EurexOTC Clear for IRS - EMIR
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EurexOTC Clear for IRS – EMIR October 2014
EurexOTC Clear IRS October 2014
Agenda
• Eurex Clearing – Overview
• EurexOTC Clear for IRS
• Risk management
• Client Asset Protection
• Collateral management
• Trade Flow
• Key contacts
www.eurexclearing.com 2
EurexOTC Clear IRS October 2014
Core competencies
Eurex Clearing – Central component of the silo structure of Deutsche Börse Group
Information Trading Clearing Settlement Custody
• Streaming data feeds • Operate open electronic • Trade Verification • Delivery of securities • New issues services
• Physical terminals books • Margining • Financing services • Income & redemption
• Indices • Connectivity to • Risk management • Securities lending & payments
international trading • Collateral management borrowing • Tax services for both
members release at source and
• Position management
claims
• Trade management
incl. give-up/take-up • Corporate action
notification &
• Exercise & assignment
processing
• Notification & allocation
• Proxy voting service
• Netting services
• Delivery management
Eurex/OTC*
FWB/ISE Clearstream Banking
Information Services Eurex Clearing
Eurex Bonds (Frankfurt and Luxembourg)
Eurex Repo
IT services and software development (Deutsche Börse MD&S)
*OTC: Over The Counter, FWB: Frankfurter Wertpapierbörse, ISE: Irish Stock Exchange, EEX: European Energy Exchange
www.eurexclearing.com 3
EurexOTC Clear IRS October 2014
Eurex Clearing is the only fully integrated CCP across
asset classes with a single legal netting structure
Lower risk Lower costs and capital Greater efficiency
• European leader in long- • Clearing of different
term interest rate futures products under a single
and options – 2.2mn legal netting set and
contracts with EUR 285bn liquidation structure lowers
notional cleared every day capital and funding costs
• 333 clearing licenses in 17 • Integrated cross-product
European countries structures and significant
existing exposures can
• 545 Non-Clearing Members lower margin, default
fund and capital
• More than 6.7 million requirements
cleared derivatives
contracts daily • Large spectrum of
eligible collateral, re-use
• EUR 205bn notional of other assets (e.g. GC
outstanding in January 2014 pooling) and access to
central-bank accounts can
mitigate funding costs
We will continue to integrate our products and services, not only across Eurex Clearing but across Eurex and
Clearstream to provide sustainable capital and operational efficiencies
www.eurexclearing.com 4EurexOTC Clear IRS October 2014
In light of tightening global regulation, an integrated CCP
model can increase cost efficiencies for clients
Cost of clearing may vary substantially across CCPs along 3 key drivers…..
• Multilateral risk netting complemented by cross- Higher netting
product netting between OTC, ETD and cleared Repo
efficiency lowers capital
1 Netting
efficiency
• Balance sheet netting of exposure at default under a
single legal CCP construct and netting of positions in
and funding
requirements
Liquidation Groups for initial margin
• Required default fund contributions depend on the
risk characteristics of the CCP Higher Default Fund
Default fund • efficiency lowers capital
2 efficiency
CCPs with significant existing exposures across
products under a single netting agreement and
reflecting segregation tend to lead to lower Default
and funding
requirements
Fund contribution and capital requirements
• CCPs with a large spectrum of eligible collateral and
re-use of other assets (e.g. GC pooling) mitigate Higher collateral
Collateral
3 efficiency
•
funding issues for clients
CCPs with access to central bank accounts remove
efficiency lowers
funding requirements
double funding requirement for individual clearers
An integrated cross-product CCP for all EUR-denominated products under a single netting agreement with
a large eligible collateral spectrum offers the highest efficiency
Source: Eurex Clearing, Oliver Wyman analysis
www.eurexclearing.com 5
© Oliver Wyman 5EurexOTC Clear IRS October 2014
Cost efficiencies between CCP’s vary across client types
and depend upon what is in their portfolio
Sell-side cost savings of clearing over Buy-side cost saving efficiencies become
bilateral with initial margin more pronounced the higher the leverage
Bps of notional
Global dealer Regional bank Fixed income mutual fund Fixed income hedge fund
+45-70% ~2.0-2.4 bps
+50-75% ~0.3-0.35 bps +65-100% ~0.25-0.3 bps
~20-35 bps
1
1 1 2
~1.4 bps
~0.2 bps 3
2
~0.15 bps 2
3
3
2
Savings on Additional Savings on Savings on a Additional Savings on Savings on Additional Savings on 3
a baseline cost Eurex baseline cost Eurex a baseline cost Eurex -10 bps
CCP efficiencies Clearing CCP efficiencies Clearing CCP efficiencies Clearing
Savings on Additional Savings on
a baseline cost Eurex
CCP efficiencies Clearing
1 2 3
Default Large eligible collateral
Netting Cross-product exposure Integrated, segmented Collateral
fund spectrum, re-use of assets &
efficiency netting and cross-margining default fund structure efficiency
efficiency central bank access.
www.eurexclearing.com 6EurexOTC Clear IRS October 2014
Default fund efficiency: An integrated default fund
reduces the risk and the size of the default fund by 30%
Ring-Fenced Default Funds Integrated Default Fund
Eurex Clearing
• Integrated default
OTC IRS
IR Deriv.
Repos
OTC IRS
fund structure
Equity
Listed
Deriv.
IR Deriv.
Equity
Listed
Repos
Deriv.
