Overview on the Consequences of an Insolvency under Eurex Clearing s Clearing Models

Quick Reference Guide Insolvency Overview Overview on the Consequences of an Insolvency under Eurex Clearing s Clearing Models Contents 1. Introduction... 2 1.1 Disclaimer... 2 1.2 Clearing Models Introduction... 3 1.3 Legal Basis for Collateral Transfer... 5 2. Calculation of the Difference Claim per Standard Agreement... 5 3. Clearing Member Default... 5 3.1 Proprietary Business... 6 3.2 Client Business... 6 3.2.1 Omnibus Segregated Accounts by Value... 7 3.2.2 Omnibus Segregated Accounts by Asset... 8 3.2.3 Omnibus Segregated Accounts under CASS... 8 3.2.4 Multiple Omnibus Segregated Accounts... 9 3.2.5 Individual Segregated Accounts... 9 3. Client Insolvency...10 3.1 Insolvency of Undisclosed Clients...10 3.2 Insolvency of Disclosed Clients...11 3.2.1 NCMs...11 3.2.2 RCs...11 3.3 Insolvency of Individually Segregated Clients...11 4. Eurex Clearing Insolvency...11 Appendix...14 Definitions...14 1

1. Introduction The purpose of this document is to explain the clearing models of Eurex Clearing and the general course of action that Eurex Clearing may take following a party s insolvency, where porting is unsuccessful. These generic descriptions assume that insolvency proceedings or similar proceedings under the laws of the jurisdiction where the relevant client, Clearing Member or Eurex Clearing has its registered seat are commenced by the competent national authorities (so-called Insolvency Termination Event), but it will not consider any Termination Event(s) for such a decision. Descriptions of the Termination Events can be found at Part I Chapter I Number 7.2.1 of the Clearing Conditions. This document will also not consider the Default Management Procedure (DMP) per se, in terms of the liquidation, hedging and auction processes for example. Further information of the DMP itself can be found at: http://www.eurexclearing.com/clearing-en/risk-management/default-managementprocess 1.1 Disclaimer The document only represents the views of Eurex Clearing and it does not purport to and should not be considered to be legal advice or an explanation to all relevant issues and considerations that may be relevant in relation to the clearing of transactions with Eurex Clearing, including relevant enforceability, regulatory, tax, accounting, insolvency, or any other aspect. It is hoped however, that this document will provide responses to the questions raised by the Derivatives Clearing Committee in relation to the segregation, porting options and general insolvency proceedings, which may occur. There is a great deal of work being completed on recovery and resolution plans and the courts generally retain authority to decide upon insolvency proceedings. Eurex Clearing does not assume any responsibility for the use of this document and given insolvency law is a complex matter, recommends that all readers seek legal advice. 2

