While Eurex Clearing is responsible for handling the default of a Clearing Member including the liquidation of any client positions that could not be successfully transferred to a non-defaulted Clearing Member, the default of a Clearing Member's client is handled by such Clearing Member, rather than by Eurex Clearing.
Different requirements apply depending on whether a disclosed client or an undisclosed client defaults. Undisclosed clients can only participate in omnibus clearing models, while individual segregation is not possible. Disclosed Direct Clients, which can be Basic DCs, DCs with System Access or DC Market Participants, can chose between omnibus segregation and individual segregation. While the identity of undisclosed clients is not known to Eurex Clearing, Eurex Clearing requires contact information for each Disclosed Direct Client and therefore knows their identity.
Default of an undisclosed client (a-account client)
- A Clearing Member has no obligation to inform Eurex Clearing of the default of an undisclosed client.
- All positions of the respective client are held on one of the Clearing Member’s client accounts (an a-account). The Clearing Member itself can transfer the positions from the client account to one of its proprietary accounts and can liquidate all respective positions. The transfer of positions is conducted via the "regular" position transfer functionality.
- Since undisclosed clients can only operate under an omnibus clearing model, the collateral securing the defaulted client's positions has been deposited with Eurex Clearing by the Clearing Member. The Clearing Member does not need to request a transfer of collateral from Eurex Clearing, but the handling or liquidation of collateral solely depends on the Clearing Member’s bilateral agreements with the respective client.
- The Clearing Member is responsible for liquidating the client’s portfolio.
Default of a Disclosed Client operating under an Individually Segregated Account (ISA)
- A Clearing Member is obliged to inform Eurex Clearing without undue delay of the default of any of its Disclosed Clients.
- The Clearing Member can use the "Stop Button", to exclude entities admitted to trading on the Eurex Exchange or the Frankfurt Stock Exchange (DC Market Participants/Indirect Client Market Participants) from any trading and clearing activity.
- Subsequently, the Clearing Member has to request in writing the suspension of the DC Market Participant (referencing Chapter I Part 1 Number 10.1 of the Clearing Conditions) or DC Market Participant with System Access/Basic DC (referencing Chapter I Part 1 Number 11.1 of the Clearing Conditions) from Eurex Clearing. Please click here for the Clearing Conditions.
- If the Clearing Member has no direct access to the Disclosed Client's accounts, Eurex Clearing will transfer the respective positions into one of proprietary accounts of the Clearing Member, unless instructed otherwise by the Clearing Member.
- In the ISA Model, collateral securing the defaulted Disclosed Client’s positions has been deposited with Eurex Clearing by the Clearing Member. The Clearing Member has direct access to this collateral and the handling or liquidation of collateral solely depends on the Clearing Member's bilateral agreements with the respective Disclosed Client.
- Once the Clearing Member has access to the defaulted Disclosed Client’s positions and collateral, all subsequent steps are in the Clearing Member's responsibility.
Default of a Disclosed Client operating under the Elementary Clearing Model
- A Clearing Member is obliged to inform Eurex Clearing without undue delay of the default of any of its Disclosed Clients.
- The Clearing Member can use the “Stop Button”, to exclude entities admitted to trading on the Eurex Exchange or the Frankfurt Stock Exchange (DC Market Participants/Indirect Client Market Participants) from any trading and clearing activity.
- Subsequently, the Clearing Member has to request in writing the suspension of the DC Market Participant (referencing Chapter I Part 1 Number 10.1 of the Clearing Conditions) or DC Market Participant with System Access/ Basic DC (referencing Chapter I Part 1 Number 11.1 of the Clearing Conditions) from Eurex Clearing. Please click here for the Clearing Conditions.
- If the Clearing Member has no direct access to the Disclosed Client's accounts, Eurex Clearing will transfer the respective positions into one of proprietary accounts of the Clearing Member, unless instructed otherwise by the Clearing Member.
- In the Elementary Clearing Model, collateral securing the defaulted Disclosed Client's positions has been deposited with Eurex Clearing by the Clearing Member. The Clearing Member has direct access to this collateral and the handling or liquidation of collateral solely depends on the Clearing Member's bilateral agreements with the respective Disclosed Client.
- Once the Clearing Member has access to the defaulted Disclosed Client's positions and collateral, all subsequent steps are in the Clearing Member's responsibility.