Structure benefits from
portfolio effects
between different
products and asset
Default classes
4.1 bn 2.9 bn
Fund - 40%
Size* EUR EUR • Highly relevant for
clearing of client
in % of Initial
10% of Initial 7% of Initial business given that
Margin Margin Margin directional portfolios
lead to high Initial
Margins
Reduced Funding AND Capital Costs
Eurex Clearing Value proposition: While an integrated default fund structure can be
replicated by competitors, the significant business in different products and asset classes, in
particular equity derivatives is hard to replicate
* Figures illustrative for Eurex Clearing
www.eurexclearing.com 7EurexOTC Clear IRS October 2014
The safety of the CCP through its lines of defense is a
key criteria in deciding where to clear
Eurex Clearing’s lines of defense are crisis proven – default fund has never been used
Eurex Clearing lines of defense
Coverage Position netting Close-out of all positions
in normal
market Total collateral held at Eurex Clearing
Collaterals of Member approx. € 48.35 * bn
conditions
in default
(Lehman/
MF Global) Clearing Fund contribution Min. € 1.0 m (DCM) or € 5.0 m (GCM)
of Member in default
€ 50 m Lines of Defence
Dedicated amount of Eurex before Eurex
Clearing AG Clearing’s capital
Coverage in Clearing fund contribution Approx. € 3.4bn sum up to more
extreme of other Members than € 9 bn
market Max 2 assessment limit liability of CM to 3x
conditions Assessments to prefunded clearing fund contribution
the Clearing Fund
€ 700 m guaranteed by Deutsche Börse AG
Parental Guarantee
Approx. € 289 m, Eurex Clearing
Remaining equity of Eurex thus fully EMIR compliant
Clearing AG
Values as of September, 2014
* Monthly average collateral value after haircut
www.eurexclearing.com 8EurexOTC Clear IRS October 2014
Key operational differentiators to be assessed
between CCP’s
Eurex Clearing Operational Differentiators
• Direct delivery of cash and securities removes operational cost for CM
• Over 25,000 eligible securities lowers funding costs of IM and DF
Efficient collateral
management • GC Pooling allows re-use of securities to cover IM requirements
• Intraday return of cash removes double funding
• Single netted margin call across all asset classes
Operational efficiencies
• Direct delivery of cash and securities means no transit risk
Protection and • Full protection of client excess allows pre-funding at no risk
segregation • Full protection of clients own assets removes liquidation and replacement risk
• No mutualization of risks with fellow customers
• Portability of clients actual / own assets in CM default
Portability and legal • Ability to become Interim Participant allows 5 + days for porting
certainty • Legal certainty for clients and Clearing Members domiciled in EU
• Legal certainty for porting, close-out netting and protection of assets at fund level
• Early return of cash removes double funding
Central Bank access • Early return of cash reduces counterparty risk and funding costs to the CCP
• Central bank access provides liquidity in a crisis and reduces systemic risk
www.eurexclearing.com 9EurexOTC Clear IRS October 2014
Key operational differentiators to be assessed
between CCP’s
Eurex Clearing Cost Differentiators
• Cross asset class CCP with single legal netting lower EaD which lowers capital
Netting • Cross product margins in Liquidation Groups
• Payment netting across asset class with a single margin call
Capital and funding efficiencies
• 5 day MPOR applied to OTC IRS for both house and client accounts
Capital costs • 0% capital risk weight for house collateral
• 2% capital risk weight for individual segregation
• DF segmentation decreases total size of CF by 40%
Default Fund • DF allocated as 7% of IM.
• Cross margins lowers IM by 20 – 40% and hence DF contribution
• Lower DF means lower funding costs
• Lower IM means lower funding costs
Funding costs • Over 25,000 eligible securities lowers funding costs of IM and DF
• GC Pooling allows re-use of securities
• Near real-time margins and intraday return of cash removes double funding
www.eurexclearing.com 10EurexOTC Clear IRS October 2014
Agenda
• Eurex Clearing – Overview
• EurexOTC Clear for IRS
• Risk management
• Client Asset Protection
• Collateral management
• Key contacts
www.eurexclearing.com 11EurexOTC Clear IRS October 2014
We have seen a significant increase in new CM’s & RC’s
• 37 OTC IRS Clearing Members and 43 Registered Customers admitted
• Over 100 Registered Customers currently onboarding
• Union Invest first major KVG live in Individual Segregation with approx. 100 underlying funds
Admitted Clearing Members:
www.eurexclearing.com 12
© Oliver Wyman 12EurexOTC Clear IRS October 2014
Eurex Clearing volumes have increased significantly
since the beginning of 2014
Outstanding Total turnover
EUR 38,947,636,212 51,168,323,582
CRD IV New capital requirements CHF 27,340,500,000 28,140,500,000
introduced in Jan 2014
USD 543,070,000 543,070,000
Mid tier European banks
Clearing demand becoming direct CM’s and Total (EUR) 61,742,344,854 74,616,232,263
increasing Eurex activity
Liquidity provided by all
Liquidity
major broker dealers 70,000,000,000
GC pooling collateral re- 60,000,000,000
Collateral use and late return of
Central Bank cash 50,000,000,000
CHF
Approx. 140 RC’s have 40,000,000,000
End clients qualified for the fee EUR
30,000,000,000
waiver and many USD
starting to actively clear 20,000,000,000 Total (EUR)
Fee waiver No OTC IRS clearing fees
10,000,000,000
until Jan 2016
0
July
Sep
Nov
Dec
Jan
Feb
Apr
May
Sep
Aug
Mar
Oct
June
www.eurexclearing.com 13
© Oliver Wyman 13EurexOTC Clear IRS October 2014
EurexOTC Clear for IRS was launched in Nov. 2012 and
was authorized as a QCCP on 10 April 2014
Product description OTC derivative classes
Currencies: Derivative
Current Product classes
classes
Settlement Maturity/Range of Settlement Range of payment
Asset-class Type Underlying 1 Notional Currency
Currency maturities/Tenor conditions frequency
EUR USD GBP CHF JPY Interest Rate Fixed to Float EURIBOR EUR EUR 2D-50Y Cash 1M, 3M, 6M, 1Y
Interest Rate Fixed to Float LIBOR CHF CHF 2D-30Y Cash 1M, 3M, 6M
Interest Rate Fixed to Float LIBOR USD USD 2D-50Y Cash 1M, 3M, 6M
Types: Interest Rate Fixed to Float LIBOR GBP GBP 2D-50Y Cash 1M, 3M, 6M, 1Y
Interest Rate Fixed to Float EURIBOR EUR EUR 2D-50Y Cash 1M, 3M, 6M, 1Y
• Vanilla IRS (Fix vs Float) Interest Rate Fixed to Float LIBOR CHF CHF 2D-30Y Cash 1M, 3M, 6M
• Basis swap (Float vs Float) Interest Rate Fixed to Float LIBOR USD USD 2D-50Y Cash 1M, 3M, 6M
Interest Rate Fixed to Float LIBOR GBP GBP 2D-50Y Cash 1M, 3M, 6M, 1Y
• OIS, FRA Interest Rate Basis EURIBOR EUR EUR 2D-50Y Cash 1M, 3M, 6M, 1Y
• Zero coupon Interest Rate Basis LIBOR CHF CHF 2D-30Y Cash 1M, 3M, 6M
Interest Rate Basis LIBOR USD USD 2D-50Y Cash 1M, 3M, 6M
