Amendments to Eurex Clearing’s Clearing Conditions and FCM Regulations with respect to the new ISDA IBOR Fallbacks Supplement

1. Introduction

This circular contains information with respect to the service offering of Eurex Clearing AG (Eurex Clearing) and introduces amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions) and the Price List of Eurex Clearing AG (Price List) regarding the following topic:

• Amendments to the index cessation regime for OTC transactions to align with the ISDA IBOR Fallbacks Supplement and further minor amendments

The amendments will become effective as of 25 January 2021.

2. Required action

There is no required action for the Participants.

3. Details

Amendments to the index cessation regime for OTC transactions to align with the ISDA IBOR Fallbacks Supplement and further minor amendments

With this circular, Eurex Clearing introduces amendments to its index cessation regime for OTC transactions to keep them in line with bilateral market practice. In particular, Eurex Clearing aims at reflecting the core provisions of the newly published ISDA IBOR Fallbacks Supplement in its rulebooks. The key amendments are as follows:

A.    Introduction of a pre-cessation event as an index cessation trigger event for LIBORs

For LIBORs, a new pre-cessation event as a trigger for the application of a fallback index is introduced. A pre-cessation event occurs if the regulatory supervisor for the relevant index administrator publicly states that

• it has determined that the relevant index is no longer, or as of a specified future date will no longer be, representative of the underlying market and economic reality that such index is intended to measure and representativeness will not be restored, and
• the public statement or publication of information is being made in the awareness that the statement or publication will engage certain contractual triggers for fallbacks activated by pre-cessation announcements by such supervisor (howsoever described) in contracts. 

This provision mirrors the respective pre-cessation event clause of the ISDA IBOR Fallbacks Supplement.

B.    Clarification of the applicable fallbacks for IBORs

Already today, Eurex Clearing’s Rulebooks foresee that in case an index cessation event occurs, in principle, the fallback specified in the 2006 ISDA Definitions will be applied. It is now clarified that also with regard to the discontinuation of certain tenors of IBORs, the fallback regime of the 2006 ISDA Definitions (as amended by the ISDA IBOR Fallbacks Supplement) will normally be applied.

C.    Amendments with respect to the temporary index non-publication regime and further minor amendments

Within the fallback logic applicable to a temporary index non-publication, it is now clarified that (unless specified otherwise) Eurex Clearing will retrieve the relevant missing index level either from another authorised distributor or directly from the index administrator or (new) it will use an index level formally recommended for use by the relevant supervisor of the index administrator. This fallback logic resembles the provisions introduced by the ISDA IBOR Fallbacks Supplement. 

Further minor amendments are introduced, in particular, to keep Eurex Clearing’s Rulebooks in line with the 2006 ISDA Definitions to the extent relevant. 

To reflect the changes, in particular the following provisions will be amended as outlined in Attachments 1-3:

• Chapter I Part 6 Number 3.7 of the Clearing Conditions
• Chapter VIII Part 1 Number 1.8 of the Clearing Conditions
• Chapter II Part 1 Number 1.8 of the FCM Regulations

As of the effective date, the full versions of the Clearing Conditions and FCM Regulations will be available for download on the Eurex Clearing website www.eurex.com/ec-en/ under the following link:

Clear > Rules & Regs > Rules and Regulations

The changes and amendments to the legal framework of Eurex Clearing AG published by this circular are deemed accepted by each affected contractual party of Eurex Clearing AG, unless the respective contractual party objects by written notice to Eurex Clearing AG within the first ten (10) Business Days after publication. Any ordinary right of Eurex Clearing AG to terminate the respective contract (including a Clearing Agreement, if applicable) shall remain unaffected.

Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or FCM Clearing Conditions of Eurex Clearing AG, as applicable.

Attachments:

Amended sections of the following Rules and Regulations, in particular:

1. Chapter I Part 6 Number 3.7 of the Clearing Conditions 
2. Chapter VIII Part 1 Number 1.8 of the Clearing Conditions
3. Chapter II Part 1 Number 1.8 of the FCM Regulations

 Further information