Eurex Clearing Lending CCP
Overview on the CCP service for securities lending
December 2015
Eurex Clearing Lending CCP
December 2015
Content
• What services does Eurex Clearing provide?
• Why is the Lending CCP beneficial for you?
• What is the Lending CCP service offering?
• What is required to participate in the Lending CCP?
• How to get in contact?
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Eurex Clearing Lending CCP
December 2015
Eurex Clearing offers central counterparty services for
multiple asset classes across multiple markets
Market participants
Eurex
Exchange
(Derivatives)
EurexOTC
(IRS)
Frankfurt
Stock Exchange
Irish Stock
Exchange
(Equities, ETFs)
(Equities)
Eurex Bonds
Eurex Repo
(Bonds, Basis)
(Repo,
GC Pooling)
Securities
Lending
Eurex Clearing
Central Securities Depositories
International Central Securities Depositories
•
Eurex Clearing is part of Eurex Group, which is a full subsidiary of Deutsche Boerse Group and has one
of the strongest rating profiles of financial market infrastructure providers in the world; S&P rates
Deutsche Boerse Group with AA.
•
Eurex Clearing is licensed as a credit institution under the supervision of the German Federal Financial
Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin).
•
Eurex Clearing is an approved QCCP; the national competent authority BaFin approved Eurex Clearing
as in accordance with the European Market Infrastructure Regulation (EMIR) effective 10 April 2014.
•
Eurex Clearing is fully compliant with CPMI and IOSCO Recommendations for CCPs.
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Eurex Clearing Lending CCP
December 2015
Lending CCP’s unique service offering benefits the
securities lending marketplace
Simplifies your multiple counterparty credit structure to a single CCP relation for all novated loans
• Improved distribution for borrowers and lenders with restrictive counterparty parameters
• Maintains bilateral trading relationships
Transparent and standardized risk management & default procedures
• Lending CCP guarantees the return of the loan and collateral securities
• Offers protection from counterparty default
Beneficial regulatory capital requirements
• Capital costs reduced for CCP loans
Operational efficiency by CCP-managed post-trade services
• Settlement flows controlled by CCP (based on Power of Attorney)
• Lending CCP operates as the ‘golden source’ for loan valuation and centralized billing
Membership structure for Lenders allows for Agency and Principal roles
• Specific Lender License supports the Agent Lender / Beneficial Owner relationship; utilizes a ‘pledge
model’ for non-cash collateral – Beneficial Owners do not pay margin for the related transactions
• Lenders can act as Principal using either a Direct or General Clearing Membership
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Eurex Clearing Lending CCP
December 2015
Lending CCP delivers a combined platform to connect
bilateral and electronic markets
Securities lending market participants
Bilateral market (OTC)
Electronic securities lending trading platforms
EquiLend*, Pirum Real-Time Service
Eurex Repo-SecLend Market
Eurex Clearing Lending CCP
Central Securities Depositories
International Central Securities Depositories
Clearstream Banking Frankfurt
Euroclear BE, FR, NL
SIX SIS
Clearstream Banking Luxembourg
Euroclear Bank
*EquiLend planned start date in March 2016
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Eurex Clearing Lending CCP
December 2015
Lending CCP serves the key elements of the securities
lending market
Transactions
• Bilateral transactions (OTC)
• Electronic markets
Markets
• Bonds – European corporate & government bonds
• Equities – coverage of key European markets
• Exchange Traded Funds (ETFs)
Collateral
• Loans against cash collateral
• Loans against non-cash collateral - bonds & equities
Tri-party
• Clearstream Banking Luxembourg
collateral agents • Euroclear Bank
Post-trade
functionality
• Loan Deliveries, Mark-to-Marks, Re-rates, Recalls, Returns, Buy-ins
• Corporate Actions, dividend payments
• Automated billing (lending fees & rebates)
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Eurex Clearing Lending CCP
December 2015
Lending CCP operates an integrated solution for your
securities lending transactions
Lending CCP System
Trade
management
Position
management
•
Loan capture
•
Buy-ins
•
Loan validation
•
Corporate Actions
•
Loan novation
•
Rebate / lending fees
•
Loan confirmation
•
Clearing fees
•
Loan recalls
•
Reporting
•
Loan returns
•
Loan re-rates
Delivery
management
•
Instruction of securities
deliveries (on behalf)
•
Instruction of cash
payments (on behalf)
•
Fee settlement
(Rebate / Lending Fees)
•
Information on
settlement results
Risk
management
•
•
Procedure to control
collateral compared to
risk exposure
Collection and release
of cash and non-cash
collateral
Collateral
management
•
Daily mark-to-market
•
Intraday calculation of
margin requirements
•
Margin requirements
consider deposited
principal collateral
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Eurex Clearing Lending CCP
December 2015
Lending CCP incorporates STP trade-flow for your
securities lending activity
Loan negotiation
Trading
Lender
Loan
information
Flow Provider*
Real-time trade validation
Loan
information
Borrower
Clearing
Membership
Clearing
Member
Data transmission
Eurex Clearing
Clearing
Clearing
Member
Settlement
Payment
bank
Clearing
Membership
Cash
Validation
Novation
Confirmation
Loan life-cycle management
Non-cash
Principal
Collateral
Tri-party
agent
Equities
CSD
Bonds
Loan
securities
ICSD
*Flow Provider used as the entry channel from market participants to Eurex Clearing e.g. for New loan transactions, Re-rates, Recalls, Returns etc.
