SwapClear DMP Fire Drill - 20 June 2011

Dear SwapClear Member,

A Fire Drill of the SwapClear Default Management Process (“DMP”) is scheduled to commence on Monday 20 June 2011 and will continue until Friday 1 July 2011.

As SwapClear members are signatories of the Default Management Process Agreement (DMPA), they are required to demonstrate that they can fulfill the obligations required of them and are therefore obliged to participate. Please note that as a mandatory regulatory activity, all conclusions will be reported to the FSA.

Detailed information of this Fire Drill was communicated to each member directly on 5 April 2011. Updates and further information were communicated on 15 April 2011 and 20 May 2011.

Summary of the Fire Drill:

• SwapClear will simulate the default of “MegaBank1” which has a portfolio of circa 150k trades. The trades are denominated in CAD, EUR, GBP, JPY and USD.

• Representative traders from Default Management Group (“DMG”) will convene at a location advised directly to the group on the date of the simulated default to begin the Risk neutralisation of the portfolios. This process is planned to take two days and will include the actions required for several scenarios for ‘Client Clearing’ portfolios.

• All SwapClear members, including new joiners will be required to test and re-confirm their ability to manage the process of downloading a set of portfolios from the LCH.Clearnet website, valuing these portfolios in their internal risk management systems and providing SwapClear with accurate valuations and / or bids as requested in the communication referred to above.

• SwapClear members that are a ‘Backup Clearer’ to a Client of the “MegaBank1” will be asked to analyse the “Client Transfer Pack” provided to them on the day of the default and provide SwapClear with an analysis of the portfolio 48 hours later.

• All SwapClear members will be asked to analyse the hedged portfolios that were produced following the DMG risk neutralisation exercise (“Auction Pack”) and provide SwapClear with both a valuation and a bid in accordance with the instruction contained in the communication referred to above.

If you require further details please contact [email protected] or Dee Dervish on +44 (0) 20 7426 7912 or [email protected].