• Compounding Interest Rate Basis LIBOR GBP GBP 2D-50Y Cash 1M, 3M, 6M, 1Y
Interest Rate Basis EURIBOR EUR EUR 2D-50Y Cash 1M, 3M, 6M, 1Y
• Variable notional
Interest Rate Basis LIBOR CHF CHF 2D-30Y Cash 1M, 3M, 6M
Structures: Interest Rate Basis LIBOR USD USD 2D-50Y Cash 1M, 3M, 6M
Interest Rate Basis LIBOR GBP GBP 2D-50Y Cash 1M, 3M, 6M, 1Y
• Spot, forward start & stub periods, Interest Rate OIS EONIA EUR EUR 2D-3Y Cash 1M, 3M, 6M, 1Y
linear interpolation Interest Rate OIS TOIS CHF CHF 2D-3Y Cash 1M, 3M, 6M
• EUR (EURIBOR) and GBP (LIBOR), Interest Rate OIS Fed Fund USD USD 2D-3Y Cash 1M, 3M, 6M
Interest Rate OIS SONIA GBP GBP 2D-3Y Cash 1M, 3M, 6M, 1Y
1m, 3m, 6m, 12m
Interest Rate FRA EURIBOR EUR EUR 28D-2Y Cash 1M, 3M, 6M, 1Y
• USD and CHF (LIBON) 1m, 3m, 6m Interest Rate FRA LIBOR CHF CHF 28D-2Y Cash 1M, 3M, 6M
Interest Rate FRA LIBOR USD USD 28D-2Y Cash 1M, 3M, 6M
Interest Rate FRA LIBOR GBP GBP 28D-2Y Cash 1M, 3M, 6M, 1Y
Interest Rate Fixed to Float LIBOR JPY JPY 2D-50Y Cash 1M, 3M, 6M, 1Y
Interest Rate Fixed to Float LIBOR JPY JPY 2D-50Y Cash 1M, 3M, 6M, 1Y
www.eurexclearing.com 14EurexOTC Clear IRS October 2014
Product/ service roadmap
Initiative Description Planned launch
Inflation swaps Nov 2014
Swap futures Launched
Products IRS CCY expansion – Nordics Planned 2015
enhancements Extension of OIS maturities Nov 2014
Combination of stub periods Nov 2014
Introduction of OIS for JPY and maturity extension Nov 2014
ECAG advanced netting Q1 2015
TriOptima D2D/ client unlinked compression Nov-14/ Q1-2015
Service
Bloomberg VCON connectivity (Trade Source/ Capture) Q4 2014
enhancements
OTC Margin Calculator enhancements Nov 2014
Fund level cross margining Launched
www.eurexclearing.com 15EurexOTC Clear IRS October 2014
Eurex is the only fully integrated listed and OTC
derivatives trading and clearing platform
European leader 333 clearing licenses in
in Fixed Income futures 17 European countries
and options Bobl
2.2mn contracts with Bund Schatz
€285bn notional 545 Non-Clearing
traded daily Members
EURIBOR
OAT
FOAT and FBTP
Eurex (10Y+5Y) the most successful
November 2014 EONIA Trading new product
Eurex will offer T7 introductions
One-Month EUR BTP
Secured covering the
Secured Funding Funding (10Y/5Y/2Y) European yield
Futures Futures curve
IRS Deliverable
EUR 205bn Clearing Swap September 2014
notional Futures Eurex launched
outstanding in physically delivered
January 2014 Euro Swap Futures
As the home of the European yield curve, Eurex will continue to integrate
products and services to provide sustainable capital and operational efficiencies.
www.eurexclearing.com 16EurexOTC Clear IRS October 2014
Exchanged Traded interest rate derivatives at Eurex
Eurex Exchange offers some of the worlds most heavily traded fixed income
derivatives products which allow you to manage your interest rate risk
Fixed Income derivatives
• Euro-Bund, Euro-Bobl, Euro-Schatz Futures & Euro-Buxl® Futures
• Mid- and Long-Term Euro-OAT Futures
• Long-, Mid- and Short-Term Euro-BTP Futures
• Options on Euro-Bund, Bobl, Schatz Futures as well as on Euro-OAT Futures
Money Market derivatives
• Three-Month EURIBOR Futures
• Options on Three-Month EURIBOR Futures
• 1- 4 year EURIBOR Mid-Curve Options
• One-Month EONIA Futures
• EUR Secured Funding Futures - to be launched on 12 November 2014
Interest Rate Swap derivatives
• Euro Swap Futures (2-, 5-, 10- and 30-year) launched on 1 September 2014
www.eurexclearing.com 17EurexOTC Clear IRS October 2014
Types of trading at Eurex Exchange
Order book – trading and clearing
• Orders are matched in public order books according to the different allocation schemes.
• Eurex’s trading system will list outright contracts as well as the full implied calendar spread matrix.
• Independent market surveillance ensures orderly markets.
Eurex Trade Entry Services / Pre-arranged trading and clearing
• Eurex Trade Entry Services enable participants to enter off-order book trades in the Eurex® system. With
these facilities trading participants can benefit from the flexibility of customized trading and the
advantages of standardized clearing and settlement.
• Most facilities are pure Trade Entry services with bilateral agreement of price and quantities. You can
trade the EUR Secured Funding Futures also via following OTC trading facility:
• Block Trade Service
• Exchange for Physicals (EFP) - against GC Pooling repo transaction (ECB or ECB EXTended
basket) with matching notional
• Exchange for Swaps (EFS) - against Interest Rate Swaps or other Money Market Futures.
www.eurexclearing.com 18EurexOTC Clear IRS October 2014
Available Eurex Trade Entry services
Exchange For Swaps (EFS)
• Bilaterally agreed simultaneous transaction of a receiver/ payer interest swap/ swaption versus futures.
– All swap payments must be denominated in a currency of the OECD member states.
– The interest rate swaps must have a price correlation so that the futures are a suitable instrument
for hedging the cash market transaction.
www.eurexclearing.com 19EurexOTC Clear IRS October 2014
Access to the service for clients
There are 2 options for clients to connect to Eurex Clearing via a Clearing Member
• The legal entity must have a tripartite agreement with a Clearing Member and Eurex Clearing AG.
• Must be a member/user of an approved trade source (MarkitWire for Phase 1).
Registered
Customer (RC) • Have access to the Common Report Engine.
• The primary relationship is between the client and the Clearing Member.
• Clearing Members are entitled to set their own eligibility criteria for clients.
• No direct relationship with Eurex Clearing AG.
Non-Disclosed / • The primary relationship is between the client and the GCM
Agency Client • The clients GCM is entitled to set their own eligibility criteria for clients.
• Must be a Member / user of an approved trade source (MarkitWire for Phase 1).
• Volume incentives on transaction fees.
Cost • Zero collateral fee for Individually segregated accounts.
• Lowest capital costs of any CCP due to c-factor of 0.34%.
www.eurexclearing.com 20EurexOTC Clear IRS October 2014
Important Information on the public website
• Eurex Clearing Company Profile
http://www.eurexclearing.com/clearing-en/about-us/company-profile/
• Eurex Clearing Rules and Regulations: Clearing Conditions
https://www.eurexclearing.com/clearing-en/resources/rules-and-regulations/136778/
• Admission documents and membership forms
http://www.eurexclearing.com/clearing-en/resources/forms/
• Eurex Clearing Price List
https://www.eurexclearing.com/clearing-en/resources/rules-and-regulations/
• List of admitted Clearing Members
http://www.eurexclearing.com/clearing-en/resources/clearing-contacts/
• Production Newsboard
http://www.eurexclearing.com/clearing-en/resources/production-newsboard/
• Risk Management Information on Lines of Defense, Default Management Process etc.
