Securities clearing: Migration of Repo clearing as part of C7 Securities Clearing Service Release 2.0

1.  Introduction

With this circular, Eurex Clearing announces the migration of the repo clearing service as part of Securities Clearing platform “C7 Securities Clearing Service” (C7 SCS), Release 2.0, on 24 October 2022.

As part of Eurex Clearing’s strategic roadmap, Eurex Clearing proceeds with the migration of Repo Clearing to the C7 architecture. The new securities clearing system C7 SCS will be introduced with Release 1.0 for all transactions involving CCP-eligible instruments concluded at the Frankfurt Stock Exchange (MICs: XETR and XFRA), and for all transactions concluded at Eurex Deutschland (MIC: XEUR) that result in securities transactions. With C7 SCS Release 2.0, all transactions that are concluded at Eurex Repo (MIC: XERE) and Brokertec (MIC: BTAM) and accepted by Eurex Clearing via either open offer or novation, will be migrated. 

The timeline for the C7 SCS, Release 2.0, is as follows:

Simulation start: June 2022
Production start: 24 October 2022

Documentation, circulars, timeline and much more about C7 SCS Release 2.0 is available on our dedicated initiative page under the following link: Support > Initiatives & Releases > C7 SCS Releases

and on the go via the personalized Eurex App.

2.  Required action

As the new release introduces changes to the entire clearing and settlement process chain in terms of new netting model, availability of settlement instructions at the (I)CSD, delivery management and reporting, Clearing Members have to ensure that impact on these areas is analyzed and changes are implemented for the introduction of C7 SCS Release 2.0. With planned migration of GC Pooling Collateral Management from Xemac to CmaX, a new account structure is required to be delivered to proceed with GC Pooling trading. Clearstream plans to publish high level requirements for Clearing Members to be prepared for these changes towards end of Q2 2021. Eurex Clearing's information update will follow Clearstream's communication.

Eurex Clearing will not maintain the existing clearing and settlement system for any transitional period after 24 October 2022. Therefore, Clearing Members must have amended their infrastructure prior to 24 October 2022 for all pending repo transactions on or after 24 October 2022.

In case of cooperation with back-office vendors, Clearing Members should contact their third-party providers as soon as possible to ensure the necessary adjustments can be made for the introduction of C7 SCS Release 2.0.

Please check whether you have registered and/or updated your Release Contacts for Eurex Repo via the Member Section on the Eurex Clearing website under "Release Contacts".

In parallel, please subscribe to Eurex Clearing circulars and newsflashes on our subscription page under the following link: Support > Information Channels > Circulars & Newsflashes > Subscription page 

Please note that any communication regarding C7 SCS will only be distributed via Eurex Clearing circulars and newsflashes.

3.  Details of the initiative

A.   Timeline

B.    Overview of functional changes

The following list provides a functional overview of the features offered to the participants for Special repo and GC repo market with C7 SCS Release 2.0:

• Settlement Date Netting (SDN) replaces the current Actual Settlement Day Netting (ASDN). The pending delivery instructions will not be cancelled by Eurex Clearing and will not be considered again for netting.
• Participants have the following choice for the Processing Method setting: Netting (default) and Gross Processing. The selection must be performed at Clearing Member and Settlement account level.
• Delivery instructions can be sent out as released (default) or on hold on the same level of netting parameters.
• Settlement locations offered are Clearstream Banking Frankfurt/T2S, Clearstream Banking Luxembourg and Euroclear Bank.
• Instead of today’s Gross Delivery Management on single trades, Clearing Members can modify the Hold/Release status on delivery instructions at the (I)CSD. T2S Members can use partial release at CBF/T2S.
• Eurex Clearing will not offer a routing service for change of Hold/Release status and partial release of pending delivery instructions resulting out of repo transactions.
• Manufactured coupon payments will be compensated by debiting the Repo buyer and crediting the Repo seller based on in-house Clearstream CA service.
• Eurex Clearing will not reflect the updates to delivery instructions received from the (I)CSD due to Hold/Release status changes in the Pending Delivery Report.

The following list provides a functional overview of the features offered to the participants for GC Pooling market with the C7 SCS Release 2.0:

• Mandatory adaptation to ECB rules requires Clearstream to move to one common collateral system latest with Eurosystem Collateral Management System (ECMS). Clearstream will migrate the GC Pooling Collateral Management from Xemac to CmaX and the timeline is aligned with C7 SCS Release 2.0.
• The settlement flow for GC Pooling between Eurex Clearing and CmaX will be adapted.
• Settlement Date Exposure Netting (SDEN) is a new mechanism offered with C7 SCS.
• Participants don’t have the choice for the Processing Method setting and all trades are considered for Settlement Date Exposure Netting. 
• Exposure adjustment instructions are always sent out as released.
• Collateral Management will be supported by Clearstream Banking Luxembourg’s system CmaX, while both Clearstream Banking Luxembourg and Clearstream Banking Frankfurt continue to act as Triparty Collateral Agents.
• Corporate actions are handled by Triparty Collateral agent. If necessary, either automatic substitutions of allocated securities are performed prior to a mandatory corporate action or securities stay allocated and the proceeds are compensated back to the original collateral provider.
• After migration, Xemac will not be available for GC Pooling Collateral Management.

C.    Reports

• All C7 SCS Reports will be provided in XML format to the Common Reporting Engine (CRE). Moreover, participants can opt for some reports in text version. 
• Changes to reports selection for Trading Participants (for both XML and text versions) have to be instructed by their respective Clearing Members via a dedicated form.
• Most C7 SCS reports will be provided at the end of each business day for repo transactions. No intraday Pending Delivery and Settled Delivery reports will be offered.

D.    Technical connection

The delivery management functionality can be performed directly at the (I)CSD. Routing Service will not be offered for repo transactions. No specific Member GUI for C7 SCS will be provided to our Clearing Members. The Securities Clearing GUI will be decommissioned for repo transactions.

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.

Attachment: 

• C7 SCS Release 2.0 Member Communication Calendar 

Further information