Eurex Lending CCP IMN 22nd Annual Beneficial Owners' International Securities Lending & Collateral Management Conference February 5, 2016
Agenda What services does Eurex provide? Why is the Lending CCP beneficial for you? What is the Lending CCP service offering? How to get in contact? 2
Eurex offers integrated qualified central counterparty (QCCP) clearing across a wide range of asset classes and products Eurex Eurex is a full subsidiary of Deutsche Boerse Group and has one of the strongest rating profiles of financial market infrastructure providers in the world; S&P rates Deutsche Boerse Group with AA. Deutsche Boerse Group (DBOEF) is a publically traded company with market capitalization of over 14B. Deutsche Börse Group offers a full service portfolio from trading and clearing to settlement, custody and collateral management as well as information and technology services Eurex offers central counterparty clearing services across derivatives, cash and securities financing for equity and fixed income products Our integrated legal and operational framework across products allows us to deliver unmatched efficiencies to our clients We manage your counterparty credit risk and thereby keeping you Clear to Trade 3
Advantages for Beneficial Owners using a CCP service for the securities lending market Existing relationships and structure with Lending Agents are maintained Beneficial Owner remains as Principal for securities lending transactions Enhanced default management protection by the CCP Superior CCP Risk Management approved by regulatory authorities Re-use of existing infrastructure to allow for a wider distribution of counterparts Flexible collateral schedules allowing for optimization of collateral CCPs for securities lending deliver: Effective use of capital Credit intermediation Risk mitigation Increased utilization Operational efficiency 4
Lending CCP delivers a combined platform to connect bilateral and electronic markets Securities lending market participants Bilateral market (OTC) Electronic securities lending trading platforms Third-party Flow Providers Eurex Repo-SecLend Market Eurex Lending CCP Central Securities Depositories International Central Securities Depositories 5
Lending CCP serves the key elements of the securities lending market Transactions Bilateral transactions (OTC) Electronic markets Markets Equities coverage of key European markets Exchange Traded Funds (ETFs) Fixed income European corporate & government bonds Collateral Loans against cash collateral Loans against non-cash collateral bonds, equities & ETFs Tri-party collateral agents Clearstream Banking Luxembourg Euroclear Bank Post-trade functionality Loan Deliveries, Mark-to-Marks, Re-rates, Recalls, Returns, Buy-ins Corporate Actions, dividend payments Automated billing (lending fees & rebates) 6
Lending CCP incorporates STP trade-flow for your securities lending activity Loan negotiation Trading Lender Loan information Flow Provider* Real-time trade validation Loan information Borrower Data transmission Member Membership Eurex Validation Novation Confirmation Loan life-cycle management Membership Member Settlement Cash Non-cash Equities Bonds Principal Loan CSD ICSD Collateral securities Payment bank Tri-party agent *Flow Provider used as the entry channel from market participants to Eurex e.g. for New loan transactions, Re-rates, Recalls, Returns etc. 7
Lending CCP s Specific Lender License supports the Beneficial Owner s role and Agent Lender relationship Agent Lender Loan negotiation Borrower Beneficial Owner Specific Lender License Loan securities Non-cash Principal Collateral Eurex Loan securities Non-cash Principal Collateral Margin Collateral Member Key: Pledge to Lender Pledge to the CCP Transfer of Title Beneficial Owner maintains business relationship with Agent Lender Agent Lender continues to arrange loans for CCP eligible transactions Operational links with flow provider and CCP maintained by Agent Lender Agent Lender reports loans and collateral through existing reporting set Beneficial Owner uses an approved Specific Lender License with a distinctive CCP membership No requirement to clear through a General Member No requirement to pay margin No default fund contribution Dedicated requirements for Specific Lender License Supervised financial sector entity located within the EU, Switzerland, USA* and other selected countries Permission to perform securities lending business Pre-requisite is collateral pledge model with Tri-party Collateral Agent *Pending legal analysis 8