1.2 Clearing Models Introduction The clearing models at Eurex Clearing satisfy the segregation and porting requirements contained within the European Market Infrastructure Regulation (EMIR), properly titled the Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties (CCPs) and trade repositories (TRs). Eurex Clearing offers both omnibus segregated accounts (OSAs) and individually segregated accounts (ISAs). Eurex Clearing also allows CMs based in the United Kingdom (UK) to comply with the UK Client Asset sourcebook (CASS). It is important to note that Eurex Clearing s rules and regulations use different naming conventions than general market terminology. Market terminology is associated with the Eurex Clearing Models as follows: Market Standard Terminology OSA OSA under CASS Multiple OSA ISA Eurex Clearing naming conventions Either Elementary Clearing Model (ECM) by Value or by Asset Net Omnibus Clearing Model (NOCM) Multiple Omnibus Segregated Accounts (MOSA) Individual Clearing Model (ICM) For further general information on each of the clearing models and the process for porting, please see the Information Memoranda which can be found on the Forms part of the Eurex Clearing website, and through the following links (please copy and paste the links in your web browser): ECM http://forms.eurexchange.com/xfmws/binary/de/07_markets_services_- _Member_Services_+_Admission/Clearing/INFORMATION_MEMORAND UM_Client_Asset_Protection_- _Elementary_Clearing_Model_(ECM)_(only_English_version_available).p ECM porting NOCM NOCM porting ICM ICM porting ICM Interim Participa tion df http://forms.eurexchange.com/xfmws/binary/en/07_markets_services_- _Member_Services_+_Admission/Clearing/INFORMATION_MEMORAND UM_Client_Asset_Protection_Client_Porting_in_the_Elementary_Clearin g_model_%28ecm%29.pdf http://forms.eurexchange.com/xfmws/binary/en/07_markets_services_- _Member_Services_+_Admission/Clearing/INFORMATION_MEMORAND UM_Client_Asset_Protection_- _Net_Omnibus_Clearing_Model_%28NOCM%29.pdf http://forms.eurexchange.com/xfmws/binary/de/07_markets_services_- _Member_Services_+_Admission/Clearing/INFORMATION_MEMORAND UM_Client_Asset_Protection_- _Client_Porting_in_the_Net_Omnibus_Clearing_Model_%28NOCM%29_ %28only_English_version_available%29.pdf http://forms.eurexchange.com/xfmws/binary/en/07_markets_services_- _Member_Services_+_Admission/Clearing/Information_Memorandum_- _Client_Asset_Protection_Individual_Clearing_Model.pdf http://forms.eurexchange.com/xfmws/binary/en/07_markets_services_- _Member_Services_+_Admission/Clearing/Information_Memorandum- Client_Asset_Protection- Client_Parting_in_the_individual_Clearing_Model_%28ICM%29.pdf http://forms.eurexchange.com/xfmws/binary/en/07_markets_services_- _Member_Services_+_Admission/Clearing/Information_Memorandum_Cli ent_asset_protection_interim_participation.pdf 3

Eurex Clearing does not charge any fees for the clearing model chosen to either the Clearing Member (CM) or client. The high-level account structure is as follows: For further information please see the Quick Reference Guide to Client Clearing & Collateral Management which can be found on the Members Section of the Eurex Clearing website or the EMIR Article 39(7) disclosure document. 4

1.3 Legal Basis for Collateral Transfer Cash margin collateral transferred to Eurex Clearing is always achieved on a full- title transfer basis. Non-cash margin collateral can either be provided to Eurex Clearing by way of: a security interest collateral arrangement (German-law pledge) for proprietary and omnibus segregation; or a title transfer collateral arrangement for ISAs. 2. Calculation of the Difference Claim per Standard Agreement This document describes the calculation process for a Clearing Member insolvency, a client insolvency and Eurex Clearing s insolvency. A small selection of definitions are included in the Appendix of this document, but it is worth understanding how Eurex Clearing calculates and covers each Difference Claim to create a single netted close-out amount between the parties. Each Clearing Member will have a number of Standard Agreements with Eurex Clearing (for an OSA, OSA under CASS, or ISA) and the Difference Claim represents the single close-out claim arising after the insolvency of a party to the relevant Standard Agreement in accordance with the following logic for margin collateral: Margin collateral transferred under title transfer arrangements (all cash collateral under any clearing model and non-cash collateral under the ISA) is included in the Difference Claim; and Margin collateral transferred under a pledge arrangement (i.e. non-cash margin collateral under the OSAs) is not included in the Difference Claim, but rather is held to cover the Difference Claim. For example: Clearing Member insolvency, proprietary business: As the proprietary business is cleared under the Elementary Clearing Model, Eurex Clearing would calculate the Difference Claim under the Elementary Proprietary Standard Agreement by valuing the Clearing Member s positions and cash collateral (including any FX), and will then use pledged collateral to the extent required to cover the Difference Claim. Any excess collateral will be released back to the CM to the extent possible in the form it was received. Clearing Member insolvency, individual segregated (ISA) client: Eurex Clearing would calculate the Difference Claim (assuming porting has failed) under the relevant Clearing Agreement (Appendix 1 of the Clearing Conditions in case of the ICM-CCD or Appendix 3 of the Clearing Conditions in case of the ICM-ECD), and would include all cash and non-cash collateral in the calculation of that Difference Claim. Any excess collateral would be directly returned to the individual client. 3. Clearing Member Default This section assumes that the Clearing Member has become insolvent and it describes the process for each clearing model. This document does not further consider the Termination Event of a Clearing Member, but simply assumes that this has occurred. 5

