## EXECUTIVE SUMMARY — _cr16197

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---

### Overview and institutional role
- Eurex Clearing observes the CPSS/IOSCO Principles for Financial Market Infrastructures (PFMIs).
- Global central counterparty (CCP) clearing listed and OTC products; provides fully automated straight-through post trade services to Eurex Deutschland, Eurex Zürich, Frankfurt Stock Exchange, Eurex Bonds GmbH, Eurex Repo GmbH, Irish Stock Exchange, and EurexOTC Clear.
- Maintains accounts at multiple central securities depositories (CSD) and International CSDs (ICSDs); reports to trade repository REGIS-TR for EMIR reporting.
- No links to other CCPs.
- Membership structure:
  - General Clearing Member (GCM): may clear own, customers’, and trading participants’ (NCM) transactions.
  - Direct Clearing Member (DCM): may clear own, customers’, and affiliated NCMs’ transactions.
- Legal form and ownership:
  - Stock corporation (Aktiengesellschaft) under German law, founded on March 9, 1998.
  - Wholly owned subsidiary of Eurex Frankfurt AG, itself wholly owned by Deutsche Börse AG.

### Key statistics and operational scale
- Clearing members: more than 183 clearing members located in 17 European countries (as mid-2015).
- Collateral pool: EUR 68.8 billion (as of 31 July 2015).
- Transactions processed: approximately 1.5 billion transactions (as end-2014).
- Trading days (2010–2015 as displayed): 256, 257, 254, 253, 253, 253.
- Selected Clearing Fund figures (2010–2015 as displayed): 1,299.3; 1,368.7; 1,416.1; 1,604.7; 2,971.1; 3,809.2.

### Risk management, custody, and financial safeguards
- Comprehensive and adequate risk management framework addressing financial, business, and operational risks.
- Participant default rules and procedures publicly available, comprehensive, and adequate.
- Participant assets and Eurex Clearing collateral held in regulated CSDs and deposited at central bank accounts.
- Credit and liquidity risks minimized by:
  - Settling cash in central bank money;
  - Access to central bank liquidity;
  - Stringent requirements concerning margins and financial resources.
- Managed volatile markets and strengthened international standards.

### Main recommendations to enhance soundness and resilience
- Consider eliminating cross-managerial responsibility at heads-of-departments to remove potential conflict of interest, in particular between head of CCP Risk Management and head of Clearing Product Design and Supervision.
- Enhance business-as-usual liquidity stress tests by conducting them more frequently than quarterly.
- Explicitly reflect in the Clearing Conditions how the moment of irrevocability and the moment of entry are specified in German law.
- Strengthen the secondary site with appropriate staffing, sufficient resources, capabilities, and functionalities to allow operational swaps between primary and secondary sites on a business-as-usual basis.

### Governance and legal status
- Re-authorized by BaFin as a clearing house on April 10 2014 in accordance with EMIR.
- Listed in ESMA’s registers relevant to CCPs and designated systems under Directive 98/26 on Settlement Finality.
- Governance information (Supervisory Board composition, committees, Executive Board structure) published on Eurex Clearing’s website; structured to comply with Part 4, Section 1 and 2 of the Stock Corporation Act (Aktiengesetz, AktG).
- During EMIR preparation: Supervisory Board and Risk Committee reassembled; Internal Audit, Outsourcing Coordination, and Compliance brought in-house since April 2014.
- Parts of risk management outsourced to Deutsche Börse Group (DBG) conducted by Eurex Clearing Enterprise Risk Management Department as of May 2014.
- Licensed as a bank and provides CCP services, deposit business, lending business, and own account trading not relating to a client.

### Regulatory, supervisory, and oversight framework
- Authorities involved: Federal Financial Supervisory Authority (BaFin), Deutsche Bundesbank, Federal Agency for Financial Market Stabilization (FMSA).
- Legal/supervisory bases:
  - BaFin: regulatory authority under section 6 (1) KWG (German Banking Act); Bundesbank performs off-site and on-site inspections and oversight as a financial market infrastructure.
  - Eurex Clearing in scope of the Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz, SAG) transposing BRRD into national law; BaFin and Bundesbank competent to review recovery plan; FMSA responsible for resolution planning.
- EMIR and European cooperation:
  - BaFin designated as National Competent Authority under EMIR and chairs the EMIR supervisory college for Eurex Clearing.
  - ESMA coordinates the EMIR college, fosters supervisory convergence, develops technical standards, and validates significant changes to CCPs’ risk models.
  - Eurex Clearing as a “Less Significant Credit Institution” under the SSM is subject to indirect prudential supervision by the ECB.
  - Eurosystem implementation of PFMIs via ECB Regulation No 795/2014 of 3 July 2014 on oversight requirements for systemically important payment systems.

### Assessment of observance and supervisory responsibilities
- PFMI Principles rating summary (Table 2 as provided):
  - Observed: P1, P2, P3, P4, P5, P6, P7, P8, P9, P12, P13, P14, P15, P16, P18, P19, P20, P21, P22, and P23.
  - Broadly observed: P17.
  - Not applicable: P10, P11, and P24.
- Responsibilities rating summary (Table 3 as provided):
  - Observed: A, B, C, D, and E.

---

### Legal basis, contracts, and enforceability (Principle 1 and Chapter IX excerpts)

### Legal basis and contracts
- Rules, procedures and contracts clear and consistent with German laws and regulations.
- Legal framework supports enforcement of:
  - clearing models, novation and open offer,
  - netting procedures,
  - collateral arrangements,
  - set-off,
  - close-out netting.
- Clearing transactions when final are protected from insolvency procedures.
- Clearing Agreements and/or ICM Participation Agreement govern operations and are publicly available as Appendices 1, 2, 3, 4, 7, 8 and 9 of the Clearing Conditions.
- Two legal mechanisms:
  - Open offer for transactions concluded on Frankfurt Stock Exchange, Eurex Deutschland and Eurex Zürich, Eurex Bonds, Eurex Repo, and Irish Stock Exchange (Clearing Conditions, Chapter I, Part 1, Number 1.1.2).
  - Novation for OTC transactions, Repo transactions transmitted by GC Pooling, and securities lending transactions transmitted to Eurex Clearing (Clearing Conditions, Chapter VIII, Part 1, Number 1.2.3).

### Timing of assumption of liability as CCP
- Entrance of CCP for open offer: confirmation of matching of selling and buying offer on trading platform (Clearing Conditions, Chapter 1, Part 1, Number 1.2.2, Paragraph 1).
- Novation confirmed by Eurex Clearing directly (Clearing Conditions, Chapter VIII, Number 1.2.2 and Chapter IX, Number 1.2.1).
- Clearing Conditions do not provide for possibility that an open offer or a novation can be revoked by counterparties.

### Netting and collateral arrangements
- Netting procedures based on set-off-principles under Sections 387 et seqq. of the German Civil Code (BGB) (Clearing Conditions, Chapter I, Part 1, Number 1.3).
- Collateral under models:
  - Elementary Clearing Model and Net Omnibus Clearing Model: margin via cash (full title transfer) and securities (pledge).
  - Individual Clearing Model: both cash and securities provided on full-title-transfer-basis.
- Pledged securities: German law applies to securities located in Germany (lex rei sitae); EU directives (98/26/EC “SFD” and 2002/47/EC Collateral Directive) increase legal certainty.
- EMIR requirements (Articles 41 and 46) further constrain margin calls, collection, and nature of acceptable collateral.

### Default procedures and finality
- Default rules address clearing member default and Eurex Clearing default (Clearing Conditions cited).
- Finality of clearing transactions:
  - Based on German civil code for irrevocability and insolvency law for enforceability; supported in Clearing Conditions.
- Finality of settlements: achieved in CSDs with contractual relationships in accordance with the Settlement Finality Directive.

---

### Governance, organization, and conflicts of interest (Principle 2 & organizational excerpts)

### Governance and stakeholder engagement
- Executive Board and Supervisory Board roles and responsibilities laid down in Articles of Incorporation, Rules and Procedures, Business Distribution Plan; comply with AktG §§ 76 – 116.
- Chief Risk Officer (CRO), Chief Compliance Officer (CCO), Chief Technology Officer (CTO) nominated and report to Executive Board.
- Committees and consultative bodies:
  - Risk Committee (Article 28 EMIR) — advises Supervisory and Executive Boards; composed of Supervisory Board members, clearing member representatives and client representatives; competent supervisory authorities entitled to attend without voting rights.
  - Derivatives Clearing Committee; Securities Clearing and Settlement Committee; Clearing Collateral Committee; Interest Rate Swaps (IRS) Product Committee; Default Management Committee (DMC).
- Disclosure: governance, remuneration policy key elements, audited financial statements, default management procedures, Business Continuity Policy, and risk methodologies/parameters disclosed on Eurex Clearing website.

### Conflicts of interest and internal control
- Internal Control System (ICS) in place to assure effectiveness, efficiency, reliability of financial reporting, and compliance.
- Cross-managerial deputizing: Head of Clearing Product Design & Supervision and Chief Risk Officer deputize one another — identified as potential conflict of interest.
- Recommendation: consider eliminating cross-managerial deputizing at heads-of-department level, particularly between head of CCP Risk Management and head of Clearing Product Design & Supervision. (Table 4 — timeframe: 6 months)

---

### Risk management framework, models, and stress testing (Principles 3–7; PRISMA and stress testing excerpts)

### Risk framework and organization
- Documented Risk Strategy approved by Risk Committee, Executive Board and Supervisory Board.
- CCP Risk Management Department headed by CRO; Enterprise Risk Management unit handles operational/project/business risks since April 10, 2014.
- Risk function staffing in 2015: 50 staff located in Frankfurt and London.
- Four major risks: Financial risk, Operational risk, Project risk, Business risk.
- Internal Audit independent; validates risk management and governance.

### Risk measurement and stress testing (credit and liquidity)
- Economic Capital VaR: one-year time horizon and 99.98 percent confidence level.
- Management VaR (MVaR): one-year time horizon and 99.0 percent confidence level.
- Coverage targets:
  - Clearing Fund calibrated such that in 99.9 percent of all cases potential losses will be covered with collateral and post-default backings.
  - Hypothetical scenarios cover at least 999 out of 1,000 possible events over a 30 years look-back period.
- Stress test programs and frequencies:
  - Credit VaR Stress Test:
    - “Default of largest customer” performed monthly;
    - “Economic Deterioration” quarterly;
    - “Cover 2 Default” daily.
  - Liquidity Stress Tests (Treasury Frankfurt):
    - “business-as-usual” stress test reported quarterly;
    - “Cover2 Default” stress test performed and reported daily.
  - Liquidity stress tests of liquid financial resources performed on a daily basis; intraday stress tests in extraordinary situations.
- Stress-testing expectations (governance text):
  - Stress tests should be performed daily using standard predetermined parameters.
  - Comprehensive analysis of stress testing scenarios, models, and parameters at least monthly; more frequent when products/markets volatile or position concentration increases.
  - Full validation of risk-management model at least annually.

### Key numeric parameters in margining and stress testing
- Confidence levels:
  - 99 percent for listed derivatives initial margin.
  - 99.5 percent for OTC derivatives initial margin.
  - 99.9 percent for “extreme but plausible” conditions used in collateral sufficiency tests.
- Hypothetical scenarios: cover at least 999 out of 1,000 possible events over a 30 years look-back period.
- Historical scenarios set: currently includes 13 events (examples: 1987 Black Monday, 2008 Lehman Default).
- Holding/liquidation periods: in general between 2 and 5 days.
- Haircuts calibrated to ensure coverage over a five-day liquidation period.
- Minimum correlation threshold for margin class grouping/payment of offsets: minimum value of 50 percent.
- Margin call operational timing (numeric points preserved later in report):
  - Intraday margin calls must be covered within one hour.
  - If margin shortfall exceeds intraday margin call limits, once informed the member has thirty minutes to reduce exposure or provide additional collateral; otherwise required amount will be debited to its central bank account.
- Clearing Fund contribution methodology (minimum components):
  - A clearing member’s contribution is the highest of:
    - 7 percent of average of initial margin requirements (30 days),
    - 7 percent of average of initial margin requirements (250 days),
    - EUR 5 million (General clearing member) or EUR 1 million (Direct clearing member).
- Liability cap on assessments for non-affected clearing members:
  - Two times the originally applicable contribution requirement within 20 rolling business days;
  - Overall liability limited to three times pre-funded Clearing Fund contribution.
- Reinstatement timeframe for dedicated own resources:
  - Eurex Clearing will reinstate dedicated own resources within one month after it has fallen under the minimum requirement stipulated in Art. 35 Delegated Regulations (EU) No 153/2013.

### PRISMA margin model and portfolio margining
- PRISMA uses risk-factor-based simulation to calculate market risk VaR with:
  - Filtered historical scenarios (normalized and adapted to most recent volatility regime).
  - Stress period scenarios (historical returns from periods of financial distress).
- Minimum margin parameter:
  - Calibrated based on estimated volatility over a 10 year historical look back period.
  - Number of stress period scenarios used is at least 25 percent of the total sample used to calculate the market risk component.
- PRISMA margining:
  - Margins are multifaceted, consider offsets within liquidation groups only, and include correlation break adjustments and other controls to limit procyclicality.
  - Portfolio offsets monitored; Eurex Clearing monitors cases where portfolio offsets result in 80 per cent or more reduction compared to gross product-level margin.

### Model validation and backtesting
- New risk models validated by independent party prior to launch.
- Backtesting conducted daily; results summarized monthly and reported to management; statistical tests include the Kupiec POF test.
- Full validation at least annually; sensitivity analyses and parameter re-calibration ongoing.

### Key conclusions (Principle 4–6)
- Comprehensive Risk Management Framework; multiple layers of defense: margins, pre-funded Clearing Fund, dedicated Eurex Clearing equity, parental guarantee arrangements.
- Stress testing and daily monitoring ensure sufficiency of total and liquid financial resources under Cover-2 and other scenarios.
- Assessment of Principle 4: Observed. Assessment of Principle 6: Observed.

---

### Default management, segregation, and replenishment (Principles 13–14 and Default Waterfall)

### Default management process
- Automatic termination on commencement of insolvency proceedings; non-automatic terminations include Failure-to-pay and failure to comply with Clearing Conditions.
- Default Management Committee (DMC) includes Clearing Members; regular default simulations and at least one full simulation per year (EMIR-compliant: at least one and a maximum of three full simulations annually).
- Default procedures include hedging, independent sale, mandatory auctions by clearing members active in affected liquidation group, and residual settlement procedures.
- Client segregation and portability:
  - Three Clearing Models: Elementary Clearing Model (ECM) — omnibus client segregation; Individual Clearing Model (ICM) — individual client segregation; Net Omnibus Clearing Model (NOCM) — omnibus segregation with UK CASS features.
  - ICM features: double Title Transfer for collateral; separate ICM Standard Agreement and Difference Claim mechanism; porting provisions and modified ICM for non-EU jurisdictions.
  - Porting period after Termination Event runs from occurrence until 13.00 CET on the immediately following business day.
- Default Waterfall (order documented in Clearing Conditions, Chapter I, Part 1, 6.2):
  - (i) initial margin and other margins posted by the defaulter;
  - (ii) defaulter’s contribution to the Clearing Fund;
  - (iii) Eurex Clearing’s own contribution to the Clearing Fund (according to EMIR, 25 percent of its capital);
  - (iv) Clearing Fund contributions of non-defaulting clearing members;
  - (v) assessments to the Clearing Fund (max of 2 assessments in the capped period of twice the prefunded Clearing Fund contribution);
  - (vi) parental guarantee;
  - (vii) remaining equity of Eurex Clearing.

### Replenishment and assessments
- Clearing members required to replenish relevant Clearing Fund(s) up to relevant contribution requirement applicable to them (Clearing Conditions, Chapter I, Part 1, Number 6.3).
- Liability cap mechanics:
  - Each non-affected clearing member liable up to two times the originally applicable contribution requirement within 20 rolling business days; overall liability limited to three times its pre-funded Clearing Fund contribution.
  - Capped period restarts if another default occurs within the capped period; rolling capped period provisions described.
- Eurex Clearing will reinstate dedicated own resources within one month after falling under the minimum requirement in Art. 35 Delegated Regulations (EU) No 153/2013.

---

### Settlement finality, money settlements, and links to CSDs (Principles 8–12, 9 numeric timing)

### Finality and settlement
- Finality achieved based on German civil code for irrevocability and insolvency law for enforceability; supported in Clearing Conditions.
- Settlement finality at CSD level when CSD reports settlement and Eurex Clearing receives confirmation.
- Links with CSDs: Clearstream Banking AG (CBF), Clearstream Banking S.A. (CBL), and SIX SIS Ltd., and notified link to Euroclear UK & Ireland per Settlement Finality Directive.

### Money settlements and timing (exact timing preserved)
- More than 90 percent of total liquidity transactions are in EUR and CHF settled in central bank money.
- Payment timing examples (as displayed in source):
  - Euro: Debit instructions released Around 06:00 CET; Debit instructions met 07:00 CET same day; Credit instructions released Around 08:00 CET (after confirmation that debit instructions are met)
  - CHF: Debit instructions released Around 06:00 CET; Debit instructions met 07:00 CET same day; Credit instructions released Around 08:00 CET (after confirmation that debit instructions are met)
  - GBP: Debit instructions released Around 06:00 CET; Debit instructions met 09:00 CET same day; Credit instructions released Around 09:10 CET (after confirmation that debit instructions are met)
  - USD: Debit instructions released Around 06:00 CET; Debit instructions met 08:00 CET same day; Credit instructions released Around 08:10 CET (after confirmation that debit instructions are met)
  - JPY: Debit instructions released Around 07:00 CET (after FXYCS system is closed); Debit instructions met 08:00 CET the following day due to time difference; Credit instructions released 15:30 CET on same day as debit instructions (before the confirmation that debit instructions are met)
  - KRW: Debit instructions released Around 03:10 CET; Debit instructions met 07:00 CET (08:00 CEST) same day; Credit instructions released 07:00 CET (08:00 CET CEST) same day (after confirmation that debit instructions are met)

### Commercial settlement banks selection and monitoring
- For non-EUR/CHF currencies (e.g., USD, GBP) Eurex Clearing uses commercial payment banks with FACT methodology; minimum internal rating acceptable is ‘C’ (corresponds to S&P/Fitch rating of ‘A, A-‘ and Moody’s ‘A2, A3’).
- At least two payment banks per relevant currency appointed in principle to avoid concentration.
- Not less than 95 per cent of available cash not placed with a central bank is collateralized with high quality collateral meeting Article 45 of Regulation No 648/2012 and Annex II of Delegated Regulation No 153/2013.

