How to get started with Select Finance. Admission Guide for Buyside Clients and Clearing Agents

Transcription

1 How to get started with Select Finance Admission Guide for Buyside Clients and Clearing Agents

2 1 Welcome Participation in Select Finance Participation in Select Finance Connection to the Eurex Repo trading system Connection to the Eurex Clearing Systems Access to Member Portal of Deutsche Börse Group Registration of Traders Clearing Staff Settlement Repo Market (GC & Specials) GC Pooling Market Margining Reporting Reports for the Clearing Agent Reports for the Select Finance participant Simulation Checklist Contacts... 17

3 1 Welcome Thank you for your interest in Select Finance. This guideline outlines all necessary steps to become a Eurex Repo Select Finance participant and a respective Eurex Clearing Member. Eurex Clearing steps in as central counterparty for all trades concluded at the electronic marketplace Eurex Repo. Therefore it is always required to become a Eurex Clearing Member in conjunction with a corresponding repo clearing license. The Select Finance trading license offers regulated financial service companies, insurance and reinsurance undertakings, pension funds or investment funds access to the Repo and GC Pooling Markets of Eurex Repo. Other specific licenses for the SecLend and GC Pooling Markets (Select Invest and Specific Lender) offer restricted trading opportunities and therefore enable simplified access conditions for buyside customers. The Select Finance trading license can be combined with specific licenses. This guideline focuses on the admission as Select Finance participant in order to trade products of the GC Pooling and Repo Market. If you are interested in getting the guidelines for the other licenses please contact Eurex Repo Account Management.

4 Overview on Eurex Repo Markets and Trading Permissions for Buyside customers The legal basics regarding Eurex Repo trading can be found in the Terms and Conditions for Participation and Trading on Eurex Repo GmbH and for the Clearing Membership in the Clearing Conditions of Eurex Clearing AG. All rules and regulations are available on respectively Eurex Repo GmbH and Eurex Clearing AG are 100% subsidiaries of Eurex Frankfurt AG, which in turn is a 100% subsidiary of Deutsche Börse AG. Furthermore, Eurex Repo is a marketplace under private law and is not a stock exchange subject to public law. Eurex Clearing is a company incorporated in Germany and licensed as a credit institution and also as authorized clearing house under the European Market Infrastructure Regulation (EMIR). Both companies are supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Kind regards, Your Eurex Repo Team

5 2 Participation in Select Finance All Select Finance participants of Eurex Repo must participate in the clearing process of Eurex Clearing by applying for a ISA Direct Member Clearing license ( ISA Direct Member ). This license qualifies for the clearing of own trades. Hence, the ISA Direct Member of Eurex Clearing cannot provide clearing services to third-party customers. The ISA Direct member has a direct contractual relationship to Eurex Clearing i.e. the member is creditor and debtor with regard to any obligations and claims arising under the clearing agreement. Nevertheless it is required to sign a trilateral agreement with a Clearing Agent because the Clearing Agent has to provide certain services to the ISA Direct member: Provision of the Clearing Fund Contribution Reponsibility for participation in DMP (Default Management Process) auctions and the bidding obligation. ISA Direct members may also participate in addition to their Clearing Agent but without releasing the Clearing Agent from its obligation. Furthermore the following operational services will also be provided by the Clearing Agent for its ISA Direct member: Transaction Management Cash Management Collateral Management This of course includes each Clearing Agent s responsibility to dispose of Qualified Clearing Staff (QCS) as well as having the mandatory access to the Common Report Engine (CRE) and other Eurex Clearing systems. However, in exceptional cases and only upon explicit request by the ISA Direct member, some or all operational functions can be given back to the client. If this is requested, the ISA Direct member has to confirm that he has all necessary technical and operational capabilities to fulfil comprehensive transaction-, cash- and collateral-management requirements. All Clearing Agents need to have a General Clearing Member License for Eurex Repo.