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Eurex Clearing Lending CCP
December 2015
Lending CCP’s Specific Lender License supports the
Beneficial Owner’s role and Agent Lender relationship
Agent Lender
Loan negotiation
Borrower
Loan securities
Beneficial
Owner
Non-cash Principal Collateral
Specific Lender
License
Key:
Loan securities
Eurex
Clearing
Non-cash Principal Collateral
Clearing
Member
Margin Collateral
Pledge to Lender
Pledge to the CCP
Transfer of Title
Beneficial Owner maintains business relationship with Agent Lender
• Agent Lender continues to arrange loans for CCP eligible transactions
• Operational links with flow provider and CCP maintained by Agent Lender
• Agent Lender reports loans and collateral through existing reporting set
Beneficial Owner uses an approved Specific Lender License with a distinctive CCP membership
• No requirement to clear through a General Clearing Member
• No requirement to pay margin
• No default fund contribution
Dedicated requirements for Specific Lender License
• Supervised financial sector entity located within the EU, Switzerland, USA* and other selected countries
• Permission to perform securities lending business
• Pre-requisite is collateral pledge model with Tri-party Collateral Agent
*Pending legal analysis
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Eurex Clearing Lending CCP
December 2015
Lending CCP incorporates a Tri-party collateral process
for the management of your non-cash collateral
Lender
Clearing
Member
CCP
Reporting
Eurex
Clearing
Borrower
Reporting
Clearing
Member
Tri-party agreement*
Collateral
Receiver
Lender
Tri-party
a/c
Collateral
Giver
Collateral Giver & Receiver
Transfer of Title
or
Pledge
CCP
Tri-party
a/c
Transfer of Title
Borrower
Tri-party
a/c
Integrated and enhanced collateral management
• Exposure management undertaken by Lending CCP
• Lender eligibility profiles (bonds & equities) maintained by Lending CCP and Tri-party collateral agent
• Borrower substitutions of Principal Collateral undertaken by Tri-party collateral agent
• Tri-party collateral agents ensures substitution of Principal Collateral prior to Corporate Actions
• Re-use of Principal Collateral within the regulations of Tri-party collateral agent (for transfer of title)
*Borrower, Lender and the CCP make use of the same Tri-party Collateral Agent e.g. Clearstream Banking Luxembourg or Euroclear Bank
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Eurex Clearing Lending CCP
December 2015
Lending CCP includes an integrated solution for
Corporate Action processing on novated transactions
Management of Corporate Actions
Mandatory
Voluntary
Cash Distributions
• Automatic processing of compensation payments based on the
payment rate as agreed in the loan transaction
Distributions with Options
• Automatic distribution of Rights processed as an opening of a new
Rights loan
• Lender can recall the Rights to execute/sell; non-recalled/returned
Rights will be automatically cash settled at the end of the subscription
period
Securities Distributions
• Automatic distribution of stock dividends and bonus shares
processed as an opening of a new loan or an update to the existing
loan
Mandatory Reorganizations
• Automatic nominal and/or ISIN changes processed as an opening
of a new loan or an update to the existing loan; Squeezeout/Redemptions/Liquidations lead to closing of the loan and an
automatic cash settlement
Voluntary Reorganizations
• Corporate Action CCP Transformation* function allows market
participants to arrange for all types of voluntary corporate actions
bilaterally while keeping the loan within the CCP
• Eurex Clearing’s Graphical User Interface** allows Borrowers and
