EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey. 22 January 2014

Transcription

1 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 January 2014

2 Agenda Introduction Claude Kremer, Arendt & Medernach Presentations EMIR: Legal framework and overview Henning Schwabe, Arendt & Medernach EurexOTC Clear Services IRS Clearing Philip Simons, Eurex Clearing AG Trade Reporting: Practical Issues Nicolas Boatwright, REGIS-TR Panel discussion Moderator : Philippe Dupont, Arendt & Medernach Panelists : Philip Simons, Eurex Clearing AG Nicolas Boatwright, REGIS-TR Ricky Maloney, Eurex Clearing AG Henning Schwabe, Arendt & Medernach Yann Fihey, Arendt Regulatory Solutions 2 Conclusion EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

3 EMIR : Legal framework and overview Henning Schwabe 22 January 2014

4 Table of contents 1. Introduction 2. General overview 3. Clearing 4. Risk mitigation techniques 5. Reporting 6. Private banking 4 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

5 1. Introduction 5 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

6 1.1 A wave of regulatory requirements UCITS IV UCITS V AIFMD UCITS VI etc. CRD IV Global Distribution Rules Asia (Singapore, Hong Kong) Switzerland (FINMA) etc. Luxembourg MiFID II Global Reporting / Disclosure Rules Basel II Solvency II FATCA etc. PRIPs U.S. Dodd-Frank EMIR 6 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

7 1.2 Background of EMIR The financial crisis of 2007/08 The global impact of this crisis required collective action by governments around the world and hence the issue was taken up by the G-20 leaders at the 2009 summit in Pittsburgh EMIR = European Market Infrastructure Regulation (original name of the regulation in its first draft stages) Regulation (EU) Nr 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories entered into force on 16 August 2012 (EMIR Regulation) Objective regarding the regulation of the OTC derivatives market Mitigating systemic risk and increasing transparency Key role for ESMA Allowed to decide which derivatives are eligible and when clearing obligations apply 7 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

8 1.3 EMIR applies to Investment firms Other undertakings established in the European Union Credit institutions EMIR Pension funds Insurance / reinsurance / assurance undertakings UCITS / AIFs 8 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

9 1.4 High-level timeline Financial crisis 2009 September G20 in Pittsburgh September EU Proposal of EMIR March Adopted by the EU Parliament 27 July Publication 16 August Entered into force 30 September Deadline for draft technical standards 31 December G20 deadline January ITS entered into force 15 March/ 15 September RTS entered into force February Reporting obligation to TRs 2 nd Half Clearing obligation (expected) 9 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

10 2. General overview 10 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

11 2.1 Legal framework (1/4) Penalties Member States Development of ITS and RTS ESMA EMIR Regulation European Union 11 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

12 2.1 Legal framework (2/4) Regulatory Technical Standards EMIR Implementing Technical Standards 12 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

13 2.1 Legal framework (3/4) A ESMA and EIOPA s Joint Discussion Paper on Draft Regulatory Technical Standards on risk mitigation techniques for OTC derivatives not cleared by a CCP under the Regulation on OTC derivatives, CCPs and Trade Repositories (JC/DP/2012/1) of 6 March 2012 EBA Final Draft Regulatory Technical Standards on Capital Requirements for Central Counterparties under Regulation (EU) No 648/2012 (EBA/Draft/RTS/2012/01) of 26 September 2012 Implementing technical standards (ITS) published on 21 December 2012 in the Official Journal of the European Union and entered into force on 10 January 2013 with regard to the format of the records to be maintained by central counterparties with regard to the format and frequency of trade reports to trade repositories with regard to the format of applications of trade repositories 13 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

14 2.1 Legal framework (4/4) Regulatory technical standards (RTS) published on 23 February 2013 in the Official Journal of the European Union and entered into force on 15 March 2013 on capital requirements for central counterparties on requirements for central counterparties on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, risk mitigation techniques for OTC derivatives contracts not cleared by a CCP on the minimum details of the data to be reported to trade repositories specifying the details of the application for registration as a trade repository specifying the data to be published and made available by trade repositories and operational standards for aggregating, comparing and accessing the data RTS published on 28 May 2013 in the Official Journal of the European Union and entered into force on 17 June 2013 on colleges for central counterparties 14 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

15 2.2 Recap All derivative contracts Derivative contracts OTC derivative contracts Reporting obligation retrospective Clearing / riskmitigation obligation Risk mitigation Clearing Trade repository Clearing member Client ESMA CCP Systemic risk monitoring Increase of market and price transparency Systemic risk reduction Mitigation of counterparty and operational risk 15 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

16 3. Clearing 16 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

17 3.1 Simple example Simple bilateral trade: Cleared trade: A B A B CCP A and B might be a FC and / or a NFC Central counterparty (CCP) means a legal person that interposes itself between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer Clearing means the process of establishing positions including the calculation of net obligations, and ensuring that financial instruments, cash, or both, are available to secure the exposures arising from those positions Financial counterparty (FC) means investment funds, credit institutions, insurance/reinsurance undertakings, UCITS, AIFs and pension funds Non-financial counterparty (NFC) means an undertaking established in the Union other than FCs 17 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

18 3.2 How does it work? Client clearing: Indirect client clearing: Party B (indirect client) Party B (client of clearing member) Client Party A (clearing member) Clearing member Party A (clearing member) Clearing member CCP CCP 18 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

19 3.3 Scope Financial Counterparty FC Banks, Insurances, investment firms, UCITS, pension funds, AIFs managed by AIFMs EU Entities Non Financial Counterparty NFC + Systemically important Non- Financial Counterparty entering into nonhedging activities in derivatives above the clearing threshold NFC - Not systemically important Non- Financial Counterparty entering into derivatives positions for hedging activities only Non EU Entities Non EU counterparties that would be subject to the clearing obligation if they were established in the Union will have to clear relevant OTC transactions via CCPs if the contract has a direct, substantial and foreseeable effect within the Union CCP 19 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

20 4. Risk mitigation techniques 20 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