---

### Operational risk, business continuity, and IT resilience (Principle 17)

### Operational resilience and recovery objectives
- Operational risk framework: Group Risk Management Policy and Operational Risk Procedure; mission-critical functions defined.
- Recovery objectives:
  - Recovery Time Objective (RTO) for mission critical functions: 2 hours.
  - Recovery Point Objective (RPO): zero (real-time synchronization/mirroring between two independent data centers).
  - Availability rate during last 12 months: 100 percent.
- Data centers and secondary site:
  - Systems replicated across two geographically separated redundant data centers in Rhein-Main area; additional access points/data centers in Chicago and Luxembourg; night shift operated from Chicago.
  - Secondary processing site available and geographically less than 50 kilometer from primary site; has IT capacity and functionalities for continuity but is not a fully-fledged clone with full on-premises back-up business team.
- Tests and audits:
  - Annual workspace and staff unavailability tests; systems failover tests after significant modifications; BCM Plans tested regularly including large scale disaster scenarios.
  - Internal Audit and external audits annually; Internal Audit Plan based on a three year risk-based cycle.
- Standards and certifications:
  - ISO 9001:2008/TickIT and ISO/IEC 20000-1:2011; Protection & Security Standards reference ISO 27000.
- Recommendation: ensure presence of a secondary business team on premises of the secondary site to allow swaps of operations between primary and secondary sites during business-as-usual. (Table 4 — timeframe: 12 months)

---

### Access, participation, tiered arrangements, and links to other FMIs (Principles 18–20)

### Access and participation requirements
- Objective, risk-based admission criteria requiring sufficient financial resources and operational capacity.
- Minimum Clearing Fund static components at admission:
  - General clearing member: EUR 5 million;
  - Direct clearing member: EUR 1 million.
- Dynamic component based on member’s total margin requirement across products.
- Operational capability requirements: technical/functional connection, back-office facilities, qualified personnel.
- Obligations to participate in Default Management Committees, simulations, and auctions for classes where active.

### Tiered participation and monitoring of indirect risks
- Tripartite agreements with Non-Clearing Members/Registered Customers permit information flow; Know your customer procedures applied.
- Undisclosed clients must be recorded on dedicated account (A Account).
- Concentration and wrong-way risk monitoring, stress-testing and client-level monitoring in place.

### Links with other FMIs
- No link with another CCP.
- Maintains accounts with CSDs and reports to trade repository (REGIS-TR).
- Linked CSDs: Clearstream Banking AG, Clearstream Banking S.A., and SIX SIS Ltd.; link to Euroclear UK & Ireland notified under Settlement Finality Directive.
- Trade repository: REGIS-TR located in Luxembourg, supervised by CSSF; ESMA registered REGIS-TR on 7th of November 2013.

---

### Efficiency, communication standards, and transparency (Principles 21–23)

### Efficiency and technology
- Technology Roadmap; use of standards such as FIXML for derivatives communications and SWIFT ISO 15022 for FMI and securities communications.
- Performance metrics and ICS in place; IT availability 100 percent over last 2 years (2014 to July 2015).

### Transparency and disclosure
- Clearing Conditions, Price List, Risk Committee Statutes, Default Management and Auction Rules, Committee statutes, Auction Terms, Disciplinary Rules publicly disclosed on website.
- Risk Management Framework materials and Disclosure Document published; public quantitative data and parameters available (theoretical prices, margin parameters, haircuts, accepted collateral specifications, margin groups/classes, volatility shifts).
- Assessment of Principle 23: Observed. Principle 24: Not applicable.

---

### Authorities’ responsibilities, oversight, and cooperation (Section 7 and responsibilities A–E)

### Institutional roles and legal framework
- BaFin: national competent authority for CCP authorization and supervision under EMIR; chairs EMIR college for Eurex Clearing.
- Deutsche Bundesbank: oversight function (Eurosystem oversight based on PFMI), participates in supervision with BaFin.
- FMSA: responsible for resolution planning and measures under the German Recovery and Resolution Act.
- EMIR colleges and ESMA role: ESMA coordinates colleges, fosters supervisory convergence, validates significant CCP changes.

### Powers, resources, and cooperation
- BaFin powers include authorization, information gathering, inspections, issuing orders, and rule-making contributions (Section 7 German Banking Act).
- Deutsche Bundesbank oversight powers based on Treaty provisions and Deutsche Bundesbank Act; tools include information collection, onsite meetings, moral suasion.
- Authorities possess powers to obtain timely information and to induce change or enforce corrective action; BaFin can issue binding orders (section 53 l German Banking Act).
- Resources:
  - BaFin funds operations from fees; staff increased with EMIR implementation.
  - FMSA funds through fees and reimbursements; expanded staff for resolution tasks.
  - Deutsche Bundesbank oversight staff increased; training and resourcing adequate.
- Recommendation: strengthen legal basis in German law for Bundesbank’s oversight function over CCPs to clarify powers and disclose activities. (Table 5 — Responsible party: Bundesbank — timeframe: 12 months)
- Recommendation: establish a short-term staff exchange program with other relevant jurisdictions to enhance cooperation and staff competencies. (BaFin, Bundesbank — Immediately)

### Application and adoption of PFMIs
- PFMIs adopted and enforced through EMIR, German Banking Act, German Recovery and Resolution Act, and Eurosystem oversight policy statement (ECB Governing Council adoption 3 June 2013).
- Identified gaps: ex ante rules for replenishment of financial resources and allocation of uncovered losses/liquidity shortfalls not fully covered by EMIR; mitigants exist in Clearing Conditions and Recovery Plan; European Commission legislative proposal on Recovery and Resolution for CCPs expected to address gaps.

### Cross-border cooperation and colleges
- EMIR colleges established under Article 18; college membership includes relevant national and EU authorities and ESMA.
- MoUs with non-EU authorities (example: CFTC) and cooperation arrangements with Swiss authorities noted.

---

### Prioritized recommendations and timeframes (selected from Tables 4–5)
- Consolidate Eurex Clearing’s risk management framework into an overarching published document. (Eurex Clearing — 6 months)
- Consider eliminating cross-managerial deputizing between heads of CCP Risk Management and Clearing Product Design & Supervision. (Eurex Clearing — 6 months)
- Conduct business-as-usual liquidity stress tests more frequently than quarterly. (Eurex Clearing — 6 months)
- Explicitly reflect in Clearing Conditions how moments of irrevocability and entry of a clearing transaction are specified in German law. (Eurex Clearing — 3 months)
- Ensure a secondary business team is present on premises of the secondary site to allow operational swaps during business-as-usual. (Eurex Clearing — 12 months)
- Strengthen legal basis for Bundesbank’s oversight function over CCPs in national law. (Bundesbank — 12 months)
- Establish a short-term staff exchange program with other jurisdictions’ relevant authorities. (BaFin, Bundesbank — Immediately)

---

### Authorities’ response and subsequent developments
- German authorities thanked the IMF assessment team and noted developments between report completion and publication:
  - On 1 February 2016, Eurex Clearing was registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Derivatives Clearing Organization (DCO).
  - On 25 January 2016, BaFin and Deutsche Bundesbank signed an MoU with the CFTC to enhance supervision arrangements of cross-border clearing organisations.
- Expected closer cooperation with CFTC including information exchange, meetings, and joint on-site visits.
- Authorities emphasized that Eurex Clearing has a secondary site with hot backup-arrangements; business team members can be called in on short notice or perform duties via remote access.
- Highlighted ongoing close contact with MAS and multi-CCP supervisory exercises (example: multi CCP fire drill with UK and German supervisory authorities).

*Source: _cr16197 - EXECUTIVE SUMMARY and selected chapters/excerpts from IMF staff assessment on Eurex Clearing AG*

### EXECUTIVE SUMMARY ___________________________________________________________________________  5

### EXECUTIVE SUMMARY

### Overview and institutional role
- Eurex Clearing observes the CPSS/IOSCO Principles for Financial Market Infrastructures (PFMIs).
- It is a global central counterparty (CCP) that clears a broad range of listed and over-the-counter (OTC) products and offers fully automated and straight-through post trade services to Eurex Deutschland, Eurex Zürich, the Frankfurt Stock Exchange, Eurex Bonds GmbH, Eurex Repo GmbH, the Irish Stock Exchange, and EurexOTC Clear.
- It maintains accounts at multiple central securities depositories (CSD) and International CSDs (ICSDs), reports to the trade repository REGIS-TR in order to fulfill EMIR reporting requirements, and does not have any link to other CCPs.
- Membership structure:
  - General Clearing Member (GCM): may clear its own transactions, those of its customers, and those of trading participants without a clearing license (NCM).
  - Direct Clearing Member (DCM): may clear its own transactions, those of its customers, and those of its company-affiliated NCMs.
- Legal form and ownership:
  - Eurex Clearing is a stock corporation (Aktiengesellschaft) formed under German law, founded on March 9, 1998.
  - It is a wholly owned subsidiary of Eurex Frankfurt AG, which is wholly owned by Deutsche Börse AG.

### Key statistics and operational scale
- As mid-2015, Eurex Clearing serves more than 183 clearing members located in 17 European countries.
- Collateral pool: EUR 68.8 billion (as of 31 July 2015), including margin collateral contribution and the Clearing Fund contribution of Clearing Members.
- As end-2014, Eurex Clearing processed approximately 1.5 billion transactions.
- Trading days: 256, 257, 254, 253, 253, 253 (2010–2015 as displayed in source).
- Selected clearing fund figures (as displayed in source): 1,299.3; 1,368.7; 1,416.1; 1,604.7; 2,971.1; 3,809.2 (2010–2015).

### Risk management, custody, and financial safeguards
- Eurex Clearing has a comprehensive and adequate risk management framework addressing financial, business, and operational risks.
- Participant default rules and procedures are publicly available, comprehensive, and adequate.
- Participant assets and Eurex Clearing’s collateral are held in regulated central securities depositories and deposited at central bank accounts.
- Credit and liquidity risks are minimized by:
  - Settling cash in central bank money;
  - Having access to central bank liquidity;
  - Maintaining stringent requirements concerning margins and financial resources.
- Eurex Clearing has managed volatile markets and strengthened international standards.

### Main recommendations to enhance soundness and resilience (as stated)
- Consider eliminating cross-managerial responsibility at the level of heads of departments in order to eliminate the potential conflict of interest, in particular, between the head of CCP Risk Management and that of the Clearing Product Design and Supervision.
- Consider enhancing business-as-usual liquidity stress tests by conducting them more frequently than quarterly.
- Consider for the sake of clarity reflecting explicitly in the Clearing conditions how the moment of irrevocability and the moment of entry are specified in German law.
- Ensure effective business continuity arrangement by strengthening the secondary site with appropriate staffing arrangements, sufficient resources, capabilities, and functionalities, which would allow swaps of operations between the primary and secondary sites on a business-as-usual basis.

### Governance and legal status
- Eurex Clearing was re-authorized by BaFin as a clearing house on April 10 2014 in accordance with EMIR and is listed in ESMA’s registers relevant to CCPs and designated systems under Directive 98/26 on Settlement Finality.
- Governance information (Supervisory Board composition, committees, Executive Board structure) is published on Eurex Clearing’s website and structured to comply with Part 4, Section 1 and 2 of the Stock Corporation Act (Aktiengesetz, AktG).
- During preparation for EMIR authorization, Eurex Clearing amended governance: Supervisory Board and Risk Committee reassembled; formerly outsourced Internal Audit, Outsourcing Coordination, and Compliance functions brought in-house since April 2014.
- Parts of the risk management function outsourced to Deutsche Börse Group (DBG) are conducted by Eurex Clearing Enterprise Risk Management Department as of May 2014.
- Eurex Clearing is also licensed as a bank and provides services as a CCP (zentraler Kontrahent), deposit business (Einlagengeschäft), lending business (Kreditgeschäft), and own account trading not relating to a client (Eigengeschäft).

### Regulatory, supervisory, and oversight framework
- Regulators and oversight bodies involved: Federal Financial Supervisory Authority (BaFin), Deutsche Bundesbank, and Federal Agency for Financial Market Stabilization (FMSA).
- Legal and supervisory bases:
  - As it falls within scope of the German Banking Act (KWG), BaFin is the regulatory authority responsible for supervision pursuant to section 6 (1) KWG; the Bundesbank conducts off-site and on-site inspections as part of ongoing supervision and provides oversight as a financial market infrastructure.
  - Eurex Clearing falls within the scope of the Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz, SAG) transposing BRRD into national law and obliging recovery planning, with BaFin and Bundesbank competent to review and assess the recovery plan; the FMSA is responsible for resolution planning and measures to remedy resolution impediments.
- EMIR and European cooperation:
  - BaFin is designated as National Competent Authority under EMIR and chairs the EMIR supervisory college for Eurex Clearing based on written agreements between college members.
  - ESMA coordinates the EMIR college, fosters supervisory convergence, develops regulatory and implementing technical standards, and validates significant changes to CCPs’ risk models.
  - As a “Less Significant Credit Institution” under the SSM, Eurex Clearing is subject to indirect prudential supervision by the European Central Bank (ECB), which can require BaFin to report about supervisory activities relating to LSIs.
  - The Governing Council of the ECB implemented the PFMIs in the euro area through the Eurosystem’s conduct relating to FMIs and Regulation of the European Central Bank No 795/2014 of 3 July 2014 on oversight requirements for systemically important payment systems.

### Assessment of observance and supervisory responsibilities
- Rating summary for Principles (Table 2 as provided):
  - Observed: P1, P2, P3, P4, P5, P6, P7, P8, P9, P12, P13, P14, P15, P16, P18, P19, P20, P21, P22, and P23.
  - Broadly observed: P17.
  - Partly observed: none listed.
  - Not observed: none listed.
  - Not applicable: P10, P11, and P24.
- Rating summary for Responsibilities (Table 3 as provided):
  - Observed: A, B, C, D, and E.
  - Broadly observed, Partly observed, Not observed, Not applicable: none listed.

*Source: _cr16197 - EXECUTIVE SUMMARY*

### 20.      Eurex Clearing has a well-founded, clear, transparent, and enforceable legal basis for

### 20.      Eurex Clearing has a well-founded, clear, transparent, and enforceable legal basis for

### Legal basis and contracts
- Eurex Clearing’s rules, procedures and contracts are clear and consistent with German laws and regulations.
- The legal framework supports enforcement of:
  - clearing models, novation and open offer,
  - netting procedures,
  - collateral arrangements,
  - set-off,
  - close-out netting.
- Clearing transactions when final are protected from insolvency procedures.
- Clearing Agreements and/or ICM (Individual Clearing Member) Participation Agreement govern operations and are publicly available as Appendices 1, 2, 3, 4, 7, 8 and 9 of the Clearing Conditions.
- Two legal mechanisms used by Eurex Clearing:
  - open offer for transactions concluded on Frankfurt Stock Exchange, Eurex Deutschland and Eurex Zürich, Eurex Bonds, Eurex Repo, and Irish Stock Exchange (Clearing Conditions, Chapter I, Part 1, Number 1.1.2);
  - novation for OTC Transactions, Repo transactions transmitted by GC Pooling, and securities lending transactions transmitted to Eurex Clearing (Clearing Conditions, Chapter VIII, Part 1, Number 1.2.3).

### Governance
- Governance arrangements are transparent, promote safety and efficiency, and support financial stability.
- Managed by highly skilled professionals; Executive Board ensures major decisions reflect participants’ and stakeholders’ interests.
- Executive Board and Supervisory Board are advised by several Committees:
  - most important Committees for both Boards: EMIR Risk Committee;
  - for Supervisory Board: Audit and Risk Committee.
- Committees focus on daily risk management, overall risk appetite, and compliance.

### Risk management framework (overall)
- Comprehensive framework that identifies, monitors, and mitigates risks; periodically reviewed by the Executive Board.
- Framework involves clearing members in designing policies and systems and provides incentives for members to monitor risks they pose.
- A recovery plan covering orderly wind-down is prepared, reviewed annually, and submitted to relevant authorities.
- Recommendation: prepare and publish a consolidated document of its risk management framework.

### Organizational structure and conflicts of interest
- Current cross-managerial deputizing: Head of Clearing Product Design & Supervision Department and Chief Risk Officer (head of CCP Risk Management Department) deputize one another.
- Potential conflict of interest: Risk Management Department is responsible for identifying and managing risks that may arise from Product Design and Supervision Department activities.
- Recommendation: consider eliminating cross-managerial deputizing at heads-of-department level, in particular between head of CCP Risk Management and head of Clearing Product Design and Supervision. (Table 4 — timeframe: 6 months)

### Credit risk management (Principles 4–7)
- Comprehensive framework for credit risk exposures based on collateral requirements and credit limits.
- Maintains sufficient financial resources to cover losses resulting from the default of the two largest clearing members.
- Multiple layers of defense include:
  - pre-funded clearing fund calibrated to cover losses from the default of the two largest clearing members,
  - a dedicated amount of Eurex Clearing equity.
- Comprehensive stress tests ensure solvency under stress; models are reviewed and validated on an ongoing basis.

### Eligible collateral and concentration / procyclicality controls
- Eligible collateral meets stringent eligibility criteria: high credit quality, minimum market risk, high liquidity, immediate accessibility, and valuation.
- Risk management procedures to reduce procyclicality and wrong-way risk.
- Defined dedicated concentration risk thresholds applicable to all counterparties.

### Margining (initial and variation margin)
- Multifaceted, time-critical margining process considering multiple factors.
- Initial margin and variation margin models and parameters are risk-based and generate margin requirements sufficient to cover potential future exposure.
- Power and operational capacity to make intraday margin calls and payments.
- Regular review and validation of margin methodology; Risk Committee (including clearing members and authorities’ representatives) regularly advised for ongoing revisions.

### Liquidity risk management
- Robust Liquidity Risk Management Framework designed to ensure ability to effect payment and settlement obligations in all relevant currencies as they fall due.
- Requirement to cover potential simultaneous default of the two largest clearing members (Liquidity Cover-2 stress test).
- Recommendation: conduct business-as-usual liquidity stress tests more frequently than current quarterly frequency. (Table 4 — timeframe: 6 months)

### Settlement (Principles 8–10)
- Finality of clearing transactions achieved in Eurex Clearing system:
  - based on German civil code for irrevocability,
  - based on insolvency law for enforceability,
  - supported in the Clearing Conditions.
- Recommendation: Clearing Conditions should explicitly reflect how the moment of irrevocability and the moment of entry of a clearing transaction are specified in German law. (Table 4 — timeframe: 3 months)
- Settlement resources:
  - Mainly uses central bank money for Euro and Swiss Francs, accounting for more than 90 percent of total liquidity transactions.
  - For US Dollar and British Pound, Eurex Clearing relies on commercial payment banks and has rigorous procedures to assess and monitor commercial settlement banks.

### CSD and exchange-of-value settlement (Principles 11–12)
- Eurex Clearing is not an exchange-of-value settlement system.
- Mechanisms in place ensure elimination of principal risk via DvP/RvP settlement processes.

### Default management (Principles 13–14)
- Effective and clearly defined rules and procedures to manage a participant default.
- Procedures designed to contain losses and liquidity pressures and allow Eurex Clearing to continue to meet obligations.
- Involves clearing members in Default Management Committee; conducts regular default simulations and fire drills.
- Segregation and portability:
  - Rules and procedures enable segregation and portability of Clearing Members’ customers’ positions and collateral.
  - Customer collateral held separately from clearing member collateral and Eurex Clearing own assets.
  - Three clearing models offering different levels of segregation: individual client segregation, omnibus segregation, etc.

