07 Apr 2020

Eurex Clearing

Introduction of Advanced Risk Netting Units and other amendments to the Clearing Conditions and FCM Regulations of Eurex Clearing AG

Eurex Clearing Circular 031/20

Please note: On 28 April 2020, an update to this Eurex Clearing Circular was published that clarified the restrictions applying to the ARNU offering. In chapter 3.A., the last bullet point was changed.

1. Introduction

This circular contains information with respect to the service offering of Eurex Clearing AG (Eurex Clearing) and 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 Advanced Risk Netting Units for OTC Derivatives customer transactions
B.Clarification of personal prerequisites of a Clearing Member License or Basic Clearing Member License based outside the EU or Switzerland
C.Rounding conventions for floating rates
D.OTC Interest Rate Derivative Transactions and OTC XCCY Transactions: No interest payment if the scheduled payment date is no TARGET Settlement Day
E.Correction of the maximum remaining term for OIS €STR Swaps
F.Simplification and correction of the provisions on the transfer of Eurex Transactions

The amendments under the items A to F will come into effect as of 4 May 2020.

2. Required action

Clearing Members, Basic Clearing Members, Disclosed Direct Clients, FCM Clearing Members, vendors and other affected contractual parties should take the amendments to the Clearing Conditions and FCM Clearing Conditions into consideration.

3. Details

A.    Introduction of Advanced Risk Netting Units for OTC Derivatives customer transactions

With the introduction of Advanced Risk Netting Units (ARNUs), Eurex Clearing extends its support for the calculation of the Initial Margin requirement across several transaction accounts. The ARNU functionality enables customers to benefit from portfolio netting effects for Initial Margin calculation, even if transactions are booked to separate transaction accounts for the sake of proper position keeping and accounting. ARNUs do neither change the risk model nor the margin model – the calculation is always portfolio based. 

The usage of ARNU will be optional and Clearing Members can request the ARNU setup for their clients by contacting the Onboarding Team via the e-mail: onboarding@deutsche-boerse.com.

ARNU will be available under all EMIR clearing models for transaction accounts of Disclosed Direct Clients and Indirect Clients. To comply with EMIR and due to technical limitations, the following restrictions apply: 

  • No ARNU is possible across transaction accounts for proprietary transactions of the Disclosed Direct Client and transaction accounts for transactions relating to a client of the respective Disclosed Direct Client.
  • If an ARNU includes one or more GOSA Indirect Client Accounts, the ARNU is only possible across transaction accounts that relate to the same Indirect Client.
  • An ARNU is only possible with respect to transaction accounts that are allocated to the same Standard Agreement (i.e. netting set - hence, in case of GOSA or ISA segregated Disclosed Direct Clients, only transaction accounts relating to this Disclosed Direct Client may be included) and to the same collateral pool.
  • Following the creation of an ARNU, the Initial Margin requirement will be reported at ARNU level for the accounts assigned to an ARNU.
  • The name of an ARNU has always to start with ‘ARNU’, e.g. ‘ARNUBIGCLIENT1’, ‘ARNU2392199’, etc. The name may only consist of alphanumeric uppercase characters; special characters will be not allowed. The maximum number of characters for the name of an ARNU will be 32 (including the first 4 characters specified as ‘ARNU’).
  • The ARNU functionality is not available for transaction accounts that are enabled for cross margining.

Please note that ARNUs have no impact on the Variation Margin requirement, i.e. the calculation and reporting of the Variation Margin will still take place on transaction level respective transaction account level.

Together with this implementation of ARNUs, the current PP Risk Netting Unit setup that allows a netting between (certain) own accounts of a Clearing Member, Disclosed Direct Client or Indirect Client Market Participant will also be explicitly regulated. No change of the current setup is intended in this respect.

To reflect the changes and amendments, the following provisions of the Clearing Conditions and FCM Regulations will be amended as outlined in Attachments 1, 2, 3 and 4:

  • Chapter I Part 1 Number 1.6.2, 3, 3.1, 2.1.3 (2), 3.2.5 (a), 6.1.1 (1) of the Clearing Conditions
  • Chapter I Part 2 Number 4.1.1 and 4.1.2 of the Clearing Conditions
  • Chapter I Part 4 Number 6.1.1 and 6.1.2 of the Clearing Conditions
  • Chapter I Part 6 Number 7.2.1 and 7.2.2 of the Clearing Conditions
  • Chapter II Part 1 Number 1.2 (6) and 1.3.1 (2) of the Clearing Conditions
  • Chapter II Part 2 Number 2.1.3 of the Clearing Conditions
  • Chapter VIII Part 2 Number 2.1.7 (2) of the Clearing Conditions
  • Chapter VIII Part 3 Number 3.1.7 (1) of the Clearing Conditions
  • Chapter VIII Part 4 Number 4.1.7 (1) of the Clearing Conditions
  • Chapter I Part 1 Number 1.6.2 of the FCM Regulations 
  • Chapter I Part 3 Number 3.1.1 (1) and 3.1.2 (5) of the FCM Regulations 

