C7 Securities Clearing Service (C7 SCS): Introduction of a Pair-Off-Service; Amendments to the legal framework of Eurex Clearing AG

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 to the Price List of Eurex Clearing AG (Price List) regarding the following topics:

A.    Introduction of Pair-Off Service for C7 Securities Clearing Service (C7 SCS)
B.    Minor amendments to the Clearing Conditions due to harmonization of wording 

The amendments under items A and B will become effective as of 4 October 2021. 

Production start: 4 October 2021

Learn more about C7 SCS Release 1.0 on our dedicated initiative page under the following link: Support > Initiatives & Releases > C7 SCS Releases > C7 SCS Release 1.0. System documentation, circulars, timeline and much more information will be available there for you.

2.   Required action

There is no required action.

3.   Details of the initiative

A.    Introduction of Pair-Off-Service for C7 Securities Clearing Service (C7 SCS)

In response to requirements from our customers in context of the introduction of C7 Securities Clearing Service (C7 SCS) applying Trade Date Netting (TDN), Eurex Clearing is introducing a Pair-Off Service to provide Clearing Members with an opportunity to resolve opposing late securities transactions relating to the same securities and currency and pending at the settlement location on the same settlement account.

In scenarios where settlement instructions with opposing delivery obligations between the Clearing Member and Eurex Clearing stay unsettled at the settlement location for several days, a risk arises that Eurex Clearing initiates a buy-in process in accordance with the Clearing Conditions. The Pair-Off Service allows Clearing Members to set-off such opposing delivery obligations so that sell transactions and buy transactions get cash-settled before Eurex Clearing initiates the buy-in. 

The Pair-Off is initiated by submitting the Pair-Off-Request Form on the Pair-Off Date, which is the Business Day on which a buy-in process for a late sell transaction would be initiated after settlement cut-off time for the first time. For shares falling under ESMA Short Selling Regulation (SSR)¹  this is the 4th Business Day after the Contractual Settlement Date, for other securities it is the 5th Business Day after the Contractual Settlement Date.

¹ Article 15 of Regulation (EU) No. 236/2012

The Pair-Off Service is limited to a maximum of 5 Pair-Off Requests per Trading Participant per Pair-Off Day.

A Pair-Off Request will only be processed by Eurex Clearing, if 

• the request has been received during the Pair-Off Request Period from 10:00 – 16:00 CET on the Pair-Off Date, 
• all Pair-Off Eligibility Requirements are met, and 
• Eurex Clearing has notified the Clearing Member by submitting a written acceptance notice (Pair-Off Acceptance Notice) that the request is accepted. 

Eurex Clearing will – in its own discretion and using best efforts – only accept a Pair-Off Request, if it deems itself capable of processing the Pair-Off Request. When making this determination, Eurex Clearing particularly considers the point in time when the relevant Pair-Off Request was received. If Eurex Clearing determines that it does not have the capability to process the relevant Pair-Off Request, Eurex Clearing is entitled to reject such Pair-Off Request. Eurex Clearing will inform the Clearing Member about the rejection in writing as soon as practicably possible.

Each accepted Pair-Off Request will be processed within the Pair-Off Processing Time, latest until 08:30 CET of next business day.

The processing of the Pair-Off Request includes the following steps:  

• Settlement of all transactions forming part in the set-off in cash, 
• Cancellation of the pending settlement instructions at the settlement location, 
• Transfer of the cash offset amount on the same cash account of the relevant Clearing Member that is specified for cash compensations in course of the buy-in process, and
• (If any) re-instruction of surplus quantity in securities for settlement at the settlement’s location.

A Pair-Off Procedural Manual with a detailed description of the service and the Pair-Off Request Form will be published with a separate Eurex Clearing circular.

To reflect the introduction of the Pair-Off Service, the following provision will be amended as outlined in Attachment 1 and Attachment 2:

• Chapter V Part 2 Number 2.2.5 of the Clearing Conditions
• Number 8.3.8 of the Price List

B.    Minor amendments to the Clearing Conditions due to harmonization of wording and referencing

Eurex Clearing proposes further minor amendments to its Clearing Conditions to further streamline its legal framework. For the amendments in detail, please refer to Attachment 1:

• Chapter V Part 2 Number 2.5.4 of the Clearing Conditions

Publication of amendments to the Price List and the Clearing Conditions

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

Rules & Regs > Rules and Regulations

The 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 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:

1. Amended sections of Chapter V of the Clearing Conditions
2. Amended sections of Price List

Further information