3.1 Proprietary Business A Clearing Member s proprietary business is governed by the Elementary Proprietary Standard Agreement, which can be found in Appendix 1 of the Clearing Conditions, titled: Clearing Agreement between Eurex Clearing AG and a Clearing Member. Please note that this agreement may also constitute separate client Standard Agreements under the Individual Clearing Model and the Net Omnibus Clearing Model, as explained further below. When an Insolvency Termination Event occurs, Eurex Clearing will close-out that Member s positions and will liquidate its collateral to the extent required to settle the Difference Claim. Following close-out and the determination of the Difference Claim, if the Clearing Member has excess collateral left at the CCP, then Eurex Clearing will return any cash collateral back to the insolvency estate of the Clearing Member and release any pledged non-cash collateral. As noted above, cash is included in the Difference Claim and Eurex Clearing has discretion over which non-cash collateral is used to settle the Difference Claim. Where there is insufficient margin collateral to settle the Difference Claim, then Eurex Clearing will utilise the lines of defence to settle it. Any returned or released collateral will fall within the general insolvency estate of the Clearing Member and can be used to satisfy claims of the creditors of the insolvent Clearing Member. 3.2 Client Business Proprietary transactions and margin assets are entirely ring-fenced from the Clearing Member s client clearing activity. Eurex Clearing maintains separate position accounts for undisclosed clients (the socalled A Accounts) and at least two position accounts per each disclosed client (Non- Clearing Member (NCMs) and Registered Customer (RCs)), for the direct client s proprietary business and the client s client business. For each A Account and each Non-Clearing Member and/or Registered Customer-account Eurex Clearing calculates a net initial margin requirement and calls the Clearing Member for the aggregate sum of those margin requirements. Clearing Members may maintain either undisclosed net margin omnibus accounts, or disclosed client accounts which are gross margined, from the Clearing Member s perspective. For example, undisclosed clients would usually have offsetting positions within an A Account, so whilst the Clearing Member would have called each client on a gross basis, the Clearing Member will post margin on a net basis to Eurex Clearing per each A Account. In contrast, because NCMs and RCs have their own position accounts, margining from the perspective of the Clearing Member is on a gross basis because the Clearing Member is required to call at a minimum and post to Eurex Clearing, that client s initial margin requirement. As this is omnibus client business, Clearing Members are not required to post excess margin to CCPs. These net and gross margin accounts can either be combined in a standard omnibus pool, or they may be further segregated into separate Multiple OSA pools. Individual segregated accounts are always held gross from a Clearing Members perspective (and follows the logic set out above, gross position keeping and net initial margin per client), however EMIR requires that the Clearing Member posts and excess margin to a CCP. 6