B.    Clarification of general prerequisites for a Clearing Member License or Basic Clearing Member License based outside the EU or Switzerland

The amendments serve the purpose of clarifying the general prerequisites for granting a Clearing Member License or Basic Clearing Member License to entities domiciled outside the EU or Switzerland. No change of the prerequisites is intended when compared to the application of the current prerequisites.
The following provisions of the Clearing Conditions will be amended as outlined in Attachment 1:

  • Chapter I Part 1 Number 2.1.2 (2) of the Clearing Conditions
  • Chapter I Part 6 Number 2.1.2 (1) and (3) of the Clearing Conditions

C.    Rounding conventions for floating rates

To secure the netting possibility between OTC Interest Rate Derivative Transactions that are ISDA-based and OTC Interest Rate Derivative Transactions that are DRV-based, it is clarified that any rounding that occurs with respect to a floating rate shall be based on uniform rounding conventions that are based on the 2006 ISDA Definitions. This clarification will not change the rounding logic as currently applied by the systems of Eurex Clearing AG, as both section 8.1 (a) of the 2006 ISDA Definitions and the Deutsche Rahmenvertrag (DRV) normally require a rounding to the nearest 1/100.000 of a percentage point.

To reflect the changes and amendments, the following provisions of the Clearing Conditions and FCM Regulations will be amended as outlined in Attachments 3 and 5:

  • Chapter VIII Part 2 Number 2.2.7 and 2.4 of the Clearing Conditions
  • Chapter II Part 2 Number 2.2.7 and 2.4 of the FCM Regulations

D.    OTC Interest Rate Derivative Transactions and OTC XCCY Transactions: No interest payment if the scheduled payment date is no TARGET Settlement Day

For OTC Interest Rate Derivatives and OTX XCCY Transactions, if the scheduled payment date is no TARGET Settlement Day, no interest will be payable by the relevant payer for the delay between the scheduled payment date and the actual payment date. This clarification will not change the payment logic as currently applied by the systems of Eurex Clearing AG.

The following provisions of the Clearing Conditions and FCM Regulations will be amended as outlined in Attachments 3 and 5:

  • Chapter VIII Part 2 Number 2.2.1 of the Clearing Conditions
  • Chapter VIII Part 4 Number 4.2.1 of the Clearing Conditions
  • Chapter II Part 2 Number 2.2.1 of the FCM Regulations

E.    Correction of the maximum remaining term for OIS €STR Swaps

For overnight indexed swaps in EUR referencing to EUR-EuroSTR-COMPOUND, the maximum remaining term will be extended to 50 years plus 10 business days. Eurex Clearing already accepts OIS with this maximum remaining term, so the intention of this amendment is only to properly reflect current processes.

The following provisions of the Clearing Conditions and FCM Regulations will be amended as outlined in Attachments 3 and 5:

  • Chapter VIII Part 2 Number 2.1.5.1 of the Clearing Conditions
  • Chapter II Part 2 Number 2.1.5.1 of the FCM Regulations

F.    Simplification and correction of the provisions on the transfer of Eurex transactions

The amendments introduced previously with Eurex Clearing Circular 091/18 and 102/18 regarding Eurex Transaction transfers will be merged and the respective provisions will be simplified in general.

The following provision of the Clearing Conditions will be amended as outlined in Attachment 2:

  • Chapter II Part 1 Number 1.3.3 of the Clearing Conditions

As of the effective date, the full version of the amended Clearing Conditions and FCM Regulations 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 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 FCM Clearing Conditions of Eurex Clearing AG, as applicable.
 

Attachments:

1.    Amended sections of Chapter I of the Clearing Conditions
2.    Amended sections of Chapter II of the Clearing Conditions
3.    Amended sections of Chapter VIII of the Clearing Conditions
4.    Amended sections of Chapter I of the FCM Regulations
5.    Amended sections of Chapter II of the FCM Regulations
 

Further information

Recipients:All Clearing Members, Basic Clearing Members, Disclosed Direct Clients, FCM Clearing Members, vendors and other affected contractual parties
Target groups:Front Office/Trading, Middle + Backoffice
Contact:client.services@eurexclearing.com
Web:www.eurexclearing.com
Related Eurex Clearing circulars:091/18, 102/18
Authorised by:Heike Eckert