Lenders to electronically communicate, agree and transmit the
expected outturn instructions towards Eurex Clearing
• Dispute Resolution Committee provides independent deliberation on
disputed voluntary corporate actions
*Transformation via Pirum Real-time Service; ** GUI via Eurex Clearing web portal
www.eurexclearing.com
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Eurex Clearing Lending CCP
December 2015
Summary of the Lending CCP’s participation and set-up
requirements
Clearing Membership - Securities Lending license
• Clearing Conditions of Eurex Clearing - Chapter IX Clearing of Securities Lending Transactions
• ‘Full’ clearing membership (GCM/DCM) or Specific Lender License for Beneficial Owners
Technical connectivity to Lending CCP flow provider & reporting infrastructure
• Eurex Repo-SecLend Market and/or Pirum Real-Time Service
• Eurex Clearing Common Report Engine
Securities accounts for loan securities at (I)CSDs
• Equities - Clearstream Banking Frankfurt, Euroclear Belgium/France/Netherlands (ESES) and/or SIX SIS
• Fixed income - Clearstream Banking Luxembourg or Euroclear Bank
Cash accounts for loan related activities
• Cash accounts for fee/rebate and compensation payments (CHF, EUR, USD)
Collateral accounts for Principal Collateral
• Cash accounts for EUR and USD for cash collateral (EUR, USD)
• Tri-party collateral profile/account at Clearstream Banking Luxembourg and/or Euroclear Bank for non-cash collateral
Collateral accounts for Margin Collateral
• Cash accounts (CHF, GBP, EUR, USD) for additional margin payments and/or
• Pledge securities account at Clearstream Banking Frankfurt, Clearstream Banking Luxembourg or SIX SIS
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Eurex Clearing Lending CCP
December 2015
Eurex Clearing continues to advance its Lending CCP for
the securities lending market
Lending CCP service offering:
Asset classes
Flow Providers
Cash, Bonds, Equities & Exchange Traded Funds
EquiLend*, Eurex Repo-SecLend Market & Pirum Real-Time Service
Loan securities
Settlement locations
European fixed income:
Government bonds
Supranational bonds
Regional bonds
Local government bonds
Corporate bonds
ICSD:
Equities:
Belgium
France
Germany
Netherlands
Switzerland
CSD:
ESES / Euroclear Belgium
ESES / Euroclear France
Clearstream Banking Frankfurt
ESES / Euroclear Netherlands
SIX SIS
Exchange Traded Funds:
Replicated ETFs
CSD:
Clearstream Banking Frankfurt
Non-cash Principal Collateral
Tri-party Collateral Agents
Bonds, equities & ETFs
Clearstream Banking Luxembourg & Euroclear Bank
Cash Principal Collateral
Payment locations
EUR
USD
TARGET2 account
Payment banks
Clearstream Banking Luxembourg & Euroclear Bank
*EquiLend planned start date in March 2016
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Eurex Clearing Lending CCP
December 2015
Lending CCP information
Contact
Frankfurt
Paris
Efthimia Kefalea
Thomas Wißbach
Ebru Ciaravino
T +49 (0) 69 2111 7275
M +49 (0) 172 299 0628
T +49 (0) 69 2111 7992
M +49 (0) 172 619 9850
T +33 (0) 155 27 6768
M +33 (0) 685 93 1333
efthimia.kefalea@eurexclearing.com
thomas.wissbach@eurexclearing.com
ebru.ciaravino@eurexclearing.com
London
USA
Gerard Denham
Jonathan Lombardo
Tim Gits
T +44 (0) 207 862 7634
M +44 (0) 787 688 5276
T +44 (0) 207 862 7559
M +44 (0) 746 915 8310
T +1 312 544 1091
M +1 312 929 8588
gerard.denham@eurexclearing.com
jonathan.lombardo@eurexclearing.com
tim.gits@eurexclearing.com
Connect
Web
Twitter
www.eurexclearing.com
@EurexGroup
E-mail
LinkedIn
LendingCCP@eurexclearing.com
www.linkedin.com/company/eurex
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Eurex Clearing Lending CCP
December 2015
© Eurex 2015
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