3.2.1 Omnibus Segregated Accounts by Value Under the Elementary Clearing Model, the Clearing Member can choose between two allocation options: (a) the allocation by value (described in the following) and (b) the allocation by asset (described under item 3.2.2 below). The OSA by value model is the minimum level of segregation required by EMIR, which provides a single collateral pool for both proprietary and client positions. The value of the delivered collateral is automatically allocated by Eurex Clearing to the proprietary and client business on a pro rata basis (as a percentage) depending on the relevant margin requirements for the proprietary or client business Nevertheless, the OSA by value provides for the segregation and allocation of the margin securities booked to the relevant CSD account on a by asset basis in the books and records of Eurex Clearing. (i) Porting If a Clearing Member becomes insolvent and all clients, both undisclosed and disclosed, combined under a specific omnibus collateral pool agree to port to the same Transferee Clearing Member by 1:00 pm Frankfurt-time the business day following the Termination Date, then Eurex Clearing will port the OSA by value positions and collateral to the Transferee Clearing Member in the evening of the business day following the day of default provided that all of the Porting Requirements enlisted under Chapter I Part 2 Number 8.3.3 of the Clearing Conditions are fulfilled by such time. This includes that disclosed clients have confirmed to Eurex Clearing that they will enter into new clearing documentation with the Transferee Clearing Member within five business days. Additionally, porting will only be successful where the Transferee Clearing Member (i) provides a written confirmation that it will accept the transfer, (ii) confirms that it can act on behalf of all clients and has provided a list of all transactions between the defaulting Clearing Member and its undisclosed clients (unless the Transferee Clearing Member was designated as back-up Clearing Member prior to the insolvency of the Transferor Clearing Member); and (iii) has confirmed it will meet any margin requirements. If, for any reason, Eurex Clearing cannot transfer the non-cash margin collateral of the insolvent Clearing Member then it reserves the right to liquidate the securities and transfer cash. In practice, porting may be unlikely because all clients may be unable to agree to a single Transferee Clearing Member within the porting timelines. Additionally, an omnibus pool may contain an A account on a net omnibus basis. This means that the defaulting Clearing Member s insolvency proceedings will trap the difference between the gross called from clients and the net margin posted from the insolvent CM to Eurex Clearing), such that the replacement Clearing Member would have to cover this collateral shortfall. Please note that porting cannot be offered in every jurisdiction due to specific restrictions under local law. On the Eurex Clearing website you can find a list of all eligible jurisdictions for ECM porting. (ii) Termination scenarios (in case porting does not occur) Negative Difference Claim If porting is unsuccessful and there is insufficient margin collateral to cover the close out of the positions under the relevant Elementary Omnibus Standard Agreement, a 7

negative Difference Claim is calculated (meaning that Eurex Clearing is the creditor of the Difference Claim) and Eurex Clearing is entitled to realise the pledged securities. If the value of the pledged securities are also not sufficient to cover the Difference Claim, Eurex Clearing will use any remaining proprietary excess collateral to settle the client Difference Claim under the relevant Elementary Omnibus Standard Agreement. If that was similarly insufficient, the lines of defence would be utilised to the extent required to cover the loss, starting with the Clearing Member s Default Fund contribution. Positive Difference Claim If a positive Difference Claim is calculated (meaning that Eurex Clearing is the debtor of the Difference Claim), the excess cash collateral can neither be used to cover any proprietary or other client Difference Claim shortfall. Where there are disclosed and undisclosed clients in one collateral pool, Eurex Clearing will return the excess cash collateral to the insolvency administrator of the (insolvent) Clearing Member for the account of all disclosed and undisclosed clients. This is in line with Article 48 para 7 of EMIR, which only requires a CCP to return any excess collateral to those clients when they are known to the CCP. In case the clients are not known to the CCP, the CCP shall return the excess collateral to the insolvency administrator of the (insolvent) Clearing Member for the account of such clients. Any pledged non-cash collateral will be released so that the insolvency administrator of the (insolvent) Clearing Member can freely dispose over such securities. 3.2.2 Omnibus Segregated Accounts by Asset The OSA by asset is no different from the OSA by value apart from the fact that the OSA by asset uses two separate CSD accounts for proprietary and client business. Any securities collateral provided by the Clearing Member for both, proprietary and client business must be booked to the relevant securities account at the CSD by the Clearing Member. Instead of an automatic allocation as under OSA by value, the Clearing Member decides on which securities shall serve as collateral for the relevant collateral pool. 3.2.3 Omnibus Segregated Accounts under CASS The Omnibus Segregated Accounts under CASS allows Clearing Members based in the United Kingdom (UK) to comply with the UK Client Asset sourcebook (CASS). Operationally, the OSA under CASS is similar to OSA by asset, but it provides a different protection mechanism under UK regulation. The OSA under CASS means that the collateral can be protected by the statutory client money trust and securities protected by agreement and the custody rules at the Clearing Member level. OSA under CASS therefore offers a mechanism for Clearing Members to shield certain clients from falling within their general estate if they were to default. (i) Porting The same timelines and requirements for porting as under the OSA by value and OSA by asset apply. If porting is successful, the segregated positions and related collateral will be transferred to a transferee Clearing Member who also offers client money protection to its clients. 8

