In case of the occurrence of a Termination Event with respect to a FCM Clearing Member
In case of the occurrence of a Termination Event with respect to a FCM Clearing Member, Eurex Clearing is entitled to (i) either issue an FCM Client Declaration of Termination with respect to the relevant FCM Client Netting Set and to calculate the Difference Claim with respect to such FCM Client Netting Set, or (ii) to use all reasonable efforts to transfer all FCM Client Transactions (including Eligible Margin Assets) under the relevant FCM Client Netting Set to a Replacement FCM Clearing Members by initiating a porting process with respect to all FCM Clients of the FCM Clearing Member.
The porting process starts with Eurex Clearing informing all other FCM Clearing Members, all FCM Clients of the relevant FCM Clearing Member and all Non-FCM Clearing Members of the occurrence of the Termination Event with respect to the FCM Clearing Member and the initiation of the porting process with respect to the FCM Client Transactions (the "Replacement Notice"), including providing information on the Replacement Cut-Off Time stating until when all FCM Clearing Member Replacement Requirements need to be fulfilled to ensure a valid porting.
Each FCM Client can be ported individually ("Porting Unit") to a separate Replacement FCM Clearing Member.
With the Replacement Notice, Eurex Clearing also publishes the Replacement Cut-Off Time stating the relevant point in time until when all FCM Clearing Member Replacement Requirements need to be fulfilled to ensure a valid porting. The Replacement Cut-Off Time is 1:00 p.m. CET on the Business Day following the date on which the FCM Clearing Member Termination Time has occurred. Eurex Clearing AG may extend the Replacement Cut-Off Time to facilitate the porting process by giving notice to the affected FCM Clearing Member, all FCM Clients of the affected FCM Clearing Member, all other FCM Clearing Members and to all Non-FCM Clearing Members.
The FCM Clearing Member Replacement Requirements are stipulated under Chapter I Number 9.4.3 (2) of the FCM Regulations. In addition to the fulfilment of the FCM Clearing Member Replacement Requirements, the potential Replacement FCM Clearing Member must provide documentation to enable the technical set-up of the clients in its Eurex Clearing AG environment. For further details please see below under "Mandatory Prerequisites".
If a potential Replacement FCM Clearing Member is willing to accept the transfer of FCM Client Transactions in one or more FCM Client Transaction Accounts, and all FCM Clearing Member Replacement Requirements in respect of the relevant FCM Client Transactions are fulfilled by the end of the Replacement Cut-Off Time, the FCM Client Transactions, and all rights and obligations of the Affected FCM Clearing Member arising from such FCM Client Transactions, shall be transferred to the Replacement FCM Clearing Member.
As a result of a Transfer, the Affected FCM Clearing Member will be released from all its obligations in relation to the transferred FCM Client Transactions and the Replacement FCM Clearing Member shall have assumed such obligations in relation to such FCM Client Transactions.
In addition to the FCM Client Transactions, Eurex Clearing will also transfer a portion of the value of Eligible Margin Assets booked on the FCM Client Margin Account (corresponding to the LSV reserved for the particular FCM Client) to the Replacement FCM Clearing Member.
If no Replacement FCM Clearing Member can be identified or if any of the FCM Clearing Member Replacement Requirements with respect to a potential Replacement FCM Clearing Member are not fulfilled by the end of the Replacement Cut-Off Time, Eurex Clearing AG will
As a consequence of the issuance of the FCM Client Declaration of Termination, all FCM Client Transactions forming an FCM Client Netting Set shall be treated as if they are terminated and Eurex Clearing AG shall be entitled to liquidate such FCM Client Transactions by initiating the Default Management Process in accordance with the FCM Default Rules.
Once all FCM Client Transactions under the relevant FCM Client Netting Set are liquidated (meaning replaced by equivalent Swap Transactions entered into between Eurex Clearing AG and other FCM Clearing Members or Non-FCM Clearing Members during the Default Management Process), Eurex Clearing AG will calculate a separate Difference Claim for each FCM Client Netting Set by way of combining the relevant Liquidation Price of all Swap Transactions and forming part of the relevant FCM Client Netting Set and which are deemed terminated. The final amount of the Difference Claim will (i) if it is a positive figure, be owed by Eurex Clearing AG to the FCM Clearing Member on behalf of the relevant FCM Client, or (ii) if it is a negative figure, be owed by the FCM Clearing Member on behalf of the relevant FCM Client to Eurex Clearing AG.
In case Eurex Clearing AG is the creditor of the Difference Claim against the FCM Clearing Member, Eurex Clearing AG is entitled to realize its security interests in all of the Eligible Margin Assets actually delivered to Eurex Clearing AG as Margin with respect to the relevant FCM Client Netting Set. In the case of Eligible Margin Assets in form of cash, Eurex Clearing will simply use such cash as cash is transferred on basis of a full title transfer, whereas in the case of Eligible Margin Assets in form of securities, Eurex Clearing AG will enforce its German law pledge granted by the FCM Clearing Member in accordance with the Pledge Agreement.
Eurex Clearing AG will realize security interests with a value amounting to the relevant LSV reserved for the relevant FCM Client. In case of a remaining FCM Client Margin Shortfall, Eurex Clearing AG will apply FCM Client Buffer to cover such shortfall. If the available FCM Client Buffer is insufficient to fully cover all FCM Client Margin Shortfalls of all FCM Clients linked to the same FCM Client Margin Account, Eurex Clearing AG will apply the available FCM Client Buffer on a pro rata basis to each FCM Client with respect to which a FCM Client Margin Shortfall has occurred.
In case Eurex Clearing AG is the debtor of the Difference Claim, the Difference Claim will be discharged by payment of the relevant amount to the FCM Clearing Member and such payment will constitute a return to the FCM Clearing Member for the account of the relevant FCM Clients. Any remaining pledges in respect of Eligible Margin Assets in the form of securities booked into the FCM Client Margin Account will expire and the pledged securities will be released by Eurex Clearing AG. Any remaining Eligible Margin Assets in the form of cash booked into the FCM Client Margin Account will be returned to the FCM Clearing Member for the benefit of its FCM Clients.
In case of an Insolvency of the FCM Clearing Member
In case of the occurrence of an Insolvency Termination Event with respect to the FCM Clearing Member, the insolvent FCM Clearing Member will be subject to U.S. insolvency proceedings. Depending on the regulatory status of the FCM Clearing Member in the U.S. either a bankruptcy case under Chapter 7 Subpart IV of the U.S. Bankruptcy Code and Part 190 of the CFTC Rules or proceedings under the U.S. Securities Investors Protection Act (SIPA Proceedings) will be initiated with respect to the relevant FCM Clearing Member including the appointment of either a bankruptcy trustee or SIPA trustee.
In deviation from the porting process Eurex Clearing AG applies in case of the occurrence of a Termination Event, the porting process which applies in case of the occurrence of an Insolvency Termination Event will be determined in close cooperation with the relevant bankruptcy trustee or SIPA trustee of the insolvent FCM Clearing Member and the CFTC.
Eurex Clearing AG will seek to coordinate any action to be taken to transfer FCM Client Transactions and Eligible Margin Assets to a Replacement FCM Clearing Member with the relevant trustee and the CFTC. To comply with applicable U.S. insolvency law or instructions or orders by the CFTC or the competent U.S. bankruptcy court, Eurex Clearing AG is entitled to deviate from the porting process described in the FCM Regulations.
