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EurexOTC Clear Dubai April 2015

The document discusses Eurex Clearing's services related to segregation, collateral, and capital and margin efficiencies. It provides an overview of Eurex Clearing and its operations, including average daily volumes and outstanding notional amounts. It then discusses Eurex Clearing's segregation models, eligible collateral, capital cost differentiators, lines of defense, and collateral management services. The key messages are that Eurex Clearing provides legal certainty and protection of client assets through various segregation options, accepts a wide range of eligible collateral to lower funding costs, and offers capital and margin efficiencies through netting and other services.

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EurexOTC Clear – Segregation, Collateral & Capital and Margin Efficiencies Dubai, 1 April 2015
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Capital & Margin Efficiencies Agenda 2
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Continued product and service development and integration across Eurex, Eurex Clearing and Clearstream will provide our members with sustainable capital and operational efficiencies • €6.7m contracts €285bn notional cleared every day • 333 clearing licenses in 17 European countries • 545 NCM‘s • €205bn notional outstanding in ETD • €100bn OTC IRS • 115 GCP members €203.7bn daily volume, €153.8bn Outstanding • X-product clearing under a single legal netting set lowers capital and lowers funding costs • Integration of Derivatives and Securities Financing • Collateral demand and supply equilibrium • Large spectrum of eligible collateral and access to central-bank Lower risk Lower costs and capital Greater efficiency The single legal netting structure across asset class results in lower risks, lower costs and greater efficiency 3
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Key operational differentiators exist between CCP’s • Early return of cash removes double funding • Early return of cash reduces counterparty risk • Central bank access provides liquidity in a crisis, reduces systemic risk Eurex Clearing Operational Differentiators • Direct delivery of cash and securities removes CM operational cost • Over 25,000 eligible securities lowers funding costs of IM and DF • Single netted margin call across all asset classes • Direct delivery of cash and securities means no transit risk • No mutualisation of client excess allows pre-funding at no risk • Protection of clients own assets. No liquidation and replacement risk Operationalefficiencies Collateral Management Portability and Legal Certainty Central Bank Access • Portability of clients actual / own assets in CM default • Ability to become Interim Participant allows 5 + days for porting • Legal certainty: porting, close-out netting, asset protection at fund level Protection and Segregation 4
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Key cost differentiators exist between CCP’s • 5 day MPOR applied to OTC IRS for both house and client accounts • 0% capital risk weight for house collateral • 2% capital risk weight for individual segregation • Lower DF and IM means lower funding costs • Over 30,000 eligible securities lowers funding costs of IM and DF • GC Pooling allows re-use of securities • Real-time margin and intraday return of cash removes double funding Eurex Clearing Cost Differentiators • Cross asset class CCP , single legal netting lowers EaD and capital • Cross product margins in Liquidation Groups • Payment netting across asset class with a single margin call • DF segmentation decreases total size of CF by 40% • DF allocated as 7% of IM. • Cross margins lowers IM by 20 – 40% and hence DF contribution Capitalandfundingefficiencies Capital Costs Netting Default Fund Funding Costs 5
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Approx. € 289 m, Eurex Clearing thus fully EMIR compliant Clearing fund contribution of member in default (€ 151 m average for Top 10 CMs)* Minimum € 1 m (DCM) or € 5 m (GCM) Collateral of member in default (€ 2.23 bn average for Top 10 CMs)** Close-out of all positions Clearing fund contribution of other members Approx. € 3.32 bn € 50 m Position Netting Coverage in normal market conditions (Lehman/ MF Global) Coverage in extreme market conditions ** Values as of 22/09/2014 Total collateral held at Eurex Clearing approx. € 56.36 bn Max 2 assessment limit liability of CM to 3x prefunded clearing fund contribution Lines of Defense waterfall ensures loss coverage in normal and extreme market conditions Eurex Clearing’s Lines of Defense are crisis proven – default fund has never been employed. € 700 m guaranteed by Deutsche Börse AG Lines of Defense before Eurex Clearings Capital sum up to more than € 9 bn Eurex Clearing Lines of Defense Remaining equity of Eurex Clearing Parental Guarantee Dedicated amount of Eurex Clearing CM in default CMn… *CM1 (€ 215 m) CM in default CMn… *CM1 (€ 3.5 bn) Position Netting Assessments to the clearing fund Clearing fund contribution of other members *largest member)
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Margin & Capital Efficiencies Agenda 7