6 2.1 Participation in Select Finance In order to participate in Select Finance it is necessary to fulfil the following criteria: The applicant must be domiciled in a member state of the European Union or Switzerland. Limited trading possibilities are availbale for Canadian participants. The applicant must be subject in its country of domicile to the competent supervisory authority. The applicant is licensed as a credit institution, financial institution, insurance undertaking, reinsurance undertaking, investment firm, collective investment undertaking (or, where relevant, an asset management company thereof) as defined in Article 4 (1) of EU Regulation No 575/2013 ( CRR) or an institution for occupational retirement provision as defined in Article 6(a) of Directive 2003/41/EC (including any authorised entity responsible for managing such an institution and acting on its behalf). The applicant must have available own funds of at least EUR 50 million. Applicants not subject to the own fund requirements under the CRD IV and CRR must have available equivalent regulatory capital. Regulatory capital is considered equivalent when it is (i) used as a measure of adequate solvency for the applicant by its competent supervisory authority, (ii) reported to the applicant's competent supervisory authority on a regular basis and (iii) audited at least yearly or, in the case of collective investment undertakings, provide evidence of a net asset value in respect of their assets under management The applicant must provide evidence of the own funds upon the application as well as regularly as defined by Eurex Clearing. The applicant has to sign a trilateral clearing agreement with a Clearing Agent and Eurex Clearing. The applicant must provide a contribution to the clearing fund of at least: - EUR if the applicant is an investment firm, collective investment undertaking, insurance pools - EUR if the applicant is a credit institution, financial institution, insurance undertaking or reinsurance undertaking. The fund consists of deposited collateral (cash or securities) and is used to cover the counterparty risk which is not covered by the deposited margin collateral. The Clearing Fund contribution is provided via the Clearing Agent. The applicant has to nominate a person who by law, articles of association or shareholders' agreement, is entrusted with the management and the representation of the business of the applicant, is reliable and has the professional qualification required for the Eurex Repo business. This person must have the professional qualification required for trading at Eurex Repo.

7 The applicant has to register qualified traders unless the Select Finance participant trades via a qualified institution (e.g. asset manager) authorized by the Select Finance participant. The applicant has the necessary technical and organizational facilities to ensure the orderly trading and settlement of transactions or must provide a Power of Attorney (PoA) to empower the qualified institution to conclude transactions on its behalf. Settlement requirements for GC Pooling Market Settlement via Clearstream Banking Luxembourg (CBL) and connection to CmaX ( the Collateral Management System/-Service of Clearstream) or settlement via Clearstream Banking Frankfurt (CBF) and connection to Xemac (Collateral Management System) Settlement requirements for Repo Market Settlement via Clearstream Banking Luxembourg (CBL), Clearstream Banking Frankfurt (CBF) or Euroclear Bank. 2.2 Connection to the Eurex Repo trading system The following connection alternatives are available for the connection to the Eurex Repo F7 trading system via the network of Group Deutsche Boerse: via a web-based access or a leased line connection It is a browser based GUI solution which does not require any maintenance effort by the Select Finance participant. All data traffic will take place by use of x509 certificates (secured). The certificates can be ordered in the Eurex Repo Member Section. The Eurex Repo F7 trading GUI is based on HTML5. Due to this fact we currently do not support Microsoft Internet Explorer as a browser to run the F7 Trading GUI in a production environment. Browsers which comply with the HTML5 standard such as Mozilla Firefox, Google Chrome, or Opera are supported. Detailed information regarding the connection can be found in the Connectivity Guide under - Eurex Repo F7 Connectivity Guide The connection fee for a web-based certificate access is currently EUR 300,- per month. The connection fee for a leased line can be found on our website under - F7 Connectivity Price List.

