Amendments to the Legal Framework of Eurex Clearing on Hedging Auction - 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 AG (Clearing Conditions), Default Management Auction Rules and the FCM Default Rules of Eurex Clearing AG (FCM Default Rules) regarding the following topic:

• Clarifications with respect to Hedging Auctions

The amendments to the Clearing Conditions regarding the above topic are subject to a consultation process (Consultation); the Consultation will end on 23 June 2022 (Consultation Period). The planned effective date of these amendments is 1 August 2022, depending on the outcome of the Consultation which will be communicated in a separate Eurex Clearing circular.

The amendments to the FCM Regulations and FCM Default Rules will become effective as of 1 August 2022. 

2. Required action

The amendments to the Clearing Conditions are subject to a Consultation which will end with the expiry of 23 June 2022.

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

The Hedging Auctions were introduced into the Clearing Conditions of Eurex Clearing AG as an additional Default Management Tool on 17 August 2021. The Hedging Auctions rely on an opt-in framework that allows qualified market makers to commit to support the hedging phase of a Default Management Process within a transparent and pre-defined auction framework.

Based on customer feedback, Eurex Clearing intends to modify specific rules to facilitate the onboarding process for potential hedging auction participants. The changes do not modify the existing obligations of the Clearing Members, nor do they introduce any new obligations. The overall Hedging Auction Process remains unchanged.  

The main changes relate to the following:

Introduction of a product annex in participation forms allowing participants to specify the scope of products for which they participate in Hedging Auctions: 

Currently, Hedging Auction Participants opt-in for an entire Liquidation Group. Based on regularly performed liquidity surveys, the CCP can identify the trading capacity of Clearing Members on product level. It is proposed to add a product annex to the Hedging Auction Participation Form, so that the participants can predefine the product scope contractually for which they shall be obliged to participate in Hedging Auctions. 

To accelerate the non-voluntary participation process, the requirement for signing the relevant participation form is removed:

Currently, Eurex Clearing has the right to mandate a Clearing Member to opt-in as a Hedging Auction Participant in order to prevent an insufficient number of Hedging Auction Participants. However, the current provisions foresee that the mandated Clearing Members are also required to sign the applicable participation form. To accelerate the process, it is proposed to amend the current provisions to remove the obligation for the Clearing Member to sign additional forms upon such an appointment.

The scope for client participation in Hedging Auctions will be extended:

Currently, a Direct Client can only participate in Hedging Auctions if its Clearing Member qualifies as Hedging Auction Participant. This requirement will be removed entitling all Direct Clients to participate in Hedging Auctions provided that they (and their Clearing Member) sign the required application forms.

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

• Number 7.5.2 of the Clearing Conditions,
• Number 4.2 of the FCM Default Rules, and 
• the DM Auction Rules.

Consultation with respect to the amendments to the Clearing Conditions

Pursuant to Chapter I Part 1 Number 17 of the Clearing Conditions, the proposed changes and amendments to the Clearing Conditions are subject to a Consultation which will end with the expiry of 23 June 2022.

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.eurex.com/ec-en/ under the following link:

Find > Forms > 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 is 1 August 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 Clearing Conditions, Default Management Auction Rules and the FCM Default Rules

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

Rules & Regs > Eurex Clearing Rules & Regulations

The changes and amendments to the Clearing Conditions, Default Management Auction Rules and the FCM Default Rules 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 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 or FCM Clearing Conditions, as applicable.

Attachments: 

1. Amended sections of the Clearing Conditions
2. Amended sections of the Default Management Auction Rules 
3. Amended sections of the FCM Default Rules 

Further information