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Amendments to the Clearing Conditions of Eurex Clearing AG

Release date: 24 Jun 2020 | Eurex Clearing

No. 052/2020 Amendments to the Clearing Conditions of Eurex Clearing AG

Eurex Clearing Circular 052/20

1. Introduction

This circular contains information with respect to the service offering of Eurex Clearing AG (Eurex Clearing) and introduces amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions) and the FCM Regulations of Eurex Clearing AG (FCM Regulations) regarding the following topics:

A. Introduction of an obligation to publish the Termination of a Clearing Member, Basic Clearing Member or FCM Clearing Member on Eurex Clearing's website

B. Amendments with regards to the Termination and Porting requirements in the FCM Regulations

C. Introduction of a Buy-In Cost Reclaim Procedure to the Securities Lending Market

D. Representation by Clearing Members and FCM Clearing Members with regards to Eurex Clearing’s status as a Recognised Clearing House (RCH) in Singapore

E. Admission of Disclosed Direct Clients from the People’s Republic of China (PRC) with a Clearing Member outside the PRC

The amendments under items A. to E. will become effective as of 1 September 2020.

The amendments under item A. with regards to Chapter I Part 1 Number 7.2 of the Clearing Conditions and the amendments under item C. are subject to a Consultation. The Consultation will end on 24 July 2020. The planned effective date of these amendments is 1 September 2020, depending on the outcome of the Consultation which will be communicated in a separate Eurex Clearing circular.

2. Required action

The amendments to Chapter I Part 1 Number 7.2 of the Clearing Conditions under item A. and the amendments under item C. are subject to a Consultation which will end with the expiry of 24 July 2020 (“Consultation Period”).

Eurex Clearing herewith invites all Affected Customers to submit comments on the proposed changes and amendments within the Consultation Period.

3. Details

A. Introduction of an obligation to publish the Termination of a Clearing Member, Basic Clearing Member or FCM Clearing Member on Eurex Clearing’s website

The Commodity Futures Trading Commission (CFTC) published new rules with respect to Derivatives Clearing Organizations (DCO) requiring DCOs to communicate the Termination of a Clearing Member, Basic Clearing Member or FCM Clearing Member as soon as possible on its website. This amendment will be included in both rulebooks of Eurex Clearing.

To reflect the changes, the following provisions will be amended as outlined in Attachments 1 and 2:

  • Chapter I Part 1 Number 7.2 of the Clearing Conditions
  • Chapter I Part 6 Number 10.5 of the Clearing Conditions
  • Chapter I Number 9.2.3 of the FCM Regulations

B. Amendments with regards to the Termination and Porting requirements in the FCM Regulations

Eurex Clearing amends certain provisions in the FCM Regulations as follows:

  • Certain legal consequences of the Termination of an FCM Clearing Member shall be effective as of the “FCM Clearing Member Termination Time“, instead of the issuance of the Declaration of Termination;
  • Eurex Clearing can determine whether the “FCM Clearing Member Replacement Requirements“ are fulfilled at its own discretion;
  • Eurex Clearing is now entitled to waive certain “FCM Clearing Member Replacement Requirements“ to facilitate the porting process;
  • Some clarifications regarding the scope of the participation in the non-default losses.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 2:

  • Chapter I Numbers 3.1.6, 9.2.3 and 9.4.3 of the FCM Regulations

C. Introduction of a Buy-In Cost Reclaim Procedure to the Securities Lending Market

Eurex Clearing is currently processing buy-ins on request of the lender as part of its late delivery management actions for securities lending transactions. With the introduction of settlement discipline measures under the Central Securities Depository Regulation (CSDR) in 2021, counterparties will be required to process buy-ins on a mandatory basis.

Although central counterparty (CCP) buy-in procedures have been proven as effective, late deliveries are often part of a broader fails chain. To avoid having multiple and sometimes even unnecessary buy-ins in the bilateral market, buy-ins are typically processed only at the end of the fails chain and resulting costs are passed on towards the ultimate party causing the settlement fail. However, under the CSDR framework it is not possible to process buy-ins against a CCP.

