Collateral Management Engine

The introduction of the collateral management engine with Eurex Release 11.0 means that with intraday substitution of collateral allows for more cost-effective and process-efficient use of valuable collateral. Now, the entry of collateral requests will be electronic. This considerably streamlines the withdrawal of collateral for Clearing Members, because instead of sending a fax to Eurex Market Supervision, Clearing Members can edit the request in the system themselves. With Eurex Release 11.0, all commonly used collateral will be stored in the Eurex @X-tract system. Clearing Members can inquire as to whether a specific type of collateral is accepted via the Collateral Security Information window.

Currently, security collateral withdrawal requests are manually handled. Relevant securities remain in pledged accounts and the withdrawal requests are only sent to the Central Security Depository (CSD) during the end-of-day processing.

In Eurex Release 11.0, the collateral management engine will enable Eurex Clearing Members to enter collateral release requests real-time using the Clearing GUI. The collateral management engine will process security collateral, cash collateral as well as guarantees to calculate the collateral balance for margin, clearing fund and company capital. The collateral management engine will process the security deposit transactions received from the CSD near-time. Clearing Members will be informed of the result on a transactional basis by a broadcast.

Currently, Clearing Members can only store collateral in one location. After the introduction of Eurex Release 11.0, Members will be able to use multiple collateral accounts (margin, clearing fund and company capital) with different CSDs.

Deposits of Securities

There are several changes to how Clearing Members deposit additional securities into their pledged accounts in Central Security Depositories (CSD).

Additions During the Exchange Trading Day
Currently collateral deposits are only recorded during the end-of-day processing. With Eurex Release 11.0 these deposits will be credited near-time. Clearing Members will receive information about shortfalls/surpluses and will always have an up-to-date overview of their pledged securities including the collateral value through the new Collateral Transaction Overview window. To receive this information they must subscribe to the respective broadcast stream. Clearing Members will be informed of the deposit on a transactional basis by a broadcast.

Acceptability of Collateral
With Eurex Release 11.0, all commonly used collateral will be stored in the Eurex® system. Members can inquire as to the acceptability of any given security on the Collateral Security Information window. Should a member's security not be listed, they have the option of calling Eurex Market Supervision.

Rejections of Collateral
In the event that a deposit is unacceptable, Eurex will now instruct a deposit reversal (back to the member's main account) near-time.

Withdrawal of Securities

Rather than manually requesting the withdrawal of securities in Members' accounts by fax, as is the current procedure, and receiving them back into the main account the following day, Eurex Release 11.0 has upgraded the system for a quicker and more efficient process.

Initial withdrawals will now be made using the Security Collateral Transaction Entry (SCTE) window. Once confirmed by Eurex Market Supervision that margins will be met without the securities requested, there will be an immediate transfer from the pledge account into the Member's main account.

Should a withdrawal request lead to an under-collateralization in the Member's account, the transfer of the requested securities will be postponed until the next business day or until the proper amount of funds are in the account to fully fund the margin requirements.

Handling of Permanent Cash Collateral

As Clearing Members generally keep the majority of their margin deposits in securities and use a smaller amount of cash to take care of short term margin variations, there is a need to efficiently manage capital on deposit with the Clearing House. For this reason, Eurex introduces enhancements to the handling of permanent cash collateral.

Once the margin requirements have been determined, Members will now be able to maintain (deposit or withdraw) funds using the Collateral tab of the Member General Information window.

Deposits and Withdrawals of Cash

When intraday margin changes take place, cash withdrawal requests and deposits are received and then entered into the cash module by Eurex Market Supervision. This in turn will update the collateral balance of the Member.