Our ISA Direct model combines elements of a direct clearing membership and the traditional service relationship in client clearing - tailored specifically for the buy side. It establishes a principal client relationship between buy side clients and the CCP, with the regular Clearing Member acting as a Clearing Agent or Indemnifying Clearing Agent providing a variety of mandatory and optional service functions. The Mandatory legal obligations are summarized below:
ISA Direct | ISA Direct Indemnified | |
CCP Trade Counterparty | ISA Direct Clearing Member (IDCM) | ISA Direct Indemnified Clearing Member (IDICM) |
CCP Margin Obligation | IDCM | IDICM |
Default Fund Contribution | Clearing Agent (CA) | Indemnifying Clearing Agent (ICA) |
Default Management Process (DMP) | CA | ICA |
Indemnity | n/a | ICA |
Eligible clients, jurisdictions and market/product coverage are outlined in the following table:
ISA Direct | ISA Direct Indemnified | |
Eligible Client Types | Insurance companies**, Investment Funds**, Pension Funds, Financial Institutions* | same as for ISA Direct plus |
Markets | OTC IRD, Repo Market/GC Pooling | Repo Market/GC Pooling |
Eligible client jurisdictions |
** as defined in Art. 4 of the CRR
EEA: European Economic Area, CRR: Capital Requirement Regulation
An ISA Direct Clearing Membership may also be granted as an ISA Direct Light License (eligible for GC Pooling Transactions only).
For further information click here.
Please find below the main requirements to take into consideration, if you wish to pursue becoming an ISA Direct/ISA Direct Indemnified Clearing Member by applying for an IDCM/IDICM Membership - for Eurex OTC IRD Clear and/or Eurex Repo Market. This section provides details on the application forms, regulatory and capital requirements and necessary collateral infrastructure. IDCM/IDICM must enter into a triparty clearing agreement with a Clearing Agent and Eurex Clearing AG.
There might be further requirements and/or forms to complete depending on the market, products, cash and securities accounts to be set up. Please note that IDCM/IDICM can only conduct house business and as such only have principal (P) position accounts.
Eurex Clearing requires proof of the applicant's capital adequacy. Proof is provided by scanned copy of the return the applicant would usually provide to its regulator, so providing evidence is a straightforward process. As such, members are required to prove capital-/own funds requirements according to the highest amount out of the following minimum or dynamic components:
Minimum component
OTC IRD | Repo | |
ISA Direct/ISA Direct Indemnified CM | 7.5 mn** | 50 mn** |
** for Investment Funds, Mutual Funds, Insurance Pools, and Pension Funds capital requirements are based on their assets under management for which, in deviation of the above, a minimum of EUR 100 million is applicable.
The total minimum requirement is aggregated over all clearing licenses i.e. if applying for Repo and OTC it would be EUR 50 mn + EUR 7.5 mn = EUR 57.5 mn.
Dynamic component
The dynamic requirement is represented by the higher amount out of
• 20 percent of the 30-day average of the Initial Margin requirements or
• 20 percent of the 250-day average of the Initial Margin requirements.
It is the Clearing Agent's responsibility to post the default fund to Eurex Clearing with respect to the ISA Direct/ISA Direct Indemnified CM’s transactions. Contribution to the Default Fund depends on the relative risk exposure brought to the Eurex Clearing system by such ISA Direct/ISA Direct Indemnified Clearing Member.
As such, Clearing Agents are required to deposit the highest of the amounts as referred to under Default Fund.
The operational requirements depend on your agreement with your Clearing Agent/Indemnifying Clearing Agent. The following requirements or business functions can be either fulfilled by the ISA Direct/ISA Direct Indemnified Clearing Member (IDCM/IDICM) or the Clearing Agent (CA)/Indemnifying Clearing Agent (ICA) or a third party (e.g. custodian) in case eligible:
The operational requirements are per default to be fulfilled by the CA/ICA based on agreements between the CA/ICA and ISA Direct Member (Indemnified Clearing Member) whereas the IDCM/IDICM can limit the CA/ICA for the following:
Collateral infrastructure
Business functions
Eurex Clearing will also need to carry out know your customer (KYC) checks. For further information click here.
Application for the Granting of a ISA Direct Clearing Member License
This is the initial form to start the onboarding process.
ISA Direct Member Clearing-Agreement
This forms the legal basis of the relationships and obligations of the IDCM, CA and Eurex Clearing.
ISA Direct Pledge Agreement
This is only used if the IDCM/CA is pledging securities in order to meet margin requirement. It is essentially to ensure the enforceability of a pledge in a default situation. One pledge agreement covers all securities accounts.
Clearing Agent limitation notice
To confirm the operational set up you have agreed with your Clearing Agent, you and the Clearing Agent must sign the limitation notice. Please note, based on the responsibilities taken over from the Clearing Agent, additional documentation might be required.
Segregation Setup Sheet
This is used to define on the cash and securities accounts.
Static Data Form (OTC IRD only)
This form is used to define parameters for OTC IRS.
* the afore mentioned terms (unless otherwise stated) also comprises ISA Direct Indemnified Clearing Member, ISA Direct Indemnified Clearing License or Indemnifying Clearing Agent.
