In accordance with German insolvency law, upon a Clearing Member's default Eurex Clearing terminates all transactions with such Clearing Member, nets all outstanding claims between itself and the Clearing Member, and determines a single monetary claim owed by one party to the other, a so-called difference claim.
Calculation of the difference claim
The difference claim calculation is based on the liquidation prices obtained by Eurex Clearing during the Default Management Process. Costs which are related to the Default Management Process, such as hedging costs, are also included in the difference claim calculation. If no liquidation prices could be determined, exchange prices will be used.
For each legal framework agreement between Eurex Clearing and its members, a dedicated own difference claim is calculated. As such, generally, one difference claim for the Clearing Member’s proprietary business under the Elementary Clearing Model, one difference claim for each Direct Client, with all its indirect clients will be calculated by Eurex Clearing.
Margin collateral and Default Fund contributions are either directly included in the difference claim calculation, or secure the respective difference claim calculation. Margin collateral deposited via title transfer, i.e. cash margin collateral under all Clearing Models, and non-cash margin collateral of an Individually segregated account that opted for titled transfer margin is directly included in the difference claim calculation. Margin collateral deposited via pledge, is not included in the difference claim calculation, but rather secures the respective difference claim calculation. Default Fund contributions are also not included in the difference claim calculation but secure the respective difference claim calculation.
In addition to the determination of all relevant difference claims at the end of the Default Management Process, under the Individual Clearing Model the transfer of an individually segregated DC Market Participant's/Disclosed Client's positions to a non-defaulted Clearing Member, or the re-opening of such DC Market Participant/Disclosed Client as an interim participant, requires a close-out and re-opening of all respective positions and the determination of a difference claim. As in this case no liquidation prices are available, only in case of a successful transfer/re-opening of an individually segregated DC Market Participant/Disclosed Client the difference claim is calculated based on daily calculated settlement prices.