market Disruption”).

When Eurex Clearing AG becomes aware of an announcement of a Market Disruption which commences immediately following the announcement and without sufficient opportunity to trade at the relevant reference market, it will consider measures to determine the Final Settlement Prices for affected futures and options in accordance with its rules.

This does not apply in case the reference market announces a closure with sufficient time for final settlement price determination. In such cases Eurex Clearing AG will use the last price (usually from closing auction) as a reference price.

2.    Index Futures and Options

Determination of Final Settlement Prices is defined in Chapter II Part 2 Numbers 2.4.2 (for index futures) and 3.4.3 (for index options) of the Clearing Conditions of Eurex Clearing AG. Chapter II Part 2 Numbers 2.4.2 (12) and 3.4.3 (11) of the Clearing Conditions allow Eurex Clearing AG to carry out an alternative procedure in case of events such as the occurrence of a Market Disruption.

2.1.    (Euro) STOXX index futures and options

In case of a Market Disruption of a reference market for one or more components in the STOXX® 600 index, Eurex Clearing AG will consider alternative cash market venues* as reference markets. If no other reference markets are available, the last available price of the disrupted reference market will be used.

Eurex Clearing AG will apply the same considerations as for the STOXX® 600 index, for all derivatives on the STOXX® equity indices which additionally comprise the EURO STOXX 50® Index components, such as derivatives on STOXX® sector indices.

With respect to index futures/options on STOXX® Global Select Dividend 100 Index (FGDV/OGDV) and STOXX® USA 500 ESG-X Index Futures (FSUS), Eurex Clearing AG will use the last available price at the disrupted reference market for these indices. 

2.2.    SMI, SMIM and SLI index futures and options

In case of a Market Disruption of the reference market for one or more components in the SMI, SMIM and SLI indices, Eurex Clearing AG will use the last price (usually from closing auction) as the reference price for Final Settlement Price determination.

3.    Equity Options

Determination of reference prices is defined in Chapter II Part 3 Number 3.6.3 of the Clearing Conditions of Eurex Clearing AG. Chapter II Part 3 Number 3.6.3 (3) of the Clearing Conditions allows Eurex Clearing AG to carry out an alternative procedure in case of Market Disruptions.

In case of a Market Disruption of the reference market for one or more components in the STOXX® 600 index, Eurex Clearing AG will use an alternative cash market venue* as the reference market. If no other reference markets are available, the last available price of the disrupted reference market will be used.

In case of usage of an alternative cash market without closing auction, Eurex Clearing AG may also consider using a volume-weighted average of a certain time period prior to close of trading.

For all other equity options, Eurex Clearing AG will use the last available price at the disrupted reference market.

4.    Single Stock Futures

Determination of Final Settlement Prices is defined in Chapter II Part 2 Number 2.7.2 of the Clearing Conditions of Eurex Clearing AG. Chapter II Part 2 Number 2.7.2 (3) allow Eurex Clearing AG to carry out an alternative procedure in case of Market Disruptions.

In case of a Market Disruption of the reference market for one or more components in the STOXX® 600 index, Eurex Clearing AG will use an alternative cash market venue* as the reference market. If no other reference markets are available, the last available price of the disrupted reference market will be used.

In case of usage of an alternative cash market without closing auction, Eurex Clearing AG may also consider using a volume-weighted average of a certain time period prior to close of trading.

For all other single stock futures, Eurex Clearing AG will use the last available price at the disrupted reference market.

Eurex Clearing AG will notify market participants if it becomes aware of a Market Disruption and determines that certain alternative procedures shall be applied in respect of the Market Disruption for the determination of Final Settlement Prices or reference prices. The guidance on potential alternative procedures set out herein is not intended and shall not be understood as a comprehensive, final and legally binding summary of the procedures that Eurex Clearing AG will apply in a certain situation. Eurex Clearing AG may take additional circumstances into account when making the relevant determinations and accordingly, Eurex Clearing AG may come to the conclusion that different measures than those set out in this Circular shall be applied. 

* Eurex Clearing AG has identified potential alternative trading venues that may (if available) be used in case of a Market Disruption in the following order: CBOE Europe Equities (CXE) and, if not available, Xetra (XETR) thereafter; the alternative trading venue will be announced by Eurex Clearing AG following the occurrence of a Market Disruption.
 

Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions of Eurex Clearing AG.


Further information

Recipients:All Clearing Members, Basic Clearing Members and Disclosed Direct Clients of Eurex Clearing AG
Target groups:Front Office/Trading, Middle + Back Office, IT/System Administration, Auditing/Security Coordination
Contact:client.services@eurexclearing.com
Web:www.eurexclearing.com
Authorised by:Dmitrij Senko