21 4.1 Scope Financial Counterparty FC Banks, Insurances, investment firms, UCITS, pension funds, AIFs managed by AIFMs EU Entities Non Financial Counterparty NFC + Systemically important Non- Financial Counterparty entering into nonhedging activities in derivatives above the clearing threshold NFC - Not systemically important Non- Financial Counterparty entering into derivatives positions for hedging activities only Non EU Entities Non EU counterparties that would be subject to the clearing obligation if they were established in the Union will have to clear relevant OTC transactions via CCPs if the contract has a direct, substantial and foreseeable effect within the Union CCP Trades not cleared by a CCP 21 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

22 4.2 Overview Only for non-cleared OTC derivative contracts Timely confirmation Exchange of collateral / Amount of capital Marking to market / model Risk Mitigation Techniques Portfolio compression Portfolio reconciliation Dispute resolution 22 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

23 5. Reporting 23 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

24 5.1 Scope EU Entities Financial Counterparty Non Financial Counterparty FC Banks, Insurances, investment firms, UCITS, pension funds, AIFs managed by AIFMs NFC + Systemically important Non- Financial Counterparty entering into nonhedging activities in derivatives above the clearing threshold NFC - Not systemically important Non- Financial Counterparty entering into derivatives positions for hedging activities only Non EU Entities CCP 24 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

25 5.2 Reporting mechanism Counterparty A Delegated Reporting Counterparty B Direct Reporting A A Third party B Direct Reporting B Intermediated Reporting Trade repository 25 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

26 6. Private banking 26 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

27 6.1 Acting as individual Individual Trade Bank EMIR (-) EMIR (+)! Reporting of counterparty data Clearing (-) RMT (-) Reporting (+) 27 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

28 6.2 Acting throughout a vehicle Individual Vehicle Trade Bank EMIR (+) EMIR (+) Clearing (+/-) RMT (+/-) Reporting (+) Most probably a non financial counterparty below threshold (NFC - ) Clearing (+/-) RMT (+/-) Reporting (+) 28 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

29 Contact us Henning Schwabe Partner Investment Funds henning.schwabe@arendt.com Tel. : (+352) Philippe Dupont Partner Banking and Financial Services philippe.dupont@arendt.com Tel. : (+352) Claudia Hoffmann Associate Investment Funds claudia.hoffmann@arendt.com Tel. : (+352) Yann Fihey Senior Manager Arendt Regulatory Solutions yann.fihey@arendt-ars.com Tel. : (+352) Disclaimer This presentation of Arendt & Medernach is designed to provide with summarized information and illustrations regarding the topics covered by such a presentation. This information and those illustrations are not intended to constitute legal advice and do not substitute for the consultation with legal counsel required before any actual undertakings. 29 EMIR: Go immediately to the REPORTING gate and transit to CLEARING to complete your journey 22 Jan Luxembourg Copyright 2014 Arendt & Medernach

30 EurexOTC Clear Services IRS Clearing EMIR Update Arendt - Luxembourg 22 nd January 2014

31 EurexOTC Clear IRS November, 2013 Agenda Overview of regulatory landscape and role of CCP s Safety Proven and robust CCP risk manager Protection and portability of client assets Efficiency Integrated full asset class offering Efficient collateral management Capital efficiency EurexOTC Clear 31

32 EurexOTC Clear IRS November, 2013 CCP services improve soundness of market infrastructure and strengthen market integrity Bilateral trading & clearing Current OTC market structure- 1:n relationship Bilateral trading & multilateral clearing CCP market structure - 1:1 relationships between CM and CCP A D B E C F E F D OTC CCP A C B Benefits of multilateral clearing with Central Counterparty 1 Reduced systemic risk 2 Increased transparency 3 Efficiency gains CCP takes over counterparty risk through trade novation CCP enforces strict risk control and adequate collateralisation of open positions Automatic multilateral netting reduces gross risk exposure Awareness of concentration risk Independent position valuation by neutral institution Early warning function by daily mark-tomarket Full automation and straight-through processing reduces manual errors Efficient use and management of collateral Increased capital efficiency by reduced balance sheet exposure 32

33 EurexOTC Clear IRS November, 2013 Eurex Clearing has submitted its application for re-authorisation as central counterparty under EMIR on Status Eurex Clearing Eurex Clearing has submitted its application for re-authorization as CCP under EMIR to its national competent authority, BaFin, on Bafin confirmed completion on the 11 th of October From 11 October 2013, the competent national authority (BaFin) shall conduct a risk assessment of Eurex Clearing and submit a report to the College. After the receipt of the risk assessment report, the College has 30 calendar days to reach a joint opinion determining whether Eurex Clearing complies with the EMIR requirements. Overall, EMIR anticipates a maximum of six months for the national competent authority to inform the applicant CCP in writing whether authorisation has been granted or refused, from the date of confirmation of completeness. 33

34 EFFICIENCY SAFETY EurexOTC Clear IRS November, 2013 Level of safety and efficiency are key differentiators between different CCP clearing services Value proposition Major aspects to be assessed Proven and robust CCP risk manager The central Counterparty is your counterpart. How safe is the CCP to withstand defaults and crisis situations? Protection and portability of client assets Protection: Are my assets protected? What is the risk if another counterparty fails? Portability: Is portability possible? What is ported and when? What are the conditions? Is the segregation service operationally viable? What are the costs? Integrated full asset class offering How broad is the service offering of the CCP as a key prerequisite to deliver efficiencies? Is there existing business which can be leveraged in regards to operational and capital efficiency? Efficient collateral management Capital efficiency Who can benefit from the preferred CCP risk weight? What are the margin requirements? How can I fulfill my margin requirements taking my investment portfolio into account? What is my clearing fund contribution and what is my capitalization factor? How does the buy side client benefit from the capital efficiencies? 34