### General business and operational risk management (Principles 15–17)
- Adequate arrangements to identify, monitor, and manage business risks (strategy execution, negative cash flows, large operating expenses).
- Holds sufficient liquid resources to cover potential business losses and sufficient own funds for winding down or recovery during a period of 6 months.
- Assets of Eurex Clearing and participants held at supervised and regulated entities; robust assessment of custody, accounting, safekeeping, and controls.
- Investment strategy consistent with risk management and fully disclosed to participants.
- Operational risk framework includes systems, policies, procedures, and controls.
- Secondary processing site with IT capacity, resources, and functionalities to ensure continuity of critical functions exists but is not a fully-fledged clone of the primary site:
  - not all members of the back-up business team are present at the secondary site at all times; some work via remote access or can be called in.
  - Recommendation: ensure presence of a secondary business team on premises of the secondary site to allow swaps of operations between primary and secondary sites during business-as-usual. (Table 4 — timeframe: 12 months)

### Access (Principles 18–20)
- Participation requirements are risk-based, transparent, and continuously assessed.
- Publicly disclosed procedures for suspension and orderly exit of participants that breach or no longer meet requirements.
- Rules, procedures, and agreements identify, monitor, and manage risks from clearing members’ customers, including obligations to record transactions related to undisclosed clients on a dedicated account.
- Different minimum Clearing Fund contribution requirements depending on the type of clearing membership.
- No links to other CCPs; connected to designated settlement and payment systems for securities and cash settlement. Risk management framework ensures safety of these connections.

### Efficiency (Principles 21–22) and communication standards
- Adequate processes to consider needs of participants and markets; defined measurable goals (minimum service levels, risk management expectations, business priorities).
- Uses internationally accepted communication standards:
  - SWIFT ISO 15022 for communication with other FMIs.
  - FIXML for derivatives market participant communication.

### Transparency (Principles 23–24)
- Clear and comprehensive rules and procedures fully disclosed to participants to assess rights, obligations, and risks.
- Public disclosure of prices and fees associated with clearing services.
- Methodologies and risk management practices reviewed against the PFMIs; results published in the Disclosure Document on the Eurex Clearing website.

### Authorities’ responsibilities and oversight
- Authorities have clearly defined and publicly disclosed criteria to identify FMIs for regulation, supervision, and oversight.
- Full consistency with the PFMIs achieved through policy-based central bank oversight authority on top of supervisory authority, based on EMIR and regulatory technical standards, complemented by the German Recovery and Resolution Act.
- Authorities have powers and resources to obtain timely information and induce change or enforce corrective action.
- Issue: German law does not explicitly provide the Deutsche Bundesbank oversight power consistent with this responsibility over CCPs nor disclose its activities in the field.
- Recommendation for authorities: strengthen legal basis in German law for Bundesbank’s oversight function over CCPs. (Table 5 — Responsible party: Bundesbank — timeframe: 12 months)
- BaFin, Deutsche Bundesbank, and FMSA policies are clearly defined, legally outlined, and publicly disclosed.
- PFMIs for CCPs adopted by BaFin, Deutsche Bundesbank, and Via ECB policy statement for Eurosystem oversight.
- Cooperation: BaFin, Deutsche Bundesbank, and FMSA cooperate domestically and internationally (colleges and MOUs). No staff exchange program presently; recommendation to establish a short-term staff exchange program with other relevant jurisdictions. (Table 5 — Responsible parties: BaFin, Bundesbank — timeframe: Immediately)

### Prioritized recommendations (selected, from Tables 4–5)
- Consolidate Eurex Clearing’s risk management framework into an overarching published document. (Eurex Clearing — 6 months)
- Consider eliminating cross-managerial deputizing between heads of CCP Risk Management and Clearing Product Design & Supervision. (Eurex Clearing — 6 months)
- Conduct business-as-usual liquidity stress tests more frequently than quarterly. (Eurex Clearing — 6 months)
- Explicitly reflect in Clearing Conditions how moments of irrevocability and entry of a clearing transaction are specified in German law. (Eurex Clearing — 3 months)
- Ensure a secondary business team is present on premises of the secondary site to allow operational swaps during business-as-usual. (Eurex Clearing — 12 months)
- Strengthen legal basis for Bundesbank’s oversight function over CCPs in national law. (Bundesbank — 12 months)
- Establish a short-term staff exchange program with other jurisdictions’ relevant authorities. (BaFin, Bundesbank — Immediately)

### Authorities’ response (summary)
- German authorities (BaFin, Deutsche Bundesbank, and FMSA) thanked the IMF assessment team.
- Noted developments between report completion and publication:
  - On 1 February 2016, Eurex Clearing was registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Derivatives Clearing Organization (DCO).
  - On 25 January 2016, BaFin and Deutsche Bundesbank signed an MoU with the CFTC to enhance supervision arrangements of cross-border clearing organisations.
- Expected closer cooperation with CFTC, including information exchange, meetings, and joint on-site visits.
- Emphasized Eurex Clearing has a secondary site with hot backup-arrangements; business team members can be called in on short notice or perform duties via remote access.
- Highlighted ongoing close contact with MAS and multi-CCP supervisory exercises (example: multi CCP fire drill with UK and German supervisory authorities).

*Source: IMF staff assessment text on Eurex Clearing AG (excerpts 20–end of Principle 1 assessment).*

### Chapter IX, Part 1, Number 1.2.2).

### Chapter IX, Part 1, Number 1.2.2)

### Timing of assumption of liability as CCP
- Entrance of the CCP for open offer occurs at the confirmation of the matching of the selling and the buying offer on the trading platform (Clearing Conditions, Chapter 1, Part 1, Number 1.2.2, Paragraph 1).
- The novation will be confirmed by Eurex Clearing directly (Clearing Conditions, Chapter VIII, Number 1.2.2 and Chapter IX, Number 1.2.1).
- The Clearing Conditions do not provide for the possibility that an open offer or a novation can be revoked by the relevant counterparties.

### Netting arrangements
- Netting procedures are included in the Clearing Conditions and are based on the set-off-principles under Sections 387 et seqq. of the German Civil Code (Bürgerliches Gesetzbuch—“BGB”) (Clearing Conditions, Chapter I, Part 1, Number 1.3).

### Collateral arrangements
- Under the Elementary Clearing Model and the Net Omnibus Clearing Model:
  - Clearing member must fulfill its Margin Requirement by delivery of collateral in the form of cash and securities.
  - Cash collateral is granted through a full title transfer.
  - Collateral in the form of securities is provided by way of pledging the securities to Eurex Clearing.
- Under the Individual Clearing Model:
  - Both collateral in the form of cash and in the form of securities are provided on a full-title-transfer-basis.
- Regarding pledged securities:
  - Based on general legal principles (lex rei sitae), German law is applicable regarding pledged securities located in Germany as far as the right in rem is concerned.
  - EU legislation increases legal certainty, in particular Directive 98/26/EC “SFD” and Directive 2002/47/EC on financial collateral arrangements (Collateral Directive).
- EMIR requirements:
  - Articles 41 and 46 of EMIR, together with the respective Regulatory and Implementation Technical Standards, provide further requirements Eurex Clearing must fulfill regarding margin calls and collection and the nature of collateral which can be accepted.

### Default procedures
- Eurex Clearing’s default rules include rules for:
  - Default of a clearing member (Clearing Conditions, Chapter I, Part 1, Number 7; Part 2, Number 8; Part 3 Subpart A, Number 8; Part 4, Number 8).
  - Eurex Clearing’s default (Clearing Conditions, Chapter I, Part 1, Number 9).
- Eurex Clearing’s default procedures comply with EMIR requirements:
  - Article 42 (Default fund – Clearing Conditions: Chapter I, Part 1, number 6).
  - Article 45 (Default waterfall - Clearing Conditions, Chapter I, Part 1, Number 6.2).
  - Article 48 (Default procedures - Clearing Conditions, Chapter I, Part 1, Number 7; Part 2, Number 8; Part 3 Subpart A, Number 8; Part 4, Number).

### Finality of transfers of funds and financial instruments
- Finality of clearing transactions:
  - Achieved on the basis of the German civil code for irrevocability and on the basis of the insolvency law for enforceability, and supported in the Clearing Conditions.
- Finality of settlements:
  - Achieved in the Central Securities Depositories (CSD) with which Eurex Clearing has contractual relationships in accordance with the Settlement Finality Directive.
- Further details on Settlement finality are referenced in Principle 8.

### Interoperability
- Interoperability arrangements are subject to Article 51 of EMIR.
- Currently, Eurex Clearing does not engage in any interoperability arrangements.

### Other significant aspects of the CCP’s operations, risk management procedures and related rules
- Material aspects of Eurex Clearing’s activities are governed by Eurex Clearing’s Clearing Conditions.
- Eurex Clearing participants are required to comply with the Clearing Conditions when providing clearing business.
- Governing law and structure:
  - Clearing Conditions are governed by German law (Clearing Conditions, Chapter I, Part 1, Number 17.1.1).
  - Clearing Conditions are structured as general terms and conditions (Allgemeine Geschäftsbedingungen) within the meaning of Sections 305 et seqq. of the BGB.
- Structure of the Clearing Conditions:
  - Chapter I contains general provisions.
  - Chapters II to IX contain provisions applicable to each specific relevant market.

### Legal basis for each material aspect
- EU harmonized rules:
  - Implemented across Member States so that “in the event of insolvency proceedings being opened against a participant in a system (e.g., Eurex Clearing), the rights and obligations arising from, or in connection with, the participation of that participant shall be determined by the law governing that system” (EU Directive 98/26/EC "Settlement Finality Directive").
  - As a result, German law applies generally between Eurex Clearing and its clearing members pursuant to Section 340 paras. 1 and 3 of the German Insolvency Code (Insolvenzordnung – InsO).
  - Section 340 para. 3 InsO does not differentiate between CCP participants domiciled in EU Member States and CCP participants not domiciled in EU Member States.
- Agreement of parties:
  - All Eurex Clearing’s clearing members must submit to German law once they sign the Eurex Clearing’s Clearing Agreement and/or ICM Participation Agreement.
  - Chapter I, Part 1, Number 17.1.1 and 17.1.2 of the Clearing Conditions: any rights and obligations – including non-contractual – arising from, or in connection with, the Clearing Conditions shall be governed by German law.
  - In cases of disputes regarding fulfillment, non-fulfillment, non-performance, etc., German law will primarily apply.

### Compliance with EU framework and participant coverage
- German framework aligns with the European legal framework after the implementation in German law of European directives, including:
  - Settlement Finality Directive.
  - Collateral Directive.
  - Banking Recovery and Resolution Directive.
- Current coverage:
  - Eurex Clearing provides clearing business to more than 260 participants (clearing members, Non-clearing members, and Registered Customers) located in 20 European countries2 and Switzerland.

*Source: _cr16197 - Chapter IX, Part 1, Number 1.2.2).*

### Chapter I, Part 1, Number 2.1.2 of the Clearing Conditions, Eurex Clearing

### Chapter I, Part 1, Number 2.1.2 of the Clearing Conditions, Eurex Clearing

### Legal basis, enforceability, and choice of law (Principle 1)
- Eurex Clearing may require an applicant for a clearing license to provide, at its own expense, a legal opinion from leading counsel approved by Eurex Clearing verifying the legal validity and enforceability of the Clearing Conditions in the respective jurisdiction according to standards provided by Eurex Clearing.  
- The same legal opinion requirement can apply to third-parties requesting a link to the CCP.  
- Eurex Clearing mandates a local law firm in every jurisdiction from which it on-boards Clearing Members to analyze enforceability of the Clearing Conditions and the choice of law (Regulatory Compliance Policy).  
- Clearing members submit themselves to German law once they sign the clearing agreements and/or ICM Participation Agreement.  
- Eurex Clearing obtained legal opinions from local law firms confirming effectiveness of close-out netting rules and other Clearing Models principles as requested by Article 48 (4) of EMIR and Article 5 (2) and (4) of Regulation No. 153/2013; these legal opinions are updated on a regular basis (last up-dates 2014 and 2015).  
- Enforceability opinions have been commissioned and reviewed for all EU Member States, Switzerland and Singapore; further opinions may be commissioned depending on market demands.  
- As part of the legal opinion the binding nature and enforceability of provisions related to set-off, close-out netting, collateral provisioning is analyzed per jurisdiction.  
- The enforceability of Eurex Clearing’s relevant activities or arrangements under its rules and procedures has not been challenged as of now.  
- Key conclusion: “Eurex Clearing has a well-founded, clear and enforceable legal basis for each material aspect of its activities in all relevant jurisdictions and monitors the measures to identify any potential conflict of law issues which could arise.”  
- Assessment of Principle 1: Observed.

### Rules, procedures, transparency, and consultation (Principle 1 & cross-cutting)
- Eurex Clearing ensures its rules, procedures and contractual arrangements are clear, comprehensive, and in compliance with EMIR and other applicable regulatory and supervisory requirements.  
- The Compliance function reports to the Executive Board and is responsible to detect any risk of non-compliance with the obligations under EMIR by Eurex Clearing and its employees; where internal expertise is lacking, the compliance function may obtain expertise from third parties outside the Deutsche Börse Group.  
- Rules, procedures, contractual arrangements and accompanying material are maintained up-to-date and are analyzed on an ongoing basis through the EMIR annual assessment and internal assessments against Key Performance Indicators (e.g., Outsourcing business surveillance).  
- Adequate rules for amendments to the Clearing Conditions: Chapter I Part 1 section 17-2 “Changes and Amendments to the Clearing Conditions” and 17-3 Consultation in case of changes and amendments of the Clearing Conditions.  
  - Clearing members, Non-Clearing-Members and Registered customers affected are consulted where changes are considered to be “special provisions”.  
  - Each clearing member has the right to object to amendments by written notice; in case of objection, discussions take place with the respective clearing member to resolve the issue. Changes and amendments are published.  
- Any major amendments which may affect Eurex Clearing`s risk management should be introduced and discussed with BaFin and Deutsche Bundesbank before implementation (monthly meetings or separate meetings).  
- Changes qualifying as a “significant change” to risk models/parameters or an extension of activities per EMIR should be subject to authorization or validation by the EMIR college of authorities.  
- Eurex Clearing provides information on regulatory framework, business continuity measures, financials, company profile and governance on its website; documents applicable to all parties (Clearing Conditions) are publicly available, other materials (process descriptions, procedure manuals, certain legal opinions) are available for participants only in the member section. Competent authority access is via BaFin on request.  
- Compliance to EMIR must be demonstrated to the college of authorities and ESMA during authorization and supervision.

### Governance arrangements and stakeholder engagement (Principle 2)
- Objective: assure safety and integrity of markets while providing innovation in risk management, clearing technology and client asset protection across OTC and listed derivatives, equities, bonds, secured funding and securities financing.  
- Strategic objectives include effective protection of customer positions and deposited collateral through reductions in counterparty risk and offering cost-efficient risk and trade management.  
- Internal Control System (ICS) in place to provide reasonable assurance on effectiveness and efficiency of operations, reliability of financial reporting and compliance with laws and regulations.  
- Documented governance arrangements with clear responsibility and accountability; Eurex Clearing is a wholly-owned subsidiary of Eurex Frankfurt AG, which is a wholly-owned subsidiary of Deutsche Börse AG; Eurex Clearing decides independently about clearing offering and risk framework implementation.  
- Supervisory Board and Executive Board roles and responsibilities are laid down in Rules of procedure complying with Part 4, Section 1 and 2 of the Stock Corporation Act (Aktiengesetz, AktG), §§ 76 – 116.  
- Chief Risk Officer (CRO), Chief Compliance Officer (CCO), and Chief Technology Officer (CTO) are nominated and report to the Executive Board.  
- Stakeholder consultation and committees (members/clients participation):  
  - Risk Committee (set up in accordance with Article 28 EMIR) — advises Supervisory and Executive Boards on arrangements impacting CCP risk management; composed of Supervisory Board members, clearing member representatives and client representatives; competent supervisory authorities entitled to attend without voting rights.  
  - Derivatives Clearing Committee — consults on listed and OTC derivative product changes;  
  - Securities Clearing and Settlement Committee — consults on equity, bonds and repo products (excluding GC Pooling);  
  - Clearing Collateral Committee — consults on collateral management, valuation, locations, account infrastructure and cash management;  
  - Interest Rate Swaps (IRS) Product Committee — consults on IRS clearing;  
  - Default Management Committee (DMC) — advises and assists on default management process and participates in default simulation exercises; DMC members are eligible Clearing Members and traders executing hedging strategies.  
- Disclosure: governance, corporate governance, remuneration policy key elements, audited financial statements, default management procedures, Business Continuity Policy, and risk methodologies/risk parameters are disclosed on the Eurex Clearing website (member/public sections). Material changes published via website.  
- Complaints Handling Process and Complaints Procedure Manual are in place to handle complaints arising in connection with performance or failure to perform obligations defined in the Clearing Conditions.  
- Key conclusion: “Eurex Clearing is managed by highly skilled professionals and has governance arrangements that are clear and transparent, promote safety and efficiency and support systemic stability for the financial markets.”  
- Assessment of Principle 2: Observed.

### Board, management, and internal control (Principle 2)
- Roles and responsibilities for Executive Board and Supervisory Board are specified in Articles of Incorporation, Rules and Procedures, and Business Distribution Plan.  
- Supervisory Board composition: 12 members elected for 5 years; 11 are independent members (2 of them being Board members in other undertakings of the DBG). Interpretation of “board” for EMIR purposes corresponds to the Supervisory Board.  
- Supervisory Board oversight: approves strategy and planning, oversees Executive Board (Article 111 AktG), appoints Executive Board members.  
- Supervisory Board committees: Audit and Risk Committee (3 members), Compensation Review and Nomination Committee (3 members).  
- Internal Audit reports to the Executive Board and Audit and Risk Committee; Internal Audit uses a risk-based approach and assesses ICS effectiveness.  
- Suitability and annual assessment policies in place for Members of Management Body and Key Function Holders, aligned with EBA Guideline 2012.06 and §25a/§25d KWG; Rules of Procedure amended to meet EBA and CRD IV requirements.  
- Conflicts of interest management: Clearing Member and Client Conflicts of Interest Policy (internal) and DBG Guideline on the Avoidance of Conflicts of Interest apply.  
- Cross-managerial responsibilities exist (e.g., Head of CCP Risk Management deputizes Head of Clearing Product Design & Supervision and vice versa); recommendation later notes potential conflict of interest.

### Risk management framework and organization (Principle 3)
- Documented Risk Strategy approved by Risk Committee, Executive Board and Supervisory Board; CRO heads CCP Risk Management Department and implements the risk management framework, revised annually or when material change occurs.  
- Risk management responsibilities: Executive Board ultimately responsible; CCP Risk Management, Clearing Product Design & Supervision, Clients & Markets, Treasury are specialized departments. Enterprise Risk Management unit handles operational, project and business risks since 10 April 2014.  
- Internal Audit assesses risk management, control and governance processes and reports to Executive Board and Audit & Risk Committee.  
- Risk identification: Eurex Clearing differentiates four major risks — Financial risk, Operational risk, Project risk, Business risk.  
- Risk reporting: consolidated reports and Quarterly Risk Report containing Credit, Liquidity, Operational Risk and Capital view. Operational Risk incidents are recorded via template.  
- Staffing: in 2015, the risk function (CCP Risk Management) comprised 50 staff located in Frankfurt and London.  
- Independence and segregation of duties: reporting lines and organizational structure designed to ensure separation of front-office and back-office processing & control; Internal Audit is independent.  
- Recommendation from the report: risk management framework is not consolidated in an overarching document; Eurex Clearing should prepare and publish a consolidated document. Eurex Clearing should consider eliminating cross-managerial responsibility at heads of departments to eliminate conflict of interest, particularly between Clearing Product Design & Supervision and CCP Risk Management.

