LCH.Clearnet: update on MF Global default

London, 29 November 2011

The clearing houses of the LCH.Clearnet group (LCH.Clearnet) have today updated clients on the progress of the resolution of the MF Global UK Ltd’s (MF Global) default:

• The transfer of over 300 clients’ positions to the clearing member of the client’s choice is now complete.  The operation has involved managing client positions across multiple markets including the London Stock Exchange, LIFFE, LME, Nodal, HKMEx, OTC energy, in multiple asset classes including cash equities, commodities, metals, financial and energy derivatives. 

• All segregated client monies have been passed to MF Global UK Ltd’s Joint Special Administrators.  The final tranche was returned today Tuesday 29 November.

• MF Global’s fixed income positions, which had a combined nominal value of over €14.7 billion, have been successfully sold, with the exception of a very small number of residual positions, with no recourse to the default fund.  The process of managing the outstanding positions of MF Global is virtually complete.

Ian Axe, Chief Executive, LCH.Clearnet said: “I am very pleased with the way our team has handled a very complex and difficult resolution over multiple markets and multiple asset classes at a time of extreme market stress and been able to preserve value for clients and continuity of service. I am also delighted that we have managed the situation within margin and without recourse to the default fund.”

-Ends-

To view the press release as a pdf click here.

About LCH.Clearnet

The LCH.Clearnet Group is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, CDS and euro and sterling denominated bonds and repos; and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in. By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations. The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis. Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times. LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.