http://www.eurexclearing.com/clearing-en/risk-management/
• Risk Parameters and Eligible Collateral
http://www.eurexchange.com/exchange-en/market-data/clearing-data/risk-parameters/
• Information on C7, our new clearing architecture
http://www.eurexclearing.com/clearing-en/technology/c7/
• Report Reference Manual
http://www.eurexclearing.com/blob/clearing-en/136500-861464/1032542/3/data/Eurex_XML_Report_Reference_Manual_V211.pdf
www.eurexclearing.com 21EurexOTC Clear IRS October 2014
EurexOTC Clear for IRS: Standard Fee Model
Booking Fee Maintenance Fee
Booking fee per million in trade currency 0.25 Maintenance fee per million notional per day
0.007
in trade currency
Maturity premium per million per year in
0.75
trade currency
Fee cap (Booking fee + Maturity premium)
18.00
per million in trade currency
Backloading discount for booking fee: 70%
Rebate program for Registered Customers
Booking Fee Rebates Maintenance Fee Rebates
(Based on the cumulated cleared notional amount) (Based on the outstanding notional amount)
Up to 240 bn € cleared notional 0% Up to 240 bn € cleared notional 0%
240 bn € to 720 bn € 15% 240 bn € to 720 bn € 15%
720 bn € to 1,500 bn € 25% 720 bn € to 1,500 bn € 25%
Above 1500 bn € 35% Above 1500 bn € 35%
* Effective 1 May 2014
Note: Fees are always billed in the underlying currency
www.eurexclearing.com 22EurexOTC Clear IRS October 2014
EurexOTC Clear for IRS: Flat Fee Packages for Clearing
Members*
GOLD SILVER BRONZE
Fixed Fee p.a.
2.75 1.75 0.75
in mn EUR
Threshold for cleared
notional volume in bn
unlimited 2,000 200
EUR included in fixed
fee
Rebate to Standard Fee
Model if cleared notional
n/a 75% 75%
volume exceeds
threshold
If no Flat Fee Package is booked Standard Fee Model applies for Clearing Members
* Available for House Account; sign-up with one month notice in advance; billed in equal monthly installments
** Effective 1 May 2014
Note: Fees are always billed in the underlying currency
www.eurexclearing.com 23EurexOTC Clear IRS October 2014
Agenda
• Eurex Clearing – Overview
• EurexOTC Clear for IRS
• Risk management
• Client Asset Protection
• Collateral management
• Key contacts
www.eurexclearing.com 24EurexOTC Clear IRS October 2014
The Eurex Clearing Prisma portfolio risk management
module delivers significant benefits….
Margin efficiencies of Eurex Clearing Prisma highly depend on the size and structure
of a portfolio, but show up to 80 percent reductions in individual margin requirements.
• More accurate risk-netting effects for listed, and also between listed
Capital and OTC positions.
efficiency
• Higher capital efficiency for customers through risk calculation on
portfolio basis.
1 • Cross-product scenarios enable consistent way to account for portfolio
2 Accuracy correlation and diversification effects.
• Risk covered at 99 percent through margin calculation consisting of
− a mark-to-market component
− a forward-looking component
− an adequate liquidation time horizon
Central benefits 3
• Adjustments to enable stable margin requirements: concentration,
Robustness uncertainty in correlations, model error adjustments if compression
is used.
• Flooring for stability: stressed period scenarios and dynamic volatility
4 scaling to at least long-run volatility percentiles.
5 • Aligned Default Management process between listed and OTC.
Consistency • Positions deemed suitable for simultaneous liquidation are
assigned to the same Liquidation Group.
• Risk offsets are only granted within the same Liquidation Group
(e.g. equity, commodity or fixed income).
Flexibility • Reduced time-to-market for new products.
www.eurexclearing.com 25EurexOTC Clear IRS October 2014
Fragmentation of Clearing across 3 CCP’s is inefficient
Eurex Clearing CCP I CCP L
Long-term ETD Short-term ETD OTC Swaps
(Bund, Bobl, Schatz) (Euribor) (Euro IRS)
Inefficient for participants from a margin & DF perspective
Eurex Clearing – PRISMA margin optimiser for Euro Derivatives
Fixed Income
• Euro-Bund, Bobl, Schatz, Buxl Futures
• Long-, Mid, and Short-Term Euro-BTP Futures
• Plain vanilla IRS
EURO IRS
• Mid-,Long-Term Euro-OAT Futures
• Zero coupons
• Options on Euro-Bund, Bobl, Schatz and Euro-OAT
• Overnight index swap
Futures
• Variable notional swaps
• Compounding swaps
• Three-Month Euribor Futures & Options
•
MM
FRAs
• 1-4 year Euribor Mid-Curve Options
• One-Month EONIA Futures
Additional efficiency from new products being delivered in 2014
• EURO Deliverable Swap Futures, 2-, 5-, 10- and 30 year
• Cash settled One-Month Euro Secured funding (Repo) Futures
www.eurexclearing.com 26EurexOTC Clear IRS October 2014
Netting efficiency: Prisma cross-product margining - risk
reduction and margin savings of up to 70% possible
Product/ Liquidation Note: The longer the Auto New PRISMA
Portfolio horizon liquidation horizon the Allocation Portfolio Allocation
higher the margin
requirement
Portfolio 1
Interest Rate Interest Rate Interest Rate
5 days
SWAPs SWAPs SWAPs
Interest Rate
FUTUREs
Shift of Futures into
Swap Portfolio
Portfolio 2
Interest Rate 2 days Interest Rate Interest Rate
FUTUREs FUTUREs FUTUREs
-70%
160 160
100 60
Margin 112
Require 48
ment
Interest Interest Rate SUBTOTAL SUBTOTAL Cross-Margin TOTAL
Rate Swaps Futures Benefit
www.eurexclearing.com 27EurexOTC Clear IRS October 2014
Cross-product margining efficiency when clearing the
OTC IRS and Fixed Income futures on the same CCP
Using the EFS (Exchange for Swap) service can reduce execution risk and save 1.9bps
Initial Margin Default Fund Total Costs1 In bps
In ‘000 EUR In ‘000 EUR In EUR of notional
Maturity: 10Y
CCPx
Interest
Swaps
Rate
Fixed Payer 17,000
1.100 110
Notional: 50MM
28,000 2.8 bps
Clearing
BUND Future
Eurex
Interest
Future
Rate
364 contracts
850 60 11,000
Notional: 50MM
- 69%
Maturity: 10Y
Interest
Swaps
Eurex Clearing
Rate
Fixed Payer
PRISMA
Notional: 50MM
700 48 9,000 0.9 bps
BUND Future
Interest
Future
Rate
364 contracts
Notional: 50MM
www.eurexclearing.com 28EurexOTC Clear IRS October 2014
Margin Calculator EurexOTC Clear for IRS
Online tool for margin simulation to calculate test portfolios
• Prisma margin calculation for test portfolios allows Clearing Members and Registered Customers to
evaluate the indicative margin requirements that would be attributed to a portfolio of positions or trades.
• The margin calculator supports the whole product scope of EurexOTC Clear, in particular IRS, basis,
OIS, FRAs, VNSs, compounding and zero coupon swaps. The tool is implemented as an on-line service.