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 FM FM Standard Omnibus Segregated Account (N-OSA) Multiple Gross Omnibus Account (G-OSA) Segregated multiple omnibus collateral pool for FM only One collateral pool for all OSA by asset clients CCP MR per RC/NCM Agency position accounts … CCP MR per FN Fund N CCP MR per F1 CCP MR per F2 F1 F2 … CCP MR per F1 CCP MR per F2 CCP MR per FN … … Fund NF2F1 RC/NCM position accounts CCP MR per A account FM … F1 Seg Pool F2 Seg Pool FN Seg Pool Individual Segregated Accounts (ISA) CCP MR per F1 CCP MR per F2 CCP MR per FN … F1 F2 Fund N Margin calculation Position accounts EurexClearing Collateralpools Fund position individually segregated Each fund has its own collateral pool Asset Tagging available per client. No fellow customer risk The fund’s positions are individually segregated Margin is called gross per fund Co-mingled collateral pool across all position a/c’s Client exposed to fellow customer risk Positions remain individually segregated Margin is called gross per fund Collateral sits in its own omnibus pool. Fellow customer risk between own funds Client Asset Segregation - options for the Fund Manager Reduced operational and documentation effort for fund managers allows the asset management company to sign on behalf of underlying funds
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 9 Asset tagging reduces overhead & operational effort Multiple CBF accounts Eurex collateral pools Single CBF account Eurex collateral pools Ref. ID 2 Full Physical Segregation Asset Tagging Account: 61111 Account: 62222 Account: 63333 Pool ID: 1111 Pool ID: 2222 Pool ID: 3333 Pool ID: 1111 Pool ID: 2222 Pool ID: 3333 Account: 61111 • Security collateral for ISA clients is delivered to Eurex Clearing on a double-title (direct-transfer) basis • At the CSD*, individual (sub)accounts can be opened per collateral pool providing physical segregation • Pools can be linked to the same (sub)account and security collateral allocated to the client pool by asset tagging • Tagged security collateral is held in one CSD account but the legal model and protection remains exactly the same • CM tags assets using the predefined 4 digit ‘Client Reference ID’** to the SWIFT message • Upon settlement, the CSD confirms settlement via SWIFT message incl. the Client Reference ID • Asset tagging is also available for multiple omnibus collateral pools under the Standard OSA and/or CASS OSA. * So far, only Clearstream Banking Frankfurt (incl. 6 series creation accounts) is an approved collateral location for ICM ** If a Client Ref ID is missing, the transfer will not be processed; CM will be informed. If the Client Ref ID is valid, the transfer will be processed accordingly, even if it is erroneous
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Disclosed Client (NCM / RC) No Undisclosed clientUndisclosed client Only to known clients ValueValueAssetAsset Yes Individual Segregation Account (ISA) Multiple Omnibus Segregation Account (OSA) Standard Omnibus Segregation Account (OSA) Type of client position account? ustomer riskFellow customer risk acceptable? ollateralType of collateral protection? Type of segregation 10 Client Asset Protection Decision Tree EMIR segregation and porting requirements provide different levels of protection. Our Clearing models Individual Clearing Model Elementary Clearing models *Net Omnibus Clearing model *Offers CASS Protection Non-Disclosed / Agency Client • The RC legal entity needs a tripartite agreement with a CM/ECAG • Have access to the Common Report Engine for transparency Registered Customer (RC) • No direct relationship with Eurex Clearing AG • Eurex Clearing only knows the Clearing Member
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Capital & Margin Efficiencies Agenda 11
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Eurex Clearing Eligible Collateral & Haircuts Yield Shift = Yield Shift Market Price Risk Credit Risk Liquidity Risk Government and Short Term Issues (Bubills) Bonds BBUN 3.1% 3.1% 0.8% 0.80% 0.0% 1.00 State Issues BLAN 3.1% 3.1% 0.8% 0.80% 0.0% 1.00 City and Municipality Bonds BSTA 4.4% 4.3% 1.1% 0.80% 0.2% 1.12 State Agencies BAGE 4.2% 4.2% 1.1% 0.80% 0.2% 1.07 Corporates & Other Bonds BIND, BOTH 8.8% 9.2% 2.4% 0.80% 1.2% 1.18 Bank Bonds BBAK 10.8% 11.9% 2.8% 0.80% 1.4% 1.27 Federal Bonds and Bills (GMBF), Loan obligations BCNF 2.7% 2.7% 0.8% 0.80% 0.0% 1.00 Kantonal Obligations, Bonds, Bills (GMBF) BCAN 3.0% 2.9% 0.8% 0.80% 0.0% 1.00 City and Municipality Bonds BSTA 4.4% 4.3% 1.1% 0.80% 0.2% 1.12 State Agencies BAGE 4.2% 4.2% 1.1% 0.80% 0.2% 1.07 Corporates & Other Bonds BIND, BOTH 8.8% 9.2% 2.4% 0.80% 1.2% 1.18 Bank Bonds, Mortgage Bonds (Pfandbriefzentralen) BBAN 10.2% 11.4% 3.5% 0.80% 1.4% 1.59 USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Exchange listing 2) Admissible proportion of the issued capital is 25% 3) High credit quality - investment grade Government Bonds BAUS, BABP, BADK, BANK, BASK, BAAD, BACD, BAJY 3.1% 3.1% 0.8% 0.80% 0.0% 1.00 EUR, CHF, USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Exchange listing 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade High Yield Government Bonds BBSL 9.6% 10.4% 2.6% 0.80% 1.4% 1.17 EUR, CHF, USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Exchange listing 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade Italian Government Bonds BABS 10.6% 12.5% 2.8% 0.80% 1.6% 1.17 EUR, CHF, USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Exchange listing 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade Irish Bonds BPOS 7.0% 7.9% 2.0% 0.80% 0.9% 