Client Asset Protection www.eurexclearing.com
Your segregation options Eurex Clearing, as a multiasset class central counterparty (CCP), offers Clearing Members and clients streamlined segregation and porting options to address your needs across all markets. As a CCP authorized under the European Markets Infrastructure Regulation (EMIR), we offer both omnibus and individual segregation to Clearing Members and clients. Because we responded to our customers needs during and since the financial crisis, we have offered the most sophisticated range of segregation models since 2011. Since the launch of our client segregation models, we have worked with Clearing Members and clients to ensure each segregation model is designed to provide flexibility in terms of available position and collateral set-ups in order to meet your specific needs. Safety and efficiency have been key principles in designing our models. This booklet aims to provide you with sufficient information to consider which model will best satisfy your business, capital and risk requirements. We do however recognize that the move to mandated central clearing is a complex matter so please contact us if you require any assistance. Further information and contact details are at the back of this booklet. 3
Clearing models and client types At Eurex Clearing you can choose between omnibus and individual segregation, each offering different levels of protection. Individual Accounts (ISA) Eurex Clearing was the first CCP to launch an EMIR compliant Individual Account, which fully mitigates the risks of a Clearing Member (CM) default. In summary, EMIR requires individual client segregation of positions and protection of the clients actual collateral. In the event of a default, the positions and collateral can be ported to a Replacement Clearing Member, or closed out with the collateral being directly returned to the client. Eurex Clearing s ISA has set the industry standard for individual segregation and we have worked closely with Clearing Members and clients to ensure the model is as efficient as possible, whilst offering the maximum level of protection. Disclosed clients Clients known to Eurex Clearing. They have entered into a tripartite agreement with Eurex Clearing and their Clearing Member. They have their own position s. Undisclosed clients Clients not known to Eurex Clearing, only to their Clearing Member. They sit in an omnibus position commingled with other unknown clients. Margin is called by Eurex Clearing on a net basis across these clients, while the Clearing Member collects gross per client. Omnibus Accounts (OSA) Our OSA models offer our Clearing Members and their clients a range of options to allow flexible position and collateral segregation. We offer traditional listed net omnibus clearing, gross omnibus clearing for disclosed clients, and allow Clearing Members to compy with the United Kingdom (U.K.) Client Asset Sourcebook (CASS), where applicable and required. In September 2014 we also launched a service to allow clients to maintain multiple omnibus collateral pools. This service allows clients to determine the level of fellow customer risk they are comfortable with. No additional fees for our segregation services are charged to our Clearing Members or clients. 4 5
What level of segregation is right for you as client? Type of client position? Disclosed client (Non-Clearing Member or Registered Customer) Undisclosed client Fellow customer risk acceptable? No Only to known clients Yes Type of collateral protection? Asset Asset Value Type of segregation Our clearing models Individual Account (ISA) Individual Clearing Model Multiple Omnibus Account (MOSA) Elementary Clearing Model Net Omnibus Clearing Model 1 Standard Omnibus Account (OSA) 1 Offers CASS protection 6 7
Our Individual Account Individual Account (ISA) Individual Clearing Model Our Multiple Omnibus Account Elementary Clearing Model Multiple Omnibus Account (MOSA) Net Omnibus Clearing Model Our ISA was the first asset segregation service to provide full protection and portability globally. All actual assets provided to Eurex Clearing are protected against the default of another market participant. This differs from value-based models where only a value equivalent is protected instead of the client s actual assets. Should there be a default, clients can choose to port immediately to a Replacement Clearing Member or become an Interim Participant, directly facing Eurex Clearing until a Replacement Clearing Member is identified and accepts the port. Alternatively, clients can elect to closeout and directly receive their collateral back. Safety No fellow customer risk Highly likely porting