Amendments to the Clearing Conditions and the Price List of Eurex Clearing AG, to the FCM Rules and Default Management Committee Rules and other related documents

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), the Price List of Eurex Clearing AG (Price List), the FCM Regulations of Eurex Clearing AG (FCM Regulations), the Default Management Committee Rules (DMC Rules) and other related documents with respect to the following topics:

The amendments under items A., B., C., D. and E. will become effective as of 3 February 2020.

The amendments under item F. will become effective as of 17 February 2020.

The amendments under items G. and H. are within the scope of Special Provisions of the Clearing Conditions and are hence subject to a consultation process (Consultation). The Consultation will end with the expiry of 23 January 2020. The planned effective date is 2 March 2020, depending on the outcome of the Consultation which will be communicated in a separate Eurex Clearing circular. 

2.    Required action

Regarding items G. and H.: The proposed changes and amendments to the DMC Rules and to the Clearing Conditions outlined in the Attachments 8 and 9 are subject to a Consultation which will end with the expiry of 23 January 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 tax provisions for Repo CCP

Eurex Clearing aligns the tax-related provisions in the Clearing Conditions for Repo Transactions more closely with tax-related provisions which are applied in the bilateral repo market. Among other things, it is clarified that all payments under a Repo Transaction shall be made without deduction or withholding of any Tax, and, if any tax-related deduction or withholding is required by law, the payment to the recipient shall be increased by an additional amount equalling the deduction or withholding. If Eurex Clearing is required to pay any such additional amount to the recipient, it shall be reimbursed by the respective Clearing Member or Basic Clearing Member acting as Payer in relation to Eurex Clearing. In addition, it is clarified that any amounts payable are exclusive of any Sales Tax. The provisions that are to be introduced mirror the existing provisions applicable for Securities Lending Transactions.

Furthermore, a new provision is introduced that stipulates an obligation to disclose information needed for tax purposes of the requesting party. Among other things, Eurex Clearing needs certain information from its counterparties to fulfil its requirements for the deduction and withholding of tax on payments to foreign persons under 26 CFR § 1.1441-1.

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

• Chapter IV Part 1 Number 1.4
• Chapter IV Part 2 Number 2.10
• Chapter IX Part 2 Number 2.1.8

B. Amendment of existing tax provisions in Lending CCP

Eurex Clearing introduced a new provision that stipulates an obligation to disclose information needed for tax purposes of the requesting party. Among other things, Eurex Clearing needs certain information from its counterparties to fulfil its requirements for the deduction and withholding of tax on payments to foreign persons under 26 CFR § 1.1441-1.

Further minor amendments are introduced to other tax-related provisions applicable to Securities Lending Transactions to align their wording with the newly introduced provisions for Repo Transactions (see item A. above).

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

• Chapter IX Part 1 Number 1.5

C. Inclusion of the Inter-Product-Spread transactions in Volume Rebate eligibility

Three standardised Inter-Product-Spread strategy products (IPLX, IPPL and IPS2) have been launched on 16 September 2019 (see Eurex Clearing circular 083/19). At launch, the traded volume resulting from the standardised Inter-Product-Spread strategies was considered as not eligible for Volume Rebate calculations in Interest Rate Futures.

Effective 3 February 2020, the volume resulting from the standardised Inter-Product-Spread strategies in Interest Rate Futures will be considered eligible for Volume Rebate calculations. Volume Rebate eligibility rules as described under Number 3.2.2 “Volume Rebates” of the Price List do apply.

To reflect the changes, the following provisions of the Price List will be amended, as outlined in Attachment 3:

• Section 3 Number 3.2.2.2 

D. Provision of KYC Information and nomination of KYC Contact

Within the scope of legal requirements, Eurex Clearing is obliged to thoroughly verify its direct contractual counterparties (i.e. Clearing Members, Disclosed Clients With System Access) with regards to Money Laundering (KYC).

