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Collateral Securities

ECC accepts a wide variety of highly liquid bonds as collateral.

ECC does not accept own issues (wrong-way risk) as well as close link securities as eligible collateral. Debt securities that have a remaining term of 15 calendar days or less are not accepted as well.

ECC determines concentration limits for margin and default fund requirements separately. Concentration limits for margin requirements are calculated per clearing member group. A clearing member group is formed if clearing members have a close link* that makes it likely that a default of one clearing member leads to a default of the linked clearing member. Concentration limits for the default fund requirement are calculated for the default fund as a whole due to the fact that the default fund covers losses of any clearing member.

ECC has a collateral policy which establishes concentration limits at the level of:

  • individual issuers
  • country of issuer
  • currency (except EUR).

If a concentration limit is violated, ECC's Clearing & Settlement team will contact the clearing member who submitted collateral leading to the breach to initiate a replacement of collateral.

The collateral policy and procedures are reviewed at least annually and whenever a material change occurs that materially affects the risk exposure.

More details are published in the document “Concentration Limits”.

* A close link might be a majority holding of shares or explicit guarantees.

 

Securities Collateral Deposit

The Clearing Member opens a pledge account in one of ECCs securities collateral locations and allocates this to a specific collateral pool. All transfers to this pledge account are automatically credited in ECCs clearing system near-time to the linked collateral pool. If collateral is not acceptable, ECC will automatically release the collateral and return it to the clearing member.

The Collateral Transaction Overview window in the EUREX system provides an on-line view of the collateral posted.

 

Securities Collateral Release

Withdrawals are requested using the Security Collateral Transaction Entry window. Once the collateral is released, the securities are debited in near-time from the Clearing Member's collateral account. If a withdrawal request leads to under-collateralization in the member's account, the transfer of the requested securities is postponed until the under-collateralization is resolved. This can be achieved by bringing other collateral or by reducing the risk position.

Action

House Account CM

GOS

SOS

OSA

ISA

Instruct Release

CM

CM

CM

CM

CM

Release of collateral maximum till

Margin Requirement

Margin Requirement + Underfunded Margin Requirement from SOS, OSA & ISA

0

0

0

Shortfall covered by

House

GOS

GOS

GOS

GOS

Acceptance by

CM

CM

CM

CM+ Represen-tative

CM + ISA Client Represen-tative

Release to

CM

CM

CM

CM

CM