8 There are no specific hardware recommendations for Participant Own Applications (POA) connected to the Eurex Repo environment. It is the responsibility of the participant to determine the appropriate hardware configuration. If the Select Finance participant decides to trade via a qualified institution (e.g. asset manager, clearing agent) it is not required to have an own technical connection to the Eurex Repo s F7 trading system. 2.3 Connection to the Eurex Clearing Systems Eurex Clearing offers three different systems in general. 1.) C7 GUI for collateral management purposes 2.) CCP GUI (Central Counterparty) Securities Clearing GUI for the delivery management. For both Front-Ends (GUIs) a Web certificates access via the Browser is available. The certificate to access the Securities Clearing GUI via the browser can be ordered via Technical Connection -> Requests & Configuration -> New Request -> Certificates -> Clearing GUI in the Member Section. Once it is delivered it can be downloaded from the Member Section via Technical Connection -> Requests & Configuration -> Current Configuration -> Location/Selection: GUI Certificates and subsequently installed in the browser. One certificate can be used for multiple users and for both GUIs. Please find an overview of the Eurex Clearing connection types below: Eurex Clearing Connection Type C7 GUI via web certificate Securities Clearing GUI via web certificate Common Report Engine Price per month EUR 300,- per production certificate (C7 GUI and Securities Clearing GUI can share a certificate) EUR 300,- per production certificate (C7 GUI and Securities Clearing GUI can share a certificate) Free of charge

9 3.) Access to Common Report Engine The set-up of the Common Report Engine (CRE) takes place via the Member Portal of Deutsche Börse Group. A connection to the Common Report Engine can be established via an encrypted Internet connection and is mandatory for all clients. The Common Report Engine User Guide, which describes the setup of the Common Report Engine can be accessed via the following link: -> Technology -> Eurex Clearing s C7 -> System documentation -> Release 3.1 -> Eurex Reports -> Common Report Engine (CRE), User Guide. The CRE provides a comprehensive reporting which ensures the transparency and control of all transactions of the ISA Direct Member. There are Intraday broadcast streams through the Enhanced Risk Solution available which Eurex Clearing dispatches changes in margin requirements. However the majority of the reports are sent after the night time processing in the early hours of the morning of the following day. The ISA Direct member needs an own access to the CRE. 2.4 Access to Member Portal of Deutsche Börse Group After receipt of the first documents including the form Reference Data Sheet, the Central Coordinator (contact person for the communication with Eurex Repo) receives log-in data and rights for the Member Portal of Deutsche Börse Group. The Member Portal delivers detailed information on Eurex Repo and Eurex Clearing e.g. release notes, the registration possibilities for contact persons (e.g. clearing and techncial contact) and the order function for the certificates to connect e.g. to Eurex Repo. The access to the Member Portal is mandatory for all clients. 2.5 Registration of Traders All Select Finance participants are obliged to request an individual access code (Log-in) for each person (trader, system manager, backoffice staff) who shall have access to the system unless a qualified institution is acting on its behalf. The participants can apply for Log-ins with limited (read-only) or complete (trading-) functionality for the simulation as well as for the production environment. Log-ins for the trading functionality can only be applied for in connection with the submission of an application for registration as trader. It is not required that traders pass the Eurex Repo trader exam. Please note: Log-on IDs with read-only authorisation can be ordered at any time with the Info User of Eurex Repo form. The number of log-on IDs is unlimited and free of charge. After application, Eurex Repo will send the log-on details via post to the central contact person in your company.