1.16 DAX, EuroStoxx 50, SMI constituents SAKT, SHDX 23.1% 20.0% - - - 1.00 Eligible equities for GC Pooling Equity Basket SHDX 23.1% 20.0% - - - 1.00 Specific Equity Collateral SECA 100% 100.0% - - - 1.00 Security Sub-Group Security Type Code New Minimum Haircut Old Minimum Haircut Equities EUR, CHF 1) Issuer <> Clearer or seg. NCM if applicable 2) Admissible proportion of the free float is 5% 3) maximum 30% of required daily collateral Yield Shift (Market Price Risk + Credit Risk) xLiquidity Risk Bond Collateral EUR, DEM 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Issuer <> Clearer or seg. NCM if applicable 4) Exchange listing & price (except Bubills) 5) Admissible proportion of the issued capital is 25% 6) High credit quality - investment g CHF 1) SNB Repo eligible 2) Issuer <> Clearer or seg. NCM if applicable 3) Exchange listing & price 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade Collateral Type Currency Admission Criteria
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Eurex Clearing offers a variety of services to guarantee an optimal usage of provided collateral 13 Transparency • Intraday monitoring (online processing, real time up date of collateral balances) • Daily publication of admissible securities list * • Timely margin requirements against the collateral deposited intraday and end of day • Automatic balancing through the reuse of GC Pooling® Basket Collateral ** • Efficient cash handling using optional auto-repay and Permanent Cash Balance (PCB) functionality to reduce operational effort and cash balances to a minimum • Manage collateral in real-time and to deposit and release securities online • Margin and Clearing Fund requirements using cash in Euro and CHF • Eurex Clearing accepts approx 30,000 ISINs based on liquidity categories of European Central Bank Eligible Asset Database as well as Swiss National Bank • Eligible securities are validated on a daily basis • Late cash cut offs: Withdraw prefunded cash for ISA segregated collateral pools same day until late afternoon (CHF 1:30, EUR 2:30pm CET) upon receipt of client collateral Efficiency Flexibility * The full list of eligible securities is distributed via CRE (.txt & .csv) and published on our webpage http://www.eurexchange.com/exchange-en/market-data/clearing-data/risk-parameters/ ** Presentation “Reuse GCP `Collateral for Eurex Margining” published under : http://www.eurexclearing.com/blob/clearing-en/46792/149090/2/data/reuse_gcp_service_description.pdf *** Xemac is the collateral management system of Clearstream Banking Frankfurt and CmaX is the collateral management system of Clearstream Banking Luxembourg
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 § Overview of the Client Custodian Gateway § A solution whereby Clearstream Banking Luxembourg and Eurex Clearing jointly offer, in collaboration with Global Custodians, a collateralization model that: § Allows Registered Customers and NCM’s to satisfy margin requirements for their segregated collateral business under the Individual Clearing Model (ISA/ICM) while keeping securities at their existing Custodian § Reduces operational effort for all involved parties in the margining process by providing a high-degree of automation for the collateral allocation, withdrawal and substitution process § Assumes compliance with EMIR requirements for Omnibus and Individual Segregation Model (Article 39) as well as safekeeping of collateral assets (Article 47.3) § Offering is currently focused on OTC IRS but will be extended across all asset classes cleared § Creation of an attractive value proposition to market actors through § Leveraging the Buy-Side clients’ existing infrastructure and business relationships with Clearing Members, (I)CSDs and Global Custodians in the design of the joint solution § Extension of the Client Custodian Gateway to include additional service offerings such as Securities Lending and Tri-Party Repo 14 Solution Concept: Client Custodian Gateway
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Solution Concept: CCP-enabled Direct Buy Side Repo Clearing Trusted Bank (TB) Eurex Clearing CM BS Specific Repo License Holder (SRLH) Eurex Repo GC Pooling Collateral Securities Non-Cash Variation Margin 3 Eurex Clearing as single CCP for IRS and GC Pooling repo markets allows for reduced capital requirements and balance sheet netting for back-to-back repo and reverse repo transactions. BS Registered Customer (RC) TB IRS Clearing Member (CM) EurexOTC Clear IRS Net Position Initial Margin EurexOTC Clear – Interest Rate Swap – Clearing Service Eurex Repo GC Pooling – GC Pooling Select Finance – Clearing Service Trusted Bank (TB) acting potentially in dual capacity as IRS and GC Pooling. Clearing members are allowed to offer CCP-cleared repo and reverse repo trading with BS in GC Pooling repo market. Buy Side Institution (BS): Registered Customer (RC) enters into complementary Specific Repo License Holder (SRLH) agreement. Account setup for cash and collateral based on integrated Clearstream offering. 15 GCPSF Dealer Bank (BDB) Eurex Repo GCM Cash Collateral Securities Cash SM ICFC Subject to chosen trading model, counterparty to a GCPSF GC Pooling repo / reverse repo trade would always be a GCPSF dealer bank (BDB), i.e., trading will only be allowed with a Eurex Repo GCM / DCM. 1 42
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Capital & Margin Efficiencies Agenda 16