• The following functionalities are available in the Margin Calculator:
– Download of a trade template
– Trade/ portfolio upload and trade validation
– Display and download of the result summary
– What-if trade scenarios
• Margin Calculator is a web-based tool used to calculate margins for OTC IRS products.
• Outputs in GUI and for download include portfolio MtM, IM (including the breakdown of components),
and per trade MtM.
• Access to the Margin Calculator via the OTC GUI, save portfolios in the GUI to re-run/edit in the future.
• Utilization of an API (IRS only) to allow Members to submit portfolio for calculation.
www.eurexclearing.com 29EurexOTC Clear IRS October 2014
Agenda
• Eurex Clearing – Overview
• EurexOTC Clear for IRS
• Risk management
• Client Asset Protection
• Collateral management
• Key contacts
www.eurexclearing.com 30EurexOTC Clear IRS October 2014
Eurex Clearing qualified as a CCP under EMIR on 10 April
2014 and provides full segregation and portability
After the Lehman and MF Global defaults, the demand for segregation increased as clients faced issues around
uncertainty of porting, double funding, mutualization of client and CM risks from co-mingling of assets and potential
misuse of client collateral.
EMIR article 39 requires CCPs and Clearing Members to offer at a minimum omnibus and individual
segregation models.
ESMA finally provided clarity that individual client segregation requires that the actual assets of the client are
segregated and available for porting. Models which merely segregate the value of collateral due to the accounts of
clients, 'do not meet the requirement to offer individual client segregation’ (ESMA Q&A 5 August 2013).
Individual models are intended to secure the positions and the collateral assets at all times in the event of
default of a Clearing Member or other clients of the clearing member.
Some local investment laws require asset managers to segregate assets at the fund level to prevent co-mingling
of positions and assets between the clearing broker, other clients and funds of the same fund company.
The Eurex Clearing EMIR disclosure document is available on our website:
http://www.eurexclearing.com/blob/clearing-en/51546/284984/6/data/EMIR_disclosure_document_39.pdf
www.eurexclearing.com 31EurexOTC Clear IRS October 2014
Client Asset Protection Decision Tree
Eurex Clearing offers Clearing Models which satisfy EMIR segregation and porting
requirements providing different levels of protection.
Disclosed Client (NCM / RC)
Type of client?
Undisclosed client
Only to known
Fellow Customer Risk? No clients Yes
Type of Collateral Protection? Asset Value
Standard
Individual Multiple Omnibus
Omnibus
Type of segregation Segregation Account Segregation Account
Segregation
(ISA) (OSA)
Account (OSA)
CASS
Protection
Yes No
Individual Net Omnibus Elementary
Clearing Model Clearing Model Clearing Model Clearing Model
www.eurexclearing.com 32EurexOTC Clear IRS October 2014
Overview of Segregation Models at Eurex Clearing
Standard OSA Individual
Multiple OSAs Segregated
OSA by Asset Requires OSA by asset and is available under CASS
OSA by Value Accounts
And /or OSA under CASS*
accounts
Position
CM
propriet Agency RC/NCM Agency RC/NCM Agency Agency RC/NCM RC/NCM RC/NCM RC/NCM
ary position position position position position position position position position position
account accounts accounts accounts accounts accounts accounts accounts accounts accounts accounts
CM calls each client on a gross basis and can either post net or gross to Eurex Clearing. For the CM, disclosed clients (RC/NCM) are gross margined
calculation
Margin
CCP MR CCP MR CCP MR CCP MR CCP MR CCP MR CCP MR CCP MR CCP MR CCP MR CCP MR
per P per A per per A per per A per A per per per A per
account account RC/NCM account RC/NCM account account RC/NCM RC/NCM account RC/NCM
MOSA
Collateral pool for all
Collateral pools
Eurex Clearing
collateral MOSA collateral MOSA collateral
OSA by asset
pool by pool by asset pool by asset
A single collateral pool is clients RC/NCM
asset
maintained which dynamically collateral
records proprietary and OSA by MOSA pool
value client collateral Collateral pool for all
collateral MOSA collateral MOSA collateral
OSA under CASS
pool under pool under CASS pool under CASS
clients
CASS
OSA by value is the default When OSA by asset is chosen, a When OSA by asset is chosen, CMs have the option to
Full physical
segregation model at Eurex separate collateral pool is opened at open multiple omnibus collateral pools at Eurex
segregation
Clearing. Segregation is achieved Eurex Clearing. Specific securities Clearing. This enables CMs to group affiliated clients
of positions
33
through reporting and not via and cash are designated to the together. It is possible to have multiple collateral pools
and collateral
separate collateral pools in the collateral pool for all OSA by asset protected under UK Client money rules (OSA under
per client
Eurex Clearing system clients and/or OSA under CASS CASS) or not (OSA by asset)
* The OSA by asset and OSA under CASS models are operationally identically. The only difference is the later affords clients CASS protection.
www.eurexclearing.com 33EurexOTC Clear IRS October 2014
Standard omnibus segregated account (OSA)
Clearing Member Omnibus segregation is available under the Elementary Clearing Model (ECM) or the
Net Omnibus Model (NOCM), which offers UK CM’s the ability to comply with CASS.
Client Individual
The omnibus models offer net or gross margining at a client level.
Omnibus Segregated Accounts Segregation
Accounts
Net omnibus segregation is available through Agency position accounts. The ECM
allows separation of positions into A1 and six further position accounts (A2-A7). CM’s
Position accounts
Net Net Gross
for example may wish to separate affiliate positions. The ECM has one collateral pool.
Agency Affiliate The Affiliated
NOCM relies upon the same operational and functional infrastructure but
RC/NCM Agency RC/NCM in compliance
RC/NCMwith the CASS RC/NCM
position positions segregates positions and collateral rules. NOCM
positions position positions positions positions
account (undisclosed) positions are segregated into A9, which has a segregated collateral pool.
account
Gross omnibus segregation is available by disclosing the client to Eurex Clearing.
Each disclosed client (RC or NCM) has their own position account and is therefore
effectively gross margined. Each RC/NCM shares in the single commingled collateral
Margin Margin pool.
Margin
Margin Margin Margin Margin Margin
requirement requirement
requirement requirement requirement requirement requirement
per A per A
per RC/NCM
Each position account is held on a gross position keeping basis and is net initial
per A account per RC/NCM per RC/NCM per RC/NCM
account account margined.
Legal agreements
• Eurex Clearing has no documentation requirements for Agency clients.
Collateral
ECM collateral pool • Disclosed
Affiliated clients are required to sign a tripartite agreement to register with Eurex
RC/NCM
pools
agency(under the relevant
Clearing RC/NCMtripartite
(xn) collateral pool which can collateral
agreement be found at Appendix 2
NOCM collateral pool (A9) collateral
for ECM pool
and Appendix 8 for the NOCM) pool
Porting
accounts
ECM collateral account (asset based) • Porting under the ECM model is possible if all clients in the ECM client pool port to
CSD
a single replacement Clearing Member and Eurex Clearing receives this
NOCM collateral account (A9) confirmation by 13.00 CET on the business day following default.