### Risk measurement, models, and stress testing (Principle 3 & 4)
- Eurex Clearing uses Value-at-Risk (VaR) based approaches:  
  - Economic Capital Value at Risk (VaR): one-year time horizon and 99.98 percent confidence level; used to determine minimum equity needed.  
  - Management Value at Risk (MVaR): one-year time horizon and 99.0 percent confidence level; “a going concern” risk measure not used for capital management.  
- Risk-bearing capacity: calculates required Economic Capital at confidence level of 99.98 per cent and uses regulatory own funds as risk-bearing capacity; “utilization of risk-bearing capacity” ratio is monitored.  
- Stress tests: multiple stress testing programs in place:  
  - Credit VaR Stress Test: “Default of largest customer” performed monthly; “Economic Deterioration” quarterly; “Cover 2 Default” daily.  
  - Liquidity Stress Tests (Treasury Frankfurt): i) “business-as-usual” stress test reported quarterly; ii) “Cover2 Default” stress test performed and reported daily.  
  - Clearing Member Default or "Cover 2" liquidity stress test scenarios generate results at Clearing Member and Corporate Group level and per Settlement Institution.  
  - Operational Risk Stress Tests: performed during yearly review of operational risk scenarios.  
  - Further stress tests: verify that collateral pledged by the largest two members plus Eurex reserves and Clearing Fund suffices to cover risk exposure in 999 out of 1000 events.  
- Credit concentration monitoring: Credit VaR calculated per counterparty and compared to Total Credit VaR to identify concentrations; credit, concentration and wrong-way risk framework limits exposures.  
- Risk management and policies are reviewed annually and designed to account for fluctuations in risk intensity.

### Incentives and participant risk management (Principle 3 & 2)
- Real-time monitoring: clearing members’ risk situation is monitored in real time; portfolio risk recalculated on each position or price change and figures visible to Clearing Members via data streams.  
- Margining: margin requirements calculated in real-time. Eurex Clearing publishes a margin calculator and models for Risk Based Margining (RBM) and Portfolio Based Margining (PRISMA).  
- Mutualization: Clearing Fund mutualizes losses beyond margins; Clearing Fund size validated daily and calibrated quarterly.  
- Member services and controls include real-time order and trade information, Stop Button (for CMs and NCMs), partial position transfers, and Incremental Risk Check for IRS.  
- Member Compliance Framework assesses compliance with participation requirements, and Eurex Clearing monitors clearing members’ creditworthiness via internal and external ratings; operational capabilities are also assessed (technical connection, back-office facilities, qualified personnel).  
- Default Management Committees (DMCs): involved in default management and simulation exercises; last DMC convened for annual fire drill on September 28 2015 where hedged portfolio was auctioned to 21 Clearing Members.

### Recovery, wind-down, and business continuity (Principle 3)
- Scenario analysis: Eurex Clearing uses scenario risk analysis as part of operational risk processes to include disruptions from hardware, network, software, terrorist attack, disruption of external providers, utilities, and internal human errors.  
- Business Continuity Management (BCM): annual business impact assessment identifies critical units; Unit Recovery Plans (URP) for critical units identify interdependencies; multiple parallel infrastructures/providers used to reduce dependency risk.  
- Recovery plan: maintained to cover multi-member defaults in extreme idiosyncratic or market-wide events; defines recovery limits and options; aligned with CPMI-IOSCO Recovery of FMI (October 2014) principles and German Recovery and Resolution Act (SAG) minimum requirements. The recovery plan has been assessed and approved by competent authorities.  
- Recovery indicators: Regulatory capital (Pillar I), Risk profile (Pillar II), Liquidity, Operational risk — conservative recovery indicators with early warning triggers and recovery limits.  
- Interconnectedness and liquidity planning: monitors daily liquidity requirements arising out of several members’ default, ignoring liquidation or refinancing possibility of margin collateral; monitors parallel default of a collateral location.  
- Margin collateral custody: uses Clearstream Banking Frankfurt (CSD), Clearstream Banking Luxembourg (CBL), and SIX SIS (ICSDs) for collateral; if an ICSD stops settlement services Eurex Clearing would request securities via CBF, SIX SIS or ask for cash collateral at short notice.  
- Default Management Unit and Enterprise Risk Management conduct annual review of wind-down/restructuring of Eurex Clearing business.

### Credit risk management and financial resources (Principle 4)
- Credit Risk Management Policy covers admission requirements, collateral management cornerstones, guiding principles for the risk model including validation methodologies, and cornerstones of credit, concentration and wrong-way risk monitoring and mitigation and default management process.  
- Sources of credit risk are identified and exposures are measured and monitored by types of relationships, grouping of counterparties, definitions of exposures, duration of exposure, and level of collateralization. Exposures are aggregated on legal entity level.  
- Exposure metrics: Notional Exposure (Notional Cash Exposure and Notional Derivatives Equivalent) and Risk Exposure (secured and unsecured exposure). CCP total risk exposure equals total margin requirement (split into secured exposure and unsecured exposure).  
- Credit Exposure Limits set at counterparty level; general thresholds defined based on rating; specific threshold overrides allowed; credit limits reviewed at least yearly or on demand.  
- Limit breach responses: Risk Control informs Executive Board and Group Risk Management; Credit Committee assesses level of exceedance, credit quality, collateral coverage and concentration/wrong-way risk, and correlation between creditworthiness and exposure; proposed actions submitted to Executive Board, including charging supplementary margin per the Clearing Conditions; if non-compliance persists an additional short “grace period” may be granted by the Executive Board at its discretion.  
- Coverage of exposures and default waterfall:  
  - Margins are the main collateral for open positions.  
  - Eurex maintains a pre-funded Clearing Fund calibrated to cover losses from default of the two clearing members with the largest exposures in extreme but plausible scenarios. Eurex defines “extreme but plausible” such that in 99.9 percent of all cases potential losses will be covered with collateral and post-default backings (collateral of defaulting member, Clearing Fund contribution of defaulting clearing member/Clearing Fund contributions of non-defaulting clearing members) based on scenario simulation.  
  - Dedicated own reserves of Eurex Clearing are utilized after the defaulting clearing member’s contribution but before mutual Clearing Fund, parental guaranty and remaining capital.  
  - Clearing Fund can be replenished by demanding further contributions from Non-Affected Clearing Members within a Capped period [the capped period shall be 20 business days after a termination event and is prolonged to 20 days after each further termination. The max duration is 3 month]; Non-Affected Clearing Members shall, subject to the Liability Cap [two times in addition to the original clearing fund], be obliged to make further contributions to the Clearing Fund as soon as possible but no later than one business day following receipt of Eurex Clearing demand.  
  - Beyond the mutualized resources, Eurex Clearing remaining equity is the last line of defense.  
  - Clearing Fund structure: separated into different Clearing Fund segments (CDFS) and liquidation groups; each liquidation group is assigned to one particular CFS; size of each CFS depends on exposure of the clearing member’s active CFS relative to the overall exposure of this member; CFSs sum to total Clearing Fund.  
- Calibration and testing: Clearing Fund calibrated to cover extreme market events in 999 out of 1000 events over the liquidation period for the respective products (2 to 5 days); margins are updated and monitored intraday; Clearing Fund recalibrated quarterly and in extreme market events.  
- Risk profile and systemic importance: Eurex Clearing does not clear “exotics” such as barrier, path dependent, jump to default products like CDS; it is systemically important in more than one jurisdiction (supervision by BaFin in Germany and recognition as systemically important to the Swiss market by Swiss National Bank and Swiss Banking Supervisory Authority).  
- Additional financial resources: objective is to cover default of at least the two clearing members and their customers with the largest exposure; stress procedures analyze default of the three and five largest members; EMIR requirement to assess how many members overall the lines of defense can withstand.  
- Governance and rationale: daily stress tests are conducted; market, credit and liquidity governance monitored through CCP Risk Management and reported continuously to relevant Executive Management.

### Stress testing and reporting (Principle 4 & 5)
- Eurex Clearing conducts comprehensive stress tests to test sufficiency of total financial resources (Principle 4) and liquid financial resources (Principle 7) to ensure solvency and liquidity under stress.  
- Key stress test elements include Credit VaR Stress Tests, Liquidity Stress Tests (business-as-usual and Cover2 Default), Clearing Member Default or "Cover 2" scenarios, Operational Risk Stress Tests, and tests ensuring sufficiency of collateral and Clearing Fund in 999 out of 1000 events.  
- Credit VaR Stress Test frequencies: “Default of largest customer” monthly; “Economic Deterioration” quarterly; “Cover 2 Default” daily.  
- Liquidity stress tests reported quarterly or daily depending on the scenario and performed by Treasury Frankfurt.

*Source: Chapter I, Part 1, Number 2.1.2 of the Clearing Conditions, Eurex Clearing (status as of August 2015) — IMF country report content provided in the supplied PDF excerpt.*

### 1.      Total financial resources / Credit Risk. Total financial resources at

### _cr16197 - 1.      Total financial resources / Credit Risk. Total financial resources at

### Organization of total financial resources
- Total financial resources at Eurex Clearing are organized in the Default Waterfall.
- The Default Waterfall contains mainly:
  - margins,
  - Eurex Clearing own contribution,
  - Clearing Fund.
- These elements are described in more detail under Principle 4, key consideration 4.

### Stress testing: "Credit Cover-2"
- “Credit Cover-2” stress tests check the sufficiency of total financial resources under the scenario where:
  - the default of two participants occurs, and
  - this is in combination with significant moves of market prices (extreme but plausible market conditions).
- More information on the scenario construction and market parameters being stressed (scenarios of different severities e.g., historical and hypothetical scenarios) are described under Principle 4, key consideration 6.

### Governance, frequency, and validation of stress testing
- The text states: “use these results to evaluate the adequacy of and adjust its total financial resources.”
- Stress-testing frequency and validation expectations:
  - Stress tests should be performed daily using standard and predetermined parameters and assumptions.
  - On at least a monthly basis, a CCP should perform a comprehensive and thorough analysis of stress testing scenarios, models, and underlying parameters and assumptions used to ensure they are appropriate for determining the CCP’s required level of default protection in light of current and evolving market conditions.
  - A CCP should perform this analysis of stress testing more frequently when the products cleared or markets served display high volatility, become less liquid, or when the size or concentration of positions held by a CCP’s participant increases significantly.
  - A full validation of a CCP’s risk-management model should be performed at least annually.

*Source: _cr16197 - 1.      Total financial resources / Credit Risk. Total financial resources at*

### 2.      Liquid financial resources / Liquidity Risk. Liquid financial

### 2.      Liquid financial resources / Liquidity Risk. Liquid financial

### Stress testing of liquid financial resources
- Liquid financial resources examples: CCP own contribution, member cash deposits and available credit facilities for liquidity purposes.
- Two types of liquidity stress tests:
  - “Liquidity business-as-usual” stress tests:
    - Quantify potential liquidity requirement under normal (no participant in default) daily operations (e.g., reduction in member cash deposits, outflows in case of prepayment during settlement cycles, unavailability of some credit facilities).
    - Three sub-scenarios: base scenario, market disruption, market disruption/idiosyncratic.
    - Further information referenced under Principle 7, key consideration 9.
  - “Liquidity Cover-2” stress tests:
    - Quantify largest liquidity requirement resulting from the default of two participants and compare with liquid financial resources.
    - Liquidity requirements arise from necessity to fulfill payment obligations of defaulting members; sub-scenarios of different severities are in place.
    - Further details referenced under Principle 7, key consideration 9.
- Stress tests of Eurex Clearing’s liquid financial resources are performed on a daily basis; intraday stress tests are also performed in extraordinary market situations.

### Credit stress tests and loss-absorption sizing
- Objective: verify that collateral posted by an individual defaulting member plus Clearing Fund suffices to cover potential losses of the two clearing members and their customers with largest exposure under extreme but plausible market conditions.
- Extreme but plausible conditions defined at a confidence level of 99.9 percent.
- Each clearing member’s risk exposure is stress tested against a comprehensive set of scenarios for all product groups cleared:
  - Scenarios include worst historical observations per product group and hypothetical scenarios representing expectations on worst potential future price movements.
  - Scenarios are forward looking and simulate extreme risk factor movements for all cleared asset classes and products simultaneously, while keeping plausibility via consistent risk factor movements and pricing principles.
- Hypothetical scenarios:
  - Constructed to cover at least 999 out of 1,000 possible events over a 30 years look-back period.
  - Account for largest risk factor movements in both directions with a confidence level of 99.9 percent.
  - ‘Risk factor movement’ = End-of-Day relative return over the particular holding period of the corresponding instrument or security.
- Historical scenarios:
  - Selection principle: if a historic price movement of a material risk factor is larger than its highest constructed shift in the hypothetical scenarios (i.e., 99.9 percent quantile), the event is identified as extreme historic event.
  - Current set of historical scenarios includes 13 events (examples: 1987 Black Monday, 2008 Lehman Default).
  - Two types: price movements across all product groups on specific crisis days; historically largest moves per product group independent of the observation day.
- Stress testing execution and comparisons:
  - Potential losses per stress scenario are compared to each member’s additional margin; losses beyond additional margin are compared to the Clearing Fund.
  - How much of the Clearing Fund is consumed by theoretical stress test calculations is identified and analyzed daily.
  - Intraday stress tests in extraordinary situations.

### Segregation assumptions and stress test scope
- Stress tests respect segregation structure by assuming that clients may default; Eurex Clearing assumptions in stress tests include:
  - the default of the two largest clearing members;
  - that all clients segregated in a Net Omnibus Account as well as the two largest individually segregated clients are also in default and cannot find a new clearing member and consequently get liquidated together with their clearing member.
- Stress tests take into account Eurex Clearing’s risk profile and apply stressed parameters, assumptions and scenarios to models used for estimation of risk exposures, including:
  - Simultaneous insolvency of multiple market participants;
  - Consideration of Eurex Clearing’s product mix and all elements of its models and methodologies;
  - Defined stress testing scenarios on both past and hypothetical extreme but plausible market conditions;
  - Time horizons for liquidation period reflecting characteristics of the instrument cleared and period for calculation and collection of margins;
  - Consideration of correlations, implied and historical volatility factors, concentration risks, interdependencies and multiple relationships, FX risks and wrong-way risks.

### Reporting, governance, and review of stress testing
- Stress test results incorporated into reporting to senior management to inform overall risk management and decision making; senior management involved in determining scope of specific stress tests.
- Reporting cadence:
  - Report to the Risk Committee quarterly.
  - Review of stress testing framework (including set of historical and hypothetical market scenarios used to dimension Clearing Fund) at least annually and more frequently if market developments or material changes require.
  - Comprehensive stress testing report provided to the CRO and to the Executive Board monthly.
- Framework presentation and approvals:
  - General framework presented to risk committee (which includes clearing members) and regulators who approved it.
  - Parameters subject to a defined calibration process; calibration results approved by Chief Risk Officer and presented to the risk committee.
- External reporting:
  - Anonymous stress testing reports on clearing house level to inform recipients about potential risks without breaking confidentiality.
  - Detailed stress testing reports available for clearing members and clients providing detailed results for their portfolios only.

### Model review, validation, and backtesting
- Risk Management Framework documents testing programs, processes and report structures.
- New risk models validated by an independent party prior to launch (e.g., international consulting and accounting firms).
- Processes define roles, responsibilities, metrics, thresholds and actions; ongoing revision and improvement involves Risk Committee advice; major changes presented to Risk Committee and approved by Executive Board.
- Model validation approach:
  - Back testing is the basic instrument: compares actual return performance (realized and unrealized gains and losses) with modeled estimates to verify returns are within expected range for portfolios and holdings.
  - Model parameter sensitivities investigate responsiveness of margin model to parameter changes.
  - Basic assumptions and the model are reviewed annually; some components validated more frequently.
  - Backtests conducted on a daily basis; realized PnLs compared against model estimate (market risk initial margin). Observations where loss exceeds margin are marked as outliers.
  - Frequency and severity of outliers assessed by statistical tests such as the Kupiec POF test.
  - Backtest results summarized and reported monthly to management; detailed and ad-hoc reports generated.
- Stress tests performed on a daily basis; regular sensitivity analysis performed as daily monitoring and monthly validation of Eurex Clearing’s haircuts and underlying factors; intraday analyses in extraordinary situations.
- Default procedures:
  - Default procedures are tested by realistic default simulations; test and review of default procedures (no simulation) performed quarterly.
  - External validation findings/recommendations reported to the Executive Board.

### Default management process and replenishment of financial resources
- Asset Protection Service: segregation and timely portability of client positions and collateral (cash and securities); optional protection solutions for different protection levels (further discussion in Principle 14).
- Default management process components (post-porting residual positions):
  - Default Management Committees (DMC): representatives of Clearing Members with trading and risk expertise for relevant liquidation groups; convened in defaults and for regular default simulations; assist on hedging and auctioning.
  - Hedging: reduce risk of a liquidation group, reduce portfolio sensitivity and stabilize for auctions.
  - Independent sale: liquidation groups can be sold independently; positions closed by clearing house and opened in account of clearing member that overtook the position.
  - Auction process: liquidation group-specific auction is main default management component; enables rapid transfer of risk in bulk to willing absorbers; auctions mandatory for clearing members active in affected liquidation group.
  - Residual Settlement: if auction results in remaining positions, Eurex Clearing charges any losses to parties who didn’t participate in auction or such parties agree to transactions with Eurex Clearing; if no participant in auction, Eurex Clearing terminates corresponding transactions with non-participating clearing members.
- Replenishment and assessment rules:
  - Clearing members required to provide further contributions to Clearing Fund (assessments) to ensure appropriate size.
  - If total Clearing Fund realized due to a clearing member default, non-affected clearing members obliged to replenish relevant Clearing Fund(s) up to relevant contribution requirement applicable to them (Clearing Conditions, Chapter I, Part 1, Number 6.3).
  - Liability cap for each non-affected clearing member: two times the originally applicable contribution requirement to the relevant Clearing Fund for such non-affected clearing member within 20 rolling business days (i.e., overall liability limited to three times its pre-funded Clearing Fund contribution).
  - Required pre-funded Clearing Fund contribution determined on a quarterly basis.
  - Capped period is rolling: if another default occurs within capped period, the period restarts to last another 20 day; when capped period is rolled the number of assessments does not restart counting. Within the rolling capped period each member obliged to provide assessments up to two times the original amount of its clearing fund contribution at the start of the capped period.
- Eurex Clearing will reinstate dedicated own resources within one month after it has fallen under the minimum requirement stipulated in Art. 35 Delegated Regulations (EU) No 153/2013.
  - If a subsequent default occurs before reinstatement, only the residual amount of allocated dedicated own resources will be used to comply with requirements in Art. 45 EMIR.

### Clearing Fund contribution methodology (summary of requirements)
- Each clearing member must pay a contribution to the Clearing Fund if the clearing member holds a clearing license in the respective business; contributions can be paid in cash and securities.
- Basis for calculation: margin requirement of all positions and transactions of the respective clearing member, its Non-clearing members and Clients in the respective markets.
- A clearing member’s contribution to the general Clearing Fund is the highest amount of:
  - 7 percent of average of initial margin requirements (30 days), which corresponds to the sum of futures spread margin and additional margin; or
  - 7 percent of average of initial margin requirements (250 days); or
  - General clearing member: EUR 5 million, Direct clearing member: EUR 1 million.
- The sum of minimum components over all clearing members represents a minimum component below which the size of the Clearing Fund cannot fall under any circumstances.