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Money Market futures: German government futures: Bund Bobl Schatz 8.5-10.5 1M Eonia 3M Euribor 24-35 correlation across maturities Buxl EUR IRS interest rate risk: ~ 10y rate ~ 5y rate ~ 2y rate FRAs Bond / swap correlation French government futures: Long term Mid term short rate correlation ~ 30y rate Cross-margining enhances Eurex Clearing’s portfolio margining by taking government futures, Euro- Swap futures and interest rate swap (IRS) links into account. Euro yield curve coverage across listed and OTC products Hedging relations for cross-margining based upon correlation 24-35 1.75-2.25 4.5-5.5 Bond / swap correlation correlation across maturities 17 Euro-Swap futures: FSWL FSWM FSWS 10y correlation across maturities FSWX 30y 2y 5y
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 18 Overall initial margins for cross-margined portfolios might be lower which reflects risk reduction. Prisma Cross-Margining Went Live in May 2014 – Portfolio Simulations Available Optimal allocation of positions delivers lowest cost through cross-margining of OTC and ETD Without cross-margining With 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 2 day liquidation horizon OTC IRSFI listed products IR Swaps FI futures / futures- style options 2 day horizon 5 day horizon Margin requirements: Futures / future -style options OTC IRS Total If IRS and futures positions are hedged: Futures are transferred to the IRS split such that the reduced risk is reflected in lower margins* IRS+FI IR Swaps FI futures / opt. Allocation of FI listed products that hedge IRS exposure FI-only FI futures / futures-style options 2 day horizon 5 day horizon Margin reduction by cross-margining: Cross-margined portfolio * Depending on portfolio diversity Total
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 1919© Oliver Wyman Benefits for the sell side of clearing EURIBOR, Fixed Income Futures & EUR IRS through Eurex Clearing 19 Comments • Cross-product netting benefits result in reduction of funding requirements • RWA for DF reduced mainly due to lower DF contribution on Eurex Clearing & low c-factor • Significant capital cost reduction driven by lower DF contribution/ c-factor & cross-margining benefits for the portfolio Eurex FI F&O + Euribor Futures Optimised IRS Portfolio EUR MM OTC IRS Eurex FI F&O Euribor On separate CCPs Combined on Eurex Clearing % Reduction Initial margin posted 54.0 26.9 10.4 91.3 27.9 69% Default fund 5.4 1.9 1.0 8.3 2.0 77% Funding requirements 59.4 28.8 11.4 99.6 29.8 70% EAD 25.2 12.5 4.9 42.6 13.0 69% Trade exp. (RWA) 0.5 0.3 0.1 0.9 0.3 69% Default fund (RWA) 13.5 0.1 2.6 16.2 0.1 99% CVA VaR (RWA) - - - - - - Total RWA 14.0 0.3 2.7 17.1 0.4 98% Capital requirements 1.8 0.0 0.3 2.1 0.0 98% Capital costs 0.2 0.0 0.0 0.2 0.0 98% Funding costs 0.7 0.3 0.1 1.2 0.3 72% CVA - - - - - - Total costs 0.9 0.3 0.2 1.4 0.3 76%
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Cross-Product Margining: Example – Futures Asset Swap 20 Interest Rate Swaps Interest Rate Future Maturity: 10Y Fixed Payer Notional: 50MM BUND Future 364 contracts Notional: 50MM Initial Margin In ‘000 EUR Default Fund In ‘000 EUR Total Costs1 In EUR In bps of notional 1.100 850 110 60 17,000 11,000 2.8 bps28,000 Interest Rate Swaps Interest Rate Future Maturity: 10Y Fixed Payer Notional: 50MM BUND Future 364 contracts Notional: 50MM 700 48 0.9 bps9,000 Baseline CCP EurexClearingPRISMA - 69% Eurex Clearing
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 21 TED Spread - Schatz Futures vs Euribor Strip – Example of the Benefits of Cross- Margining through one CCP TEDSpreadTEDSpread Euribor + Schatz Euribor + Schatz RBM IM Euribor 48,750 + 25,200 48,750 TEDSpread Euribor Schatz Two CCPs EurexClearingPRISMAEurex Clearing IM Schatz TEDSpread - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 1 2 3 PRISMA saving 49% RBM saving 34% RBM Margin PRISMA Margin Euribor Margin Schatz Margin 37,614 73,650 Two CCPs Eurex RBM Prisma
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 IRS CCP Switch A EUR 250 million 10 year fixed payer IRS position is switched from another CCP to EurexOTC Clear – what are the benefits? Current position Notional € 250MM IRS 10 Year Fixed Payer IM DF CCP Current position Notional € 250MM IRS 10 Year Fixed Payer IM DF ECAG Current position IM DF If there is already an existing position in Eurex Exchange’s Fixed Income Futures with Eurex Clearing: €250 million 10 year fixed payer IM € 7.5m € 5.3m € 4.2m* € 309,456* € 7.5m* € 529,563* € 787, 500*€ 7.875m* 2,500 long Eurex Exchange’s Bund Futures * Calculated September 2014.
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 23 Enhanced netting functions deliver greater reductions in gross notional and lowers capital and leverage ratio cost Apr 2015 2015 Live
www.eurexclearing.com EurexOTC Clear - Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 24 © Eurex 2015 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 IndexSM 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 WizardSM, 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. ATX®, ATX® five, CECE® and RDX® are registered trademarks 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 IndexSM and Dow Jones Sector Titans IndexesSM are service marks of Dow Jones & Company, Inc. Dow Jones-UBS Commodity IndexSM 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.

