Admission criteria and scope

LSOC is offered for a subset of EurexOTC Clear Swaps products

For initial launch LSOC accommodates Plain vanilla IRS, Overnight Index Swaps and Forward Rate Agreements. Supported product currencies are the main currencies EUR, USD and GBP.

Sound admission criteria take into account the nature of the LSOC market structures

The LSOC model is offered to applicants that are registered as Future Commission Merchants (FCMs) with the CFTC and are members of the National Futures Association (NFA). 

Admission is limited initially to entities with principal places of business in New York State.

The relevant FCM Clients' jurisdiction can be found under Resources > Admission requirements > Jurisdictions.

Capital Requirement
Proof is provided by obtaining a copy of the return the CM would usually provide to its home regulator (i.e. CFTC 1-FR-FCM). The minimum static amount required is equivalent to EUR 30 million whereas a dynamic component of 20% of the Initial Margin requirement applies if higher.

Credit Assessment
During the onboarding process Eurex Clearing performs an internal credit assessment and requires the following information from the applicant:

  • Audited Financial Statements - balance sheet and income statements (last 3 years)
  • Quarterly Financial Statements - balance sheet and income statements (preferably covering latest 5 quarters) 
  • Latest audited Financial Statement of parent holding company (if applicable)

Default Fund
Members must contribute to the CCP default fund.The minimum static amount required is EUR 5 million upon admission (with a dynamic requirement of 9% of the Initial Margin requirement if higher after start of clearing activity).

Risk assessment

CFTC Regulation 39.13 requires Eurex Clearing to review the risk management policies, procedures, and practices of each Clearing Member on a periodic basis. Thus, completing a risk assessment is a prerequisite for membership approval.

Back Office Requirements
All FCM CMs of Eurex Clearing are required to have at least one Qualified Clearing Staff (QCS). In addition, further Clearing contacts have to be entered into the Member Portal of Deutsche Börse Group (Member Section).

Emergency contact
FCM CMs must provide day-to-day contact details via the Eurex Clearing Member Section. An emergency contact must be available during regular business hours (8 AM - 10 PM CET).

With regards to the transaction flow, the LSOC model will be built on the well established EurexOTC Clear Service approach. Upon execution at a connected Approved Trade Source (ATS) between the FCM Client and its counterparty, the transaction is automatically sent to Eurex Clearing comprising a unique identifier of the relevant counterparties (e.g. “Markitwire BIC”).