Actual assets protected Allows full segregation at sub-fund level Efficiency 2 percent risk weight for trade and collateral exposures Asset tagging (optional) Direct transfer of collateral (optional) Later cash withdrawals for euro and Swiss francs Cl Client Cl 1 ISA Protection of assets and portability ensures: No replacement risk No liquidity risk No liquidation risk in case of a Clearing Member default Multiple omnibus collateral pools allow for groups of clients to be pooled together. Cl Client Cl 1 Cl 2 MOSA Multiple OSA (MOSA) While being operationally the same as the Standard Omnibus Account (OSA), multiple omnibus segregation s allow a Clearing Member and clients to decide which clients are allocated to which collateral pool, allowing the clients to determine their acceptable fellow customer risk. Both disclosed and undisclosed client s are available. For example it is possible to segregate a Fund Manager s funds into a single separate collateral pool. Safety Limited and accepted fellow customer risk Likely porting Actual assets can be protected with Clearing Member agreement Optional U.K. CASS protection available Efficiency 4 percent risk weight for trade and collateral exposures, in Eurex Clearing s view Increased collateral efficiency by pooling in a single 8 9
Our Standard Omnibus Account Cl 1 Cl 2 OSA All other CM clients Elementary Clearing Model Standard Multiple Omnibus Segregation Account (MOSA) (OSA) Net Omnibus Clearing Model Fund Manager set-up Eurex Clearing has developed a reporting and legal approach for funds which streamlines the on-boarding process and provides flexibility for an efficient position and collateral set-up. For documentation purposes, the Fund Manager enters into an agreement with Eurex Clearing and simply lists all funds it is acting on behalf of. There is no need for each fund to sign legal agreements with Eurex Clearing. The Fund Manager receives detailed and aggregated reporting. Cl Client Standard Omnibus Account (OSA) s of disclosed clients and positions of undisclosed clients are segregated and covered by a single collateral pool. Net omnibus is available through the use of an undisclosed position and gross omnibus is available for disclosed clients (NCMs and RCs). OSA CASS Eurex Clearing s CASS Net Omnibus Clearing Model additionally allows Clearing Members located in the United Kingdom to apply the CASS rules when providing omnibus segregation. set-up with positions segregated at fund level. Set-up available for all segregation options (ISA, MOSA and OSA). Aggregated reporting F1 F2 F3 Safety Fellow customer risk Porting available. Any excess collateral will be returned for the benefit of clients. Fund Manager F Fund Efficiency 4 percent risk weight for trade and collateral exposures, in Eurex Clearing s view Leverages historical operational Clearing Member processes 10 11
Fund Manager collateral pool options Why choose Eurex Clearing? If you decide to go with our Fund Manager set-up, there are a number of collateral segregation options available to you. 1. Individual Account (ISA) The Fund Manager receives aggregated reporting. Each fund has a segregated position and collateral. F1 ISA1 F2 ISA 2 F3 ISA 3 Cost efficiencies vary across CCPs and multiasset class CCPs, such as Eurex Clearing, offer greater capital efficiencies such as cross product margining, netting of default fund contributions and collateral efficiencies. Eurex Clearing has access to central bank funding in stressed market conditions. Eurex Clearing has a wide eligibility schedule, over 25,000 products accepted as collateral. 2. Multiple Omnibus Account (MOSA) Eurex Clearing offers reuse of GC pooling for proprietary margin purposes. a) pool shared accross multiple funds. F1 F2 MOSA F3 Eurex Clearing does not charge for any segregation model. b) pool shared accross multiple Fund Managers. F1 F2 OSA all other CM clients Fund Manager F Fund 12 13
For more information please contact Eurex Clearing Sales T +44-20-78 62-72 78 ClearingRelations@eurexclearing.com U.K. Representative Office Westferry House 11 Westferry Circus, Canary Wharf London, E14 4HE United Kingdom Clearing Models Richard Wilding T +44-20-78 62-72 79 richard.wilding@eurexclearing.com Beth Jones-Williams T +44-20-78 62-72 77 beth.jones-williams@eurexclearing.com Eurex 2014 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 cor porate 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. 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Eurex, November 2014 Published by Eurex Clearing AG Mergenthalerallee 61 65760 Eschborn Germany www.eurexclearing.com Order number C2E-011-1114 ARBN number Eurex Frankfurt AG ARBN 100 999 764