(ii) Termination Negative Difference Claim (Eurex Clearing is the creditor) Where porting is unsuccessful the same process is followed for a negative Difference Claim as the OSAs described above. Positive Difference Claim(Eurex Clearing is the debtor) Where there is a positive Difference Claim, then generally - the client money will be returned to the Insolvency Practitioner of the (insolvent) Clearing Member. The Insolvency Practitioner will combine all client money into the single pool and then distribute it to all client money protected clients based upon their entitlements on a pari passu basis. Where a Clearing Member has created a specific sub-pool for net omnibus client money clearing with Eurex Clearing, then that pool of collateral would be maintained separately from the general pool and we would consider that to be a Multiple Omnibus Segregated Account which is described below. 3.2.4 Multiple Omnibus Segregated Accounts Under the OSA by asset and the OSA under CASS, the Clearing Member has the option to establish separate Elementary Omnibus Standard Agreements for certain groups of clients by assigning certain transaction accounts for client transactions to a specific Elementary Omnibus Standard Agreement. For those groups of transaction accounts a separate netting set is established with the consequence that a separate Difference Claim will be calculated in case of an insolvency of the Clearing Member. The multiple omnibus segregated accounts are not a separate clearing model, such option rather provides the possibility to achieve a further segregation between certain types of clients. For example, a group of companies may wish to be segregated in a multiple OSA, or funds of an asset manager may wish to be segregated in their own pool to reduce fellow customer risk to known fellow customers (funds) of that asset manager. Accordingly, the porting and termination rules for OSA by asset or OSA under CASS apply. Where the CM has maintained a specific sub-pool of client money to protect the clients, then that client money would not be combined with the Clearing Member s general client money pool. Rather the specific sub-pool will be used only to satisfy the claims of those clients who were a beneficiary of such pool. 3.2.5 Individual Segregated Accounts The ISA allows a client to become fully segregated from the proprietary business (which is also the case under the OSA and the OSA under CASS) and all other client business of its Clearing Member, protecting both the client s positions and actual collateral, including any excess. (i) Porting In summary, the porting timeline is as follows: Upon the occurrence of a Termination Date, the ICM Client may elect by giving notice to Eurex Clearing: 9

(i) (ii) (iii) to re-establish the terminated Covered Transactions as an interim participant (IP Election); to immediately re-establish the terminated client transactions with a Replacement Clearing Member; or not to re-establish the terminated client transactions; in each case by 21:00 hours Frankfurt time on the Valuation Date. The Valuation Date is the day on which insolvency proceedings are commenced over the assets of the Clearing member prior to 17:23 hours Frankfurt time. In case insolvency proceedings are commenced after 17:23 hours Frankfurt time, the Valuation Date will be the next business day. Accordingly, if insolvency occurs before 17:23 hours Frankfurt time, the ICM Clients have until 21:00 Frankfurt time on the day of insolvency to make their nomination, or if the insolvency occurs after 17:23 hours Frankfurt time, the ICM Clients have until 21:00 hours Frankfurt time the next business day. (ii) Termination scenarios (in case no porting occurs) Negative Difference Claim (Eurex Clearing is the creditor) As with the omnibus models, if porting is unsuccessful and a negative Difference Claim is calculated (i.e. there is insufficient margin collateral to cover the cost of closing out of the positions), then Eurex Clearing will use any proprietary excess margin collateral remaining following the insolvency of the Clearing Member to settle the Difference Claim. If that was similarly insufficient, the lines of defence would be utilised to the extent required to cover the loss. Positive Difference Claim (Eurex Clearing is the debtor) If a positive Difference Claim is calculated, any excess margin collateral cannot be used to cover any proprietary or other client Difference Claim shortfall. The client s actual excess cash and/or non-cash margin collateral will be directly returned to the ICM Client following the conclusion of the default management process. 3. Client Insolvency This section describes the general process for handling a client default. Eurex Clearing operates on a principal-to-principal legal basis and therefore only handles its Clearing Member defaults. Where a client of a Clearing Member defaults, the Clearing Member would be expected to manage the client default as outlined below. 3.1 Insolvency of Undisclosed Clients If insolvency proceedings are commenced over the assets of a Clearing Member s undisclosed client, the Clearing Member would be responsible for the handling of that client s positions and collateral. As Eurex Clearing has no relationship to the client, the Clearing Member is not required to inform Eurex Clearing of the default. This applies to the OSA and the OSA under CASS. Please note that the Clearing Member can not choose the ISA for undisclosed clients. 10

