Important milestone to facilitate client on-boarding under the new EMIR segregation rules
Eurex Clearing, the clearing house of Deutsche Börse Group, announced today that it has extended its client clearing documentation by market standard annexes to the FOA* Client Clearing Module and the International Swaps and Derivatives Association (ISDA)/FOA Client Clearing Addendum. The clearing house worked closely with FIA Europe, ISDA and market participants to integrate the Annex into the client clearing standard agreements. These standards can be used with immediate effect to on-board with Eurex Clearing’s EMIR compliant omnibus and individual segregation models.
Simon Puleston Jones, CEO of FIA Europe, noted: “Having the choice between use of the Module and the Addendum provides maximum flexibility to clearing members and their clients when documenting the terms of their OTC client clearing relationship. FIA Europe is grateful for the proactive approach taken by Eurex Clearing with FIA Europe’s other members in working together with them to ensure that the Module and the Addendum each work seamlessly with Eurex Clearing’s product offerings, including their cross-product margining solution. This further cements the role of the Module and the Addendum as the core documentation for the client clearing of OTC derivatives in Europe.”
“This is a major milestone for EurexOTC Clear. We are very happy that Eurex Clearing is the first CCP that offers its customers EMIR compliant segregation models that are fully compatible with the client clearing standard documentation. We would like to express our thanks for the close cooperation with FIA Europe, ISDA and the market participants in producing the Eurex Clearing Annex terms,” commented Thomas Book, CEO of Eurex Clearing.
Currently 33 clearing members and 19 Registered Customers are connected to EurexOTC Clear. More than 140 clients, mostly buy-side firms, are in the on-boarding process. Eurex Clearing has been approved as a clearing house in accordance with EMIR by its national competent authority BaFin (Federal Financial Supervisory Authority) on 10 April 2014. The authorization provides regulatory certainty to market participants to complete their readiness for the upcoming clearing mandate in Europe. With the expansion of compatible client clearing standard documentation, Eurex Clearing facilitates in particular on-boarding of international clients. The compatible standard German Clearing Framework Agreement for use with EurexOTC Clear has already been published in March 2014 by the German Banking Association.
The standard documentation offers users of a clearing house a single, binding contractual basis, setting out the legal relationship between clearing members and their clients in derivatives clearing. Using the standard documentation not only simplifies the legal documentation process, but also increases legal certainty by taking advantage of legal opinions provided by FIA Europe, ISDA and Eurex Clearing. The Addendum provides for OTC clearing with an underlying ISDA Master Agreement or the Professional Client Agreement, whereas the Module allows for listed and OTC clearing using the Professional Client Agreement. Clients using the Module will also be able to benefit from Eurex Clearing’s cross-product margining as listed and OTC positions will offset each other, potentially lowering initial margin requirements by up to 70 per cent for a balanced portfolio.
*This document was developed prior to FIA Europe’s name change, from Futures and Options Association (FOA) on 11 March 2014.