35 EurexOTC Clear IRS November, 2013 Superior value proposition built on Eurex Clearings proven track record of providing safety and efficiency to markets Value proposition Integrated full asset class offering Protection and portability of client assets Capital efficiency Efficient collateral management Proven and robust CCP risk manager Benefits One-stop-shop across markets: listed & OTC derivatives, repo and asset classes: equity & fixed income to maximize client capital & operational efficiencies. Netting of regulatory capital under Basel III across cleared products with Eurex Clearing. Customer choice of different protection models. Highest level of protection and portability of positions and assets with full segregation. Consistent offerings across all cleared markets. Portfolio margining between listed and OTC derivatives. 2% counterparty risk weight for Individual Clearing Model customers. Balance sheet netting for Eurex Clearing positions. Broad range of collateral accepted approximately 25,000 products. Re-use of investment portfolio for collateralization. Non-cash variation margin by leveraging Eurex Repo and SecLend offerings (in development). Portfolio risk management with Eurex Clearing Prisma ensuring consistency between margin methodology and default management process. Successful track record for default events of the past. 35

36 EurexOTC Clear IRS November, 2013 Efficiency - An integrated service offering with broad product and service scope is key for both operational and capital efficiencies 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 Equities Bonds Commodity & others Securities Lending Consultation on Buyside Variation Margin (BSVM) Dividend Eurex Clearing Equity Repo / GC Pooling Index Interest Rate Credit EUR 229bn notional outstanding in May 2013 Euro- Bund/ Bobl/ Schatz Futures & Options Cross margins with IRS European market leader in long-term interest rate futures and options 2.2mn contracts with a notional of EUR 285bn cleared every day Ability to re-use GC Pooling collateral for Initial Margin Cross Margins between ETD and IRS May

37 EurexOTC Clear IRS November, 2013 EurexOTC Clear: current service scope Currencies: Types: Vanilla IRS (Fixed versus Floating) and Basis Swap (Floating versus Floating) OIS, FRA Zero Coupon, Compounding, Variable Notional Structures: Spot, forward starts & stub periods, linear interpolation EUR (EURIBOR) and GBP (LIBOR), 1m, 3m, 6m, 12m USD and CHF (Libor) 1m, 3m, 6m Maturity: Up to 50 years Product description EUR USD GBP CHF CHF & JPY up to 30 years JPY Risk management Fully transparent risk methodology and valuation with segmented clearing fund New portfolio margining model for IRS: optimal offsets within OTC IRS portfolio for higher capital efficiency OTC MarginCalculator X-Margining between listed & OTC in prototype environment Wide range of eligible collateral including securities and cash, approx. 25,000 ISINs Re-use of GC Pooling collateral Individual Clearing Model for Registered Customers incl. asset managers Live To follow Collateral Management Client Asset Protection GER ENG/WAL FRA NLD LUX FIN SWI SCO SPA BEL Omnibus Net segregation under U.K. CASS for U.K. Clearing Members Flow Provider and interfaces Trade entry via MarkitServ (Bloomberg in progress) Post-trade management via API using WebSphere MQ, AMQP or MarkitServ IRE AUT 37

38 EurexOTC Clear IRS November, 2013 Eurex Clearing launched an EMIR compliant EurexOTC Clear IRS service in November clearing members admitted to EurexOTC Clear and 120 distinct Registered Customers Admitted Clearing Members: Oliver Wyman

39 EurexOTC Clear IRS November, 2013 Agenda Overview of EurexOTC Clear and regulatory landscape Safety Proven and robust CCP risk manager Protection and portability of client assets Efficiency Integrated full asset class offering Efficient collateral management Capital efficiency EurexOTC Clear 39

40 EurexOTC Clear IRS November, 2013 Eurex Clearing Prisma Ensuring consistency between default management process and risk margining method Eurex Clearing plans to introduce portfolio margining combining its OTC and listed business. Therefore in case of a Clearing Member (CM) default the liquidation will be on portfolio level and not on position level in order to utilize offsets granted. Guiding principles - default management process Aim of the default management process is to transfer the clearing house s risk exposure, inherited from a defaulting member, to others willing to overtake it The guiding principles of default management process are: Minimize losses to the Clearing House s lines of defense Minimize the effect and disruption on the membership and the wider market Guiding principles margin methodology Greater capital efficiency Enhanced accuracy Increased robustness Consistent framework More flexibility More efficient risk aggregation across listed and OTC products The new method captures more risk factors and better reflects true risks Designed to avoid pro-cyclical margin requirements Consistent risk and default management framework for listed and OTC products Broader range of instruments covered with faster to time-to-market 40

41 EurexOTC Clear IRS November, 2013 Lower costs through cross margining OTC and listed positions Without cross margining IRS and fixed income futures/futures-style options are margined separately: IRS with a 5 day liquidation horizon Futures and futures-style options with a proposed two day liquidation horizon FI listed products FI futures / futures-style options OTC IRS IR swaps 2 day horizon 5 day horizon With cross margining If IRS and futures positions are hedged: Futures are transferred to the IRS split such that the reduced risk is reflected in lower margins* FI-only FI futures / futures-style options Allocation of FI listed products that hedge IR exposure IRS+FI IR swaps FI fut./options 2 day horizon 5 day horizon Margin requirements: Margin reduction by cross margining: Futures/future-style options OTC IRS Cross margined portfolio Overall initial margins for cross margined portfolios can be lower reflecting the overall risk reduction * Depending on portfolio diversity 41

42 EurexOTC Clear IRS November, 2013 Eurex Clearing s guiding principle in a default situation is to minimize the effect on the lines of defense and stabilize the markets Eurex Clearing provides a multi-level safety system First the collaterals and the clearing fund contribution of the member in default are utilized. After the defaulters contribution is exhausted assigned dedicated amount of Eurex Clearing AG is applied before non-defaulting clearing members contribution and remaining capital of Eurex Clearing AG. The contribution to the Clearing Fund is based on a minimum contribution and a dynamic component accounting for the individual clearing member s risk situation. Following a realization of any contributions to the Clearing Fund of the non-defaulted clearing members, such clearing members are asked to provide assessments to their contribution. Clearing members total liability is limited as they have to provide maximum two assessments per capped period. Segmentation of the clearing fund The creation of liquidation group specific clearing fund segments (CFS), within the single common clearing fund. CFS are determined for each liquidation group. A CFS is a partition of the single clearing fund according to the relative weights of the initial margin of the Liquidation Groups. When liquidating a particular Liquidation Group, only the respective CFS can be used to cover losses, unless there is a known surplus from other, already completed Liquidation Groups. Lines of defense Position Netting Collateral of Member in Default Clearing Fund Contribution of Member in Default Dedicated amount of Eurex Clearing AG Clearing Fund Contribution of Other Members Max 2 assessments per CM Parental Guarantee Remaining Capital of Eurex Clearing AG 42