10 2.6 Clearing Staff All Clearing Members of Eurex Clearing are required to have at least one Qualified Clearing Staff (QCS) who has successfully passed the Clearer Test. In addition further Clearing contacts need to be entered into the Member Portal of Deutsche Börse Group (Member Section). The Clearing Agent, as existing General Clearing Member for Eurex Repo, has already registered an QCS and will additionally enter the following Clearing contacts on behalf of the ISA Direct member: Cash Management Collateral Management General Management Income Operations Risk Management Settlement Operations In any case it is required that the ISA Direct member enters an Emergency Contact into the Member Portal. 3 Settlement 3.1 Repo Market (GC & Specials) The following international securities account are necessary: Clearstream Banking Frankfurt (CBF) and Target2 account for cash settlement Clearstream Banking Luxembourg (CBL) and linked cash account Euroclear and linked cash account Eurex Clearing has to be authorized by an appropriate Power of Attorney (PoA) for all accounts. 3.2 GC Pooling Market Unlike the Repo Market, settlement in the GC Pooling Market is performed exclusively via the Creation settlement platform of the Clearstream Banking Luxemburg (CBL) infrastructure. Therefore a respective main acount is required. It is furthermore required to have access to CmaX, the Collateral Management Service of CBL. CmaX provide the allocation and substitution of the participants securities portfolio. All participants receive a Reservation Account as well as a Segregation Account. Receipt of securities from transactions are deposited in the Segregation Account while the securities to be delivered by the participants are booked into the Reservation Account.

11 The cash settlement is either processed with commercial bank or central bank money (dedicated cash account/target II). The participant may decide for a re-use of GC Pooling collateral for the margining process of Eurex Clearing (respective form needs to be signed). Eurex Clearing has to be authorized by an appropriate Power of Attorney (PoA) for all accounts. 4 Margining Eurex Clearing guarantees the settlement of all trades. Therefore, Eurex Clearing calculates a total risk exposure for each Clearing member in order to secure the risk position. Based upon this an individual margin requirement which must be deposited by each participant, the so called Total Margin Requirement is calculated. The provision of margin shall ensure that all open positions of an ISA Direct member can be closed and offset within a short period of time. The Total Margin Requirement consists of the two following components and can be provided in form of cash in the two margin currencies EUR or CHF or by deposit of collateral in securities. > Current Liquidating Margin (CLM) Is used to cover the counterparty risk in case of a member default where open security and cash positions have to be liquidated at current market prices. > Additional Margin (AM) Is used for coverage of potentially additional arising liquidation costs due to adverse price development within the next 24 hours To cover the existing exchange rate risk between the respective margin in USD resulting from USD GC Pooling transactions and the calculated Total Margin Requirement in one of the applied clearing currencies EUR or CHF respectively, the participant is obliged to pledge an additional margin the Cross- Currency Haircut. The required Cash Margin Account (collateral in the form of cash) and optional a securities account (collateral in the form of securities) in order to fulfil the margin requirements are provided by the Clearing Agent. Optional and on request the ISA Direct member may decide to use its own accounts.

12 Margin Calls: The possibility exists that Eurex Clearing could demand additional security at any time (so-called Intraday Margin Call ) due to the risk calculations carried out. If Eurex Clearing identifies an increased risk position, the Clearing Agent will be informed about it by phone or fax on behalf of the ISA Direct member. The intra-day margin call can be covered by cash or securities. If respective eligible margin assets are not delivered as required, Eurex Clearing is entitled to debit directly the relevant cash margin account (target II or eurosic for settlement in CHF or corresponding account for USD) of the Clearing Agent unless the Clearing Agent elects to proactively deliver cash. The same is valid for the Overnight Margin Call. If the overnight risk calculations identify an additional demand for security for a ISA Direct Member of Eurex Clearing, then a so-called Overnight Margin Call will be advised. An Overnight Margin Call can solely be settled in the clearing currencies EUR or CHF. Securities Accounts: Securities account at Clearstream Banking Frankfurt (CBF) or Clearstream Banking Luxemburg (CBL) for EUR or SIX SegaInterSettle (SIS) for CHF, respectively. Alternatively a deposit via the Collateral Management System Xemac of CBF or the Triparty Collateral Management Service CmaX of CBL is possible. Please note, the owner of CBF (including 6series) accounts must be the ISA Direct Member according to the German Securities Deposit Law. The Clearing Agent may provide CBL or SIS accounts. Cash accounts: Account at a Central Bank which participates with its payment module in TARGET2. Alternatively it is possible to use an account at another Central Bank which is not part of the Euro system but is, due to a special agreement, connected (Swiss participants) to TARGET2. In this context Swiss participants can use a eurosic account at SECB Swiss Euro Clearing Bank GmbH (SECB). As non-eu member, Switzerland has an interface to the TARGET2 system of the Eurozone with eurosic. For the Cash Margin Account a Debit Authorization for the respective National Bank (TARGET2) respectively SECB must be provided so that Eurex Clearing s debit notices can be booked directly from the account of the Clearing member and are transferred to the account of Eurex Clearing. Eurex Clearing has to be authorized by an appropriate Power of Attorney (PoA) for all Cash Margin Accounts.