NCM – Non-Clearing Member
www.eurexclearing.com RC – Registered Customer 34EurexOTC Clear IRS October 2014
Multiple OSA
CMs may group affiliated clients together in their own omnibus collateral pool
Clearing Member
Omnibus Client Segregation • The multiple omnibus account solution
allows the existing position accounts to be
Affiliated Affiliated covered by additional segregated collateral
Undisclosed
clients’ clients’ NCM 1 RC 2 pools under OSA by Asset or OSA by CASS
clients’
positions – positions – positions positions • Each multiple pool must have more than a
positions – A1
A2 A3 to A7 single client (excluding fund managers)
• Clients are undisclosed or disclosed
Margin Margin Margin • The position accounts are kept on a gross
Margin Margin
requirement requirement requirement
requirement requirement basis and initial margin on a net basis per
per A per A per A
per NCM 1 per RC 2 position account
account account account
• The segregated collateral pool is a separate
A1 A2 A3 to A7 Standard Agreement (i.e. set-off between
collateral collateral collateral NCM 1 & RC 2 collateral pools is prohibited)
account/ account/ account/ account/pool • At the (I)CSD collateral may be tagged or
pool pool pool deposited in to an additional (sub)account. If
first is chosen then the tag would be to the
Pool ID and not the client (not possible to
Elementary Clearing Model identify which security belong to which
Net Omnibus Clearing Model client)
www.eurexclearing.com 35EurexOTC Clear IRS October 2014
Individual Segregation Account (ISA) Overview
ICM ensures maximum portability through individual position and collateral accounts
ICM for Registered Customers/ Non-Clearing Members ICM for Funds
NCM • Positions are held in segregated ISA/Client position accounts at the CCP
RC level and kept on a on gross basis
Positions
FM • The margin requirement of an NCM/RC is covered by a dedicated
RC NCM1 collateral pool, which only holds collateral for the purpose of this
F1* F2 …Fund ZZ NCM/RC
P1 A1 P1 A1 • The Fund Manager acts as a technical RC umbrella for all its funds
allowing aggregated reporting of individually segregated accounts
•
Eurex Clearing
Unlimited number of accounts
Margin calc.
• Complete flexibility in setting up the account names
MR MR
• MR is calculated separately for every position account
MR MR MR MR MR
P1 A1 P1 A1
… • One collateral pool at single fund/segment level
F1 F2 ZZ
(i.e. individual position account level)
• Eurex Clearing guarantees portability of the client’s positions and
collateral to a back-up Clearing Member or the RC and become an
Interim Participant.
Collateral
Dedicated F1 F2 ZZ • Collateral is segregated from the proprietary collateral of the CM and all
segregated Seg Seg Seg
Collateral other clients
collateral Pool Pool Pool
pool
pool to cover • The securities collateral account is a sub-account of the CM and is
MR of NCM1 clearly labelled: a) to hold collateral for the coverage of the segregated
to cover MR
of RC NCM/RC related transactions and b) that the ownership is with Eurex
Clearing
•
Collateral
Cash collateral is paid from the account of the CM with an identifier
CSD/Cnt B
RC dedicated CM Collateral Account for indicating the respective NCM/RC
collateral CM collateral segregated Fund • Securities collateral is kept in the same sub-account but is individually
under CMs account for Managers/KAGs (F1, segregated at single fund/segment level at Eurex Clearing.
account NCM1 F2,… FZZ)
structure
• Cash collateral is paid from the account of the CM. A unique reference is
displayed in the reports indicating the respective client.
www.eurexclearing.com 36EurexOTC Clear IRS October 2014
Asset tagging reduces overhead & operational effort
Full Physical Segregation Asset Tagging
Multiple CBF accounts Eurex collateral pools Single CBF account Eurex collateral pools
Account: 61111 Pool ID: 1111 Pool ID: 1111
Account: 62222 Pool ID: 2222 Account: 61111 Pool ID: 2222
Ref. ID 2
Account: 63333 Pool ID: 3333 Pool ID: 3333
• Security collateral for ICM segregated clients/accounts can be delivered to Eurex Clearing on a double-title or direct-transfer basis
• At CSD* level, either individual (sub)accounts have to be opened per Eurex Clearing collateral pool or multiple Eurex Clearing collateral
pools can be linked to the same (sub)account. Where the latter is chosen, security collateral is allocated to the respective Eurex Clearing
pool by way of asset tagging
• With tagging, at CSD level security collateral is held in one account, while at Eurex Clearing level security collateral holdings are clearly
segregated at ICM client/account (fund(segment)) level. The legal model and protection remains exactly the same for assets held under
either model
• For asset tagging, the CM has to apply the predefined 4 digit ‘Client Reference ID’** to the SWIFT message MT54x (field “RECU/DECU”
SWIFT Field 95Q; reference number is shown in 97A). Based on this information Eurex Clearing allocates security collateral to the
respective collateral pools
• Upon settlement, the CSD confirms settlement via a SWIFT message incl. the Client Reference ID; this is sent to both the CM and CCP
• Asset tagging is also available for multiple omnibus collateral pools under the Standard OSA and/or CASS OSA.
* So far, only Clearstream Banking Frankfurt (incl. 6 series creation accounts) is an approved collateral location for ICM
** If a Client Ref ID is missing, the transfer will not be processed; CM will be informed. If the Client Ref ID is valid, the transfer will be processed accordingly, even if it is erroneous
www.eurexclearing.com 37EurexOTC Clear IRS October 2014
The fund manager set-up
Reduced operational and documentation effort for fund managers
• Eurex Clearing has developed a specific approach to facilitate the on boarding of fund managers.
The Fund Manager set up allows the asset management company to sign on behalf of an unlimited
number of funds (when the funds have no legal personality)
• This approach results in documentation efficiencies and reporting benefits. In this approach the fund
manager becomes a technical RC but each fund remains the legal counterparty, essentially each
fund has it’s own ISA
Fund Manager
Fund 1 Position Fund 2 Position Fund 3 Position Fund 4 Position
Account Account Account Account
• Whilst the position accounts of the fund manager set-up remains independent of the model used,
collateral may be omnibus or individually segregated
www.eurexclearing.com 38EurexOTC Clear IRS October 2014
Client Asset Segregation - options for the Fund Manager
Examples of the fund manager set up in omnibus and individual segregation
Individual Segregated Accounts Standard Omnibus Segregated Account Multiple omnibus collateral pools
accounts
Position
FM Agency RC/NCM FM FM
position position
accounts accounts
F1 F2 … Fund N F1 F2 … Fund N F1 F2 … Fund N
calculation
CCP MR CCP MR
Margin
CCP CCP CCP CCP CCP CCP CCP CCP CCP
MR per MR per MR per per A per MR per MR per MR per MR per MR per MR per
F1 F2 FN account RC/NCM F1 F2 FN F1 F2 FN
… … …
Collateral pools
Eurex Clearing
F1 F2 FN
One collateral pool for all OSA by asset clients Segregated multiple omnibus
Seg Seg Seg
collateral pool for FM only
Pool Pool Pool
The CM may open a multiple collateral
The fund’s positions remain individually segregated in their account for the sole purpose of the fund
own position account but there is no longer one collateral manager. Positions remain individually
Each fund its individually segregated,
pool per a position account. The collateral belonging to all segregated but the collateral sits in a omnibus
with it’s own collateral pool holding
funds sits in the omnibus collateral pool. This exposes the collateral pool. This pool holds collateral only
collateral solely for the purpose of that
client to fellow customer risk as all of the CMs clients sit in for the fund manager so fellow customer risk
fund. Asset Tagging available per client.
