Amendments to the Clearing Conditions, the Default Management Committee Rules and the FCM Default Rules of Eurex Clearing - Consultation

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 (Clearing Conditions), the Default Management Committee Rules (DM Committee Rules) and the FCM Default Rules of Eurex Clearing (FCM Default Rules) regarding the following topics:

A.    Default Management Committee convention rules,

B.    Evaluation method for participation in the Default Management Process (DMP) for the Bond Liquidation Group,

C.    Amendments to the Default Management Process for FX Rolling Spot Futures, and

D.    Minor amendments regarding the scope of independent sales and auctions as well as clarifications regarding the consequences of bad bids or non-bidding and editorial changes in regards to the reference to Hedging Auction Participation Agreement.

The amendments to the Clearing Conditions and the DM Committee Rules regarding the above topics are subject to a consultation process (Consultation); the Consultation will end upon expiry of 22 December 2021 (Consultation Period). The planned effective date of these amendments is 1 February 2022, depending on the outcome of the Consultation which will be communicated in a separate Eurex Clearing circular. 

The amendments to the FCM Default Rules will become effective as of 1 February 2022.

2.  Required action

The amendments to the Clearing Conditions and the DM Committee Rules are subject to a Consultation which will end with the expiry of 22 December 2021.

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

3.  Details of the initiative

A. Default Management Committee (DMC) convention rules - Consultation

The current provisions in the Clearing Conditions foresee that a DMC Meeting shall take place if at least one OTC Interest Rate Derivative Transaction or one OTC Currency Transaction or one Interest Rate Derivative Transaction is among the Terminated Transactions. 

Eurex Clearing is proposing to harmonize the rules across all Liquidation Groups and therefore to remove the mandatory DMC meeting convention rule leaving the decision at the discretion of Eurex Clearing. To reflect the changes, the following rules and regulations of Eurex Clearing will be amended as outlined in the attachments:

• Chapter I Part 1 Number 7.5.1 of the Clearing Conditions,
• Number 2.1.1 and 3.1.1 of the DM Committee Rules, and 
• Number 4.1.2 of the FCM Default Rules.

B. Evaluation method for participation in the Default Management Process for Bond Liquidation Group 

According to the current provisions when evaluating a Clearing Member’s performance in the Bonds Default Management Process, Eurex Clearing creates a score card which reflects the results for participation in the independent sale and auction process. Based on the overall result of the score card, the order of Default Fund Contribution utilization is determined.

For simplification and harmonization reasons and to strengthen transparency, Eurex Clearing proposes to align the Default Management Participation evaluation rules with other Liquidation Groups. Therefore, the utilization order regarding the Default Fund Contributions in case of the occurrence of a default event will be determined based on bids received during the Auction process. 

Based on the relevant reference price, the Contributions of such Clearing Members, which provided bids below the reference price or which did not bid at all, shall be realised prior to the Contributions of other Clearing Members for the affected Liquidation Group. 

To reflect the changes, the following provisions in the Clearing Conditions will be amended as outlined in the attachments:

• Chapter I Part 1 Number 7.5.3 

C.    Amendments to the Default Management Process for FX Rolling Spot Futures

Eurex Clearing reviewed the Default Management Process for FX Rolling Spot Futures and concluded that the product characteristics of FX Rolling Spot Futures do not require special close-out methods in case of the occurrence of a Termination with respect to a Clearing Member clearing FX Rolling Spot Futures. 

Rather, Eurex Clearing proposes to apply the general Default Management Process which provides for the sufficient measures to liquidate terminated FX Rolling Spot Futures as well. 

Therefore, it is proposed to remove the currently applicable special Default Management Process provisions (Market Integrity Process) for the FX Rolling Spot Futures.

To reflect the changes, the following provisions in the Clearing Conditions will be amended as outlined in the attachments:

• Chapter II Part 2 Numbers 2.12.6 and 2.12.7

D.    Minor amendments regarding the scope of independent sales and auctions as well as clarifications regarding the consequences of bad bids or non-bidding 

Further, Eurex Clearing conducts minor amendments to the Clearing Conditions and to the FCM Default Rules by removing several restrictions regarding the scope of independent sales and auctions and including clarifications regarding the consequences of bad bids or non-bidding.

To reflect the changes, the following rules and regulations of Eurex Clearing will be amended as outlined in the attachments:

• Chapter I Part 1 Numbers 7.5.2 and 7.5.3 of the Clearing Conditions and
• Number 4.3 of the FCM Default Rules.

Consultation with respect to the amendments to the Clearing Conditions and the DM Committee Rules

Pursuant to Chapter I Part 1 Number 17 of the Clearing Conditions, the proposed changes and amendments to the Clearing Conditions and the DM Auction Rules are subject to a Consultation which will end with the expiry of 22 December 2021.

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 only be submitted through a web-based commenting service for which a registration form is available on the Eurex Clearing website under the following link: 

Find > Forms > Data Forms Subject: Consultation Form

The form has to be duly signed and returned to Eurex Clearing via e-mail to SpecialProvisions@eurex.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 to the Clearing Conditions and the DM Committee Rules is 1 February 2022. 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 to the FCM Default Rules 

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

Rules & Regs > Rules and Regulations

The changes and amendments to the FCM Default Rules published by this circular are deemed accepted by each affected contractual party of Eurex Clearing, unless the respective contractual party objects by written notice to Eurex Clearing within the first ten (10) Business Days after publication. Any ordinary right of Eurex Clearing to terminate the respective contract (including the FCM 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, the DM Committee Rules or the FCM Default Rules, as applicable.

Attachments: 

1. A and 1. B: Amended sections of the Clearing Conditions
2. Amended sections of the DM Committee Rules
3. Amended sections of the FCM Default Rules

Further information