### Key conclusions (Principle 4)
- Eurex Clearing has a comprehensive Risk Management Framework to identify and manage credit risk exposures based on collateral requirements and credit limits.
- Multiple layers of defense to cover current and future exposures: main element is margin requirement; additional safety nets defined in detail in the Risk Management Framework.
- Comprehensive stress testing monitors risk exposures under stressed market conditions.
- Risk models are reviewed and validated on an ongoing basis; new risk models discussed with Clearing Members and validated by an independent party prior to launch.
- Assessment of Principle 4: Observed.

### Key numeric and parameter points preserved from source
- Confidence level for extreme but plausible conditions: 99.9 percent.
- Hypothetical scenarios cover at least 999 out of 1,000 possible events over a 30 years look-back period.
- Historical scenario set currently includes 13 events (examples cited: 1987 Black Monday, 2008 Lehman Default).
- Clearing Fund contribution rules use the highest of:
  - 7 percent of average of initial margin requirements (30 days);
  - 7 percent of average of initial margin requirements (250 days);
  - EUR 5 million (General clearing member) or EUR 1 million (Direct clearing member).
- Liability cap on assessments for non-affected clearing members: two times the originally applicable contribution requirement within 20 rolling business days; overall liability limited to three times pre-funded Clearing Fund contribution.
- Reinstatement timeframe for dedicated own resources: within one month after falling under minimum requirement (Art. 35 Delegated Regulations (EU) No 153/2013).
- Margin call response times:
  - Intraday margin calls must be covered within one hour.
  - If margin shortfall exceeds intraday margin call limits, once informed the member has thirty minutes to reduce exposure or provide additional collateral; otherwise required amount will be debited to its central bank account.
- Haircuts, scenario calibrations and stress factors use a confidence level of 99.9 percent (for haircuts and stress factors); margin parameters calibrated to hold for 99 percent for “normal” market circumstances (contrast noted).
- Haircuts calibrated to ensure coverage over a five-day liquidation period.
- Minimum correlation threshold for margin class grouping/payment of offsets: minimum value of 50 percent.
- Backtesting and model monitoring:
  - Backtests conducted daily; results summarized monthly.
  - Statistical tests include the Kupiec POF test.

*Source: IMF staff report section “2.      Liquid financial resources / Liquidity Risk. Liquid financial” (excerpts).*

### 3.3 of the 2.1.1 Clearing Conditions). All participants must be reachable

### _cr16197 - 3.3 of the 2.1.1 Clearing Conditions). All participants must be reachable

### Clearing access, accounts, and operational reachability
- All participants must be reachable during the Eurex Clearing business hours independent of their location to ensure adequate management and fulfillment of payments within the given deadlines.
- Each Clearing Member must hold a central bank account in Clearing Currency:
  - Bundesbank for EUR payments.
  - Swiss National Bank for CHF payments.
- Eurex Clearing has the power of attorney for both cash accounts and has the right to debit the respective account after informing the participant whenever margin collections and payments are necessary.
- For other currencies, payments are done via commercial bank accounts.
- For participants trading products in non clearing currencies, an account in the respective currency is obligatory to ensure the P/L payments.

*Sources of price data and valuation procedures*

### Sources of price data
- Eurex Clearing has direct access and only uses reliable sources like information provided by regulated markets to obtain timely price data.
- For equities, Eurex Clearing refers also to prices provided by Wertpapier Service System (WSS) (Xetra, FWB, SIX).
- For Bonds, Eurex Clearing generally refers to prices provided by an internal data source or from third party market sources, e.g., Bloomberg, Reuters.

### Valuation models and estimation of prices
- Futures are priced mark-to-market.
- For options, mark-to-market is the preferred solution; when market prices are not available, theoretical prices based on Black/Scholes and Cox/Rubinstein models are used.
- Theoretical prices and models are used for cleared OTC products such as OTC interest rate swaps (IRS), repurchase agreements, and securities lending transactions. For securities lending theoretical bond prices are used.
- Eurex Clearing calculates theoretical prices for all bonds in the Collateral Database; those calculated prices will be used for valuation in the Eurex Clearing systems where no current market prices are available.
- If a theoretical price is chosen, a higher haircut is applied to account for any inaccuracy embedded in the calculation methodology.
- For OTC derivative contracts an own model is in place to determine theoretical prices based on discounting and forward curves for interest rate swaps.
- Models and the Risk Management Framework of Eurex Clearing are subject to yearly independent validations.

### Key Consideration 3 — Initial margin model and parameters
- The amount of collateral to be deposited is calculated on the basis of the total risk exposure of all accounts of the clearing member.
- The total risk exposure is determined from the price risk of the derivative, repo, securities lending and cash positions held in the accounts.
- Equal but opposite risks within each account are offset against each other; risk-reducing effects of combinations of positions are taken into consideration.
- Eurex Clearing defines “all but extreme market circumstances” such that for a given confidence level potential loss in case of a member default will not exceed margin requirements, except for OTC derivatives for which a confidence level of 99.5 percent is applied.
- Confidence levels:
  - 99 percent for listed derivatives.
  - 99.5 percent for OTC derivatives.
- The potential loss will be covered by collateral provided for margin requirements from the defaulting clearing member.
- Eurex Clearing’s risk model includes additional protective mechanisms: admission criteria, intraday margining, model validation, stress testing, clearing and default management.
- Guiding principles of Eurex Clearing’s margining methodology:
  - The risk model must be in line with the Risk Management Framework, including appropriate inclusion into the lines of defense.
  - The first priority is the financial integrity and security of the clearing house; granting offsets or adherences to market practice are secondary.
  - The model must be transparent, comprehensible and replicable given the respective input parameters.
  - The methodology must be technically and operationally feasible.
  - The calculation results need to be considerably stable to avoid potential pro-cyclical effects.
- Product launch will not proceed if any of the aforementioned conditions fail.

### Liquidation period, close-out and sample periods
- The liquidation period is the assumed maximum time frame needed for the execution of the default management process; it is product dependent and must be covered by the margin requirement calculated.
- If a product with a shorter liquidation period is cross margined with a product with a longer liquidation period, the longer liquidation period is assumed for both.
- The holding period (days needed to liquidate respective liquidation groups) is in general between 2 and 5 days.
- Two sources for establishing holding period:
  1. Internal estimation by the CCP Risk Management Department; analysis of every single step of the default management process.
     - Steps after legal confirmation of default:
       i. Positions are transferred to a Eurex Clearing account after a default is legally confirmed (end of grace period / automatic trigger).
       ii. Preliminary measures applied by DMP team and supporting interfaces (e.g., sensitivity calculations or identifying portfolio concentrations); may convene a DMC for hedging strategy.
       iii. Eurex Clearing might execute hedges depending on changing market conditions.
       iv. Independent sale can be started after hedging and should be finished within one day.
       v. The auction starts after hedging and should be finished within one day (equity liquidation group) respectively two days (fixed income liquidation group), including pricing and is anticipated to take one day (equity liquidation group) respectively two days (fixed income liquidation group) at maximum.
       - An asset class resolution is triggered if the auction fails and takes at maximum one day.
  2. Market-based estimation with involvement of the Risk Committee and alignment with regulatory requirements; chosen holding periods validated by the Risk Committee.
- Eurex Clearing conducted several default simulations; historical clearing member defaults managed by Eurex Clearing support that the assumed liquidation period is realistic.

### Margin parameter calculations and observation windows
- Margin parameter is set equal to the maximum value resulting from:
  - exponentially weighted moving average (EWMA) volatilities or
  - the un-weighted volatilities multiplied by a risk factor for fixed income derivatives and cash equity products based on 30 days, 250 days, or full observation period since inception of the product (equally weighted).

### PRISMA methodology for market risk component
- PRISMA uses a risk-factor-based simulation approach to calculate the VaR for the market risk component.
- Instrument price scenarios are obtained by simulating risk factor scenarios used for theoretical pricing.
- Two sets of risk factor scenarios are simulated:
  - Filtered historical scenarios: simulated based on historically observed risk factor returns that are normalized and subsequently adapted to the most recent volatility regime.
  - Stress period scenarios: simulated by taking historical returns from periods of significant financial distress.

### Procyclicality and minimum margin parameters
- Margin calculations are designed to be considerably stable to avoid potential procyclical effects.
- An appropriate countercyclical component is ensured through setting a minimum margin parameter.
- Minimum margin parameters:
  - Based on long-term histories of respective products or benchmark instruments and complemented by expert judgment.
  - Reviewed at least annually within the annual validation of the risk model.
  - Currently calibrated based on the estimated volatility over a 10 year historical look back period and ensure that the margin requirement will not fall below the floor established by the minimum parameter.
  - Set conservatively high to cover price movements in periods of low volatility.
- PRISMA captures substantial history of risk factor moves through the economic cycle:
  - Volatility floors are used in volatility-filtered scenarios, calibrated to reflect long term volatilities including periods of stress.
  - A weighted stress period value at risk (SVaR) floors the initial margin and is a non-procyclical component to prevent market risk component from subsiding too far in calmer regimes.
  - Number of stress period scenarios used is at least 25 percent of the total sample used to calculate the market risk component.
  - Scenario prices within the stress period VaR are based on n-day returns without the application of the volatility filtering technique.
  - A downscaling factor is calibrated for SVaR to ensure a meaningful, comparable level of the two components while preserving the flooring property of the SVaR.
  - Methodology is described in the Prisma Risk Model Description.

### Wrong-way risk management
- Wrong way risks may arise if there is an unfavorable interrelatedness between:
  - clearing member’s credit risk (CM as issuer),
  - its portfolio value (portfolio),
  - and/or the value of its collateral pool (collateral).
- Addressing wrong-way risks:
  - Exclusion or restricted usage of certain issuances for a specific member to post as margin collateral (CM as issuer vs. collateral) or to use to securitize SFTs (CM as issuer vs. portfolio).
  - Monitoring or preventing wrong way risk constellations in a clearing member’s portfolio and especially in its collateral pool is important because Eurex Clearing does not consider such interdependencies in its margin methodology framework; it is assumed that the recovery rate of collateral is not related to the credit quality of the clearing member itself.
  - Wrong-way relations between a clearing member’s trading portfolio and the clearing member itself are difficult to prevent and deemed generally reasonable; such positions are 100 percent collateralized in form of supplementary margin.
  - Whenever possible to prevent certain wrong way constellations, e.g., collateralization of SFTs with own issues and close links, it is prohibited.
  - For other cases (instruments issued by entities allocated to the same sector and/or located in the same country) thresholds are defined.

### Variation margin, intraday margining and monitoring (Key Consideration 4)
- Eurex Clearing has the authority and capability to request and to pay-out variation margin as well as to conduct intraday margin calls.
- Distinction between variation margin and margin calls:
  - Variation margin offsets daily profits and losses arising from price fluctuations of open positions; marking to market ensures each position is re-valued at the daily settlement price and differences are offset by daily compensating payments.
  - For options on futures, final valuation is at the final settlement price of either the expiration date of the option or the day on which it was exercised.
  - Margin calls are issued when intraday monitoring detects under-collateralization, generally caused by adverse market movements increasing the margin requirement.
- Market movements are continuously monitored by Eurex Clearing’s Risk Management Department which issues intraday margin calls or demands supplementary margin if necessary.
- Eurex Clearing has sufficient operational capacities to make and complete intraday margin calls.

### Portfolio margining and cross-product offsets (Key Consideration 5)
- Eurex Clearing allows offsets in its margining systems Risk Based Margining (RBM) and Portfolio Based Margining (PRISMA).
- Margin classes and margin groups:
  - Derivative contracts based on the same underlying instrument are grouped into “margin classes” (e.g., all DAX® options together with the DAX futures comprise the DAX margin class).
  - For equity options, all contracts with the same underlying security are grouped together.
  - Unrealized profits and losses on futures contracts within the same margin class are offset against each other.
  - Two or more margin classes whose underlying instruments are (positively) correlated with respect to their risk structure are combined in a “margin group”; within a margin group cross margining (offsetting equal but opposite risks) is possible.
  - Correlation is validated through stress periods.
  - Narrow definition of margin groups ensures Eurex Clearing is not exposed to additional risk by granting margin reductions.
- PRISMA grants offsets only within predefined groups of products to:
  - Avoid risk of margin shortfalls during liquidation due to previously granted offsets on portfolio level.
  - Ensure cross-product offsets are not out-weighted by additional liquidity margins.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16197.pdf*

### introduction of Eurex Clearing PRISMA, the default management process

### introduction of Eurex Clearing PRISMA, the default management process

### Liquidation groups and portfolio margining
- Margining under PRISMA is on (sub-) portfolio level rather than on position level.
- Sub-portfolios are called “liquidation groups” and comprise products anticipated to be auctioned together in case of a clearing member default.
- Portfolio margining is only possible for products assigned to the same liquidation group.
- Assignment to the same liquidation group alone does not suffice to grant offsets between products; only restricted offsets are granted within one liquidation group through model adjustments, especially correlation break adjustments.
- PRISMA incorporates only offsets consistent with the Default Management Process to avoid exposure from margin reduction.
- Liquidation groups:
  - are defined equally for all members at CCP level and are unrelated to the size, trading strategy, or positions of a particular clearing member;
  - are fixed over time unless composition is adjusted in regular reviews.
- Criteria for defining liquidation groups:
  - Standard liquidation process: products that follow the standard liquidation process with an auction as central element can be assigned together; products using a different liquidation process cannot be assigned together.
  - Proximity of products: products within one liquidation group allow for objective proximity (example: Equities or equity indices); proximate products share common risk factors and required clearing licenses and settlement infrastructures.
  - Hedge-ability: dependency to other products in the liquidation group can be quantifiably proven and is stable; assignment requires products can be hedged together based on quantitative metrics.
  - Price-ability: the liquidation group can be priced by clearing members in a limited period of time; price-ability is verified during regular default simulations and is subject to auction format and hedging strategy.
- Composition review and governance:
  - Liquidation group composition is reviewed internally and in default simulations on a regular basis.
  - Final decision on definition of liquidation groups remains with the Executive Board.
- Monitoring:
  - Eurex Clearing monitors cases where portfolio margin requirements result in an offset of 80 per cent or more compared to the gross margin requirement on product level; such findings feed risk reporting and management.
- Cross-margining:
  - Eurex Clearing does not have cross margin arrangements with other CCPs.

### Robustness of margin methodologies, backtesting, and model validation
- Daily procedures:
  - Margin procedure is subject to daily stress tests.
  - Back tests are conducted daily to ensure the margin requirement meets applicable confidence levels: 99 percent for listed and 99.5 percent for OTC products.
- Model Validation Framework:
  - Designed for validation of the overall margin figure based on back testing analyses and validation/calibration of separate subcomponents.
  - Two main elements:
    - Validation of adequacy of overall margin methodology on a portfolio level by back testing several market risk figures for clearing member portfolios on different portfolio hierarchy levels.
    - Validation of adequacy of methods and parameter configurations used for derivation of the initial margin figure and its subcomponents.
- Back testing and reporting:
  - Validation of the overall initial margin figure is conducted using back testing techniques for various risk figures.
  - Back testing is conducted on a daily basis.
  - Results are reported to Eurex Clearing management monthly or ad-hoc if deemed necessary.
- Data history and statistical significance:
  - Eurex Clearing takes into account a long data history for its back testing program to mitigate detrimental effects on statistical significance.
- Change governance:
  - If validation reveals a severe deficit and a major adjustment is required, the adjusted model must go through the normal approval process and, if applicable, be approved by Eurex Clearing Risk Committee, the Competent National Authority (BaFin) and the College of ESMA if necessary before implementation.
  - Minor changes such as parameter updates need only be approved by the CRO of Eurex Clearing.
- Transparency:
  - Back testing results are made available to clearing members without breaching confidentiality.
- Sensitivity analysis:
  - For regular validation, sensitivity simulations are performed for all parameters in scope and for all clearing member portfolios, resulting in sensitivity decomposition across all member portfolios.
  - Sensitivities are analyzed for single model parameters or combinations under various market conditions and for a number of confidence levels.

### Governance of model review and validation (Key consideration 7)
- Model Validation Framework documents all testing programs, processes and report structures.
- New risk models are validated by an independent party (e.g., international consultant and accounting firms) prior to launch.
- Processes define roles and responsibilities, metrics, thresholds and actions.
- Ongoing revision:
  - Eurex Clearing regularly seeks advice of the Risk Committee for model revision and improvement.
  - Major changes and adjustments are presented to the Risk Committee and approved by the Executive Board.
  - Each risk model is validated on an ongoing basis; validation metrics are defined during development or change processes.

### Key conclusions and assessment for Principle 6
- Findings:
  - Eurex Clearing’s margining process is multifaceted and time critical, taking into account product, portfolio, and market features.
  - Margin calculation is based on reliable and timely price data.
  - Eurex Clearing has the power and operational capacity to make intraday margin calls and payments.
  - Initial margin and variation margin models and parameters are risk-based and generate margin requirements sufficient to cover potential future exposure.
  - Regular portfolio-level back testing is performed across portfolio hierarchy levels.
  - New risk models are validated by independent parties prior to launch.
  - The Risk Committee is involved in ongoing revision; major changes require Executive Board approval.
- Assessment of Principle 6: Observed.

*Source: introduction of Eurex Clearing PRISMA, the default management process (IMF content unit).*

### Chapter VIII Part 1; GC Pooling Repo transactions: under Chapter I

### Chapter VIII Part 1; GC Pooling Repo transactions: under Chapter I

### GC Pooling Repo transactions
- Chapter VIII Part 1; GC Pooling Repo transactions: under Chapter I

### Cross-reference connections
- Part 1 in connection with Chapter IV Part 3; Securities Lending Transactions: under Chapter I Part 1 in connection with Chapter IX

*Source: _cr16197 - Chapter VIII Part 1; GC Pooling Repo transactions: under Chapter I*

### Part 1] in general by making an OTC Novation Report available to the

### Part 1 — Eurex Clearing: Finality, Settlement, Default Management, Segregation, Business and Operational Risk

### Finality of clearing transactions (Principle 8)
- Finality is based on the German civil code for irrevocability and on insolvency law for enforceability, supported by the Clearing Conditions.
- Clearing transactions become final in Eurex Clearing system in real time; finality at CSD level is acknowledged when the CSD reports settlement and Eurex Clearing receives confirmation.
- Pending transactions (failed at CSD) are considered still pending and forwarded for settlement on the next business day.
- German Insolvency Law: instructions, transactions or discharge of obligations are not void only due to issuance or establishment on the day of insolvency; set-off is prohibited from the day of insolvency commencement but payment orders and transfers of securities introduced in systems are not hindered provided set-off is effected at the latest on the day of opening of the insolvency proceedings (Art. 96 (2)).
- Eurex Clearing obtains comprehensive legal opinions to verify enforceability of each clearing model for each jurisdiction (legal opinions obtained in 2011 and 2012 and updated in 2014 and 2015; most foreign law opinions obtained in 2014 or 2015).
- Assessment of Principle 8: Observed.
- Recommendation: Eurex Clearing should explicitly reflect in the Clearing Conditions how the moment of irrevocability and the moment of entry are specified in German law.

