Acceptable Collateral Alignment and Haircut Review

Members are advised that with effect from 7 March 2011, LCH.Clearnet Limited will make amendments to collateral acceptable for member margin cover purposes in order to ensure consistency, wherever possible, between the lodgement of securities on a bi-lateral and on a tri-party basis. The key alignments will be:

• To add the following as collateral acceptable under tri-party mechanisms;

- Securities issued by the Governments of Norway, Japan, the UK and the US 

- US Agency Securities issued by FNMA, FHLMC and FHLB, maintained using ISIN lists. All subject to all limits currently applicable for the same lodged bi-laterally.

• To extend the range of acceptable securities issued under government credit guarantee schemes in tri-party mechanisms to include all issues currently acceptable for bi-lateral lodgement.

• To add securities issued by the Government of Luxembourg as acceptable under both bi-lateral and tri-party lodgement mechanisms, therefore aligning with the RepoClear AAA € GC basket.

• To add securities issued by the Government of Australia as acceptable under the bi-lateral lodgement mechanism.

At the same time LCH.Clearnet Risk Management Department has performed a review of the haircuts applied to margin collateral and will also make the changes as detailed in the attached document with effect from 7 March 2011. These changes include the alignment of haircut maturity buckets across all issuers and across the bi-lateral and tri-party lodgement mechanisms. The new buckets are also detailed at this link.

• For haircut purposes this circular supersedes LCH.Clearnet Ltd Circular No 2686 dated 25 October 2010.

• Details of the current LCH.Clearnet Ltd Acceptable Collateral list and applicable haircuts can be found on the LCH.Clearnet Ltd website (www.lchclearnet.com) by selecting ‘Risk Management’ and ‘LCH.Clearnet Limited’. Details can then be found under the ‘Acceptable Collateral’ section. Please note that the website will continue to display existing haircuts applicable until 7 March when it will be updated with the new details.

 
Members seeking further information in relation to this Circular or confirmation of acceptability should contact one of the following:

Barry Gethin
Manager, Treasury and Liquidity Risk