Gold as Collateral Acceptable for Margin Cover Purposes

From 28 August 2012 unallocated Gold (Loco London) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) as collateral for margin cover purposes. 

This addition to acceptable margin collateral will be subject to the following criteria;

• Available for members clearing OTC precious metals forwards (LCH EnClear Precious Metals division) or precious metals contracts on the Hong Kong Mercantile Exchange. Acceptable to cover margin requirements for all markets cleared on both House and ‘Segregated’ omnibus Client accounts.

• Daily valuation, with an initial haircut of 14% applied.

• Concentration limits will be applied as follows;

  • lodgement not to represent more than 40% of total margin requirement of participating members across all products, including for contingent variation margin (but not realised variation margin), applied at a legal entity sub account level.

  • a maximum lodgement limit per member group of USD 200m (currently approximately 130,000 troy ounces).
    

• LCH.Clearnet will make an accommodation charge of 20 basis points (bps) on utilised collateral amounts based upon member defined usage ordering rules. Costs incurred from the custodian will be passed on to clearing members on a pro rata basis and based on the value of the collateral lodged. 
  

• Members who are eligible and wish to lodge gold for margin cover purposes will be required to submit an executed Gold as collateral ‘charge’ document for the ‘House’ and/or ‘Client’ accounts together with supporting paperwork. Please contact the Membership Team to request the relevant legal documentation needed for approval to lodge gold as collateral.

• Procedures and account details can be found in at the link below prior to the live date and thereafter in Section 4 – Collateral, of the LCH.Clearnet Ltd Rulebook. http://www.lchclearnet.com/rules_and_regulations/ltd/proposed_rules.asp

• For further details of acceptable margin collateral please see the following link, which will be updated to reflect the addition of Gold Bullion from 28 August 2012. www.lchclearnet.com/risk_management/ltd/acceptable_collateral.asp

Contacts:

Approval process: Membership – Email: [email protected]  Tel: +44 (0)20 7426 7949

Collateral lodgement and member reporting: Treasury Operations - E-mail: [email protected] Tel:  +44 (20) 7426 7593

Risk Management: E-mail: [email protected]   Tel: +44 (20) 7426 7098/7485

Andrew Howat
Group Head, Collateral and Liquidity Management