43 EurexOTC Clear IRS November, 2013 Agenda Overview of regulatory landscape and role of CCP s Safety Proven and robust CCP risk manager Protection and portability of client assets Efficiency Integrated full asset class offering Efficient collateral management Capital efficiency EurexOTC Clear 43

44 EurexOTC Clear IRS November, 2013 Segregation and portability has become increasingly important because of client demand & regulation After the Lehman and MF Global defaults, the demand for segregation increased as clients have faced issues around uncertainty of porting, double funding, mutualisation 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. Both buy-side and sell-side clients are requesting protection from additional risks including transit and liquidation risk. 44

45 Individual segregation EMIR 39(3) Omnibus segregation EMIR 39(2) EurexOTC Clear IRS November, 2013 Overview of segregation models permitted under EMIR Margin Segregation Porting Risk Operational simplicity Capital charge Eurex Clearing services Pos Coll Fellow Customer Liquidation Replacement Transit Net Allocated value/asset 4 % LIVE* Gross incl. excess Allocated value Allocated asset 4 % In development Eurex Clearing will implement a LSOC with excess model Individual physical custodian account 2 % Gross Tagged asset 2 % LIVE Very likely Unlikely None High Easy Complex *The ECM is live today and will be amended during December 2013 to implement legal changes to fulfil EMIR segregation and portability requirements. The UK CASS Net Omnibus Clearing Model is live. 45

46 EurexOTC Clear IRS November, 2013 Individual Clearing Model: Best in Class Client Segregation Eurex Clearing launched the Individual Clearing Model in August 2011 and has made significant investments to enhance collateral management to realise scalable efficiencies, which has fed through to significant client demand. Legal model is based upon a double title transfer collateral arrangement and security interests to allow Eurex Clearing to deal directly with a client following insolvency of the Clearing Member Documentation: Market standard client clearing documentation, such as the ISDA/FOA, FOA or the German Banking Association, or the Clearing Member s proprietary documentation may be used in conjunction with Eurex Clearing s ICM Annex. The client is required to enter into a Participation Agreement with Eurex Clearing. Alternatively, Eurex Clearing s triparty agreement may be used with any client documentation. Porting: Immediate porting is available upon default. The client would receive their actual segregated collateral and upon default have a range of porting options to suit individual client requirements RC 1 positions Margin requireme nt of RC 1 Positions accounts Individual positions accounts per client Clients may be a legal entity (for example, a bank or broker-dealer offering indirect client clearing), or the client can be a fund manager, a fund itself, or a fund segment Margin Requirement The margin calculation is performed per client. Clearing Members will receive individual margin reports, cash payments will be netted RC 1 collateral account Collateral A client may opt for full physical segregation where they hold a sub-account at the CSD for their benefit, or a CM can use asset tagging, where an omnibus sub-account which is held for the benefit of all clients and assets are tagged and individually booked for the client at the CCP level 46

47 EurexOTC Clear IRS November, 2013 Elementary & UK CASS Omnibus Clearing Models Under EMIR, Eurex Clearing will also be required to record the value of collateral covering the positions separately and calculate a separate Difference Claim in an omnibus structure. Therefore Eurex Clearing will amend the existing Elementary Clearing Model. The updated Clearing Conditions were published in October 2013, reflecting these amendments and Eurex Clearing will implement functional changes at the Clearing House level during December Despite these changes, Clearing Members will not be impacted unless the Clearing Member opts to have an additional subaccount at the CSD level for collateral covering client positions Legal model is based upon transfer of title in cash and a pledge of securities from Clearing Member to Eurex Clearing Any documentation may be used Porting is possible when all parties need to agree on the porting The UK CASS Omnibus Clearing Model is functionally the same as the Elementary model, but the Difference Claim would be protected under the UK Client Money Trust. Undisclosed client positions Omnibus Client Segregation NCM 1 positions RC 1 positions Positions accounts Omnibus position account for non-disclosed clients Individual clients may adopt this model (from any jurisdiction) and have segregated positions from other clients but not collateral (see the ICM model) Margin requirement all clients Margin requirement NCM 1 Margin requirement RC 1 Margin Requirement The margin calculation is performed per position account. Clearing Members will receive individual margin reports, but payments will be netted Collateral for Client omnibus segregated account/ Collateral allocation by value in proprietary account Collateral Elementary Clearing Model collateral can be held in the CM s main pledge account or in a separate sub-account for the benefit of clients UK CASS Omnibus collateral held in a separate sub-account at the CSD 47

48 EurexOTC Clear IRS November, 2013 Agenda Overview of regulatory landscape and role of CCP s Safety Proven and robust CCP risk manager Protection and portability of client assets Efficiency Integrated full asset class offering Efficient collateral management Capital efficiency EurexOTC Clear 48

49 EurexOTC Clear IRS November, 2013 Eurex Clearing s collateral eligibility criteria Stringent criteria apply on collateral pledged for securitization in order to ensure the integrity of the Clearing House All collateral must be secure, liquid and accessible as well as within ECB eligible liquidity classes I-IV (V ABS not accepted) Restrictions for bonds Restrictions for equity Admissible proportion of the issued capital is 25% Admissible proportion of the free float is 5% Debt securities deposited that have a remaining term of 15 calendar days or less will not be given value (100% haircut) Maximum 30% of required daily collateral per Clearing Member Not accepted collateral Own issues due to pro-cyclical effects (wrong-way-risk) Close links, where a participant, i.e. by ownership, directly or by way of control of 50 percent or more of the voting rights or capital of a company, or by control, i.e. by the relationship between the parent company Securities Collateral Management charge Securities collateral used to cover margin subject to a management charge of 5bp (not applicable to IRS business of Registered Customers) excess collateral is not charged 49