### Links with CSDs and DvP settlement
- Eurex Clearing maintains links with a number of CSDs and is responsible for forwarding DVP settlement instructions; it acts for Clearing Members based on irrevocable power of attorney.
- Eurex Clearing treats settlement as final upon CSD confirmation and then sends SWIFT confirmation to Clearing Members.
- Eurex Clearing creates instructions to observe the Intended Settlement Day (ISD) using CSDs batch processing cycles; it submits settlement instructions prior to overnight deadlines (example: CBF night time batch STD technically runs on S-1 for value date S).
- Gross Delivery Management and block/release functionality help Clearing Members avoid fails.

### Money settlements (Principle 9)
- Eurex Clearing uses both central bank money and commercial bank money:
  - Central bank model for Euro and Swiss Francs via TARGET2 account at Deutsche Bundesbank and CHF account at Swiss National Bank.
  - Other currencies (e.g., US Dollar and British Pound) use commercial bank money (EuroSIC, Clearstream Banking Luxembourg (CBL), EuroClear Bank, several commercial payment banks).
- More than 90 percent of total liquidity transactions are in EUR and CHF settled in central bank money.
- Initial margin and default fund contributions are collected in clearing currencies, EUR and CHF.
- Selection and monitoring of commercial settlement banks:
  - Internal FACT methodology; minimum internal rating acceptable is ‘C’ (corresponds to S&P/Fitch rating of ‘A, A-‘ and Moody’s ‘A2, A3’).
  - Technical: Banks must participate in SWIFT and support specific message types and provide online banking access.
  - Operational: Banks must meet specific cash settlement deadlines, share business continuity plans, comply with Eurex Clearing business days, and confirm agreed enquiry timeframes.
  - In principle at least two payment banks per relevant currency are appointed to avoid concentration.
  - Nostro limits per payment bank account are set; overnight cash balances are monitored and placed on secured basis via reverse repo transactions.
- For available cash not placed with a central bank, not less than 95 per cent is collateralized with high quality collateral meeting Article 45 of Regulation No 648/2012 in conjunction with Annex II of Delegated Regulation No 153/2013.
- Legal agreements with settlement banks are in place; laws (Settlement Finality Directive, German Insolvency Law (InsO, Section 116)) support transfers and finality.
- Timing for debit and credit instructions (examples preserved exactly):
  - Euro: Debit instructions released Around 06:00 CET; Debit instructions met 07:00 CET same day; Credit instructions released Around 08:00 CET (after confirmation that debit instructions are met)
  - CHF: Debit instructions released Around 06:00 CET; Debit instructions met 07:00 CET same day; Credit instructions released Around 08:00 CET (after confirmation that debit instructions are met)
  - GBP: Debit instructions released Around 06:00 CET; Debit instructions met 09:00 CET same day; Credit instructions released Around 09:10 CET (after confirmation that debit instructions are met)
  - USD: Debit instructions released Around 06:00 CET; Debit instructions met 08:00 CET same day; Credit instructions released Around 08:10 CET (after confirmation that debit instructions are met)
  - JPY: Debit instructions released Around 07:00 CET (after FXYCS system is closed); Debit instructions met 08:00 CET the following day due to time difference; Credit instructions released 15:30 CET on same day as debit instructions (before the confirmation that debit instructions are met)
  - KRW: Debit instructions released Around 03:10 CET; Debit instructions met 07:00 CET (08:00 CEST) same day; Credit instructions released 07:00 CET (08:00 CET CEST) same day (after confirmation that debit instructions are met)
- Assessment of Principle 9: Observed.

### Participant-default rules and default management (Principle 13)
- Default framework:
  - Automatic termination on commencement of insolvency proceedings (Clearing Conditions, Chapter I, Part 1, Number 7.2.2).
  - Non-automatic termination events include Failure-to-pay, Failure to comply with Clearing Conditions, and insolvency-related events.
  - In default, proprietary positions are liquidated; client positions are ported where possible.
- Client segregation and porting:
  - Client positions are segregated individually or as part of an Omnibus Client Pool.
  - Individually segregated Non-Clearing Member / Registered Customer options on default: (i) port to non-defaulted back-up Clearing Member; (ii) become a Clearing Member for limited period of 5 days to find replacement; or (iii) Eurex Clearing liquidates positions.
  - In ECM and NOCM, porting requires all clients within an Omnibus Pool to jointly agree to transfer to one replacement Clearing Member.
  - Porting period after a Termination Event runs from occurrence until 13.00 CET on the immediately following business day.
- Default resources and waterfall (lines of defence per EMIR):
  - (i) initial margin and other margins posted by the defaulter;
  - (ii) defaulter’s contribution to the clearing fund;
  - (iii) Eurex Clearing’s own contribution to the Clearing Fund (according to EMIR, 25 percent of its capital);
  - (iv) clearing fund contributions of non-defaulting clearing members;
  - (v) assessments to the clearing fund (with a maximum of 2 assessments in the capped period of twice the prefunded clearing fund contribution);
  - (vi) parental guarantee;
  - (vii) remaining equity of Eurex Clearing.
  - The order is documented in the Clearing Conditions (Chapter I, Part 1, 6.2).
- Preparedness and testing:
  - Default Management Committees (DMCs) convened; non-defaulting participants required to participate in auctions and to replenish Clearing Fund up to two times (assessments) when needed.
  - Eurex Clearing conducts regular default simulations; Clearing Members obliged to support simulations and act as potential counterparties. Eurex Clearing conducts at least one default simulation per year and, as EMIR-compliant CCP, at least one and a maximum of three full simulations annually plus multiple bilateral simulations with major members.
  - Results of simulations are reported to Executive Board and Risk Committee to drive procedural or technical changes.
- Disclosure: Key aspects of default procedures are publicly disclosed as part of Clearing Conditions on the website.
- Assessment of Principle 13: Observed.

### Segregation and portability (Principle 14)
- Clearing Models offered (three models):
  - Elementary Clearing Model (ECM) — omnibus client segregation (Article 39(2) EMIR).
  - Individual Clearing Model (ICM) — individual client segregation (Article 39(3) EMIR).
  - Net Omnibus Clearing Model (NOCM) — enables UK Clearing Members to apply CASS provisions; omnibus client segregation (Article 39(2) EMIR).
- ICM features:
  - ICM Clients do not bear risk of losses from proprietary transactions of their Clearing Member nor from other client-related transactions of the Clearing Member.
  - Transfer of collateral is based on a double Title Transfer to support porting.
  - Legal segregation via separate ICM Standard Agreement per ICM Client; in close-out, a separate “Difference Claim” mechanism is used and security interests granted to secure ICM Client Difference Claim against the Clearing Member.
  - ICM offered to all Clearing Member jurisdictions within the European Union where clearing services are offered; modified ICM for non-EU Clearing Members where local law might interfere (modified model introduced in November 2014).
  - Porting for clients of Clearing Members in Singapore and Switzerland subject to approval by the competent authority.
- Account structure and identification:
  - Separate CM Accounts and several account types per Clearing Member (own account; transaction accounts for customer-related and own transactions for NCMs and RCs).
  - Netting between different CM Accounts is legally not possible under German law (see Section 387 of the German Civil Code).
- Disclosure:
  - EMIR Disclosure Document published on website summarises the three Clearing Models and legal implications; price list publicly available.
- Assessment of Principle 14: Observed.

### General business risk and recovery (Principle 15)
- Risk measurement and capital:
  - Eurex Clearing uses a standardized VaR approach to calculate required economic capital (EC) with a confidence level of 99.98 percent and compares it to its risk-bearing capacity (equity on balance sheet).
  - Minimum capital requirement per Article 16 EMIR and EBA technical standards: EUR 7.5 million.
  - EBA technical standards require own funds for winding down/restructuring, operational/legal risk, credit risk, counterparty risk, market risk and business risk. Article 1 paragraph 3 sets a notification threshold when capital < 110 percent of minimum capital.
- Recovery and wind-down:
  - Recovery Plan developed in line with German recovery and resolution planning law and Financial Stability Board Key Attributes (October 2014) and BaFin MaSan draft (November 2012).
  - Winding down/restructuring period estimated at no longer than 6 months; six months considered as appropriate time period for winding down/recovery.
  - Eurex Clearing has procedures to identify and document recovery or wind-down actions; review regularly.
- Capital raising:
  - Triggers to monitor capital needs and predefined approval to increase capital.
  - Parent Eurex Frankfurt can increase Eurex Clearing’s equity via payment into capital reserve under German Companies Act (AktG) (references to §§ 150, 152 AktG and § 272 II No 4 HGB); German Supervisory Authorities are notified on capital increase.
- Liquidity and investment of own funds:
  - Own funds invested only in cash or highly liquid instruments with minimal market and credit risk; may be invested via direct securities purchases per Investment Policy.
- Assessment of Principle 15: Observed.

### Custody and investment risks (Principle 16)
- Custody:
  - Own and participants’ collaterals are deposited with supervised and regulated entities: Clearstream Banking AG (CBF), Clearstream Banking S.A. (CBL), and SIX SIS Ltd., Zurich; these are notified under Article 10 of the Settlement Finality Directive or licensed and supervised (SIX SIS by FINMA).
  - Requirement for legal certainty of first ranking access rights and collateral portability in respective jurisdictions.
  - Eurex Clearing offers both omnibus and individual segregation at collateral locations (CBF).
- Prompt access and exposures:
  - Eurex Clearing must have first ranking legal rights and immediate access to collateral in case of participant insolvency or default.
  - Currently not connected with a collateral location in another time zone than CET.
  - For securities collateral exclusively uses SSS operators; custodian banks are not connected for exposure management services.
  - Cash collateral: EUR and CHF prefer central bank liquidity; USD and GBP accepted via selected payment banks.
  - Counterparty exposure limits and monitoring in place for investments and placements; credit exposure limits reviewed at least yearly.
- Investment strategy:
  - Treasury Policy approved by Executive Board; primary goals: meet payment obligations and minimise counterparty risk.
  - Not less than 95 per cent of available cash not placed with a central bank is collateralized with high quality collateral meeting Article 45 of Regulation No 648/2012 and Annex II of Delegated Regulation No 153/2013.
  - Securities issuers limited to central/regional governments, central banks, multilateral development banks, EFSF, ESM.
  - Securities portfolio: average time-to-maturity may not exceed 2 years; maximum remaining time-to-maturity of individual securities may not exceed 5 years; securities by one issuer may not exceed 25 percent of the maximum amount of securities portfolio.
  - Money market placements via reverse repo transactions; credit exposure limits and concentration monitoring apply.
- Assessment of Principle 16: Observed.

### Operational risk and business continuity (Principle 17)
- Operational risk framework:
  - Group Risk Management Policy (GRMP) and Operational Risk Procedure govern identification, assessment, control, reporting. Operational risk defined to include Availability Risk, Risk of Service Deficiencies, Risk of Damages to Physical Assets, and Legal Risk.
  - OpRisk External Loss Database and scenario-based analysis used; scenarios reviewed annually and results reported to Executive Board.
  - Incident and crisis management processes in place; critical services and mission-critical functions defined (examples: Cash and Collateral Management, Delivery Management, Risk Monitoring, Default Management Processing, End-of-day processing CCP, CARMEN, Risk Engine).
- Availability and recovery objectives:
  - Recovery Time Objective (RTO) for mission critical functions: 2 hours.
  - Recovery Point Objective (RPO): zero (real-time synchronization/mirroring between two independent data centers).
  - Availability rate during last 12 months: 100 percent.
- Data centers and secondary site:
  - Systems replicated over two geographically separated redundant data centers in Rhein-Main area; data centers interconnected with high-speed redundant links; data written to multiple disks in real time across two data centers.
  - Additional access points/data centers in Chicago and Luxembourg; night shift operated from Chicago.
  - Secondary processing site available; geographically less than 50 kilometer from primary site; has IT capacity and functionalities for continuity but is not a fully-fledged secondary site cloning primary site with full staffing for swaps.
  - Comment/Recommendation: Eurex Clearing should ensure presence of a secondary business team on premises of the secondary site to allow swaps of operations between primary and secondary sites during business-as-usual.
- Testing, audits and outsourcing:
  - Annual workspace and staff unavailability tests; systems failover tests after significant modifications; BCM Plans tested regularly including large scale disaster scenarios.
  - Internal Audit and external audits on annual basis; Internal Audit Plan prepared annually based on a three year risk-based cycle.
  - Outsourced services subject to standardized outsourcing monitoring; initial and annual assessments; outsourcing coordinator involvement mandated.
- Standards and certifications:
  - IT service management certifications: ISO 9001:2008/TickIT and ISO/IEC 20000-1:2011; Protection & Security Standards for Data Centers reference ISO 27000.
  - Protection, Security, and Safety (PSSDC) analyses performed on data centers; PSSDC analyses to be addressed and fed into BCM and risk management.
- Assessment of Principle 17: Broadly observed.

### Access and participation requirements (Principle 18)
- Participation criteria:
  - Objective, risk-based criteria requiring sufficient financial resources and operational capacity.
  - Minimum liable equity capital requirements depend on product and type of clearing membership; dynamic component scales to individual member risk (percentage of additional margin requirement).
  - Where insufficient liable equity capital exists, shortfall can be covered by collateral in cash and/or securities.
  - Clearing Fund contribution: higher of static minimum or dynamic component:
    - Static component minimums for General Clearing Fund (including OTC IRS): EUR 5 million for a GCM/CM or EUR 1 million for a DCM.
    - Dynamic component based on member’s total margin requirement across products.
  - Members must demonstrate operational capability (technical/functional connection, back-office facilities, qualified staff).
  - Member Compliance Framework in place to assess ongoing compliance.
- Obligations related to default management participation:
  - Clearing Members obliged to participate in Default Management Committees (if selected), default simulations and auctions for asset classes they are active in.
- License types:
  - General Clearing License (clear own, customer, NCM and RC transactions).
  - Direct Clearing License (clear own, customer, RC transactions and affiliated NCM transactions).
- Review and disclosure:
  - Admission requirements assessed annually or ad-hoc; changes discussed with market participants, Clearing Committees and Risk Committee.
  - Assessment of participation criteria justified in terms of safety and efficiency and tailored to risks.
- Assessment of Principle 18: (no single-word assessment explicitly provided in the supplied excerpt).

*Source: IMF staff report content extracted from the provided Eurex Clearing assessment (Part 1). *

### Chapter I, Part 1 for the general prerequisites and in Chapters II-IX for

### _cr16197 - Chapter I, Part 1 for the general prerequisites and in Chapters II-IX for

### Participation requirements, monitoring, and suspension/exit (Principle 18)
- Participation criteria and special prerequisites apply for Transactions concluded at Eurex Deutschland/Zürich, Eurex Bonds, Eurex Repo, Frankfurter Wertpapierbörse, Irish Stock Exchange and/ or European Energy Exchange as well as the novation of over-the-counter Transactions in interest rate swaps and securities lending. These criteria and other rules and regulations are available on the Eurex Clearing website: https://www.eurexclearing.com/clearing-en/resources/rules-and-regulations/136778/.
- Clearing member financial and contribution thresholds (as presented in source):
  - No. 1 Futures/ Options Eurex Frankfurt/ Eurex Zürich: 50                           12.5                           7
  - No. 2 Securities (Bonds) Eurex Bonds: 307.5
  - No. 3 Securities (Repos) Eurex Repo: 20050
  - No. 4 Securities (Equities) FWB: 153.75 5, 6
  - No. 5 Securities (IRSX) Irish Stock Exchange (ISE): 15                           3.75                           4,                           5
  - No. 6 Futures/Options (EEX) EEX: 50                               12.5                               1
  - No. 7 Securities Lending CCP Services for Securities Lending: 200                         50
  - No. 8 Interest Rate Derivatives EurexOTC Clear: 30 -  
- Monitoring compliance:
  - Clearing Members must provide evidence of compliance with prerequisites for a clearing license; admission ensures all admission requirements are fulfilled.
  - Ongoing monitoring: regular audits under the Member Compliance Framework, including on-site visits and due diligence questionnaires.
  - Eurex Clearing monitors operational procedures and adequacy of back-office staff against operational minimum standards.
  - Outsourcing: Eurex Clearing can request further information from outsourcers and may conduct on-site visits (directly or via an independent auditor authorized by Eurex Clearing).
  - Financial resource monitoring:
    - Proof of liable equity capital must be submitted annually by June 30 for the previous fiscal year.
    - Minimum liable equity capital requirement at admission plus a dynamic component calculated as a percentage of each clearing member’s additional margin requirement.
    - Clearing Fund contribution: minimum contribution plus a dynamic component scaled to the member’s risk.
    - Liable equity and Clearing Fund requirements are newly determined at the end of each calendar quarter or ad-hoc if required.
    - Monitoring is performed once a week for liable equity capital requirements (against reported liable equity capital and collateral) and for the Clearing Fund requirements.
- Suspension and orderly exit:
  - Standard audit irregularities or doubts about compliance may trigger Spot Tests and On-site audits.
  - Escalation process for breaches detected in ongoing assessments, questionnaires, or on-site assessments.
  - Disciplinary process:
    - Disciplinary Procedure Notice → investigation by Member Audit Group → report to Clearing Member with findings and intended action.
    - Clearing Member responds in writing to accept or dispute the Alleged Breach.
    - If unresolved, a Disciplinary Committee convened per “Eurex Clearing Statutes For The Disciplinary Committee” hears the case and recommends penalties to the Executive Board.
    - Final Decision Notice communicates sanctions and any remedial actions.
  - Termination events and consequences are set out in the Clearing Conditions; Eurex Clearing may suspend/restrict clearing of Non-Covered, Covered and/or Net Omnibus Transactions and will notify affected parties and specify reasonable suspension/restriction periods.
  - On demand, the Clearing Member must provide information and evidence (at its own expense) for investigation of termination events.
- Key conclusion:
  - Eurex Clearing’s participation requirements do not limit access on grounds other than risk. It has clear and transparent admission criteria, continuous assessment and monitoring, and publicly disclosed procedures for suspension and orderly exit.
  - Assessment of Principle 18: Observed.

### Tiered participation arrangements (Principle 19)
- Legal/contractual framework:
  - Eurex Clearing generally transacts only with clearing members; direct contractual relationships exist with certain clients via tripartite agreements among Clearing Members, Non-Clearing Members/Registered Customers, and Eurex Clearing.
  - Tripartite agreements: (i) require clearing members to provide certain client-related information to Eurex Clearing; (ii) entitle Eurex Clearing to request risk-related information from clearing members, Non-Clearing Members, and Registered Customers.
  - “Know your customer” procedures applied prior to entering tripartite agreements.
- Monitoring and mitigation of risks from indirect participation:
  - Proprietary and client transactions must be recorded on dedicated accounts in the Eurex Clearing system, enabling monitoring per clearing member, Non-Clearing Member, and Registered Customer.
  - Undisclosed clients: clearing members must submit certain client-related information and record transactions for undisclosed clients on a dedicated account (A Account).
  - Financial resources:
    - Different minimum equity capital per clearing membership depending on cleared products and markets.
    - Compliance with financial resource requirements monitored regularly, with annual evidence submission.
    - Clearing Fund minimum contributions at admission:
      - GCM/IRS CM: EUR 5 million;
      - DCM: EUR 1 million.
    - These amounts increase if the CM has higher margin requirements.
  - Operational capacity:
    - Operational minimum standards: adequate systems and full operational support and back-up; appropriately experienced and trained member staff; required standards and training offered.
    - Member Compliance Framework requests information directly from clearing members to confirm compliance and capacity for customer business.
  - Concentration and wrong-way risk monitoring: considers trading or clearing volumes, margin requirements, internal credit, exposure level, collateral pool quality, and overall trading activities.
  - Eurex Clearing may transmit or request data from clearing and settlement institutions or independent auditors, subject to confidentiality, as necessary for orderly conduct.
  - EMR Article 37 (3): responsibility for client obligations remains with the Clearing Member; clearing member must demand or provide (additional) cover at least equal to the Variation Margin Requirement applicable between the clearing member and Eurex Clearing.
- Dependencies and concentration:
  - Material dependency defined as a close link: direct or indirect ownership/control via voting rights of 50 percent or more or a control agreement.
  - Identification and monitoring of issuer identification numbers for entities classified as close links.
  - Restrictions: clearing members cannot post as collateral financial instruments issued by highly interlinked entities.
  - Stress testing and default waterfall consider default of clearing members and their clients, implicitly incorporating indirect participant defaults that may cause direct participant insolvencies.
- Identification of significant indirect participants:
  - Segregated account models differentiate direct vs indirect participant activities (proprietary accounts vs agent/Non-clearing member/Registered Customer accounts).
  - Collateral must cover both clearing member and client exposures.
  - Concentration limits applied at clearing house level and clearing member level.
  - Outlier account behaviors (large volumes, position buildup) may prompt requests for further information or on-site meetings.
- Review cadence:
  - Policies and procedures reviewed annually and ad-hoc as needed.
- Key conclusion:
  - Eurex Clearing can gather information on indirect participation and identify, monitor, and manage material risks from tiered arrangements.
  - Assessment of Principle 19: Observed.

