Acceptable Collateral - Ltd

Collateral Management

Members may elect to use cash, securities or precious metals to cover margin requirements at the Clearing House; please note that realised variation margin may only be covered in cash. To facilitate delivery, members may lodge securities either directly or using a tri-party mechanism.

Details of haircuts applied to securities and precious metals collateral can be found at the following link:

Acceptable Securities & Precious Metals Collateral and Current Haircuts

Notes:

1. Members should refer to LCH.Clearnet Limited's General Regulations, Default Rules, and Procedures (Section 4 – Collateral) for more information. Alternatively, please telephone LCH.Clearnet Limited Collateral Operations on +44 (0)20 7426 7505 for information relating to the acceptance of collateral.

2. Before any securities or precious metals are accepted, members must complete a legal form of charge, for further information telephone LCH.Clearnet Limited Membership department on +44 (0)20 7426 7627 / 7063 / 7891.

3. The following currencies are acceptable as cash collateral; Sterling, Euros, US Dollars, Canadian Dollars, Swiss Francs, Japanese Yen, Swedish Krona, Danish Krone and Norwegian Kroner.

4. The above link refer to securities and precious metals collateral acceptable to LCH.Clearnet Limited as margin cover for business cleared. Certain European regulators have agreed that OTC instruments registered with LCH.Clearnet Limited should be exempt (following Directive 2000/12/EC of 20 March 2000) from credit equivalent amount add-on. Any such exemption applies to LCH.Clearnet Limited members only where initial margin requirements are met with Cash or the Government Securities acceptable by LCH.Clearnet Limited. Members are responsible for ensuring that they comply fully with regulatory requirements in this respect.

5. Those members clearing OTC precious metals forwards (LCH EnClear Precious Metals division) may lodge precious metals acceptable to LCH.Clearnet Limited as margin cover. Set at a legal entity sub account level, concentration limits are 40% of total margin requirement of participating members across all products (including contingent VM but not realised VM) with a maximum lodgement limit per member group equivalent to USD 200m.

6. Charge and Credits

i. Cash - Interest is paid on cash at the London Deposit Rate (LDR). LDR can be viewed daily on TRS at $BRT.  
ii. Securities - LCH.Clearnet Limited charges 10 basis points (annualised) for utilisation.
iii. Precious metals - LCH.Clearnet Limited charges 20 basis points (annualised) for utilisation.

Credits and charges accrue daily and are charged/paid on a monthly basis to the PPS account.

7. Government Agency securities collateral is subject to a minimum nominal size and sufficient market quotes. Set by clearing member, concentration limits are the lower of 20% of the margin requirement or 500 million - USD for US agencies; EUR for European agencies with separate limits applied to GNMA MBS securities. A 10% limit of the total amount outstanding on any Agency ISIN will also be applied at a clearing member level. Acceptable issues will be maintained using ISIN lists. See SwapClear website for separate limits applicable to SwapClear Client Clearing business.

8. Certain taxation restrictions and requirements may apply to securities including, but not limited to:

i. Before pledging Spanish Governments, members will be required to provide LCH.Clearnet Collateral Operations with details of their tax status, in accordance with Spanish tax law
ii. Before pledging Italian Governments, members will be required to complete a Tax Exemption Application Form, which can be obtained from LCH.Clearnet Collateral Operations

9. For FCM purposes, cash collateral can only be accepted in USD.

10. LCH.Clearnet Limited acceptable securities are also eligible for FCM collateral purposes and will be subject to all other constraints applicable to margin collateral more generally. For further details please contact the Risk Department at [email protected].

11. For all other services, please note that LCH.Clearnet only has limited capacity for certain currencies outside GBP, USD and EUR. Please contact Elissa Holme [email protected] (0207 426 7525) or Andrew Warren [email protected] (0207 426 7141) in the event of wishing to place other currencies as margin collateral.

12. Clearing members are required to provide additional notice of any collateral substitutions above GBP 50 million or equivalent (whether between currencies, or between cash and non-cash). During the Easter period (between Friday 11 April 2014 and Tuesday 22 April 2014) and the Christmas / New Year Holiday period (between Friday 19 December 2014 and Wednesday 31 December 2014) members must provide five business days’ notice to reflect the possibility of reduced market activity and liquidity.