Lending CCP incorporates a Tri-party collateral process for the management of your non-cash collateral Lender CCP Borrower Member Reporting Eurex Reporting Member Tri-party agreement* Collateral Receiver Collateral Giver & Receiver Collateral Giver Lender Tri-party a/c Transfer of Title or Pledge CCP Tri-party a/c Transfer of Title Borrower Tri-party a/c Integrated and enhanced Collateral Management Exposure management undertaken by Lending CCP Lender eligibility profiles (bonds & equities) maintained by Lending CCP and Tri-party collateral agent Borrower substitutions of Principal Collateral undertaken by Tri-party collateral agent Tri-party collateral agents ensures substitution of Principal Collateral prior to Corporate Actions Re-use of Principal Collateral within the regulations of Tri-party collateral agent (for transfer of title) *Borrower, Lender and the CCP make use of the same Tri-party Collateral Agent e.g. Clearstream Banking Luxembourg or Euroclear Bank 9
Lending CCP accepts an extensive range of assets for non-cash Principal Collateral Bonds (denominated in AUD, CAD, CHF, DEM, DKK, EUR, GBP, JPY, NOK, SEK, USD) Central government bonds: Approx. 4,000 Australia Austria Belgium Canada Denmark Finland France Germany Ireland Italy Japan Luxembourg Netherlands Norway Spain Sweden Switzerland United Kingdom United States of America and others Supranational issued bonds: Approx. 1,150 European Bank for Reconstruction and Development (EBRD) European Company for the Financing of Railroad Rolling Stock (EUROFIMA) European Council Social Development Fund (CEB) European Financial Stability Facility (EFSF) European Investment Bank (EIB) European Stability Mechanism (ESM) European Union (EU) Inter American Development Bank (IDB) International Bank for Reconstruction and Development (IBRD) International Finance Corporation (IFC) Non-central government bonds & corporate bonds: Approx. 25,000 ECB (EUR & DEM) and SNB (CHF) Repo eligible list AAA to BBB* Equities & Exchange Traded Funds Equity Indexes from Europe, Asia Pacific & North America: Approx. 1,450 Austria Belgium Denmark Finland France Germany Italy ATX BEL 20 OMX Copenhagen 20 OMX Helsinki 25 CAC 40 HDAX (DAX, MDAX, TecDAX) MIB 30 Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom AEX25 OBX PSI 20 IBEX 35 OMX Stockholm 30 SMI FTSE 100 Australia Japan Canada U.S.A. S&P ASX20 Nikkei 225, TOPIX 30 S&P TSX 60 S&P 100 ETFs: Selected funds from DE, IR & LU All Lending CCP eligible loan securities are accepted as Principal Collateral *Ratings as assigned in the environment of Clearstream Banking Luxembourg and Euroclear Bank apply; structured bonds e.g. ABS & MBS covered bonds are excluded 10
Robust lines of defence ensure market stability Eurex s guiding principle in to minimize harm to clients and a disruption of the wider market Eurex provides a multi-level security system First the collateral and the Default Fund contribution of the member in default are utilized After the defaulter s contributions are exhausted, an assigned dedicated amount of Eurex is applied, before nondefaulting Members Default Fund contributions, and remaining capital of Eurex are used Each Member s contribution to the Default Fund is based on a minimum contribution and a dynamic component, accounting for the individual Member s risk situation There is one segmented Default Fund for listed and OTC business Following a realization of any Default Fund contributions of nondefaulted Members, such Members are asked to provide assessments to their contributions Members total liability is limited as they have to provide a maximum of two assessments per capped period Eurex lines of defense Position Netting Collateral of Member in Default Default Fund Contribution of Member in Default Dedicated Amount of Eurex Default Fund Contribution of Other Members Max 2 Assessments per Member Parental Guarantee Remaining Capital of Eurex 11
Lending CCP information Contact Frankfurt Efthimia Kefalea T +49 (0) 69 2111 7275 M +49 (0) 172 299 0628 efthimia.kefalea@eurexclearing.com Thomas Wißbach T +49 (0) 69 2111 7992 M +49 (0) 172 619 9850 thomas.wissbach@eurexclearing.com Paris Ebru Ciaravino T +33 (0) 155 27 6768 M +33 (0) 685 93 1333 ebru.ciaravino@eurexclearing.com London Gerard Denham T +44 (0) 207 862 7634 M +44 (0) 787 688 5276 Jonathan Lombardo T +44 (0) 207 862 7559 M +44 (0) 746 915 8310 USA Tim Gits T +1 312 544 1091 M +1 312 929 8588 gerard.denham@eurexclearing.com Connect Web E-mail LendingCCP@eurexclearing.com jonathan.lombardo@eurexclearing.com tim.gits@eurexclearing.com Twitter @EurexGroup LinkedIn www.linkedin.com/company/eurex 12
Eurex 2016 Deutsche Börse AG (DBAG), Clearstream Banking AG (Clearstream), Eurex Frankfurt AG, Eurex AG (Eurex ) as well as Eurex Bonds GmbH (Eurex Bonds) and Eurex Repo GmbH (Eurex Repo) are corporate entities and are registered under German law. Eurex Zürich AG is a corporate entity and is registered under Swiss law. Clearstream Banking S.A. is a corporate entity and is registered under Luxembourg law. U.S. Exchange Holdings, Inc. and International Securities Exchange Holdings, Inc. (ISE) are corporate entities and are registered under U.S. American law. Eurex Frankfurt AG (Eurex) is the administrating and operating institution of Eurex Deutschland. Eurex Deutschland and Eurex Zürich AG are in the following referred to as the Eurex Exchanges. 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