3.2 Insolvency of Disclosed Clients As disclosed clients (NCMs or RCs) are known to Eurex Clearing and enter into a Clearing Agreement with their Clearing Member and Eurex Clearing, the client s insolvency is partially regulated in the Clearing Conditions. 3.2.1 NCMs As NCMs are trading participants, Eurex Clearing specifies certain matters under Chapter I Part 1 Number 10 of the Clearing Conditions for the use of the stop-button etc., but generally, those specific provisions are not considered here. If an NCM has been excluded from trading, with prior notification to Eurex Clearing, the Clearing Member may close the NCM s positions or transfer them to another Clearing Member. The NCM must be notified of the exclusion from trading and the NCM positions will be transferred to the Clearing Member s proprietary account unless otherwise requested. 3.2.2 RCs The insolvency of a Registered Customer is covered by Chapter I Part 1 Number 11 of the Clearing Conditions and such provisions generally follow the process for an NCM, whilst recognising that an RC is not a trading participant of Eurex. 3.3 Insolvency of Individually Segregated Clients Because of the additional protections provided to individually segregated clients, there are specific provisions dealing with the insolvency of the individually segregated client. The Clearing Member is obliged to notify Eurex Clearing if some or all of the Transactions with an ICM Client have been accelerated, terminated or otherwise closed-out as a consequence of an insolvency. The termination of the corresponding transactions between the Clearing Member and the ICM Client will not automatically lead to a termination of the corresponding Transactions between Eurex Clearing and the Clearing Member. Instead the Transactions between Eurex Clearing and the Clearing Member will automatically be novated and re-entered between Eurex Clearing and the Clearing Member under the Elementary Clearing Model Provisions. The novated Transactions will be booked on an Own Account or a Customer Account of the Clearing Member and from then on constitute Own Transactions or Elementary Omnibus Transactions of the Clearing Member. Margin allocated to the novated Transactions will be transferred accordingly. In the case of cash margin collateral, the transfer occurs by way of a novation of the respective Redelivery Claim, in the case of non-cash margin collateral, Eurex Clearing will instruct the relevant CSD to transfer the securities from the segregated margin account to the relevant pledged securities account of the Clearing Member. 4. Eurex Clearing Insolvency This section describes the consequences of the occurrence of insolvency of Eurex Clearing, whilst assuming the Clearing Members remain solvent. 11