In order to improve the underlying process, Eurex Clearing will include the respective obligation into Eurex Clearing's legal framework. Direct contractual counterparties shall, without undue delay, provide all information (in particular KYC information) to Eurex Clearing, which Eurex Clearing may reasonably request at any time to comply with applicable laws, rules, regulations or orders by its competent supervisory authorities.

Direct contractual counterparties shall further appoint one dedicated employee as KYC contact for Eurex Clearing.   

To reflect the changes, the following provisions will be amended, as outlined in Attachments 4 and 5:

• Chapter I Part 1 Number 2.2.5 of the Clearing Conditions 
• General Terms and Conditions to the Agreement on Technical Connection to the Clearing EDP of Eurex Clearing AG (GTC to the Connection Agreement) §10 (6)

E. Changes to cut-off times for interest calculation in US dollar and British pound

In accordance with the Clearing Conditions, Eurex Clearing may determine to pay interest or to charge negative interest on Eligible Margin Assets in the form of cash actually delivered to Eurex Clearing. Such interest is calculated on the basis of collateral balance that is held with Eurex Clearing at a certain point in time (cut-off time).

Eurex Clearing will change the existing cut-off times to determine the credit balance for the interest calculation on cash balances held in USD and GBP. The reason for this amendment is feasibility of investments. 

The changed cut-off times as shown in the table below will become effective as of 3 February 2020:

Deadlines to determine the credit balance for the interest calculation on the collateral pool:

British pound:

US dollar:

As of the effective date, the new cut-off times will be published on the Eurex Clearing website www.eurexclearing.com, as part of the overview of cut-off times for cash collateral deposit and withdrawal requests, under the following link: 

Collateral management > Cash collateral > Cut-off times

F. Changes to the novation criteria for documentation of original OTC IRD and XCCY transactions 

Eurex Clearing is planning to support all master agreement types (i.e. ISDA, DRV, AFB/FBF, EMA, "Österreichischer Rahmenvertrag für Finanztermingeschäfte", etc.) for original OTC Interest Rate Derivative Transactions and XCCY Transactions in order to allow novation of such transactions. Instead, Eurex Clearing will validate if the field on the source of specifications (i.e. the field “Contractual Definitions”) applicable to the submitted transaction in the trade record submitted by the respective ATS specifies any of the following as the source of specifications applicable to the original transaction: 

• the contractual definitions issued by ISDA (in particular, the 2000 ISDA Definitions and the 2006 ISDA Definitions)
• the German Master Agreement for Financial Derivatives Transactions ("Rahmenvertrag für Finanztermingeschäfte", the “DRV”) or
• the AFB/FBF Master Agreement

If the field containing the source of specifications applicable to the original transaction is left blank, Eurex Clearing will accept original transactions that are submitted as based on any of the following master agreements: an ISDA Master Agreement, the 2017 ISDA/FIA Clearing Derivatives Execution Agreement, the 2006 Definitions, the DRV or the AFB/FBF Master Agreement.

The legal and technical implementation will become effective on 17 February 2020.

Member documentation will be updated with OTC Release 10.1, which is planned for June 2020.

To reflect the changes and amendments, the following provisions of the Clearing Conditions and FCM Regulations will be amended as outlined in the Attachments 6 and 7:

• Chapter VIII Part 2 Number 2.1.5.2 (1) and (2) of the Clearing Conditions
• Chapter VIII Part 4 Number 4.1.5.2 (1) of the Clearing Conditions 
• Chapter II Part 2 Number 2.1.5.2 (1) and (2) of the FCM Regulations

G. Amendments to the DMC Rules with regards to the DMC Assignment Phase and decommissioning of the mandatory DMC chairman and deputy election

In line with the continuous development and improvement of the Default Management Process, Eurex Clearing decommissioned the predefined fixed DMC term and rotation process for participation in the Default Management Committee (DMC). The proposed amendments to the DMC Rules seek to provide clarifications with respect to the DMC assignment phase and predefined timelines with regards to the DMC member selection process. 