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EurexOTC Clear Dubai April 2015

  • 1.
    EurexOTC Clear –Segregation, Collateral & Capital and Margin Efficiencies Dubai, 1 April 2015
  • 2.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Capital & Margin Efficiencies Agenda 2
  • 3.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Continued product and service development and integration across Eurex, Eurex Clearing and Clearstream will provide our members with sustainable capital and operational efficiencies • €6.7m contracts €285bn notional cleared every day • 333 clearing licenses in 17 European countries • 545 NCM‘s • €205bn notional outstanding in ETD • €100bn OTC IRS • 115 GCP members €203.7bn daily volume, €153.8bn Outstanding • X-product clearing under a single legal netting set lowers capital and lowers funding costs • Integration of Derivatives and Securities Financing • Collateral demand and supply equilibrium • Large spectrum of eligible collateral and access to central-bank Lower risk Lower costs and capital Greater efficiency The single legal netting structure across asset class results in lower risks, lower costs and greater efficiency 3
  • 4.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Key operational differentiators exist between CCP’s • Early return of cash removes double funding • Early return of cash reduces counterparty risk • Central bank access provides liquidity in a crisis, reduces systemic risk Eurex Clearing Operational Differentiators • Direct delivery of cash and securities removes CM operational cost • Over 25,000 eligible securities lowers funding costs of IM and DF • Single netted margin call across all asset classes • Direct delivery of cash and securities means no transit risk • No mutualisation of client excess allows pre-funding at no risk • Protection of clients own assets. No liquidation and replacement risk Operationalefficiencies Collateral Management Portability and Legal Certainty Central Bank Access • Portability of clients actual / own assets in CM default • Ability to become Interim Participant allows 5 + days for porting • Legal certainty: porting, close-out netting, asset protection at fund level Protection and Segregation 4
  • 5.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Key cost differentiators exist between CCP’s • 5 day MPOR applied to OTC IRS for both house and client accounts • 0% capital risk weight for house collateral • 2% capital risk weight for individual segregation • Lower DF and IM means lower funding costs • Over 30,000 eligible securities lowers funding costs of IM and DF • GC Pooling allows re-use of securities • Real-time margin and intraday return of cash removes double funding Eurex Clearing Cost Differentiators • Cross asset class CCP , single legal netting lowers EaD and capital • Cross product margins in Liquidation Groups • Payment netting across asset class with a single margin call • DF segmentation decreases total size of CF by 40% • DF allocated as 7% of IM. • Cross margins lowers IM by 20 – 40% and hence DF contribution Capitalandfundingefficiencies Capital Costs Netting Default Fund Funding Costs 5
  • 6.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Approx. € 289 m, Eurex Clearing thus fully EMIR compliant Clearing fund contribution of member in default (€ 151 m average for Top 10 CMs)* Minimum € 1 m (DCM) or € 5 m (GCM) Collateral of member in default (€ 2.23 bn average for Top 10 CMs)** Close-out of all positions Clearing fund contribution of other members Approx. € 3.32 bn € 50 m Position Netting Coverage in normal market conditions (Lehman/ MF Global) Coverage in extreme market conditions ** Values as of 22/09/2014 Total collateral held at Eurex Clearing approx. € 56.36 bn Max 2 assessment limit liability of CM to 3x prefunded clearing fund contribution Lines of Defense waterfall ensures loss coverage in normal and extreme market conditions Eurex Clearing’s Lines of Defense are crisis proven – default fund has never been employed. € 700 m guaranteed by Deutsche Börse AG Lines of Defense before Eurex Clearings Capital sum up to more than € 9 bn Eurex Clearing Lines of Defense Remaining equity of Eurex Clearing Parental Guarantee Dedicated amount of Eurex Clearing CM in default CMn… *CM1 (€ 215 m) CM in default CMn… *CM1 (€ 3.5 bn) Position Netting Assessments to the clearing fund Clearing fund contribution of other members *largest member)
  • 7.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Margin & Capital Efficiencies Agenda 7
  • 8.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 FM FM Standard Omnibus Segregated Account (N-OSA) Multiple Gross Omnibus Account (G-OSA) Segregated multiple omnibus collateral pool for FM only One collateral pool for all OSA by asset clients CCP MR per RC/NCM Agency position accounts … CCP MR per FN Fund N CCP MR per F1 CCP MR per F2 F1 F2 … CCP MR per F1 CCP MR per F2 CCP MR per FN … … Fund NF2F1 RC/NCM position accounts CCP MR per A account FM … F1 Seg Pool F2 Seg Pool FN Seg Pool Individual Segregated Accounts (ISA) CCP MR per F1 CCP MR per F2 CCP MR per FN … F1 F2 Fund N Margin calculation Position accounts EurexClearing Collateralpools Fund position individually segregated Each fund has its own collateral pool Asset Tagging available per client. No fellow customer risk The fund’s positions are individually segregated Margin is called gross per fund Co-mingled collateral pool across all position a/c’s Client exposed to fellow customer risk Positions remain individually segregated Margin is called gross per fund Collateral sits in its own omnibus pool. Fellow customer risk between own funds Client Asset Segregation - options for the Fund Manager Reduced operational and documentation effort for fund managers allows the asset management company to sign on behalf of underlying funds