### Links with other FMIs (Principle 20)
- Links summary:
  - Eurex Clearing has no link with another CCP.
  - It maintains accounts with CSDs and trade repositories (TRs).
- Trade repository link:
  - Eurex Clearing reports derivatives transactions to the European trade repository REGIS-TR as required by Article 9 of EMIR.
  - REGIS-TR is located in Luxembourg and supervised by Commission de Surveillance du Secteur Financier (CSSF); ESMA registered REGIS-TR on 7th of November 2013 under Article 55 of EMIR.
  - The link to TR does not generate potential risk to Eurex Clearing but is monitored and evaluated regularly.
- CSD links:
  - Linked to Clearstream Banking AG, Frankfurt; Clearstream Banking S.A., Luxembourg; and SIX SIS Ltd., Olten, Switzerland.
  - The CSDs are designated as systemically important systems and regulated by German and Swiss authorities respectively.
  - Link to Euroclear UK & Ireland is notified according to Article 10 of the Settlement Finality Directive (98/26/EC).
  - Eurex Clearing annually (and as necessary) verifies linked CSDs’ accounting practices, safekeeping/internal control procedures, regulatory status, and financial strength.
- Not applicable items:
  - Key Considerations 3–9 (many CSD/CCP-specific link considerations) are not applicable given no CCP links.
- Key conclusion:
  - Eurex Clearing has no CCP links; it is connected to designated settlement and payment systems and TRs with appropriate risk management and monitoring.
  - Assessment of Principle 20: Observed.

### Efficiency, governance, technology, and business continuity (Principle 21)
- Governance and participant engagement:
  - Specialized committees involving market participants include: Risk Committee, Derivatives Clearing Committee, Securities Clearing and Settlement Committee, Clearing Collateral Committee, IRS Product Committee, and Default Management Committees (DMC).
  - Supervisory Board has an Audit and Risk Committee in compliance with CRD IV and EMIR.
- Technology and standards:
  - Technology Roadmap to assure market safety and innovation in risk management and clearing technology.
  - Latest clearing interfaces use industry standards such as FIXML for customization and cost savings.
- Objectives, controls, and internal control system (ICS):
  - Business Strategy sets measurable goals on cost, volume, financial and risk levels; performance monitored continuously.
  - Executive Board responsible for implementation and effective operation of ICS.
  - ICS provides reasonable assurance on effectiveness and efficiency of operations, reliability of financial reporting, and compliance with laws and regulations.
  - Enhanced ICS approach applies to areas like Accounting, Purchasing, Human Resources requiring documented main processes and annual reporting to the Audit and Risk Committee.
- Business continuity:
  - Business Continuity Management has three scenarios: System Unavailability, Workspaces Unavailability, Staff Unavailability; each tested at least yearly.
  - Mission critical areas defined with Recovery Time Objective (RTO) of 2 hours; factual maximum recovery time over last 2 years has been about 30 minutes.
- Operational performance:
  - IT systems reported availability rate of 100 percent over the last 2 years (2014 to July 2015).
  - Systems capable of processing necessary information to perform activities safely and efficiently.
- Review mechanisms:
  - ICS audited as part of annual financial audit; Internal Audit checks effectiveness of controls.
  - Enhanced ICS areas must document processes and controls (example: billing process reconciliation controls).
  - Regular participant meetings across products gather feedback on product/service developments and service quality.
- Key conclusion:
  - Eurex Clearing has adequate processes addressing participant needs and measurable, achievable objectives on service levels, risk management, and business priorities.
  - Assessment of Principle 21: Observed.

### Communication procedures and standards (Principle 22)
- Standards used:
  - SWIFT ISO 15022 used for communication with other FMIs and for securities market communications with clearing members.
  - FIXML used for derivatives market communications; Eurex Clearing FIXML Interface is standards compliant and cost-effective, based on FIX.
  - Documentation on FIXML is maintained on the Eurex Clearing website.
- Key conclusion:
  - Eurex Clearing uses internationally accepted communication procedures and standards.
  - Assessment of Principle 22: Observed.

### Disclosure of rules, procedures, and market data (Principle 23)
- Rules and disclosure:
  - Eurex Clearing Conditions regulate activities and relationships; based on German civil law and enforceable in German courts.
  - Clearing Conditions, rules, and procedures publicly disclosed on the Eurex Clearing website.
- Publicly disclosed documents (selected list in source):
  - Clearing Conditions of Eurex Clearing;
  - Price List of Eurex Clearing;
  - Statutes for the Risk Committee;
  - Default Management Committee Rules;
  - Default Management Auction Rules;
  - Statutes for CDS Market Committee and CDS Default Management Committee;
  - Statutes for the IRS Product Committee;
  - Auction Terms of Eurex Clearing;
  - Statutes for the Disciplinary Committee; and
  - Disciplinary Procedures Rules.
- System design and operational information:
  - Technology and interface documentation (Messaging Interfaces Connectivity and FIXML Interface), network access, and GUI solutions documented on the website.
  - Risk Management Framework materials published, including lines of defense, default management process, and margining process.
  - Real-time margining provides permanent risk assessments for clearing members and their clients based on current market conditions and intraday volatility.
- Training and qualification:
  - Admission criteria require qualified back-office staff and at least one Qualified Clearing Staff (QCS) per clearing license.
  - Individual tests per clearing license: a basic module (core clearing knowledge) and a market module; sufficient qualification achieved upon passing the relevant test.
- Fees and pricing:
  - Fees disclosed in Clearing Conditions Chapter I, Part 1, Number 5.1:
    - one-time fee upon conclusion of the first Clearing Agreement;
    - an annual fee for the granting of a Clearing License, payable by the clearing member on January 31 of each year;
    - further fees for certain actions and transactions.
  - Price List provides full fee structures and incentive models; circulars inform members and can present rebate models.
- Disclosure framework and market data:
  - Eurex Clearing has reviewed methodologies and risk management practices against the PFMIs; results published in the Disclosure Document.
  - Public quantitative data and parameters published: theoretical price data, theoretical values and parameters for equities, subscription rights, bonds, coupon dates and rates, margin parameters, haircuts, accepted collateral specifications, derivatives margin groups and classes, maturity factors, volatility shifts, Haircut and adjusted exchange rate. Available intraday and end of day file versions.
  - Monthly volume statistics published across market segments (Eurex Exchange, Frankfurt Stock Exchange, Eurex Repo, Eurex Bonds, ISE Dublin, EurexOTC IRS).
- Key conclusion:
  - Eurex Clearing has clear, comprehensive, and publicly disclosed rules, procedures, and pricing; it publishes risk management disclosure and transaction/parameter data.
  - Assessment of Principle 23: Observed.

### Trade repository disclosures (Principle 24)
- Not applicable to Eurex Clearing as a TR in this assessment.
- Assessment of Principle 24: Not applicable.

### Responsibilities of authorities (Regulation, supervision, and oversight)
- Legal and supervisory framework:
  - A CCP in the EU is defined in EMIR. Eurex Clearing is subject to EMIR and supervision as a CCP.
  - Eurosystem oversight: Bundesbank oversight against the PFMIs following ECB Governing Council adoption on June 3 2013.
  - As a credit institution, Eurex Clearing is supervised by Deutsche Bundesbank jointly with BaFin under the German Banking Act.
  - Recovery planning for Eurex Clearing is subject to review/assessment by BaFin in consultation with Deutsche Bundesbank under the German Act on the Recovery and Resolution of Institutions and Financial Groups.
  - BaFin is the national competent authority for CCP authorization and supervision under EMIR; BaFin chairs a college of supervisors for Eurex comprising 20 members.
- College of supervisors:
  - Composed of authorities supervising major clearing members, trading venues, CSDs, members of the ESCB as overseers and central banks of issue, and ESMA.
  - Functions under a written agreement; provides joint opinions on CCP compliance with EMIR at authorization and on extensions of services or significant changes to risk models/parameters; coordinates supervisory examination programs and receives annual reviews.
- Publicly disclosed legal bases:
  - EMIR / Regulatory Technical Standards: Official Journal of the European Union.
  - German Banking Act (modified to adapt to EMIR / specifying regulations): Federal Law Gazette.
  - German Recovery and Resolution Act transposing BRRD / EBA Regulatory Technical Standards and Guidelines: Federal Law Gazette.
  - Article 127 (2) of the Treaty on the functioning of the European Union, Article 22 of the Statute of the ESCB, Bundesbank Act (section 3): ECB website and Deutsche Bundesbank Oversight Section.
  - Adoption of the PFMI as Eurosystem oversight standards by ECB Governing Council: press release of 21 June 2013 and ECB website.
- Allocation of responsibilities:
  - BaFin supervises Eurex Clearing in cooperation with Deutsche Bundesbank under EMIR and the German Banking Act.
  - Deutsche Bundesbank oversees Eurex Clearing as CCP.
  - FMSA is the competent resolution authority for Eurex Clearing under the German Recovery and Resolution Act, responsible for resolution planning in cooperation with BaFin.
  - Recovery planning: CCP responsibility subject to BaFin review (in consultation with Deutsche Bundesbank) and submission to FMSA; resolution authority may provide recommendations if impediments to recoverability are identified.
- Key conclusion:
  - Eurex Clearing is subject to a multi-layered regulatory, supervisory, and oversight framework with roles for BaFin, Deutsche Bundesbank, FMSA, ESMA, and the college of supervisors.
  - Assessment of Responsibility A: detailed responsibilities described in source.

*Source: _cr16197 - Chapter I, Part 1 for the general prerequisites and in Chapters II-IX for*

### section 7,

### section 7

### Oversight and institutional roles
- The oversight is conducted by the Deutsche Bundesbank (Oversight Function) on the basis of the PFMI and central bank objectives based on the main objective of safety and efficiency of payment and clearing systems.
- The Bundesbank, following the Act on monitoring financial stability, is vested with responsibility for the ongoing analysis of factors key to financial stability, for identifying risks which may impair financial stability (macroprudential supervision), producing a report for the Financial Stability committee chaired by the Federal Minister of Finance and making proposals to this Committee for the issuing of warnings.
- BaFin, in consultation with the Bundesbank, is responsible for the assessment of Eurex Clearing’s recovery plans, and FMSA may provide recommendations following its recoverability assessment.
- BaFin is entrusted with certain early intervention powers under the German Recovery and Resolution Act and has to inform the FMSA if it executes those powers.
- Allocation of competences to the resolution authority and the supervisory authorities regarding recovery and resolution is stipulated in the German Recovery and Resolution Act.

### Key conclusions for Responsibility A (Identification and coverage of FMIs)
- Both at the national and the EU levels, the authorities have clearly defined and publicly disclosed the criteria used to identify FMIs that should be subject to regulation, supervision, and oversight.
- Full consistency with the PFMIs is achieved by the policy-based central bank oversight authority on top of supervisory authority based on EMIR and the accompanying regulatory technical standards, and complemented by the German Recovery and Resolution Act concerning recovery planning.
- Two PFMI requirements—replenishing and allocated and covered losses—are not covered by EMIR but are addressed in Eurex Clearing recovery plan, meaning that PFMIs are enforced in practice.
- The expected legislation on Recovery and Resolution of CCPs (European Commission proposal forthcoming) is anticipated to stipulate explicit rules for allocating uncovered credit losses and for replenishing any financial resources that Eurex Clearing may employ during a stress event in compliance with KC 7 of PFMI 4.
- Assessment of Responsibility A: Observed.

### Responsibility B — Powers and resources (overview)
- Central banks, market regulators, and other relevant authorities should have the powers and resources to carry out effectively their responsibilities in regulating, supervising, and overseeing FMIs.

### Key Consideration 1 — Powers or other authority
- BaFin (in cooperation with the Deutsche Bundesbank, Banking supervision function) is vested by law (Section 7 of the German Banking Act) with powers to ensure CCP compliance with EMIR, the German Banking Act, and the German Recovery and Resolution Act, including:
  - Authorization of CCPs / withdrawal of authorization.
  - Information gathering, data collection and inspections.
  - Issuing orders/inducing changes to ensure compliance with EMIR, the German Banking Act, the German Recovery and Resolution Act.
  - Rule making by contributing to the legislative work.
- BaFin is legally independent but subject to legal and technical supervision by the Federal Ministry of Finance under FinDAG; the Federal Ministry may issue instructions to BaFin’s Executive Board and approves organizational statute and rules of procedure; members of the Administrative Council and their deputies are appointed and dismissed by the Federal Ministry pursuant to section 7 of the FinDAG.
- Legal basis for Deutsche Bundesbank oversight activities (Oversight function) on CCPs:
  - Treaty on the Functioning of the European Union Article 3.1 of the Protocol on the Statute of the ESCB and Article 22 of the Statute of the ESCB.
  - Section 3 of the Deutsche Bundesbank Act: “The Deutsche Bundesbank... shall arrange for the execution of domestic and cross-border payments and shall contribute to the stability of payment and clearing systems".
- The oversight role of the Deutsche Bundesbank entails:
  - Ongoing collection of information, meetings with Eurex Clearing board members, on-site visits, and meetings on expert level.
  - Moral suasion to induce changes to ensure compliance with the PFMI and central bank oversight objectives.
- Central banks participate in the EMIR college of authorities (article 18) as authorities “responsible of the oversight of the CCP”, incorporated into opinions on authorization, extension of activities/services, significant changes to risk management models, and authorization of interoperability arrangements.
- EMIR requirements cover the PFMIs with identified gaps being investigated by the Deutsche Bundesbank (Oversight function) in the scope of their oversight.
- Court of Justice of the EU judgment (case T 496/11) decided the “ECB does not have the competence necessary to regulate the activity of securities clearing systems”, but the oversight role of central banks over CCPs has not been challenged and the Bundesbank has not faced resistance in exercising its oversight function.
- Recommendation/observation: strengthening the legal basis for the Bundesbank’s oversight function in national law might be of interest to clarify its powers and to disclose its activities.

### Powers to obtain timely information
- On the basis of the German Banking Act, BaFin and Deutsche Bundesbank (Banking Supervision Function) are vested with supervisory and regulatory powers including information from and inspections of CCPs, ancillary service providers, financial holding companies and enterprises included in supervision on a consolidated basis and cross-border information and inspections.
- They may perform inspections with or without a special reason, including of undertakings to which operational functions, services or activities have been outsourced.
- The German Recovery and Resolution Act vests BaFin, Deutsche Bundesbank, and FMSA with powers for recovery planning; BaFin will set a time limit to the CCP for presenting its recovery plan which should be updated following any significant change and at least annually and may require more frequent updates.
- Availability of information is ensured by transparency obligation, record keeping and information requirements pursuant to EMIR and RTS (article 5).
- Respective information channels include daily reporting of intra-day margin calls, reporting pursuant to section 53 j German Banking Act, monthly regulatory interviews, and regular participation as observers at Supervisory Board and Risk Committee meetings (in accordance with EMIR Art.28).
- As a condition for re-authorization under EMIR, CCPs had to provide to BaFin and to the college of authorities all necessary information to demonstrate full compliance with EMIR.
- In case of extension of services/activities or "significant" changes to risk models and parameters, Eurex Clearing must supply all information to obtain validation by BaFin and ESMA and an opinion of the college.
- The Deutsche Bundesbank’s oversight function implements additional data collection and conducts own meetings with board members or on-site visits and expert-level meetings on a case-by-case basis.

### Powers to induce change or enforce corrective action
- BaFin has powers under administrative and administrative procedural law to directly order corrective action (section 53 l German Banking Act) to ensure CCP compliance with EMIR, based on Deutsche Bundesbank (Banking Supervision Function) findings.
- Decisions/orders issued by BaFin as NCA are legally binding and enforceable; objections or appeals do not generally have a postponing effect and measures are immediately enforceable upon notification.
- The oversight function of the Deutsche Bundesbank can take action and induce change when a CCP does not comply with the PFMIs; the Oversight Function seeks to avoid duplication with BaFin and the college.
- Deutsche Bundesbank tools to induce changes include moral suasion, public statements, influence from participation in CCPs and provision of central bank services, and cooperation with other authorities.
- Moral suasion has been the main tool applied by the Deutsche Bundesbank (Oversight Function), typically resulting in the CCP drawing up an action plan implemented along an agreed timeline.
- Recovery plan process for Eurex Clearing:
  - If the plan is non-compliant in structure or content, capital/refinancing structure inappropriate, or significant impediments to implementation exist, BaFin will notify Eurex Clearing and request a revised recovery plan within 2 months which can be extended by 1 month.
  - BaFin will submit recovery plans to the resolution authority, which may provide recommendations if it identifies impediments to recoverability; BaFin may issue an order.

### Key Consideration 2 — Resources
- Authorities should have sufficient resources to fulfill regulatory, supervisory, and oversight responsibilities.

Resources — BaFin
- BaFin covers its expenditure entirely out of its own income and receives no funding from the Federal budget.
- BaFin raises funds from undertakings it supervises in accordance with FinDAG; sources of funding consist primarily of fees, separate reimbursements and contributions, calculated on the basis of the Ordinance on the Imposition of Fees and Allocation of Costs Pursuant to the FinDAG.
- BaFin’s budget is established by its administrative council and approved by the Federal Ministry of Finance.
- BaFin may recruit and deploy personnel without restraint; employs civil servants and public employees; civil servants remunerated under BBesG and employees under TVöD; BaFin may employ staff outside TVöD to offer higher salaries.
- BaFin has developed a training concept for supervisory skills and applies management/controlling tools to allocate resources.
- Staff has increased to 7 FTE with the implementation of EMIR.
- The supervisory unit responsible for CCPs can draw upon resources from the banking supervisory department, the “restructuring department” (recovery and resolution) and a cross-sectoral quantitative department, where appropriate.
- BaFin is subject to an internal audit assessing appropriateness of resources against tasks pursuant to EMIR, the German Banking Act and the German Recovery and Resolution Act.