50 EurexOTC Clear IRS November, 2013 Reuse of GC Pooling Collateral for Margining Increase the efficiency of your collateral What is reuse? How to reuse GC Pooling collateral? What are the member benefits? In light of the increasing demand for collateral, efficient usage of collateral is becoming increasingly important. Therefore, Eurex Clearing accepts reuse of collateral which has been received from GC Pooling cash provider activities across all GC Pooling Baskets 1 ) covering the margin requirement from Clearstream Banking Frankfurt (CBF) and Clearstream Banking Luxemburg clients (CBL). German clients acting as cash providers utilize the CBF collateral management system Xemac for the reuse facility. For international clients using the collateral management service CmaX, CBL acts as an agent on behalf of the Clearing Member to allocate reuse collateral via Clearstream Banking Frankfurt to Eurex Clearing. The Reuse of GC Pooling collateral brings benefits by: reducing margin collateral funding cost. increasing the trading flexibility of own securities. reducing the operational effort to manage collateral substitutions. mobilizing less flexible security pools. lowering securities handling fee (initially set to zero to encourage the reuse). 1) Eligible GC Pooling Baskets are: GC Pooling ECB Basket, GC Pooling ECB EXTended Basket, GC Pooling Equity Basket 50

51 EurexOTC Clear IRS November, 2013 Agenda Overview of regulatory landscape and role of CCP s Safety Proven and robust CCP risk manager Protection and portability of client assets Efficiency Integrated full asset class offering Efficient collateral management Capital efficiency EurexOTC Clear 51

52 EurexOTC Review of Clear OTC regulations IRS November, 2013 OTC derivatives are going through a global regulatory filter 1 Basel III / CRD IV Improved coverage of counterparty credit risk (CCR) Introduction of CVA Refined treatment of CCP exposures Introduction of leverage ratio Drives capital requirements 2 CPSS/IOSCO principles Common principles for CCPs Introduction of principles for financial market infrastructures incl. CCPs Stress-test (Cover 1/2) to size default fund Drives default fund requirements 3 BCBS/IOSCO margin requirements Margin requirements for non-centrally cleared OTC derivatives More stringent rules for margin calculation and segregation for non-centrally cleared derivatives Subject to an exposure threshold Drives margin requirements EMIR Mandatory central clearing for standardized OTC derivatives Defines product scope Source: BCBS, CPSS, IOSCO, ESMA Focus of study Oliver Wyman

53 CCP exposures Bilateral exposures Review of OTC regulations EurexOTC Clear IRS November, 2013 The current Basel III framework will deepen capital requirements for exposures due to OTC derivatives Element Basel II / CRD III framework (legacy) Current Basel III / CRD IV framework Coverage of counterparty credit risk (CCR) Introduction of credit value adjustment (CVA) Treatment of CCP default fund exposure Treatment of CCP trade exposure Risk-weighted assets (RWA) for CCR exposure need to be calculated and capitalized by banks using one of three methods No capital charge for potential losses on CVA due to credit deterioration of counterparty No capital requirements against exposure to CCP through default fund contribution Zero risk weight for trade exposures to CCPs Leverage ratio No leverage ratio requirement in Basel II Increased capitalization requirements for CCR exposure (better calibrated to stress periods) Introduction of a capital charge on potential losses on CVA based on VaR for bilateral exposures Introduction of capital requirements for default fund contribution based on hypothetical capital of a CCP Introduction of 2% risk weight for trade exposures to qualified CCPs (QCCPs) and collateral which is not held bankruptcy remote (otherwise 0%) Banks are required to hold at least 3% capital against their total non-risk weighted (on- and off-balance sheet) exposure Proposed/pending changes to current framework (incl. CPSS/IOSCO) New exposure method to replace the two non-internal methods, which better reflects collateral and risk offsetting Currently no changes suggested (but knock-on effect from proposed CCR method change) New approach to calculate the capital requirements for default fund contributions based on a cover stress test (CPSS/IOSCO) and the new non-internal exposure method Proposal to increase risk weight to between 2% and 20% better reflecting capitalization level of the CCP New non-internal method to be applied to calculate non-risk weighted exposures due to derivatives (better reflecting netting) Source: BCBS Study assumes a mid-term base case scenario based on the current Basel III framework plus Softened form of the cover stress test concept in the latest proposal for capital treatment of exposures to CCP Mitigation of current leverage ratio rules around margin collateral and clearing Oliver Wyman

54 Financial resource costs EurexOTC Evolution of Clear OTC IRS models and client economics November, 2013 Costs to trade OTC for sell- and buy-side participants can be grouped into four blocks Capital costs Description Key drivers Relevance for sell-side Relevance for buy-side Counterparty credit risk exposures need to be capitalized via riskweighted assets and CVA VaR by banks Capital requirements lead to regulatory (equity) capital costs Exposure method Margin period of risk (MPOR) Netting Risk weight CVA VaR Default fund contribution C-factor Capital costs for proprietary and client portfolio No direct counterparty credit risk capital costs for non-banks Capital costs for banks Funding costs Collateral requirements for initial margin lead to funding costs if collateral not available Margin method Margin period of risk Netting (initial margin) Accepted collateral Funding costs for proprietary and client portfolio Funding costs for proprietary portfolio CVA 1 Expected credit loss needs to be priced in CVA CVA for proprietary and client portfolio No CVA for non-banks CVA for banks Fees and bid-ask spread 2 Client clearing fees Dealer cost of capital and funding assumed to be reflected in bid ask spread Clearing fees No client clearing fees Bid-ask spread and bid-ask spread mark-ups Client clearing fees Bid-ask spread markups 1. Credit value adjustment; 2. CCP fees not considered since marginal and expected to converge in the long term 54