  • 9.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 9 Asset tagging reduces overhead & operational effort Multiple CBF accounts Eurex collateral pools Single CBF account Eurex collateral pools Ref. ID 2 Full Physical Segregation Asset Tagging Account: 61111 Account: 62222 Account: 63333 Pool ID: 1111 Pool ID: 2222 Pool ID: 3333 Pool ID: 1111 Pool ID: 2222 Pool ID: 3333 Account: 61111 • Security collateral for ISA clients is delivered to Eurex Clearing on a double-title (direct-transfer) basis • At the CSD*, individual (sub)accounts can be opened per collateral pool providing physical segregation • Pools can be linked to the same (sub)account and security collateral allocated to the client pool by asset tagging • Tagged security collateral is held in one CSD account but the legal model and protection remains exactly the same • CM tags assets using the predefined 4 digit ‘Client Reference ID’** to the SWIFT message • Upon settlement, the CSD confirms settlement via SWIFT message incl. the Client Reference ID • Asset tagging is also available for multiple omnibus collateral pools under the Standard OSA and/or CASS OSA. * So far, only Clearstream Banking Frankfurt (incl. 6 series creation accounts) is an approved collateral location for ICM ** If a Client Ref ID is missing, the transfer will not be processed; CM will be informed. If the Client Ref ID is valid, the transfer will be processed accordingly, even if it is erroneous
  • 10.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Disclosed Client (NCM / RC) No Undisclosed clientUndisclosed client Only to known clients ValueValueAssetAsset Yes Individual Segregation Account (ISA) Multiple Omnibus Segregation Account (OSA) Standard Omnibus Segregation Account (OSA) Type of client position account? ustomer riskFellow customer risk acceptable? ollateralType of collateral protection? Type of segregation 10 Client Asset Protection Decision Tree EMIR segregation and porting requirements provide different levels of protection. Our Clearing models Individual Clearing Model Elementary Clearing models *Net Omnibus Clearing model *Offers CASS Protection Non-Disclosed / Agency Client • The RC legal entity needs a tripartite agreement with a CM/ECAG • Have access to the Common Report Engine for transparency Registered Customer (RC) • No direct relationship with Eurex Clearing AG • Eurex Clearing only knows the Clearing Member
  • 11.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Capital & Margin Efficiencies Agenda 11
  • 12.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Eurex Clearing Eligible Collateral & Haircuts Yield Shift = Yield Shift Market Price Risk Credit Risk Liquidity Risk Government and Short Term Issues (Bubills) Bonds BBUN 3.1% 3.1% 0.8% 0.80% 0.0% 1.00 State Issues BLAN 3.1% 3.1% 0.8% 0.80% 0.0% 1.00 City and Municipality Bonds BSTA 4.4% 4.3% 1.1% 0.80% 0.2% 1.12 State Agencies BAGE 4.2% 4.2% 1.1% 0.80% 0.2% 1.07 Corporates & Other Bonds BIND, BOTH 8.8% 9.2% 2.4% 0.80% 1.2% 1.18 Bank Bonds BBAK 10.8% 11.9% 2.8% 0.80% 1.4% 1.27 Federal Bonds and Bills (GMBF), Loan obligations BCNF 2.7% 2.7% 0.8% 0.80% 0.0% 1.00 Kantonal Obligations, Bonds, Bills (GMBF) BCAN 3.0% 2.9% 0.8% 0.80% 0.0% 1.00 City and Municipality Bonds BSTA 4.4% 4.3% 1.1% 0.80% 0.2% 1.12 State Agencies BAGE 4.2% 4.2% 1.1% 0.80% 0.2% 1.07 Corporates & Other Bonds BIND, BOTH 8.8% 9.2% 2.4% 0.80% 1.2% 1.18 Bank Bonds, Mortgage Bonds (Pfandbriefzentralen) BBAN 10.2% 11.4% 3.5% 0.80% 1.4% 1.59 USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Exchange listing 2) Admissible proportion of the issued capital is 25% 3) High credit quality - investment grade Government Bonds BAUS, BABP, BADK, BANK, BASK, BAAD, BACD, BAJY 3.1% 3.1% 0.8% 0.80% 0.0% 1.00 EUR, CHF, USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Exchange listing 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade High Yield Government Bonds BBSL 9.6% 10.4% 2.6% 0.80% 1.4% 1.17 EUR, CHF, USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Exchange listing 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade Italian Government Bonds BABS 10.6% 12.5% 2.8% 0.80% 1.6% 1.17 EUR, CHF, USD, GBP, DKK, NOK, SEK, AUD, CAD, JPY 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Exchange listing 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade Irish Bonds BPOS 7.0% 7.9% 2.0% 0.80% 0.9% 1.16 DAX, EuroStoxx 50, SMI constituents SAKT, SHDX 23.1% 20.0% - - - 1.00 Eligible equities for GC Pooling Equity Basket SHDX 23.1% 20.0% - - - 1.00 Specific Equity Collateral SECA 100% 100.0% - - - 1.00 Security Sub-Group Security Type Code New Minimum Haircut Old Minimum Haircut Equities EUR, CHF 1) Issuer <> Clearer or seg. NCM if applicable 2) Admissible proportion of the free float is 5% 3) maximum 30% of required daily collateral Yield Shift (Market Price Risk + Credit Risk) xLiquidity Risk Bond Collateral EUR, DEM 1) Marketable assets as announced by ECB 2) ECB Liquidity Classes I-IV 3) Issuer <> Clearer or seg. NCM if applicable 4) Exchange listing & price (except Bubills) 5) Admissible proportion of the issued capital is 25% 6) High credit quality - investment g CHF 1) SNB Repo eligible 2) Issuer <> Clearer or seg. NCM if applicable 3) Exchange listing & price 4) Admissible proportion of the issued capital is 25% 5) High credit quality - investment grade Collateral Type Currency Admission Criteria