To increase settlement efficiency and streamline procedures of the bilateral and cleared market, Eurex Clearing will introduce a buy-in cost reclaim process. This will allow the lender to pass on costs from buy-ins through the CCP vis-à-vis the borrower. It shall be noted that the buy-in process will not replace the buy-in process of the Lending CCP, but provides an additional option for the lender to use the buy-in cost reclaim instead of such buy-in process of the Lending CCP.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 3:

  • Chapter IX Part 1 Numbers 1.1.3 (5), (8), (9); 1.1.4 (4); 1.4; Part 2 Numbers 2.1.2 (3); 2.1.5 (2); 2.2.2. (1), (4), (6), (8), (9), (10), (11), (12), (13), (14); 2.4; 2.4.1 (4); 2.4.2 (4); 2.6.1; 2.6.4 (1), (2), (3), (4), (5), (6), (7), (8), (9); 2.6.5 (1), (2); 2.6.6 (1), (2), (3), (4), (5), (6); 2.7.2 (4), (7) and 2.7.4 of the Clearing Conditions

D. Representation by Clearing Members and FCM Clearing Members with regards to Eurex Clearing’s status as a Recognised Clearing House (RCH) in Singapore

In its capacity as an RCH in Singapore, Eurex Clearing may only provide clearing services to participants that are not retail investors incorporated in Singapore. The Clearing Conditions as well as the FCM Regulations will therefore be amended accordingly by adding a provision stating that any Clearing Member or FCM Clearing Member that 

(i)    is a bank or financial institution domiciled and/or incorporated in Singapore pursuant to the Singapore Companies Act Chapter 50 or
(ii)   is or acts through a Singapore-registered branch of a foreign bank or financial institution holding the requisite capital markets services license issued by the Monetary Authority of Singapore under the Securities and Futures Act 

represents and warrants to Eurex Clearing that any Direct Clients and Indirect Clients of the Clearing Member or FCM Clearing Member, respectively, that are domiciled and/or incorporated in Singapore, are accredited investors, institutional investors and/or expert investors for the purposes of the Singapore Securities and Futures Act.

To reflect the changes, the following provisions will be amended as outlined in Attachment 4:

  • Chapter I Part 1 Number 1.13 of the Clearing Conditions
  • Appendix 1 to the Clearing Conditions
  • Chapter I Number 1.7.2 of the FCM Regulations

E. Admission of Disclosed Direct Clients from the People’s Republic of China (PRC) with a Clearing Member outside the PRC

Eurex Clearing will offer clearing services for exchange-traded derivatives (ETD) and over-the-counter (OTC) products to Clearing Members and FCM Clearing Members not located in the PRC for Disclosed Direct Clients located in the PRC. The Clearing Conditions as well as FCM Regulations will be amended accordingly by adding a provision whereby for OTC products, Clearing Members and FCM Clearing Members represent to Eurex Clearing that any entities domiciled in the PRC that they on-board as Disclosed Direct Clients and/or FCM Clients qualify as eligible investors under the relevant PRC laws.

Additionally, the affected Clearing Members or FCM Clearing Members must ensure by obtaining representation from the respective Disclosed Direct Client and/or FCM Client that the original bilateral transaction was not concluded OTC or off-book between two entities located in the PRC. These requirements will be reflected in representations in the Clearing Conditions.

Eurex Clearing does not hold any license under PRC laws and cannot provide services in the PRC.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 4:

  • Chapter I Part 1 Number 1.14 of the Clearing Conditions
  • Appendix 1 to the Clearing Conditions
  • Chapter I Number 1.7.2 of the FCM Regulations

Consultation with respect to the amendments proposed under A. and C.

