Supplementary Margins

Supplementary Margins are risk mitigating measures to cover specific risks not fully calculated with the Standard Margin Model. They are an adequate risk mitigating action since they facilitate the 'Defaulter Pays' principle and protect the mutual Default Fund in case of a Clearing Member default. Any Supplementary Margin requested by Eurex Clearing will increase the applicable margin requirement.

Learn now more about the Clearing Conditions under the following link: Rules and Regulations > Rules and Regulations > Clearing Conditions > Chapter 1-General Provisions.
All Supplementary Margin information can be found there in Part 1, Chapter 3, 3.5 Supplementary Margin.

How are Supplementary Margin bookings communicated to the clients?

  • Eurex Clearing Risk Management contacts Clearing Members via e-mail and phone shortly before Supplementary Margins are charged initially.  
  • Any change or release of Supplementary Margins will also be communicated directly to the Clearing Member. 
  • The Supplementary Margin bookings as well the Margin types used to book Supplementary Margins are provided e.g. in the Report CC750, which shows margins on 'Margin Class'- / 'Liquidation Group' level as 'Additional Margin'. 

Which Supplementary Margins do exist?

Eurex Clearing differs currently between the following Supplementary Margins, which are booked in the following 'Margin Classes':

  • Own Issues 'SUPPL'
  • Stress Testing 'SUMA'
  • Portfolio Diversification and Margin Offsets 'SUMMV'
  • Sub-Investment Grade 'SUMME & SUMMC'
  • Eurex/KRX Link 'SUPA'
  • Limit Breaches 'SUMCR & SUMCO & SUMWR'

FAQ

1. What is the 'Own Issue' Supplementary Margin SUPPL?

In case Clearing Members enter into positions, where they are exposed to the performance of their own stock (e.g. derivatives on their own equity) or other instruments issued by themselves or entities belonging to the same legal group, these positions are collateralized based on the assumption that the underlying becomes worthless in a default scenario.
So, 'Own Issue' is the amount of funds charged to the Clearing Members for trading own Futures and Options (only derivatives) and is a special 'Wrong-Way Risk' constellation.

2. What is the charging/payback process of SUPPL?

A daily monitoring process ensures a tight control of any 'Own Issue' positions. 
For a more efficient Collateral Management process on the Clearing Member side, the Supplementary Margins are charged weekly based on the largest excess (i.e. loss given default minus already provided resources) over the previous week.

3. How is SUPPL communicated?

Clearing Members are directly informed vie e-mail (phone) about SUPPL on a weekly basis. 
The booked amount can be checked e.g. in the Report CC750 under the 'Margin Class' SUPPL. 

4. Where can I find more information?

More information about 'Wrong-Way Risk' can be found on the dedicated risk management page under the following path: 
Services > Risk management > Credit, concentration & wrong way risk

1. What is SUMA?

SUMA represents additional margin that can be demanded by Eurex Clearing from the Clearing Members showing exceptional Stress Testing results, i.e. the stress shortage for a Clearing Member exceeds a predefined threshold.
Thresholds are defined as the percentage of the sum of the current Default Fund requirement and 'Dedicated Amount' provided by Eurex Clearing ('Skin in the Game').

2. What is the charging/payback process of SUMA?

In order to mitigate the risk that Eurex Clearing’s prefunded financial resources are insufficient compared to Stress Testing results, assuming the default of at least the two largest Clearing Members ("cover-2" Stress Tests), pre-defined operational thresholds have been established and are continuously monitored. 
We initiate risk mitigating actions whenever a threshold is breached. 

There are two applicable thresholds:

SUMA Screenshot





A Clearing Member is initially notified once the Clearing Member’s stress shortage consumes more than 40% of Eurex Clearing’s Default Fund (incl. Eurex Clearing’s 'Dedicated Amount').
SUMA is required when stress shortage consumes more than 45% of Eurex Clearing’s Default Fund (incl. Eurex Clearing’s 'Dedicated Amount'). 
The difference between Clearing Member’s stress shortage and 45% of Eurex Clearing’s Default Fund (incl. Eurex Clearing’s 'Dedicated Amount') is called as Supplementary Margin (SUMA) and needs to be covered as additional Collateral in order to remedy the breach.
SUMA is released if the largest stress shortage over the previous week is below the Default Fund threshold.