  • 13.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Eurex Clearing offers a variety of services to guarantee an optimal usage of provided collateral 13 Transparency • Intraday monitoring (online processing, real time up date of collateral balances) • Daily publication of admissible securities list * • Timely margin requirements against the collateral deposited intraday and end of day • Automatic balancing through the reuse of GC Pooling® Basket Collateral ** • Efficient cash handling using optional auto-repay and Permanent Cash Balance (PCB) functionality to reduce operational effort and cash balances to a minimum • Manage collateral in real-time and to deposit and release securities online • Margin and Clearing Fund requirements using cash in Euro and CHF • Eurex Clearing accepts approx 30,000 ISINs based on liquidity categories of European Central Bank Eligible Asset Database as well as Swiss National Bank • Eligible securities are validated on a daily basis • Late cash cut offs: Withdraw prefunded cash for ISA segregated collateral pools same day until late afternoon (CHF 1:30, EUR 2:30pm CET) upon receipt of client collateral Efficiency Flexibility * The full list of eligible securities is distributed via CRE (.txt & .csv) and published on our webpage http://www.eurexchange.com/exchange-en/market-data/clearing-data/risk-parameters/ ** Presentation “Reuse GCP `Collateral for Eurex Margining” published under : http://www.eurexclearing.com/blob/clearing-en/46792/149090/2/data/reuse_gcp_service_description.pdf *** Xemac is the collateral management system of Clearstream Banking Frankfurt and CmaX is the collateral management system of Clearstream Banking Luxembourg
  • 14.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 § Overview of the Client Custodian Gateway § A solution whereby Clearstream Banking Luxembourg and Eurex Clearing jointly offer, in collaboration with Global Custodians, a collateralization model that: § Allows Registered Customers and NCM’s to satisfy margin requirements for their segregated collateral business under the Individual Clearing Model (ISA/ICM) while keeping securities at their existing Custodian § Reduces operational effort for all involved parties in the margining process by providing a high-degree of automation for the collateral allocation, withdrawal and substitution process § Assumes compliance with EMIR requirements for Omnibus and Individual Segregation Model (Article 39) as well as safekeeping of collateral assets (Article 47.3) § Offering is currently focused on OTC IRS but will be extended across all asset classes cleared § Creation of an attractive value proposition to market actors through § Leveraging the Buy-Side clients’ existing infrastructure and business relationships with Clearing Members, (I)CSDs and Global Custodians in the design of the joint solution § Extension of the Client Custodian Gateway to include additional service offerings such as Securities Lending and Tri-Party Repo 14 Solution Concept: Client Custodian Gateway
  • 15.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Solution Concept: CCP-enabled Direct Buy Side Repo Clearing Trusted Bank (TB) Eurex Clearing CM BS Specific Repo License Holder (SRLH) Eurex Repo GC Pooling Collateral Securities Non-Cash Variation Margin 3 Eurex Clearing as single CCP for IRS and GC Pooling repo markets allows for reduced capital requirements and balance sheet netting for back-to-back repo and reverse repo transactions. BS Registered Customer (RC) TB IRS Clearing Member (CM) EurexOTC Clear IRS Net Position Initial Margin EurexOTC Clear – Interest Rate Swap – Clearing Service Eurex Repo GC Pooling – GC Pooling Select Finance – Clearing Service Trusted Bank (TB) acting potentially in dual capacity as IRS and GC Pooling. Clearing members are allowed to offer CCP-cleared repo and reverse repo trading with BS in GC Pooling repo market. Buy Side Institution (BS): Registered Customer (RC) enters into complementary Specific Repo License Holder (SRLH) agreement. Account setup for cash and collateral based on integrated Clearstream offering. 15 GCPSF Dealer Bank (BDB) Eurex Repo GCM Cash Collateral Securities Cash SM ICFC Subject to chosen trading model, counterparty to a GCPSF GC Pooling repo / reverse repo trade would always be a GCPSF dealer bank (BDB), i.e., trading will only be allowed with a Eurex Repo GCM / DCM. 1 42
