ECC accepts a wide variety of highly liquid bonds as collateral.
However, ECC only accepts securities that are both
- ECB eligible and
- admissible for Eurex.
Furthermore, bonds need to meet the following requirements to be admissible for ECC:
- The remaining time to maturity needs to be 15 calendar days or more.
- They need to be fixed rate or zero rate bonds, floating rate bonds or reverse floating rate bonds with constant structure
- No optionalities and inflation-linked coupon structure
- Acceptable risk profile based on the internal risk assessment
ECC does not accept own issues (wrong-way risk) as well as close link securities as eligible collateral.
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 Operations 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.
* A close link might be a majority holding of shares or explicit guarantees.