3. How is SUMA communicated?

The SUMA Booking is communicated via e-mail (phone).
The charged amount can be checked e.g. in the Report CC750 under the 'Margin Class' SUMA. 

4. Where can I find more information?

For more information regarding risk mitigating actions in regards to Stress Testing, please visit the dedicated risk management page under the following path: 
Services > Risk management > Stress testing > Risk mitigating actions
 

1. What are Portfolio Diversification and Margin Offsets (SUMMV)?

The regulatory amount of Margin reductions for every Clearing Member on sub portfolio level shall be not greater than 80 percent in a portfolio. 
If the 80 percent limit is exceeded, corresponding amounts are booked in the 'Margin Class' SUMMV.

2. What is the charging/payback process of SUMMV?

The value of SUMMV is calculated and charged on a weekly basis and does not change until next week’s recalculation.

3. How is SUMMV communicated?

The SUMMV amount is communicated to customers via e-mail (phone). 
The booked SUMMV amount can be checked e.g. in the Report CC750 under the 'Margin Class' SUMMV. 

4. Where can I find more information?

Limits are set by the additional risk monitoring framework and outlined in the Eurex Clearing Circular 095/17: 'Regulatory requirements for monitoring of portfolio diversification and margin offsets'.
 



1. What are SUMME and SUMMC?    

For sub-investment grade rated (Basic) Clearing Members Supplementary Margins may be charged ('Margin Classes' SUMME and SUMMC for EUR or CHF Clearing Currency, respectively).
The margin (without Supplementary Margin) is multiplied by a margin multiplier, which is set dependently on the credit rating of the Clearing Member. 

2. What is the charging/payback process of SUMME & SUMMC?

The calculation is done daily and is based on the previous End of Day (EOD) margin requirement. 
The Supplementary Margin difference against the previous day is booked overnight. 

3. How is SUMME & SUMMC communicated?

It is communicated to customers via e-mail (phone). 
The booked amount can be checked e.g. in the Report CC750 under the 'Margin Classes' SUMME or SUMMC. 
 


1. What is SUPA?

Since Eurex Clearing has partnered with the Korea Exchange (KRX), the 'Eurex/KRX Link' gives Members direct access to:

  • KOSPI 200 Options  
  • Mini KOSPI 200 Futures. 

The SUPA Margin ensures that the overnight risk is fully covered and that the EOD margin requirements are updated daily based on most recent positions. 

2. What is the charging/payback process of SUPA?

This KRX extra margin is booked as Supplementary Margin SUPA and charged EOD. 
The SUPA margin calculation is performed in Clearing Currency immediately after trading has closed and positions are final (21:30h CET). 
It remains charged until expired positions in the Eurex KOSPI products are settled into positions on KRX. 

3. How is SUPA communicated?

There is no special notification, but the information that the margins are being charged when KOSPI products are traded can be found in the product prospects. 
SUPA is also visible in the CC750 Report.  
Additionally, KRX positions can be found in the 'Liquidation Group' PAC01.

4. Where can I find more information?

More information about the 'Eurex/KRX Link' can be found in the Member Readiness Guide.
 


1. What are SUMCR & SUMCO & SUMWR?

They are limit breaches from additionally monitored risk limits, such as 'Credit-, Concentration and Wrong-Way Risk' limits and could be mitigated by Supplementary Margins: SUMCR, SUMCO and SUMWR.

2. What is the charging/payback process of SUMCR & SUMCO & SUMWR?

The Supplementary Margin difference against the previous day is booked EOD. 

3. How are SUMCR & SUMCO & SUMWR communicated?

The additional margin is booked into the respective 'Margin Classes' (SUMCR, SUMCO or SUMWR) e.g. in the CC750 Report. 
The Members are informed via e-mail (phone).

4. Where can I find more information?

More information about 'Wrong-Way Risk' can be found on the Eurex Clearing Circular 131/13 and on the dedicated risk management page under the following path: 
Services > Risk management > Credit, concentration & wrong way risk.


Supporting Documents

Contact


Eurex Clearing AG
CCP Risk Management / Risk Exposure Management

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risk@eurex.com