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Company Circular No:LCH.Clearnet Ltd Circular 3090
Service Circular No:LCH EnClear Precious Metals Division 009
Date:20 February 2012
To:All LCH EnClear OTC Precious Metals Clearing  Members

OTC Bullion Clearing Service Enhancement to Variation Margin Methodology

From February 21 2012, LCH.Clearnet Ltd will introduce enhancements to its variation margin methodology for its OTC Bullion clearing service provided in conjunction with the London Metal Exchange.

The changes, which follow discussions with key OTC bullion market participants, incorporate a symmetrical process, where profits and losses are realised each day and paid and received as cash.

Standard Span methodology applicable to all contracts continues to be used for Initial Margin calculation. The discounting of scanning risk will be removed for the OTC bullion contracts to be consistent with the symmetrical Variation Margin model.

Please do not hesitate to forward any questions to the following:

GeneralDavid Farrar+44 (0)20 7426 7582 david.farrar@lchclearnet.com
  Martin West+44 (0)20 7426 7089 martin.west@lchclearnet.com
Member TestingHaleema Asmal+44 (0)20 7426 7571 haleema.asmal@lchclearnet.com
RiskLifan Zhang+44 (0)20 7426 7979 lifan.zhang@lchclearnet.com

David Farrar

Director, Head of Commodities and Metals, Commercial Services