13 5 Reporting A comprehensive reporting ensures the transparency and control of all transactions of the Clearing participants. The reports are provided via the Common Report Engine (please see 3.3). Once assigned the reports are automatically generated. In the category Report Selection in the respective CCP- /Clearing GUI all selected reports can be seen. The reports of Eurex Clearing are available in XML-format (for risk and collateral management) or as a print version in text format (Securities Clearing GUI). For the Delivery Management the reports are available as a raw data file free of charge. If desired, the ISA Direct member can configure the reports in XML-format as needed. Further information regarding the individual configuration of XML-data files can be found in the Member Section (after Log-on) on the Eurex Clearing website ( in the pdf document Eurex XML Report Reference Manual. The reports in text format for the risk management are free of charge. For the print version of the delivery management reports (Securities Clearing GUI) Eurex Clearing charges a monthly fee of EUR 300 per month per report. It is the decision of each participant if and which reports are being processed. A detailed list of all reports which are available for assignment can be found in the User Guide CCP 10.0 Description of Reports Formatted Layout for Securities Clearing GUI reports and in Eurex XML Reports - Reference Manual for risk and collateral reports. The Clearing Agent gets the full range of reports for the Select Finance participant. The Select Finance participant will receive a sub-set.

14 5.1 Reports for the Clearing Agent Collateral (C7 GUI) and Risk Management The following reports are generated during the night time processing and are sent off in the early hours of the morning of the following day (so called End-of-Day Reports): CD010 Daily Cash Account Margin (Details of Balances and Transaction amounts of the cash account) CC011 Current Liquidating Margin (Individual CLM based upon the risk positions of the participant) CD031 Daily Securities Valuation (Contains the market data of the collateral in the various securities accounts) CD042 Daily Settlement Statement (Overview of the Total Margin Requirement and the collateral deposited on the securities account; provides information regarding a possible Margin Call as the case may be) CC050 Daily Margin ( Total Margin Requirement resulting from CLM + AM) CC055 Daily Margin Offset (Shows offset between margin surplus and margin shortfall in different currencies) CC060 Daily Margin Summary (Shows the Total Margin Requirement for all markets and all margin currencies) CD091 Overall Asset Summary (Displays the clearing fund and company capital requirements in form of cash respectively securities on a daily basis) CD092 Asset Summary Aggregation CD230 Monthly Interest Report (Shows the interest earned each aday, and in total for the month) Delivery Management (Securities Clearing GUI) Like the majority of the reports, the below mentioned reports are generated during the night time processing and are sent off in the early hours of the morning of the following day (so called End-of-Day Reports): CA160 Custody Payment Statement (Overview of Cash Payments) CD250 Settled Cash Transactions (Overview of all booked and initiated cash transactions for the settlement) CE260 Pending Delivery (Overview of all partially or fully pending transactions) CE265 Pending Delivery Before NTP (Overview of all partially or fully pending transactions before NTP Night Time Processing)