the same collateral pool i.e. clients in the A1 – A9 exists only between the funds and not the
accounts and any RCs or NCMs that the CM may have. CMs other clients. Asset Tagging available by
pool.
www.eurexclearing.com 39EurexOTC Clear IRS October 2014
Master fund Structure for Eurex OTC IRS
• Each master fund contains a number of segments which might
be (externally) managed by different asset managers. Master Fund 1 – Position Account
Separate reporting is therefore necessary for each segment
for management or performance measurement purposes Segment 1 – MW BIC 123
Segment 2 – MW BIC 124
• As it is the master fund that is the legal identity, individual Segment 3 – MW BIC 125
segregation is not required on the fund segment level but on Segment 4 – MW BIC 126
the master fund level. In Eurex Clearing’s structure, each
Segment 6 – MW BIC 127
master fund sits in it’s own position account with its own
collateral pool i.e. each master fund has its own ISA
accounts
Position
• Each segment has an individual individual MarkitWire ID (MW Fund Manager
BIC) which is used by the respective segment asset manager MF1 MF2 MF3 MF4
for entering OTC IRS trades at MarkitWire. It is the MW BIC
that is used to identify each segment within the master fund
calculation
Margin
CCP CCP CCP CCP
position account. MR per MR per MR per MR per
MF1 MF2 MF3 MF4
• Initial margin is calculated net per position account i.e. on the
Collateral pools
Eurex Clearing
master fund level. Therefore each master fund benefits from
MF1 MF2 MF3 MF4
risk offsetting between different segments within one master Seg Seg Seg Seg
Pool Pool Pool Pool
fund. The master fund can however calculate hypothetical
margin per MarkitWire BIC by using the CC208 report)
www.eurexclearing.com 40EurexOTC Clear IRS October 2014
Client Clearing Documentation – ECAG’s ICM clients can
choose their documentation approach
1 2 3
Eurex Clearing Market Standard Client Your own documentation
Documentation (ECD) Clearing Documentation (CCD)
Clearing Agreement under
Eurex Clearing AG Participation Agreement under Client Clearing Documentation (CCD)
Documentation (ECD)
• Triparty agreement • Eurex Clearing allows Individual • The Clearing Member’s documentation
provided by Eurex Documentation based on market should comply with the eligibility criteria
Clearing standard client clearing laid out in the clearing conditions
documentation such as the BdB CRV, • CM agrees to representations and
• Existing agreement FOA Module, or ISDA/FOA indemnities in the Participation
governs the relationship Addendum Agreement
between Eurex Clearing,
Clearing Member, & • Eurex Clearing will rely upon trade
RC/NCM for the Individual association netting opinions and will
Clearing Model across all obtain extension opinions to ensure
asset classes that the Eurex Clearing specific annex
terms to the client documentation are
• In use by members since compliant with each other
the ICM was launched in
2011
www.eurexclearing.com 41EurexOTC Clear IRS October 2014
Efficiency improvements for Eurex Clearing’s Individual
Clearing Model further mitigate costs for segregation
Value proposition
• Rather than maintaining a physical CSD account per individually segregated clients, CM’s
Collateral operations can maintain one omnibus account at the CSD for the benefit of each individual client
through asset tagging *
• Over 25,000 eligible securities (governments, corporates, equities)
Large eligibility schedule • Can be used for Initial Margin and Clearing Fund
Efficiency
• Central Bank eligible securities reduces liquidity risks for CCP in event of CM default
• CM can perform book only cash transfers between the firm and client account
Book entry cash
• Increases operational efficiency, reduces transit risk, avoids fees
• Return of EUR and CHF until late afternoon
Cash cut-off times • CM’s receive back cash intraday on receipt of client securities/risk reducing trades
• CM has flexibility to provide collateral transformation services
Collateral transformation
• Client receives full suite of position and collateral reports from Eurex Clearing
*Direct delivery of securities available for ICM customers
www.eurexclearing.com 42
© Oliver Wyman 42EurexOTC Clear IRS October 2014
Agenda
• Eurex Clearing – Overview
• EurexOTC Clear for IRS
• Risk management
• Client Asset Protection
• Collateral management
• Key contacts
www.eurexclearing.com 43EurexOTC Clear IRS October 2014
Eurex Clearing offers a variety of services to guarantee an optimal
usage of provided collateral
• CMs can satisfy margin and Clearing Fund requirements by depositing cash and/or security collateral
• Eurex Clearing accepts approximately 25,000 ISINs based on liquidity categories of European Central Bank
Eligible Asset Database as well as Swiss National Bank and accepts cash collateral in multiple currencies
Flexibility • Eligible securities are validated on a daily basis
• Late cash cut offs: CMs can withdraw prefunded cash for ICM segregated collateral pools same day until
late afternoon (CHF 1:30, EUR 2:30pm CET) upon receipt of ICM segregated client collateral
• Intraday monitoring functionalities (online processing, real time up date of collateral balances)
Transparency • Eurex Clearing stipulates and publishes an admissible securities list on a daily basis*
• Full protection for clients by providing asset segregation and near-time portability in line with regulatory
Safety requirements
• Timely validation of collateral and margin requirements: Eurex Clearing’s margin requirements are balanced
against the collateral deposited intraday and/or on a day-to-day basis, as well as through the reuse of GC
Pooling® Basket Collateral **
Efficiency • Efficient cash handling: the optional auto-repay and Permanent Cash Balance (PCB) functionality offer an
improved cash handling to reduce operational effort and cash balances to a minimum
• Efficient processing: via Xemac and/or CmaX***, CMs have the opportunity to manage collateral in real-time
and to deposit and release securities online
* The full list of eligible securities is distributed via CRE (.txt & .csv) and published on our webpage (.txt only) http://www.eurexchange.com/exchange-en/market-data/clearing-data/risk-parameters/
** Presentation “Reuse GCP Collateral for Eurex Margining” is published under http://www.eurexclearing.com/blob/clearing-en/46792/149090/2/data/reuse_gcp_service_description.pdf
*** Xemac is the collateral management system of Clearstream Banking Frankfurt and CmaX is the collateral management system of Clearstream Banking Luxembourg
www.eurexclearing.com 44EurexOTC Clear IRS October 2014
Clearing Members are able to provide collateral through a
number of standardized interfaces
Provision of securities collateral through the
Clearing Member
Provision of cash collateral through the
• CMs are required to have at least access to a cash account
in one of the selected Clearing currencies
Central bank EUR account (TARGET2)
SNB CHF account
collateral locations
correspondent banks
• CM must also have a USD cash account for Margin Calls
Eurex Clearing Collateral outside of Target2 and SNB hours
Module
• A GBP account is required if a CM intends to support
Standardized clearing of GBP underlying products or to cover intraday
Interfaces margin requirements in GBP
• CM can open accounts at Clearstream Banking AG Frankfurt
Securities (CBF) and/ or SegaInterSettle AG Zurich (SIS) and or
Cash* Collateral Clearstream Banking Luxembourg (CBL)
Collateral
Locations
Locations
• Only CBF/CBF-I have been approved as settlement location
for ICM
GBP Payment Banks6
USD Payment Banks5
in Target 2 - EUR
1SIX SIS (formerly SIS SegaInterSettle AG) Bank of New York Mellon
Central Bank
SNB – CHF4
2Clearstream Banking Frankfurt 6 The following payment banks are admitted for
CBF2
3 Clearstream Banking Luxembourg
CBL3
British pound (GBP): Barclays plc, Citibank N.A.