Pursuant to Chapter I Part 1 Number 17 of the Clearing Conditions, the proposed changes and amendments to Chapter I Part 1 Number 7.2 of the Clearing Conditions under A. and the amendments under C. are subject to a Consultation which will end with the expiry of 24 July 2020 (Consultation Period).

Eurex Clearing herewith invites all Affected Customers to submit comments on the proposed changes and amendments within the Consultation Period.

During the Consultation Period, comments on proposed changes or amendments shall be only submitted through a web-based commenting service for which a registration form is available on the Eurex Clearing website www.eurexclearing.com under the following link:

Resources > Forms > Data Forms Subject: Consultation Form

The form has to be duly signed and returned to Eurex Clearing via e-mail to SpecialProvisions@eurexclearing.com, in order to obtain a User ID and Password together with a link for accessing the web-based commenting service.

To the extent that Eurex Clearing decides to implement any comments received during the Consultation, the so-amended version of the Clearing Conditions will be published after the Consultation.

The currently envisaged effective date of the changes is 1 September 2020. However, after the Consultation Period, Eurex Clearing will issue a separate circular to announce the concrete date on which the proposed changes (as the case may be, implementing comments received during the Consultation) will come into effect. 

This announcement will be made with at least 15 Business Days’ notice (Regular Notification Period). However, if Eurex Clearing should receive a request for a Prolonged Notification Period from more than two Affected Customers during the Consultation Period, a Prolonged Notification Period as set out in the Clearing Conditions will be applied and Eurex Clearing will notify all affected parties accordingly.

Publication of other amendments as outlined under A. and amendments as outlined under B., D. and E. 

As of the effective date, the full versions of the amended Clearing Conditions and FCM Regulations of Eurex Clearing AG will be available for download on the Eurex Clearing website www.eurexclearing.com under the following link:

The changes and amendments to the legal framework of Eurex Clearing AG published by this circular are deemed accepted by each affected contractual party of Eurex Clearing AG, unless the respective contractual party objects by written notice to Eurex Clearing AG within the first ten (10) Business Days after publication. Any ordinary right of Eurex Clearing AG to terminate the respective contract (including a Clearing Agreement, if applicable) shall remain unaffected.

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 or the Default Management Auction Rules or the Default Management Committee Rules of Eurex Clearing AG, as applicable.

Attachments:

  • 1 – Amended sections of
    Chapter 1  Part 1 Number 7.2 of the Clearing Conditions
    Chapter 1  Part 6 Number 10.5 of the Clearing Conditions
  • 2 – Amended sections of Chapter I Numbers 3.1.6, 9.3.2 and 9.4.3 of the FCM Regulations
  • 3 – Amended sections of Chapter IX Part 1 Numbers 1.1.3 (5), (8), (9); 1.1.4 (4); 1.4; Part 2 Numbers 2.1.2 (3); 2.1.5 (2); 2.2.2 (1), (4), (6), (8), (9), (10), (11), (12), (13), (14); 2.4; 2.4.1 (4); 2.4.2 (4); 2.6.1; 2.6.4 (1), (2), (3), (4), (5), (6), (7), (8), (9); 2.6.5 (1), (2); 2.6.6 (1), (2), (3), (4), (5), (6); 2.7.2 (4), (7) and 2.7.4 of the Clearing Conditions
  • 4 – Amended sections of
    Chapter I Part 1 Numbers 1.13 and 1.14 of the Clearing Conditions
    Appendix 1 to the Clearing Conditions
    Chapter I Number 1.7.2 of the FCM Regulations

Further information

Recipients:

All Clearing Members, Basic Clearing Members, Disclosed Direct Clients, FCM Clearing Members of Eurex Clearing AG, vendors and other affected contractual parties

Target groups:

Front Office/Trading, Middle + Backoffice, IT/System Administration, Auditing/Security Coordination

Contact:

client.services@eurexclearing.com

Web:

www.eurexclearing.com

Authorised by:

Heike Eckert