04 May 2021

Eurex Clearing

C7 Securities Clearing Service Release 1.0: Production launch and amendments to the Clearing Conditions of Eurex Clearing AG

Eurex Clearing Circular 037/21 C7 Securities Clearing Service Release 1.0: Production launch and amendments to the Clearing Conditions of Eurex Clearing AG


1.    Introduction

In line with the Communication Calendar for the introduction of the C7 SCS Release 1.0, this circular introduces amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions) regarding the following topics:

A. Amendments to the Clearing Conditions regarding the introduction of C7 Securities Clearing Service (C7 SCS) applying Trade Date Netting (TDN)

B. Amendments to the Clearing Conditions regarding the Transfer of title in German book-entry securities

C. Minor amendments to the Clearing Conditions due to harmonization of wording and referencing

The amendments under items A, B and C will become effective as of 27 September 2021

Start of production: 27 September 2021

Learn now more about C7 SCS Release 1.0 on our dedicated initiative page under the following link: Support > Initiatives & Releases > C7 SCS Releases > C7 SCS Release 1.0. Documentation, circulars, timeline and much more information will be available there for you

... and on the go via the personalized Eurex App.

2.  Required action

With the introduction of C7 SCS, changes across the clearing and settlement process chain in terms of new netting model, creation of delivery positions, availability of settlement instructions at the (I)CSD, delivery management and reporting are applied. Clearing Members have to ensure that those areas are analyzed by the appropriate teams to ensure operational readiness.

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

3.  Details of the initiative

As announced in Eurex Clearing circular 034/20, Eurex Clearing decided to introduce the new securities clearing platform C7 SCS, which will be introduced 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 physical settled securities transactions.

With the introduction of C7 SCS, Eurex Clearing will apply Trade Date Netting (TDN) as the main supported netting model in C7 SCS. The current netting model Actual Settlement Day Netting (ASDN) for cleared transactions will be discontinued in C7 SCS.

With this circular, Eurex Clearing provides information about the proposed amendments to the Clearing Conditions, which are required to implement the new clearing platform C7 SCS into the Clearing Conditions. 

Please refer to Eurex Clearing circulars 034/20, 084/20 and related Release Notes for further details on the introduction of C7 SCS. Further information and documents regarding the introduction of C7 SCS can be found on the Eurex Clearing website on the dedicated initiative page under the following link: Support > Initiatives & Releases > C7 SCS Releases.

A.    Amendments to the Clearing Conditions regarding the introduction of C7 SCS applying Trade Date Netting (TDN)

With migration to C7 SCS, Eurex Clearing will apply Trade Date Netting (TDN) as the only supported net processing model for FWB Transactions and Eurex Transactions. The currently offered processing model Actual Settlement Day Netting (ASDN) allowing gross delivery management (Brutto-Liefer-Management) will not be available anymore for FWB® Transactions and Eurex Transactions under C7 SCS. For the avoidance of doubt, the existing net processing model will continue to be available for Repo Transactions. Please also note that Eurex Transactions settled at EuroClear UK and Ireland (EUI, CREST) will still be processed via the current Securities CCP system.

The following amendments to the Clearing Conditions are proposed to reflect the changes required for the implementation of Trade Date Netting: 

New transaction netting options

The currently offered gross delivery management (Brutto-Liefer-Management) will not be offered anymore for FWB® Transactions and Eurex Transactions. Clearing Members who applied the Actual Settlement Date Netting (Full Service/Extended Net Service) in the existing CCP service are required to implement own disposition tools. 

With the proposed amendments to the Clearing Conditions, Eurex Clearing implements two new transaction netting options, which shall apply at the end of each trade date: Netting and Aggregation. Both options are based on the legal concept of novation. Alternatively, gross processing is offered in C7 SCS.

In case of “Netting”, all Transactions which are combined in a Netting Unit are replaced by one Net Position, which combines all buy transactions and all sell transactions. If a Clearing Member opts for “Aggregation”, all Transactions forming part of same Netting Unit are replaced by two Net Positions: (i) Net Position combining all buy transactions and (ii) Net Position combining all sell transactions.

Discontinuation of actual settlement delivery report (Ist-Lieferreport)

The currently offered actual settlement delivery report (Ist-Lieferreport) will be discontinued in its current form. Instead of all single Transactions, only the Net Positions will form part of Eurex Clearing’s new transaction reporting. 

Clearing Members are required to use the information from the newly offered Net Clearing Report and the standard CSD functionality (hold/release of delivery instructions) in order to implement their disposition procedure in respect to client transactions. This may require Clearing Members to adjust their internal settlement systems, in particular if the Clearing Member currently uses Actual Settlement Date Netting (Full Service or Extended Net Service).

Deletion of conditions precedents regarding transfer of title in German law securities held in collective safe custody (Girosammelverwahrung)

Currently, the Clearing Conditions foresee certain conditions precedents (aufschiebende Bedingungen) with respect to the transfer of title in German law securities held in collective safe custody (Girosammelverwahrung) with Clearstream Banking AG. One condition precedent requires the receipt of the Ist-Lieferreport as a requirement for the transfer of title.

Due to the fact that the Ist-Lieferreport will not be offered anymore in its current form, Eurex Clearing is required to remove the conditions precedents (aufschiebende Bedingungen) from the Clearing Conditions. 

Corporate Actions

Further, with the introduction of C7 SCS, Eurex Clearing discontinues its corporate action service. In the future, corporate actions will be processed based on the pending settlement instructions by the CSDs according to their market practice. The related adjustments will be applied in C7 SCS to pending delivery instructions and reported accordingly.

To reflect the changes, provisions under Chapter I, Chapter II, Chapter IV and Chapter V will be amended as outlined in the Attachments 1, 2, 3 and 4.

B.    Amendments to the Clearing Conditions regarding Transfer of title in German book-entry securities (Gutschriften in Wertpapierrechnung)

The Clearing Conditions currently foresee that the transfer of title regarding German book-entry securities (Gutschriften in Wertpapierrechnung) occurs by means of an assignment of the depositor’s re-delivery claim against the custodian. Due to changes with respect to the dominant view among legal commentators in Germany, the legal basis is changed with the consequence that the transfer of title in German book-entry securities shall rather be achieved by two booking entries in the relevant securities accounts (i.e. a debit entry in the securities account of the transferor and a credit entry in the securities account of the transferee).

To reflect the changes, the following provision with be amended as outlined in Attachment 1 and 4:

  • Chapter I Part 1 Number 1.2.5 and 1.4.2 of the Clearing Conditions
  • Chapter I Part 4 Number 6.3.2.3 of the Clearing Conditions
  • Chapter V Part 2 Number 2.1 of the Clearing Conditions

C.    Minor amendments to the Clearing Conditions due to harmonization of wording and referencing

Eurex Clearing proposes further minor amendments to its Clearing Conditions to further streamline its legal framework. For the amendments in detail, please refer to the Attachments.

As of the effective date, the full versions of the amended Clearing Conditions will be available for download on the Eurex Clearing website www.eurex.com/ec-en/ under the following link:

Rules & Regs > Rules and Regulations > Clearing Conditions

The 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 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 IV of the Clearing Conditions
  4. Amended sections of Chapter V of the Clearing Conditions


Further information

Recipients:

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

Target groups:

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

Related circulars:

Eurex Clearing circulars 034/20, 084/20

Contact:

client.services@eurex.com

Web:

Support > Initiatives & Releases > C7 SCS Releases > C7 SCS Release 1.0

Authorized by:

Jens Janka


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