Securities Borrowing & Lending: Updates on Roadmap

Executive Summary

LCH.Clearnet is implementing additional features to the Securities Borrowing and Lending clearing service in a phased approach and is pleased to announce that the Phase II solution is expected to go live at the end of Q1 2012.

Clients benefits & features

Phase I - current benefits

• Full anonymity;
• Mitigate counterparty risk (Central Counterparty is applying stringent risk management rules);
• Increase access to wider market and increased flow; Increase in settlement efficiency (full Straight Through Processing);
• Reduce the need for multiple credit agreements (CCP is counterparty to all members);
• Reduce cost & regulatory capital allocations associated with bilateral transactions;
• Reduction of bilateral reconciliations, workloads, the CCP standing as the gold record keeper and computing the reference amounts.

Phase II - additional features available at the end of Q1 2012

Partial returns and recall:

• The Lender (the Borrower) can recall (or return) a partial quantity of the traded contract at any moment during the lifetime (as of Settlement date of the Initial Leg onwards) of the ongoing opened contract;
• Multiple partial recalls or returns can be entered on a same day or at different dates without any minimal quantity;
• The outstanding part of the ongoing opened contract (not partially recalled or returned) remains opened at the same conditions and maturity than the original opened ongoing contract unless or until a rerate is instigated;
• Partial recalls and partial returns refer solely to Open Term Loans;

Rerating of the outstanding balance on loan:

• The Lender or the Borrower enters in SecFinex a proposed revised stock loan fee in reference to an ongoing contract (opened return leg);
• The proposal of revision of the stock loan fee by one counterparty is applicable without prior agreement for the other counterparty;
• Such revision will enter into effect at T (date of rerating proposal) + 3 days;
• If the Borrower or the Lender does not agree with such rerating, a return or recall can be triggered;

Corporate actions (mandatory) - Euro manufactured dividends processing:

• Upon declaration of both Lender and Borrower on SecFinex platform, a fixed percentage of manufactured dividend is forwarded to LCH.Clearnet SA and paid by the Borrower to the Lender, for any ongoing opened contract.

Next steps and planning

Documentation

• The Service Description and the Member Reports specifications are expected to be released by the end of August 2011;
• Clients presentations of the service updates will be given in September 2011;
• Testing guide and detailed launch strategy should be provided in November 2011.

Information about the Securities Borrowing and Lending clearing service can be found on our website here.

Planning

The clearing service will be available on the External User Acceptance test platform in January 2012 and the production launch of the service is expected to be at the end of Q1 2012.

For further information, please contact:

Your LCH.Clearnet SA Product Implementation manager:
Mykael Lemosle: +33 (0) 1 70 37 65 27 - [email protected]

Or your account manager.

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