EUROPEAN UNION: Amendment of Eurex Clearing Capital Structure to Strengthen Default Waterfall

Thursday February 2 2017

As announced in Eurex Clearing circular 066/16, Eurex Clearing AG has amended its capital structure to further strengthen the default waterfall.

The default waterfall foresees that losses resulting from the default of a Clearing Member are primarily borne by the margin collateral and the Contributions to the Clearing Fund provided by the defaulted Clearing Member.

If these funds are insufficient to cover all losses, Eurex Clearing’s own contribution to the Clearing Fund, the so-called Dedicated Amount, will be applied, prior to utilising any non-defaulted Clearing Members’ resources.

When determining the exact amount of the Dedicated Amount, two main aspects have to be considered:

• The amount contributed by the CCP has to ensure that all stakeholders’ main incentive is to strengthen the CCP’s risk management, and
• The amount contributed by the CCP has to be compliant with regulatory requirements.

To meet the objective of continuously optimising the incentive structure around the CCP’s default management process and default waterfall, Eurex Clearing will increase its Dedicated Amount by EUR 50 million, from currently EUR 100 million to EUR 150 million, as of 31 January 2017.

Click on the link above for further details.