Resources — FMSA
- FMSA must cover its expenditure for measures under the German Recovery and Resolution Act entirely out of its own income and receives no funding from the Federal budget; raises funds from undertakings within its resolution regime and charges fees and requires reimbursement of costs under the Financial Market Stabilization Fund Act.
- In the transitional year 2015 FMSA’s expenditure for tasks under the German Recovery and Resolution Act were supplementarily funded by the German federal budget.
- FMSA may recruit and deploy personnel without restraint; employs civil servants and public employees, mainly highly experienced staff in resolution relevant areas; may employ staff outside TVöD to obtain senior level experts.
- Staff have substantially increased with the implementation of the German Recovery and Resolution Act.
- Regarding the resolution of CCPs FMSA has a number of currently five people with dedicated experience on board, knowledge being currently extended to a wider group of resolution experts.

Resources — Deutsche Bundesbank
- The Banking Supervision Function is based in regional offices and reports to the Banking Supervision Department in the Central Office and to BaFin.
- The scope of supervisory review of credit institutions including CCPs is defined in sections 6b and 7 of the German Banking Act.
- Staff in regional offices carry out ongoing supervision (off-site) to compile risk profiles and on-site supervision (risk-oriented on-site inspections based on Minimum requirements for risk management, or in line with advanced measurement approach for operational risk) in the context of the BaFin–Bundesbank collaboration.

*Source: _cr16197 - section 7*

### section 7 (1) of the Banking Act. Since the EMIR-authorization of the

### _cr16197 - section 7 (1) of the Banking Act. Since the EMIR-authorization of the

### Oversight and supervisory capacity, resources, and planning
- The Oversight Function of the Deutsche Bundesbank is based in the Department Payments and Settlement Systems and the Oversight Section analyses and develops Deutsche Bundesbank (Oversight Function) policies on market infrastructure developments and related legal initiatives at global and EU level.
- The Oversight Section conducts assessments of all relevant payment, clearing and settlement systems for which it has oversight responsibility and contributes to the oversight of such systems when conducted in global or Eurosystem cooperation.
- Deutsche Bundesbank staff possesses high qualifications and in-depth knowledge of market infrastructure issues. The allocation of responsibilities among staff for the various overseen FMIs is clearly defined (with back-ups).
- Training and evaluation:
  - Both in-house and external training is available to staff.
  - Evaluation of training needs and plans are an integral part of the annual appraisal process with staff and management.
- Funding and equipment:
  - The funding is sufficient to adequately cover all costs, such as costs for personnel, travels, communication, training, modern equipment, and supplies.
- Staff increases since PFMI implementation and EMIR authorization:
  - Number of staff in charge of CCP-oversight increased to 4,2 FTE for pure CCP oversight issues and 4,7 FTE for cross-sectional FMI issues that touch on CCP oversight such as SWIFT, CLS Services for CCP, and data analysts.
- Work planning and review:
  - Effective work planning, periodic work reviews and the setting of priorities are standard measures.
  - In each division, annual work plans are prepared and agreed for each Section.
  - Planning and funding are conducted on a yearly basis as part the annual budgeting procedure. The total budget (including respective staff resources) is approved by the Executive Board. Adjustments during a fiscal year are generally possible via certain instruments (e.g., via budget transfer or transfer from a contingency reserve).

### Legal protections for authorities and staff
- BaFin, FMSA and their staff are protected from legal liability for acts committed or omitted in good faith in performance or purported performance of any function, or exercised or purported exercise of any power under the constitutional law.
- Deutsche Bundesbank staff is also legally protected.
- Claims for damages may only be raised if a civil servant or other staff member intentionally or negligently misconducts its official duties vis-à-vis a third party.
- The addressee for such claims raised in the context of the performance of official duties of its staff members is the State or the Deutsche Bundesbank or the corporate body the civil servant is employed by.
- Only in cases where official duties are breached willfully or by gross negligence, the State, the Deutsche Bundesbank, may take recourse against its staff member.

### Responsibility B — powers, resources, and assessment
- Key findings:
  - BaFin as supervisory authority, Deutsche Bundesbank (in their banking supervision, oversight and financial stability capacity), FMSA in relation to recovery, have the powers consistent with their relevant responsibilities.
  - Authorities have the power to obtain timely information about all business activities, either at predetermined frequencies or upon request.
  - Authorities can induce changes through moral suasion by the Deutsche Bundesbank for the oversight function and/or enforce corrective actions through orders by BaFin.
  - The authorities have the necessary budgetary and highly skilled human resources enabling them to fulfill their mission; these have increased following the entry into force of EMIR and of the German Recovery and Resolution Act.
  - Authorities’ staff benefit from legal protection in performing their supervisory, regulatory and oversight duties. Only in cases where official duties were breached willfully or by gross negligence the State or the corporate body respectively may have recourse against the civil servant.
- Assessment of Responsibility B: Observed
- Recommendation:
  - Strengthening the legal basis for the Bundesbank’s oversight function over CCPs in the national law should be considered in order to clarify its powers, consistent with this responsibility and to enforce its activities in the field.

### Responsibility C — Disclosure of policies with respect to FMIs
- Key Consideration 1 — definition of policies:
  - BaFin acts on the basis of applicable laws and its statutory provisions; the German Banking Act provides that BaFin shall exercise supervision over credit institutions pursuant to its provisions and specifically over CCPs pursuant to the provisions of EMIR. It shall do so in cooperation with the Deutsche Bundesbank (Banking Supervision Function).
  - The German Banking Act lays down objectives for supervisory assessments and action, including assessment of rules, strategies, procedures and mechanisms, risk assessment (including stress testing), systemic risk, and forward-looking evaluation of arrangements, strategies, procedures, and processes as well as liquidity and capital resources.
  - The Deutsche Bundesbank (Oversight Function) defines oversight of payment, clearing and settlement systems as a central bank function promoting safety and efficiency, monitoring systems against objectives and the PFMIs; scope includes CCPs.
  - The Deutsche Bundesbank (Financial Stability Department) is vested by the Act on monitoring Financial stability with a responsibility for ongoing analysis of factors key to financial stability and producing reports and proposals for the Financial Stability committee.
  - FMSA acts on the basis of the German Recovery and Resolution Act and is responsible for resolution planning and resolution measures; for recovery planning FMSA will review the recovery plans which BaFin will submit with its analysis and make recommendations to BaFin.
- Key Consideration 2 — public disclosure:
  - BaFin: Policies disclosed in BaFin’s statutory laws, the German Banking Act (mainly section 6), the German Recovery and Resolution Act, EMIR and its Regulatory Technical Standards, and are published on BaFin’s website.
  - FMSA: Policies disclosed in FMSA’s statutory laws and the German Recovery and Resolution Act.
  - Deutsche Bundesbank (Oversight Function): Eurosystem oversight policy statement adopted 3 June 2013 by the Governing Council of the ECB is binding; Eurosystem oversight policies and oversight related reports are published on the ECB web site. General overview and oversight activities published on the Oversight Section of the Deutsche Bundesbank website, Annual Reports and Monthly Bulletins.
- Key Conclusions for Responsibility C:
  - BaFin, Deutsche Bundesbank, and FMSA policies are clearly defined in the laws or legally binding policy statement concerning their role, objectives and regulations applicable. These policies are publicly available and disclosed on the authorities websites.
- Assessment of Responsibility C: Observed

### Responsibility D — Adoption and application of the PFMIs
- Key Consideration 1 — adoption:
  - BaFin has adopted the Principles for Financial Market Infrastructures by applying and enforcing EMIR, the German Banking Act and the German Recovery and Resolution Act (complemented by EBA Regulatory Technical Standards and Guidelines, currently in the course of implementation).
  - EMIR: Eurex Clearing has been (re-)authorized on the basis of a full assessment of compliance with EMIR on April 10, 2014.
  - EMIR and regulatory technical standards establish requirements consistent with the PFMIs published by CPSS/IOSCO.
  - BaFin subscribes to an ESMA guideline recommending that competent authorities ensure CCPs comply with PFMI requirements.
  - EMIR re-authorization process requires applicant CCP to provide information, national authority to conduct risk assessment and submit report to ESMA and the college; the college issues a joint opinion; competent authority must duly consider the opinion and grant authorization only where fully satisfied.
  - German Banking Act: Eurex Clearing AG is licensed as a Credit Institution pursuant to the German Banking Act.
  - German Recovery and Resolution Act: addresses recovery consistent with PFMI Key Considerations and FSB Key Attributes; BaFin reviews recovery plans in consultation with Deutsche Bundesbank; FMSA assesses recovery plan to identify and eliminate recoverability impediments and supply recommendations.
  - Eurex Clearing submitted recovery plan in December 2013 and updates it yearly; BaFin may require additional updates if necessary.
  - The German Recovery and Resolution Act requirements are not tailored to a CCP, nevertheless they meet PFMI requirements to identify critical services, identify scenarios preventing going concern, assess recovery/wind down options, and prepare plans.
- Identified gaps and mitigants:
  - Gaps: A few Key Considerations and CPMI-IOSCO supplementary guidance on recovery of FMIs are not precisely covered by EMIR and the German Recovery and Resolution Act — specifically Principle 4 KC 7, Principle 7 KC 10 and Principle 13 KC 1 concerning ex ante planning for replenishment of financial resources and ex ante rules/procedures to allocate uncovered losses and liquidity shortfalls.
  - Expected remedy: European Commission legislative proposal concerning Recovery and Resolution for CCPs due by the end of 2015 is expected to cover rules specific to FMIs.
  - Existing mitigants:
    - Replenishment: Clearing conditions provide for an assessment right by Eurex Clearing on the non defaulting clearing members up to two times their originally applicable contribution requirement to the clearing fund during a capped period.
    - Parental support: a parental guarantee (Letter of comfort) by Deutsche Börse AG up to EUR 700 million will be made available before the remaining equity of Eurex Clearing is involved.
    - Loss allocation and liquidity shortfalls: Clearing conditions provide for a Default Management Process convening a Default Management Committee per “liquidation group”; auctions are mandatory for Clearing Members active in a “liquidation group”; loss distribution through juniorisation and penalties for non bidders are set to incentivize bidding.
  - Deutsche Bundesbank (Oversight Function) includes PFMI requirements not explicitly in EMIR in its oversight framework and monitors Eurex Clearing for compliance with such PFMI requirements.
- Key Consideration 2 — application to systemically important FMIs:
  - The PFMI are applied to all CCPs located in Germany.
  - European law (EMIR, SIPS Regulation, CSD Regulation) makes PFMI binding for other infrastructure types.
- Key Consideration 3 — consistent application across jurisdictions:
  - Eurex Clearing is supervised by BaFin in collaboration with Deutsche Bundesbank (Banking Supervision Function) and overseen by Deutsche Bundesbank (Oversight Function); supervision and oversight carry out tasks in close cooperation to guarantee consistency.
  - Establishment of supervisory colleges under Article 18 of EMIR and ESMA coordination role (Article 21 of EMIR) contribute to convergence and consistency. ESMA conducts at least annual peer review analysis of supervisory activities (Article 30 of ESMA Regulation).
- Key Conclusions for Responsibility D:
  - PFMIs for CCPs have been adopted by BaFin as a rules-based approach implemented via EMIR and accompanying technical standards, and for recovery through the German Recovery and Resolution Act and ESMA guidelines.
  - PFMIs have been adopted by the overseer, Deutsche Bundesbank, through the ECB Governing Council adoption of PFMI on 3 June 2013; this policy statement is binding for Eurosystem central banks as per Article 14.3 of the Statute.
  - Two PFMI-related requirements are not covered by EMIR concerning ex ante planning for replenishment of financial resources during stress and ex ante rules/procedures to allocate uncovered losses and liquidity shortfalls within the recovery phase; expected to be covered by the European Commission legislative proposal on Recovery and Resolution of CCPs and are also addressed in Eurex Clearing’s Clearing conditions and by the German Recovery and Resolution Act.
  - PFMI application is consistent within and across jurisdictions owing to institutionalized cooperation between supervisory and oversight authorities, supervisory colleges, and ESMA’s role.
- Assessment of Responsibility D: Observed

### Responsibility E — Cooperation with other authorities (domestic, European, global)
- Key Consideration 1 — domestic cooperation:
  - Cooperation between BaFin and Deutsche Bundesbank (supervision function) is provided for by the German Banking Act; specified in BaFin supervision guideline and achieved in the field.
  - Communication and consultation between the Deutsche Bundesbank oversight and supervision functions achieved through exchange of information, monthly and ad-hoc meetings.
  - Cooperation between Bundesbank (oversight function) and BaFin occurs within Eurex Clearing college.
  - Cooperation and allocation of responsibilities between BaFin (in consultation with Deutsche Bundesbank) and FMSA are specified in the Recovery and Resolution Act (SAG) and by the Cooperation Agreement (SAG-Kooperationsvereinbarung) with a three steps approach: (i) information and exchange of views, (ii) information with qualified discussion, and (iii) consent.
  - Recovery plan review: BaFin reviews in consultation with Deutsche Bundesbank, submits analysis to FMSA, which may provide recommendations.
  - Section 6 (2) of Securities Trading Act requires communication of observations and findings among various authorities when necessary for performance of their functions.
  - Facilitating cooperation is a general principle and exercised on a day-by-day basis at working level.
- Key Consideration 1 — European cooperation:
  - Supervision: Cooperation organised by Art. 18 (2) EMIR defining membership in EMIR colleges; harmonised College Framework Agreement established by ESMA.
  - EMIR college membership includes ESMA, competent authorities responsible for supervision of clearing members in largest contributor Member States, authorities supervising trading venues, CCPs with interoperability, CSDs linked to CCP, relevant ESCB members, central banks of issue of most relevant Union currencies.
  - EMIR colleges meet regularly, have access to necessary information including national competent authority’s risk assessment and supporting documentation; involvement in supervisory issues and formal opinions for material changes.
  - ESMA and the college should be informed without undue delay of any emergency situation relating to a CCP.
  - Oversight: ESCB “Crisis communication framework for oversight purposes” established October 2009 for communication and information exchange between overseers in crisis situations.
  - Recovery: German Recovery and Resolution Act provides legal basis for cross-border decision making in recovery and resolution; decisions that have consequences in other Member States must be coordinated and consider impact on financial stability and transparency.
- Key Consideration 1 — global cooperation:
  - BaFin and Deutsche Bundesbank have concluded MOUs tailored for ongoing supervision with supervisory authorities of non-EU jurisdictions where Eurex Clearing exercises activities (Switzerland).
  - Informal cooperation of Deutsche Bundesbank (Oversight Function) with Payments Oversight of the Federal Reserve Bank of New York for Eurex Clearing USD clearing activities.
- Key Consideration 2 — informing other authorities about cross-border or multicurrency FMI operations:
  - Cross-border and multicurrency services are monitored on an ongoing basis and relevant authorities have been identified during re-authorization pursuant to EMIR.
  - BaFin and Deutsche Bundesbank are notified by the CCP of operations on a regular basis (daily/monthly/quarterly) and additionally on an ad-hoc basis if necessary.
  - Criteria for determining which other authorities should be informed are laid down in Chapter 7 and 7 a-d of the German Banking Act and in Article 23 and 24 EMIR.
  - BaFin has produced a template for its monthly reporting shared with college authorities. ESMA protocols exist for information exchange and emergency situations. BaFin would provide information on events that could adversely affect another jurisdiction’s financial market ASAP depending on time-sensitivity and materiality.
  - Deutsche Bundesbank (Oversight function) would proceed with central bank community similarly for form and timing of provision of information.
- Key Consideration 3 — forms and effectiveness of cooperation:
  - Cooperation exercised on basis of German Banking Act, EMIR, German Recovery and Resolution Act, and formal arrangements (Supervision guidelines, cooperation agreements, MOUs).
  - European EMIR framework strengthened effectiveness of cooperation among Eurex Clearing college members; college chair (BaFin) prompts sharing of information using ESMA suggested monthly template, avoids duplication and improves efficiency.
  - College is a supervisory tool for ongoing supervision; senior engagement in physical meetings and voting meetings is effective for addressing issues.
  - ESMA is working to ensure improved convergence in supervisory practices; proposals to improve efficiency of supervisory processes include extension of activities under Article 15 EMIR and validation of significant model changes under Article 49 EMIR.
  - ESMA report: “Review of CCP colleges under EMIR, ESMA/2015/20” published 08.01.2015.
- Key Consideration 4 — responsibility for establishing cooperation:
  - Following EMIR, BaFin designated as National Competent Authority (NCA) and chairs and organizes the colleges.
  - Responsibilities of the NCA defined in Commission Delegated Regulation (EU) No 876/2013 of 28 May 2013 supplementing EMIR; require NCA to ensure efficiency and effectiveness of the college.
- Key Consideration 5 — periodic assessment:
  - BaFin as national competent authority exercises supervisory mission in cooperation with Deutsche Bundesbank (Supervision function) in assessing annually Eurex Clearing’s compliance with EMIR and prudential standards from the German Banking Act.
  - BaFin reviews and assesses Eurex Clearing recovery plan in consultation with Deutsche Bundesbank and submits to FMSA.
  - Deutsche Bundesbank (Oversight function) conducts ongoing oversight based on PFMIs following ECB Governing Council adoption on June 3 2013 and relies on BaFin and Bundesbank (supervisory function) assessments to avoid duplication.
- Key Consideration 6 — views of central banks of issue:
  - Deutsche Bundesbank (oversight function) assesses payment and settlement arrangements and related liquidity risk management procedures for currencies used in Eurex Clearing transactions and monitors volumes and relevance on an ongoing basis; currencies include EUR, CHF, USD, GBP, KRW.
  - At this stage, only for Swiss Franc is Eurex Clearing of systemic importance.
  - Deutsche Bundesbank participates in MoU with SNB and FINMA; views of Swiss central bank are considered.
  - Informal information sharing with the Federal Reserve implemented in case of specific USD interest.
  - Central banks of issue receive an annual risk assessment by BaFin and can take into account the views of the authority with primary responsibility for Eurex Clearing.
- Key Consideration 7 — advance notification of material regulatory changes and adverse events:
  - Information provided through BaFin’s monthly reports to EMIR college members or ad hoc information in case of emergency. EMIR college provides a forum for discussing potential impacts of regulatory actions.
- Key Consideration 8 — access to trade data recorded in a TR:
  - Not applicable.
- Key Consideration 9 — discretion to discourage use of an FMI:
  - EMIR re-authorization procedure and college opinions in on-going supervisory processes regarding new services and significant model/parameter changes give authorities possibility to express positive or negative opinion and withhold support where not convinced by supporting documentation.
- Key Consideration 10 — cooperative arrangements do not prejudice statutory powers:
  - Cooperation embedded in German Banking Act, EMIR and German Recovery and Resolution Act and does not prejudice statutory or legal powers of participating authorities or constrain discretion to act.
- Key Conclusions for Responsibility E:
  - Central banks, market regulators, and other relevant authorities cooperate domestically and internationally. In the European context this is achieved through college participation; at the international level cooperation is formalized by MOUs.
- Assessment of Responsibility E: Observed
- Recommendation:
  - To enhance cooperation with authorities of jurisdictions where Eurex Clearing has cooperation arrangements in effect or in preparation, and to strengthen competences of German authorities’ staff, it would be beneficial to establish a short-term staff exchange program with relevant authorities, such as secondment and swap.

*Italic: Content derived from section 7 (1) of the Banking Act and subsequent sections in the supplied IMF PDF excerpt.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16197.pdf_