Therefore, Eurex Clearing decided to:

• clarify that the DMC Assignment Phase starts with the distribution of the Assignment Phase Notice and ends with the signature of the Agreement for the Participation in the DMC
• update timelines referencing to Assignment Phase to referencing to the point in time of Assignment Phase Notice distribution
• outline that the selected Clearing Member should sign the DMC Participation Agreement without undue delay and that with the signature the DMC assignment starts 
• decommission the fixed DMC Term and the predefined rotation process
• decommission the mandatory chairman and deputy chairman election process and its function
• clarify that each DMC Member Institution and the designated DMC Member is selected for an indefinite period of time until either the Participating DMC Member Institution or Eurex Clearing terminates the agreement respectively the Participating DMC Member Institution’s clearing agreement with Eurex Clearing is terminated  

To reflect the changes, the following provisions will be amended as outlined in Attachment 8:

• Numbers 1.3, 2.1-2.4, 2.6, 2.8, 3.1.3, 3.2-3.4 of the DMC Rules
• Agreement for the Participation in a Default Management Committee (Appendix to the DMC Rules)

H. Amendments to the Clearing Conditions regarding participation in Default Management Auctions

The Clearing Conditions require amendments due to recently implemented amendments to the Default Management Auction Rules effective 2 December 2019, in particular with respect to the options for Clearing Members (not qualifying as Mandatory Participants), Basic Clearing Members, Disclosed Direct Client, other customers of Clearing Members and Selected Auction Participants to participate in Default Management Auctions.

To reflect the changes, the following provisions will be amended as outlined in Attachment 9:

• Chapter I Part 1 Number 7.5.3 of the Clearing Conditions 

Consultation with respect to the amendments proposed under items G. and H.

Pursuant to Chapter I Part 1 Number 17 of the Clearing Conditions, the proposed changes and amendments to the DMC Rules and the Clearing Conditions as outlined under items G. and H. are subject to a Consultation which will end with the expiry of 23 January 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: 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 amendments to the website will be published after the Consultation.

The currently envisaged effective date of the changes is 2 March 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 amendments as outlined under items A., B., C., D., E. and F.

As of the effective date, the full version of the amended legal framework of Eurex Clearing will be available for download on the Eurex Clearing website www.eurexclearing.com under the following link:

Resources > Rules and Regulations

The changes and amendments to the legal framework of Eurex Clearing, published in this circular under items A. - F. above, are deemed accepted by each affected contractual party of Eurex Clearing, 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 FCM Clearing Conditions of Eurex Clearing AG, as applicable.

Attachments: 

• 1 – Amended sections of Chapter IV Part 1 Number 1.4 and Part 2 Number 2.10 of the Clearing Conditions regarding item A.
• 2 – Amended sections of Chapter IX Part 1 Number 1.5 of the Clearing Conditions regarding item B. and Chapter IX Part 2 Number 2.1.8 of the Clearing Conditions regarding item A.
• 3 – Amended sections of Section 3 Number 3.2.2.2 of the Price List regarding item C.
• 4 – Amended sections of Chapter I Part 1 Number 2.2.5 of the Clearing Conditions regarding item D.
• 5 – Amended §10 (6) of the General Terms and Conditions to the Agreement on Technical Connection to the Clearing EDP of Eurex Clearing AG (GTC to the Connection Agreement) regarding item D.
• 6 – Amended sections of Chapter VIII Part 2 Number 2.1.5.2 (1) and (2), Chapter VIII Part 4 Number 4.1.5.2 (1) of the Clearing Conditions regarding item F.
• 7 – Amended Sections of Chapter II Part 2 Number 2.1.5.2 (1) and (2) of the FCM Regulations regarding item F.
• 8 – Amended sections of Numbers 1.3, 2.1-2.4, 2.6, 2.8,3.1.3, 3.2-3.4 of the DMC Rules and amended sections of the Agreement for the Participation in a Default Management Committee (Appendix to the DMC Rules) regarding item G.
• 9 – Amended sections of Chapter I Part 1 Number 7.5.3 of the Clearing Conditions regarding item H.

Further information