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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:
| General | David Farrar | +44 (0)20 7426 7582 | [email protected] |
| Martin West | +44 (0)20 7426 7089 | [email protected] | |
| Member Testing | Haleema Asmal | +44 (0)20 7426 7571 | [email protected] |
| Risk | Lifan Zhang | +44 (0)20 7426 7979 | [email protected] |
David Farrar
Director, Head of Commodities and Metals, Commercial Services