55 EurexOTC Evolution of Clear OTC IRS models and client economics November, 2013 CCP trades tend to be more cost-efficient than bilateral trades across all cost blocks Bilateral model without initial margin Bilateral model with initial margin Central clearing model Bilateral exposure Variation margin Initial margin CCP exposure Default fund Capital costs High Medium/low Medium/low Funding costs Low High Medium/low CVA High Medium/low No Fees and bid-ask spread High High 1 Lowest 2 1. Given margining is two-way; 2. Dealers/brokers adjust fees/bid-ask to account for differences in capital, funding and CVA costs Future models and focus of analysis given regulatory requirements 55

56 EurexOTC Evolution of Clear OTC IRS models and client economics November, 2013 Cost efficiencies may vary substantially across CCPs along 3 key drivers 1 Netting efficiency Multilateral risk netting may be complemented by crossproduct exposure netting (& cross-margining) between OTC, exchange-traded and cleared repo transactions Netting of positions in liquidation groups for initial margin and balance sheet netting of exposure at default under a single legal CCP construct Higher netting efficiency lowers capital and funding requirements 2 Default fund efficiency Required default fund contributions depend on the risk characteristics of the CCP CCPs with significant existing exposures across products under a single netting agreement and strong segregation services tend to lead to lower default fund contribution and capital requirements Higher default fund efficiency lowers capital and funding requirements 3 Collateral efficiency CCPs with a large spectrum of eligible collateral, re-use of other assets (e.g. GC pooling) and central bank access mitigate funding issues for clients Higher collateral efficiency lowers funding requirements An integrated cross-product CCP with a large eligible collateral spectrum entails the highest efficiency potential for customers Oliver Wyman

57 EurexOTC Clear IRS November, 2013 Eurex Clearing provides significant cross asset class netting efficiencies and low default fund capitalization requirements Key differentiating factors CCP model A CCP model B (Eurex Clearing) Initial margin netting efficiency Initial margin netting efficiency is dependent on the CCP netting capability across asset classes OTC CCP IR Swaps Margin ETD CCP FI futures / future-styled options Margin Total margin OTC & ETD CCP IR Swaps FI futures / future-styled options XMargin Margin reduction through cross asset class margining Trade exposure netting efficiency Trade exposure netting efficiency is dependent on the CCP netting capability across asset classes IRS FI fut./options Repos No trade exposure reduction across products IRS Repos FI fut./options Lower trade exposure driven by cross-product exposure netting Default fund capitalization Default fund capitalization of CCP is dependent on cross-asset class diversification effects and CCP contribution Hypothetical capital C-factor of 100%: Full capitalization of member contribution Member contribution Hypothetical capital Member contribution CCP contribution C-factor of 0.58%: Low capitalization of member contribution Oliver Wyman

58 EurexOTC Clear IRS November, 2013 EurexOTC Clearing Member contacts Market Participant Name Phone Bank Of America / Merrill Lynch Samantha Page +44 (0) Samantha.page@baml.com Richard Clark +44 (0) richard.d.clark@baml.com Oliver W Blower +44 (0) oliver.w.blower@baml.com Barclays Sibtain Lalji +44 (0) sib.lalji@barcap.com Ben Parker ben.parker@barclays.com Basler Kantonalbank Gerhard Hartsleben +41 (0) gerhard.hartsleben@bkb.ch BNP Paribas Gavin Dixon +44 (0) gavin.dixon@uk.bnpparibas.com Sarah Walsh +44 (0) sarah.a.walsh@uk.bnpparibas.com Stuart Abrahams +44 (0) stuart.abrahams@uk.bnpparibas.com Marco Baggioli marco.baggioli@uk.bnpparibas.com Citigroup Silas Findley silas.j.findley@citi.com Michel Planquart +44 (0) michel.d.planquart@citi.com Commerzbank Kate Koptsova +44 (0) Ekaterina.Koptsova@commerzbank.com Eugene Stanfield +44 (0) eugene.stanfield@commerzbank.com Credit Suisse Neil Burke (US) neil.burke@credit-suisse.com Steve Plestis (Europe) +44 (0) stephen.plestis@credit-suisse.com Daniel Harding daniel.harding@credit-suisse.com Yves Marcel (Asia) yves.marcel@credit-suisse.com 58

59 EurexOTC Clear IRS November, 2013 EurexOTC Clearing Member contacts Deutsche Bank Stephen Ingle +44 (0) Jason Vitale DZ BANK Claus Schnee Goldman Sachs Richard Pape +44 (0) Stuart Connolly +44 (0) HSBC Martin Taylor +44 (0) Neill Pattinson +44 (0) Richard Ingram +44 (0) JP Morgan Brian Oliver (Europe) +44 (0) Thomas Alterson (US) Jonathan Caldwell (Asia) +61 (2) KAS Bank Raymond Van Putten Morgan Stanley Andrew Ross +44 (0) Mark Bortnik +44 (0) Owain Roberts +44 (0) Newedge John Wilson john.d.wilson@newedge.com Laetitia Teuber +33 (0) laetitia.teuber@newedge.com Will Davies +44 (0) will.davies@newedge.com 59

60 EurexOTC Clear IRS November, 2013 EurexOTC Clearing Member contacts Nomura Mark Croxon +44 (0) Simon Weetman +44 (0) Michael Schneider Raiffeisen Patrick Chalverat Royal Bank of Scotland Phil Hermon (EMEA) Fred Matt Madlen Dorosh (US) Societe Generale Mohamed Braham +44 (0) Ian Morgan +44 (0) Philippe de Brossard Philippe.de-brossard@sgcib.com Edouard Knipillaire Edouard.knipillaire@scgibcom UBS Investment Bank Marco Stano +41 (0) marco.stano@ubs.com Marc-Daniel Zwyssig +41 (0) marc-daniel.zwyssig@ubs.com Zurcher Kantonalbank Reto Ziltener reto.ziltener@zkb.com 60