The relevant provisions providing for the applicable close-out mechanism are set out under Chapter I Part 1 Number 9 of the Clearing Conditions which apply to all Clearing Models provided by Eurex Clearing. In case of the occurrence of an Insolvency Event in respect of Eurex Clearing, Chapter I Part 1 Number 9.1 of the Clearing Conditions provides for an automatic expiry of all current or future primary obligations arising from any Transactions and all Redelivery Claims under the relevant Standard Agreements between Eurex Clearing and the relevant Clearing Member. An Insolvency Event will occur upon the filing of the petition for the commencement of insolvency proceedings (Insolvenzantrag) in respect of Eurex Clearing under German law which can only be filed by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin). The expired obligations and claims will be replaced by a Difference Claim for each Standard Agreement entered into between Eurex Clearing and the Clearing Member. 4.1 OSA / OSA under CASS As already stated above, the securities pledged to Eurex Clearing by the Clearing Member will not be considered in the calculation of the Difference Claim. Rather, the pledged securities serve as protection for a potential Difference Claim which Eurex Clearing may have against the relevant CM. Depending on the result of the calculation, the pledges are either realised or released by the insolvency administrator of Eurex Clearing. Positive Difference Claim (Eurex Clearing is the debtor) If the calculation leads to a Difference Claim of the Clearing Member against Eurex Clearing, the Clearing Member has to register such Difference Claim with the German insolvency court responsible for the insolvency proceedings over the assets of Eurex Clearing. Registered claims will be satisfied from the proceeds of the liquidation of Eurex Clearing 's assets. In case of collateral in form of securities pledged to Eurex Clearing, the security purpose of the pledged securities expires with the consequence that all pledges expire as well. Upon the expiry of the pledges, the Clearing Member is entitled to freely dispose over such securities. Negative Difference Claim (Eurex Clearing is the creditor) If there is a Difference Claim of Eurex Clearing against the Clearing Member, Eurex Clearing is still protected by the margin collateral in the form of securities pledged to Eurex Clearing. The pledge as such is not affected by the insolvency of Eurex Clearing. The insolvency administrator of Eurex Clearing is still entitled to enforce such pledges in accordance with their security purposes. However, as long as the relevant Clearing Member fulfils the Difference Claim, there is no need for Eurex Clearing to enforce the pledges. Once the Difference Claim is fulfilled by the Clearing Member, the pledges expire automatically. 4.2 ISA Under the Individual Clearing Model, any Eligible Margin Asset in the form of cash and securities needs to be delivered by transferring all rights and title, with the consequence that all collateral will be considered in the calculation of the Difference Claim. 12

Positive Difference Claim (Eurex Clearing is the debtor) If the calculation results in a Difference Claim of the Clearing Member against Eurex Clearing, the Clearing Member has to register such Difference Claim with the insolvency court. Negative Difference Claim (Eurex Clearing is the creditor) If Eurex Clearing has a Difference Claim against the Clearing member, Eurex Clearing's insolvency administrator will demand the payment from the relevant Clearing Member. 13

Appendix Definitions Default management procedure (DMP): Chapter I, Part 1, Number 7.5: Eurex Clearing AG maintains a default management process to reduce the risks following a default by a Clearing Member and the occurrence of a Termination Event or Insolvency Termination Event (as defined in 7.2.1 and 7.2.2) resulting in a Termination and the calculation of one or more Difference Claims Difference Claim: Chapter I Part 1 Number 7.3.1: Upon the occurrence of a Termination Date, the Difference Claim shall be determined for each Standard Agreement by way of combining (Saldieren) the Single Transaction Amounts of all Transactions under such Standard Agreement terminated as of the Termination Time and the Aggregate Value of the Redelivery Claims under such Standard Agreement, all as defined below. The final amount of the Difference Claim resulting from such combination shall (i), if it is a positive figure for the party entitled to value the Difference Claim, be owed to it by the other party, or (ii), if it is a negative figure for the party entitled to value the Difference Claim, be owed by it to the other party. Standard Agreement: A Standard Agreement represents a framework agreement between the relevant parties which governs clearing of the relevant products, licenses, and under which a Difference Claim is created. I.e. there will be a Standard Agreement for OSAs and ISAs and each will have a segregated pool of positions and margin collateral, which, when closed out, will result in a Difference Claim being determined. Termination Event: A Termination Event is an event which is set out at Chapter I, Part 1, Number 7.2.2 (1) (12). Valuation Date The Valuation Day is the date on which the Calculation Party (usually Eurex Clearing) determines the value of the Difference Claim. This shall be the day of default where porting is successful for the ICM or at the end of the Default Management Process in all other situations. 14