15 CE270 Settled Delivery (Overview of all partially or fully pending settled delivery of the current settlement cycle) TC750 Repo Contracts (Details of all done Repo transactions including information of the settlement) The following report is sent out eight times a day: CE270 Settled Delivery (Overview of all partially or fully pending settled delivery of the current settlement cycle) 5.2 Reports for the Select Finance participant TC752 Repo Contracts (Details of all done Repo transactions including information of the settlement) TC757 Repo Fixings CE262 Pending Delivery (Overview of all partially or fully pending transactions) CE267 Pending Delivery Before NTP (Overview of all partially or fully pending transactions before NTP Night Time Processing) CE272 Settled Delivery (Overview of all partially or fully pending settled delivery of the current settlement cycle) CE572 EC-IS Settled Delivery (This report contains all partially or fully pending net position trades) CE277 Settled Delivery Offsetting Block Information CD091 Overall Asset Summary (Displays the clearing fund and company capital requirements in form of cash respectively securities on a daily basis) 6 Simulation To become familiar with the Eurex Repo trading system and its applications we offer a test- and simulation environment. There you have the possibility to perform test trades and, if you are already connected to Eurex Clearing AG, you will also receive preselected reports for your test trades. A calendar with availability dates for the test environment can be found on our website via the following link: > Info Center> Publications > Euro Repo/ GC Pooling Market

16 7 Checklist Nr. Documents and activities for admission (final checklist depends on decided set-up) 1 Application for Participation (Form) 2 Reference Data Sheet Trading Participant (Form) 3 Application for the Registration as Nominated Person (Form) 4 Reference Data Sheet Nominated Person (Form) 5 Trader Application 6 Trader Reference Data Sheet 7 ECAG Spanish Tax Form (Eurex Clearing Form) Trading and Annual Fees Invoice Recipient and Direct Debiting 8 Authorisation (Form) N7 Service Agreement for the technical connection to the Eurex Repo 9 Trading System F7 (Form) 10 Excerpt from the commercial register (certified copy) Confirmation that the applicant is licensed as a financial institution, insurance undertaking, reinsurance undertaking, investment firm, 11 collective investment undertaking (or an asset management company thereof) as defined in Article 4 (1) of EU Regulation No 575/2013 (CRR) (proof) Confirmation that the applicant is under the regulation of a domestic 12 regulatory authority (proof) 13 List of authorised signatures (proof) 14 KYC Documents according to the risk classification 15 Information on Board of Management/Directors (proof) 16 Evidence of own funds/equivalent regulatory capital/net asset value (proof) 17 Access to Common Report Engine 18 Access to Member Portal of Deutsche Börse Group and entering an Emergency Contact, Complaince Contatc, Legal Entity Identifier (LEI), 19 Pledge Agreement signed either bei BCM or Clearing Agent 20 ISA Direct Upload sheet provided by Clearing Agent 21 Clearing Agreement Clearing Agent Basic Clearing Member -Eurex Clearing 22 Application for the Granting of a Basic Clearing Member Clearing License 23 For Funds: Prospectus or General ans Special Conditions of Contract, letter of permisson, POA if applicable Completed on:

17 8 Contacts For any questions around the legal admission please do not hesitate to contact: Eurex Repo Account Management Gabriele Ristau T +49 (0) Gabriele.ristau@deutsche-boerse.com Simon Gzyl T +49 (0) simon.gzyl@deutsche-boerse.com For any questions regarding simulation please do not hesitate to contact: Functional Helpdesk Repo T +41(0) F +41(0) funchelp@eurexrepo.com For any questions regarding the connection to Eurex Repo and Eurex Clearing please contact: Deutsche Börse Customer Technical Support T +49 (0) cts@deutsche-boerse.com For any questions regarding the Eurex Clearing systems please contact: Eurex Clearing CCP T +49 (0) T +49 (0) clearing@eurexclearing.com For any questions regarding the settlement/accounts about Clearstream Banking please contact: Clearstream Banking Germany Stefan Kunz T stefan.kunz@deutsche-boerse.com UK Richard Glen T Richard.glen@deutsche-boerse.com Netherlands, Switzerland, Luxembourg, Elisa Poutanen T Elisa.poutanen@deutsche-boerse.com