61 EurexOTC Clear IRS November, 2013 Your key contacts at Eurex Clearing: London New York Paris Philip Simons T Philip.simons@eurexclearing.com Ricky Maloney T ricky.maloney@eurexclearing.com Afriyie Ola Dimeji T Afriyie.ola.dimeji@eurexclearing.com Byron Baldwin T byron.baldwin@eurexchange.com Paul Beck T paul.beck@eurexchange.com Florence Besnier T florence.besnier@eurexclearing.com Frankfurt Zürich France Schuster T france.schuster@eurexchange.com Lothar Kloster T lothar.kloster@eurexchange.com Markus-Alexander Flesch T markus-alexander.flesch@eurexchange.com 61

62 EurexOTC Clear IRS November, 2013 Eurex 2013 Deutsche Börse AG (DBAG), Clearstream Banking AG (Clearstream), Eurex Frankfurt AG, Eurex Clearing AG (Eurex Clearing) as well as Eurex Bonds GmbH (Eurex Bonds) and Eurex Repo GmbH (Eurex Repo) are corporate entities and are registered under German law. Eurex Zürich AG is a corporate entity and is registered under Swiss law. Clearstream Banking S.A. is a corporate entity and is registered under Luxembourg law. U.S. Exchange Holdings, Inc. and International Securities Exchange Holdings, Inc. (ISE) are corporate entities and are registered under U.S. American law. Eurex Frankfurt AG (Eurex) is the administrating and operating institution of Eurex Deutschland. Eurex Deutschland and Eurex Zürich AG are in the following referred to as the Eurex Exchanges. All intellectual property, proprietary and other rights and interests in this publication and the subject matter hereof (other than certain trademarks and service marks listed below) are owned by DBAG and its affiliates and subsidiaries including, without limitation, all patent, registered design, copyright, trademark and service mark rights. While reasonable care has been taken in the preparation of this publication to provide details that are accurate and not misleading at the time of publication DBAG, Clearstream, Eurex, Eurex Clearing, Eurex Bonds, Eurex Repo as well as the Eurex Exchanges and their respective servants and agents (a) do not make any representations or warranties regarding the information contained herein, whether express or implied, including without limitation any implied warranty of merchantability or fitness for a particular purpose or any warranty with respect to the accuracy, correctness, quality, completeness or timeliness of such information, and (b) shall not be responsible or liable for any third party s use of any information contained herein under any circumstances, including, without limitation, in connection with actual trading or otherwise or for any errors or omissions contained in this publication. This publication is published for information purposes only and shall not constitute investment advice respectively does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any other transaction. This publication is not intended for solicitation purposes but only for use as general information. All descriptions, examples and calculations contained in this publication are for illustrative purposes only. Eurex and Eurex Clearing offer services directly to members of the Eurex exchanges respectively to clearing members of Eurex Clearing. Those who desire to trade any products available on the Eurex market or who desire to offer and sell any such products to others or who desire to possess a clearing license of Eurex Clearing in order to participate in the clearing process provided by Eurex Clearing, should consider legal and regulatory requirements of those jurisdictions relevant to them, as well as the risks associated with such products, before doing so. Eurex derivatives are currently not available for offer, sale or trading in the United States or by United States persons (other than EURO STOXX 50 Index Futures, EURO STOXX 50 ex Financials Index Futures, EURO STOXX Select Dividend 30 Index Futures, EURO STOXX Index Futures, EURO STOXX Large/Mid/Small Index Futures, STOXX Europe 50 Index Futures, STOXX Europe 600 Index Futures, STOXX Europe 600 Banks/Industrial Goods & Services/Insurance/Media/Travel & Leisure/Utilities Futures, STOXX Europe Large/Mid/Small 200 Index Futures, Dow Jones Global Titans 50 Index SM Futures (EUR & USD), DAX /MDAX /TecDAX Futures, SMIM Futures, SLI Swiss Leader Index Futures, MSCI World/Europe/Japan/AC Asia Pacific ex Japan Index Futures and VSTOXX Futures as well as Eurex inflation/commodity/weather/property and interest rate derivatives). Trademarks and Service Marks Buxl, DAX, DivDAX, eb.rexx, Eurex, Eurex Bonds, Eurex Repo, Eurex Strategy Wizard SM, Euro GC Pooling, FDAX, FWB, GC Pooling,, GCPI, MDAX, ODAX, SDAX, TecDAX, USD GC Pooling, VDAX, VDAX-NEW and Xetra are registered trademarks of DBAG. Phelix Base and Phelix Peak are registered trademarks of European Energy Exchange AG (EEX). All MSCI indexes are service marks and the exclusive property of MSCI Barra. RDX is a registered trademark of Vienna Stock Exchange AG. IPD UK Annual All Property Index is a registered trademark of Investment Property Databank Ltd. IPD and has been licensed for the use by Eurex for derivatives. SLI, SMI and SMIM are registered trademarks of SIX Swiss Exchange AG. The STOXX indexes, the data included therein and the trademarks used in the index names are the intellectual property of STOXX Limited and/or its licensors Eurex derivatives based on the STOXX indexes are in no way sponsored, endorsed, sold or promoted by STOXX and its licensors and neither STOXX nor its licensors shall have any liability with respect thereto. Dow Jones, Dow Jones Global Titans 50 Index SM and Dow Jones Sector Titans Indexes SM are service marks of Dow Jones & Company, Inc. Dow Jones-UBS Commodity Index SM and any related sub-indexes are service marks of Dow Jones & Company, Inc. and UBS AG. All derivatives based on these indexes are not sponsored, endorsed, sold or promoted by Dow Jones & Company, Inc. or UBS AG, and neither party makes any representation regarding the advisability of trading or of investing in such products. All references to London Gold and Silver Fixing prices are used with the permission of The London Gold Market Fixing Limited as well as The London Silver Market Fixing Limited, which for the avoidance of doubt has no involvement with and accepts no responsibility whatsoever for the underlying product to which the Fixing prices may be referenced. PCS and Property Claim Services are registered trademarks of ISO Services, Inc. Korea Exchange, KRX, KOSPI and KOSPI 200 are registered trademarks of Korea Exchange Inc. BSE and SENSEX are trademarks/service marks of Bombay Stock Exchange (BSE) and all rights accruing from the same, statutory or otherwise, wholly vest with BSE. Any violation of the above would constitute an offence under the laws of India and international treaties governing the same. The names of other companies and third party products may be trademarks or service marks of their respective owners. 62