SIS1
4 Schweizerische Nationalbank
(London branch), Deutsche Bank AG (London
5 The following payment banks are admitted for
branch), JP Morgan Chase N.A., HSBC Bank plc,
U.S. dollar (USD): Bank of America, Citibank N.A., Royal Bank of Scotland plc
Deutsche Bank Trust Company Americas (DBTCA),
HSBC Bank USA N.A., JP Morgan Chase N.A,
*VM is settled in underlying product currency which can be EUR, CHF, USD, GBP, JPY
www.eurexclearing.com 45EurexOTC Clear IRS October 2014
Eurex Clearing offers a variety of services to guarantee
optimal usage of provided collateral
Fixed income in EUR Fixed income in CHF Equities
ECB eligible marketable assets Swiss National Bank (SNB) Repo eligible EUR-denominated
ECB liquidity classes I-IV DAX®, EURO STOXX 50® constituents
DAX® Ex products, iShares EURO STOXX 50
Other stocks as announced by ECAG
Exchange listing and price Exchange listing and price CHF-denominated
(except bills) SMI constituents
XMTCH on SMI products
Other stocks as announced by ECAG
Types of securities Types of securities
• Government and short term • Federal bonds and bills (GMBF), loan obligations
issues (Bubills) bonds • Kantonal obligations, bonds, bills (GMBF)
• State issues • City and municipality bonds
• City and municipality bonds • State agencies
• State agencies • Corporates and other bonds
• Corporates and other bonds • Bank bonds, mortgage bonds (Pfandbriefzentralen),
• Bank bonds no ABS
Fixed Income in foreign currencies Cash
Government Bonds in USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY EUR, GBP, USD, CHF
Exchange listing and price
www.eurexclearing.com 46EurexOTC Clear IRS October 2014
GC Pooling − take advantage of secured funding
Attributes and benefits
• GC Pooling Market has become the benchmark of
electronic trading for secured funding transactions in Europe.
• The GC Pooling Market ensures straight-through processing
with automated connectivity to Eurex Clearing AG as central
counterparty and the settlement organization Clearstream
Banking.
• Easily trade extremely large tickets and have deals
seamlessly completed and then processed automatically
without any issues over credit or security allocation.
• The GC Pooling market provides real-time substitution of
securities through the cash taker and creates one virtual collateral pool, by linking CBL and CBF assets.
Benefits of GC Pooling
• Re-use of received collateral for the Eurex Clearing margining process allowing participants to use GC Pooling collateral
to fulfil their overall Eurex Clearing margin obligations.
• Re-use of received collateral to pledge to ECB / Bundesbank and refinance within the framework of European Central
Bank open market operations*.
* Provided the bank has a German banking license
www.eurexclearing.com 47EurexOTC Clear IRS October 2014
Reuse of GC Pooling® Collateral for Margin
Mandatory clearing of OTC IRS, collateralisation of non-cleared derivatives and
possible rising interest rates will increase demand for collateral and its efficient usage
• Eurex Clearing accepts reuse of collateral which has been received from GC Pooling® cash
provider activities across all GC Pooling® Baskets*
What is
GC Pooling® • Can be used to cover the margin requirements from any product cleared by Eurex Clearing
Reuse?
• GC Pooling® Cash providers are allowed to use the transferred GC Pooling® collateral up to the
amount of their full value.
Who can reuse • The service is available to clients holding securities within Clearstream Banking Frankfurt (CBF)
GC Pooling® and Clearstream Banking Luxemburg (CBL)
collateral?
• The Reuse of GC Pooling® collateral brings benefits by:
reducing margin collateral funding cost
What are the increasing the trading flexibility of own securities
Member benefits? reducing the operational effort to manage collateral substitutions
mobilizing further collateral
lowering securities handling fee (initially set to zero)
1) * Eligible GC Pooling® baskets are: GC Pooling® ECB Basket, GC Pooling® ECB EXTended Basket, GC Pooling ® INT MXQ Basket & GC Pooling® Equity Basket
www.eurexclearing.com 48EurexOTC Clear IRS October 2014
Reuse of GC Pooling® Collateral for Eurex Clearing
Margining
Claim based allocation and automatic substitution of basket securities
• Cash provider gives cash (EUR or USD) in turn for collateral in he respective GC Pooling® Basket
GCP Front Leg • Cash taker collateralizes the cash amount with eligible securities and receives the cash
• The transaction is processed anonymously via Eurex Clearing
• Once the respective reuse contract for Eurex Clearing margining is concluded and a claim amount
is specified, the “transferred” collateral is automatically allocated
Reuse • CBL acts as an agent on behalf of the CBL serviced Clearing Members using CmaX® to allocate
reuse collateral via Clearstream Banking Frankfurt (Xemac®) to Eurex Clearing
• Once a repo reaches the Term Leg settlement date, the allocated “transferred” securities will be
automatically substituted by other “transferred” securities, if sufficiently available in Xemac® /
Automatic
CmaX® to ensure settlement of the GC Pooling® transactions in due time
Substitution
• Alternatively the Reuse claim amount is to be reduced in time and replaced by other eligible
collateral
Cash Provider Settlement Cash Taker
Cash Cash Front Leg
Eurex Collateral CCP Collateral
Purchase Date
Clearing A Clearing & B
Margining Collateral Settlement Collateral
Collateral Term Leg
Cash Cash Repurchase Date
www.eurexclearing.com 49You can also read
