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24 Sep 2018
Eurex Repo Functional Information
Exclusion of unsecured bank bonds due to changes of the European Central Bank’s eligibility framework

Contact: Eurex Repo Sales

Importance: High priority

Summary:

On December 14, 2017, the European Central Bank announced in a press release to exclude senior unsecured bank bonds from its eligibility framework after December 31, 2018.

One very important criterion of Eurex Repo’s eligibility framework is Central Bank eligibility. In case a bond loses ECB eligibility, the respective bond will become ineligible for Eurex Repo’s GC Pooling Market, Repo Market and Securities Lending. Therefore, all trading participants currently using potentially affected unsecured bank bonds are kindly requested to prepare the substitution of likely affected bond collateral for GC Pooling and Securities Lending. In terms of cleared transactions in affected bonds of repo trades (Special and GC), Eurex Repo recommends not to execute any repo trades with a term leg after December 31, 2018.

The central counterparty Eurex Cleaing AG monitors actively unsecured bank bonds exposures. On an individual basis Eurex Repo will contact potentially affected trading participants and will inform about the given impact to support the market.

Eurex Clearing reserves the right to exclude individual instruments from its eligibility set before 31 December 2018 which will effect Eurex Repo’s eligibility framework as well. This will happen if

  • exposures in likely affected bonds increase significantly in Q4/2018
  • ECB publishes criteria that allow to uniquely identify instruments which will lose ECB eligibility

Preparation of substitution should avoid margin calls which might be triggered automatically if the given margin requirement cannot be covered by the potentially affected collateral which would become ineligible. Unfortunately, Eurex Repo cannot provide any indicative list of ISINs now since the case-by-case assessment by the ECB is still going on. If we get more detailed information from the ECB, we will inform you accordingly.

If you have questions please do not hesitate to contact Eurex Repo Sales & Relationship via T +49 (0)69 2 11-1 40 40 or sales@eurexrepo.com.

Kind regards,
Your Eurex Repo Team

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Eurex Repo GmbH
Managing Directors/Geschäftsführer:
Frank Gast, Marcel Naas.
Gesellschaft mit beschränkter Haftung with registered
seat in/mit Sitz in Frankfurt am Main.
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