63 Trade Reporting: Practical Issues Luxembourg, 22 January 2014

64 Introducing REGIS-TR REGIS-TR Feb 2012 What is REGIS-TR and who is behind REGIS-TR What REGIS-TR brings to the industry Interest rates and fixedincome Credit default swaps Equities Reporting of all asset classes Commodities Foreign exchange Exchange Trades Derivs A Trade Repository offering registration and reporting services for Derivatives out of Luxembourg Belonging to well known European Market Infrastructures within two exchange infrastructures Registration and reporting services for Derivatives and holding the customer data exclusively in the EU Providing a one-stop-shop service, based on a reliable, cost-efficient TR solution for all types of market participants Delivering added-value services well beyond regulatory compliance matching, exposure management, third-country domestic solutions 64

65 Update on Timeframe EMIR Timeline - November 2013 REGIS-TR Reporting ESMA Nov 2013 Jan 2014 Apr 2014 Jul 2014 Jan 2015 A: Registration of TR A + 90 days: RSD for IRS and CDS (OTC) RSD for all other asset classes (OTC) 7 Nov Feb Feb 2014 REGIS-TR registered in first wave on 7 Nov RSD for all asset classes traded on exchange (ETD) 12 Feb

66 EMIR Key Cornerstones of the EU Regulation REGIS-TR ESMA Final Report Key components of the reporting regulation: Reporting Obligation: Financial and non-financial counterparties Cleared and non-cleared ETDs and OTC-traded contracts No threshold applies and no exceptions on derivatives products Reporting of exposures: Timing: All Financials and non-financials above the clearing threshold, are obliged to report daily M2M valuations and collateral values All derivatives positions must be reported to a trade repository by the end of day T+1 66

67 EMIR Reporting obligation - Backloading trades REGIS-TR EMIR only requires immediate reporting of trades in scenario 5: 1. not relevant for EMIR reporting 2. within 3 years after the reporting start date 3. within 90 days after the reporting start date 4. within 3 years after the reporting start date 5. immediately after the reporting start date 6. until trade date + 1 business day 67

68 Implementation Challenges EMIR- Legal Entity Identifier REGIS-TR WM Datenservice Example: ROC-endorsed Pre-LOUs NCA Takasbank INSEE LSE A1B2C3D4E5F6 99 LOU code reserved security code 12 alphanumeric characters CICI Utility FSB (Financial Stability Board) is coordinating the development of a global legal entity identifier system (GLEIS) LEIs are set to uniquely identify market participants both FC and NFC However, there is no global system yet, leaving participants with Pre-LEIs Only a few local operating units (LOU) have been endorsed by national regulators so far Some offer Pre-LEIs to participants outside of their jurisdiction (EMIRcompliant) Usage of Pre-LEI is strongly recommended to identify counterparties in reporting, although some issues remain yet to be solved 68 Source: WM Datenservice

69 Implementation Challenges EMIR Unique Trade Identifier (UTI) REGIS-TR EMIR obliges counterparties to agree on a Unique Trade ID at European level Until ESMA endorses a single framework, a code should be bilaterally agreed by the counterparties or, in case of a platform, be assigned by the venue operator ISDA proposed workflow (subject to review by ESMA), which outlines procedures for different trading flows Virtually the same progress in terms of Unique Product Identifier (UPI), where no standard exists yet especially for hybrid or exotic products Until then, reporting shall be done using a combination of an assigned ISIN or Alternative Instrument Identifier (AII) with corresponding Interim UTI classification temporary support 69 Sources: ISDA, Eurex Clearing

70 Implementation Challenges Unique Product Identifier (UPI) REGIS-TR Unique Product Identifier Standard does not exist although recommendations emanating from ISDA among others ESMA will endorse UPI solution as soon it is considered complete In its absence, two possibilities for the product identification: I. Combination of ISIN + AII with corresponding CFI code or, II. Simplified taxonomy specifying asset class and type 70

71 Update on Implementation Challenges EMIR - Interoperability REGIS-TR Proposal subject to ESMA approval Common Data Un-paired UTIs Common Data 1) TR seeks to reconcile reported trade in its own books 2) If counterparty cannot be found, then broadcast LEI & UTI to all other TRs 3) Exchange of common data only between counterparties s TR. Common Data Common Data Other ESMA-approved Trade Repository 71

72 Reporting and Delegation Models Delegation Possibilities REGIS-TR Feb 2012 Supervisory Authorities Third Parties Trading platforms IT vendors Reporting Channels PDF CCPs Market Participants Clients/ Subsidiaries Reporting Obligation 72

73 REGIS-TR Onboarding REGIS-TR Prerequisites Test environment access Onboarding process (Live environment) - Identify reporting entities - Define appropriate account set-up - Define required reporting - Define related connectivity set-up - Review Legal framework - Apply for access to REGIS-TR test environment - Conduct different reporting scenarios - Debrief + Q&A with REGIS-TR - Obtain Pre-LEI - Register to REGIS-TR - Account(s) set-up - Back loading Start Testing Start Onboarding Start Reporting Customer Consultancy 40 Relationship Managers across Europe SPOCs in each region Operational Helpdesk 73

74 REGIS-TR Contact Details Nicolas Boatwright Managing Director REGIS-TR 42 Avenue J.F. Kennedy L-1855 Luxembourg Phone Fax nicolas.boatwright@clearstream.com Daniel Mureddu Vice President Clearstream Banking SA L-1855 Luxembourg Phone Fax Daniel.mureddu@clearstream.com 74