Becoming an ISA Direct Member - Basic Clearing Members

Our ISA Direct model combines elements of a direct clearing membership and the traditional service relationship in client clearing - tailored specifically for the buy side.  It opens up a new principal client relationship between buy side clients and the CCP, with the regular Clearing Member acting as a Clearing Agent, providing a variety of mandatory and optional service functions.

Buyside clients who onboard under the ISA Direct model are called Basic Clearing Members (BCMs).

Who can become a Member
Insurance companies, financial institutions, pension funds, investment funds

What Jurisdictions are covered
You must be domiciled in the European Union or in Switzerland.

Regulatory requirements
Supervised by the local competent authority, governmental ministry or governmental institution and be subject to local insurance or banking law, pension act or subject to local investment fund law respectively.

Markets covered
EurexOTC IRD Clear and Eurex Repo

Please find below the main requirements and general considerations you should make if you wish to pursue becoming an ISA Direct Member and apply for a Basic Clearing Membership - for Eurex OTC Clear and Eurex Repo. This section provides details on the application forms, regulatory and capital requirements and necessary collateral infrastructure.

Please note that BCMs can only conduct house business and as such only have P accounts.

The capital requirements for an ISA Direct Member is the maximum out of a minimum component and a dynamic component:

Minimum component

Eurex Repo: EUR 50 million
OTC IRD: EUR 7.5 million own funds
The total minimum requirement is aggregated over all clearing licences i.e. if applying for Repo and OTC it would be EUR 50 mn + EUR 7.5 mn = EUR 57.5 mn.

Dynamic component

The dynamic requirement is represented by the maximum out of 20 percent of the average Initial Margin over the past 30 or 250 business days.

Please note that for funds capital requirements are based on their assets under management for which, in deviation of the above, a minimum of EUR 100 million is applicable.

The operational requirements depend on your agreement with your Clearing Agent.

The following requirements or business functions can be either fulfilled by the Basic Clearing Member (BCM) or the Clearing Agent:

Collateral infrastructure

  • Pledged security account (not needed if using cash only)
  • Cash accounts for margin payments dependent on the Clearing currency i.e EUR, CHF or GBP Please see webpage for accepted payment banks accepted payment banks
  • Optional cash accounts in further currencies that you wish to trade in, e.g. USD, GBP, JPY

Business functions

  • Fulfilment of payment obligations (amongst others overnight margin calls, transaction and variation margin payments, excluding intraday margin calls)
  • Intraday risk management (amongst others risk monitoring and intraday margin call)
  • Delivery of securities margin collateral
  • Trade and position management

The following requirements must be fulfilled by the ISA Direct Member and not the Clearing Agent:

  • Licence at Swaps Monitor Publication, Inc.
  • ISDA-Licence (In context of the admission members will receive the ISDA Definitions 2006 as being a component of the Clearing Conditions)

  1. The ISA Direct Basic Clearing Member (BCM) selects a Clearing Agent
  2. The BCM selects and approaches the approved trade source(s), such as MarkitWire or Bloomberg (for OTC IRD)
  3. If desired, the BCM carries out testing to get familiar with the Eurex Clearing clearing procedures
  4. The BCM establishes the technical connectivity
  5. The BCM completes and provides the required documentation

Application for the Granting of a Basic Clearing Member Clearing Licence
This is the main application form, there will be additional forms to complete depending on the cash and securities accounts you want to set up.

Basic Clearing Member Clearing-Agreement
The BCM will also have to enter into the Basic Clearing Member Clearing-Agreement.

Pledge Agreement
If using securities collateral, they will also have to enter into the pledge agreement for the ISA direct model.

Clearing Agent limitation notice
To confirm the operational set up you have agreed with your Clearing Agent, you and the Clearing Agent must sign the limitation notice