  • 16.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 • Eurex Clearing – Overview • Segregation • Collateral • Capital & Margin Efficiencies Agenda 16
  • 17.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Money Market futures: German government futures: Bund Bobl Schatz 8.5-10.5 1M Eonia 3M Euribor 24-35 correlation across maturities Buxl EUR IRS interest rate risk: ~ 10y rate ~ 5y rate ~ 2y rate FRAs Bond / swap correlation French government futures: Long term Mid term short rate correlation ~ 30y rate Cross-margining enhances Eurex Clearing’s portfolio margining by taking government futures, Euro- Swap futures and interest rate swap (IRS) links into account. Euro yield curve coverage across listed and OTC products Hedging relations for cross-margining based upon correlation 24-35 1.75-2.25 4.5-5.5 Bond / swap correlation correlation across maturities 17 Euro-Swap futures: FSWL FSWM FSWS 10y correlation across maturities FSWX 30y 2y 5y
  • 18.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 18 Overall initial margins for cross-margined portfolios might be lower which reflects risk reduction. Prisma Cross-Margining Went Live in May 2014 – Portfolio Simulations Available Optimal allocation of positions delivers lowest cost through cross-margining of OTC and ETD Without cross-margining With 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 2 day liquidation horizon OTC IRSFI listed products IR Swaps FI futures / futures- style options 2 day horizon 5 day horizon Margin requirements: Futures / future -style options OTC IRS Total If IRS and futures positions are hedged: Futures are transferred to the IRS split such that the reduced risk is reflected in lower margins* IRS+FI IR Swaps FI futures / opt. Allocation of FI listed products that hedge IRS exposure FI-only FI futures / futures-style options 2 day horizon 5 day horizon Margin reduction by cross-margining: Cross-margined portfolio * Depending on portfolio diversity Total
  • 19.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 1919© Oliver Wyman Benefits for the sell side of clearing EURIBOR, Fixed Income Futures & EUR IRS through Eurex Clearing 19 Comments • Cross-product netting benefits result in reduction of funding requirements • RWA for DF reduced mainly due to lower DF contribution on Eurex Clearing & low c-factor • Significant capital cost reduction driven by lower DF contribution/ c-factor & cross-margining benefits for the portfolio Eurex FI F&O + Euribor Futures Optimised IRS Portfolio EUR MM OTC IRS Eurex FI F&O Euribor On separate CCPs Combined on Eurex Clearing % Reduction Initial margin posted 54.0 26.9 10.4 91.3 27.9 69% Default fund 5.4 1.9 1.0 8.3 2.0 77% Funding requirements 59.4 28.8 11.4 99.6 29.8 70% EAD 25.2 12.5 4.9 42.6 13.0 69% Trade exp. (RWA) 0.5 0.3 0.1 0.9 0.3 69% Default fund (RWA) 13.5 0.1 2.6 16.2 0.1 99% CVA VaR (RWA) - - - - - - Total RWA 14.0 0.3 2.7 17.1 0.4 98% Capital requirements 1.8 0.0 0.3 2.1 0.0 98% Capital costs 0.2 0.0 0.0 0.2 0.0 98% Funding costs 0.7 0.3 0.1 1.2 0.3 72% CVA - - - - - - Total costs 0.9 0.3 0.2 1.4 0.3 76%
  • 20.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 Cross-Product Margining: Example – Futures Asset Swap 20 Interest Rate Swaps Interest Rate Future Maturity: 10Y Fixed Payer Notional: 50MM BUND Future 364 contracts Notional: 50MM Initial Margin In ‘000 EUR Default Fund In ‘000 EUR Total Costs1 In EUR In bps of notional 1.100 850 110 60 17,000 11,000 2.8 bps28,000 Interest Rate Swaps Interest Rate Future Maturity: 10Y Fixed Payer Notional: 50MM BUND Future 364 contracts Notional: 50MM 700 48 0.9 bps9,000 Baseline CCP EurexClearingPRISMA - 69% Eurex Clearing
  • 21.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 21 TED Spread - Schatz Futures vs Euribor Strip – Example of the Benefits of Cross- Margining through one CCP TEDSpreadTEDSpread Euribor + Schatz Euribor + Schatz RBM IM Euribor 48,750 + 25,200 48,750 TEDSpread Euribor Schatz Two CCPs EurexClearingPRISMAEurex Clearing IM Schatz TEDSpread - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 1 2 3 PRISMA saving 49% RBM saving 34% RBM Margin PRISMA Margin Euribor Margin Schatz Margin 37,614 73,650 Two CCPs Eurex RBM Prisma
  • 22.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 IRS CCP Switch A EUR 250 million 10 year fixed payer IRS position is switched from another CCP to EurexOTC Clear – what are the benefits? Current position Notional € 250MM IRS 10 Year Fixed Payer IM DF CCP Current position Notional € 250MM IRS 10 Year Fixed Payer IM DF ECAG Current position IM DF If there is already an existing position in Eurex Exchange’s Fixed Income Futures with Eurex Clearing: €250 million 10 year fixed payer IM € 7.5m € 5.3m € 4.2m* € 309,456* € 7.5m* € 529,563* € 787, 500*€ 7.875m* 2,500 long Eurex Exchange’s Bund Futures * Calculated September 2014.
  • 23.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 23 Enhanced netting functions deliver greater reductions in gross notional and lowers capital and leverage ratio cost Apr 2015 2015 Live
  • 24.
    www.eurexclearing.com EurexOTC Clear -Segregation, Collateral & Capital & Margin Efficiencies Dubai, 01 April 2015 24 © Eurex 2015 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”. 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