Ltd SA

Clearing Members including FCM Clearing Members may elect to use cash or securities 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 can be found at the following link:

Acceptable Securities Collateral and all haircuts (including FX) as of 21/08/17

Notes:

  • Members should refer to LCH Limited's General Regulations, Default Rules, and Procedures (Section 4 – Collateral) for more information. Alternatively, please telephone LCH Limited Treasury Operations on +44 20 7426 7505 for information relating to the acceptance of collateral.
  • Before any securities are accepted, members must complete a legal form of charge, for further information telephone LCH Limited Membership department on +44 20 7426 7627 / 7063 / 7891.
  • The following currencies are acceptable as cash collateral; Sterling, Euros, and US Dollars. Other ccys may be posted in limited quantities.
  • The above link refers to securities collateral acceptable to LCH Limited as margin cover for business cleared. Certain European regulators have agreed that OTC instruments registered with LCH 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 Limited members only where initial margin requirements are met with Cash or the Government Securities acceptable by LCH Limited. Members are responsible for ensuring that they comply fully with regulatory requirements in this respect.
  • Charge and Credits

i. Cash - Currently there are three different rates with which Clearing Members accrue interest against cash balances held with LCH, namely:

  • Client Deposit Rate (CDR)
    Applicable to EUR, GBP, USD cash balances held on SwapClear client accounts
  • RepoClear Deposit Rate (RDR)
    Applicable to EUR, GBP, USD cash balances held on RepoClear accounts
  • London Deposit Rate (LDR)
    Applicable to all other cash balances (Default Fund excluded)

ii. Securities - LCH Limited charges 10 basis points (annualised) for utilisation of non cash collateral to cover house and client margin in all Clearing Services but charges 0% where non cash collateral is used to cover a Client margin requirement in the SwapClear service.

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

  • 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.
  • 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 Treasury 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 Treasury Operations

  • For FCM purposes, cash collateral can only be accepted in USD.
  • LCH Limited acceptable securities are also eligible for FCM collateral purposes and will be subject to all other constraints applicable to margin collateral more generally.
  • Please note that LCH has limited capacity for certain currencies outside GBP, USD and EUR. Those currencies that are acceptable but currently have limits include: Canadian Dollars, Swiss Francs, Japanese Yen, Swedish Krona, Danish Krone and Norwegian Kroner. Please contact Elissa Holme elissa.holme@lch.com (0207 426 7525) or Andrew Warren andrew.warren@lch.com (0207 426 7141) in the event of wishing to place these currencies.
  • LCH requires a minimum of 2 working days notice for any substitution of collateral in excess of 100mn cash value this applies in respect of cash being substituted for non-cash, or vice versa and substituting cash for cash in an alternative currency.
  •  LCH reserves the right to increase the standard notice period and/or exclude specific days by providing advanced notice to Clearing Members via a member circular.

    The above applies to both Clearing Member’s Proprietary and Client business.
     


 

In order to guarantee the net positions of Clearing Members and to be able to manage the risk of a default, LCH SA requires its members the deposit of an initial margin. This margin is calculated on a daily basis for all new positions on all markets: Securities, Derivatives, Fixed Income (for cash and repo transactions) and CDSClear.

Centralisation of collateral management

SECURITIES, DERIVATIVES AND FIXED INCOME

 

CDSClear

Eligible Collateral Summary

LCH SA accepts deposits of cash and securities to cover margin requirements Clearing Members can satisfy their margin requirements using the following possibilities:

1. Euro cash: Clearing Member must deposit via an account held within a central bank connected to the TARGET 2 system or be represented by a Payment Agent holding such an account.

 

 

Daily cap for €uro cash collateral deposit: Euro cash deposit after the First Intraday Slot will be subject to a 50M€ cap per CDS Clearing member. Any change on the cap amount will be communicated in advance.

2. USD or GBP cash: deposited via an account in the name of LCH within the commercial bank Euroclear Bank.
3. Securities collateral: deposited via Full Title Transfer Accounts opened by
LCH in various Central Securities Depositories (CSDs)

4.   Central Bank guarantee offers provided by the National Belgium Bank (NBB) or Dutch National Bank (DNB).

 

5.   CDSClear pledge solution: enables Clearing Members to enter into a collateral arrangement whereby it deposits eligible collateral via a Single Pledgor Pledged Account (SPPA) opened by LCH SA in Euroclear Bank

Rules and Regulations

 

Instruction IV.4-1  *

 

CDSClear Section 3: Collateral and Cash Payment *

* Protection against third parties' claims:

Collateral transferred to LCH SA is subject to all applicable legal and regulatory provisions governing Collateral provided to a clearing house, including, without limitation, Article L. 440-7 and L. 440-8 of the French Monetary and Financial Code.

Contribution to Default Fund transferred to LCH SA is subject to all applicable legal and regulatory provisions governing securities settlement systems including, without limitation, Article L. 330-2 of the French Monetary and Financial Code.

In accordance with the provisions of Article L.440-7 and L. 330-2 of the French Monetary and Financial Code, collateral and contribution to Default Fund transferred to LCH SA are protected against third party claims. Actually, no creditor of either a Clearing Member or LCH SA, no representative of a Clearing Member and no insolvency official (mandataire judiciaire) appointed under French insolvency proceedings (under Book VI of the French Commercial Code) may claim any right, neither over the Collateral transferred for the purpose of meeting a Clearing Member's Margin Requirement, nor over any contribution to the Default Fund, even in the context of an LCH Insolvency Proceeding or insolvency proceedings opened outside of France which are equivalent or similar to those set out in Book VI of the French Commercial Code. 

Collateral Accepted to meet Margin

Cash

EURO
USD (haircut 4,8%)
GBP (haircut 5.4%)

Securities

Acceptable Securities Collateral and Current Haircuts

For the most up-to-date version on Collateral, please log into one of the following secure areas:

•    CaLRM Secure area -  Fixed Income, Cash Equities & Listed Derivatives haircuts
•    CDSClear Secure area  - CDSClear haircuts

Collateral interest rates & fees

These rates are applied on the 3rd business day of the following month.

Click to view the Treasury Fees

Collateral Operating Procedure

Equities, Listed Derivatives & Fixed Income

For non cash collateral:

1 –Deposit of securities:

     11- On J -1, CMS Instruction is sent at 16:00 CET to LCH SA;

     12- On J, instructions (Franco or Sell Free of payment) keyed in on EOC Bank or ESES (EOC France) by member and by LCH SA (Buy free of payment) if member uses Sell free of payment ;

     13– On J, if the instructions are matched before 12:00 CET: restitution of Cash Euro possible on member request

     14– If the instructions are matched after 12:00 CET: restitution of cash euro on J+ 1.

2 – Withdrawal of securities:

     21– On J-1, CMS Instruction is sent at 16:00 CET to LCH SA;

     22– On J-1 value J, LCH SA makes withdrawal in its system to calculate member's margin call without these securities ;

     23 – On J, payment of margin call by member in T2 system (8:30-9:00 am CET) ;

     24 – On J, restitution of securities : after reception of payment of margin call, LCH SA keys in (Sell free of payment) on EOC Bank or ESES (EOC France) and member keys in buy free of payment.

3 – Substitution of securities possible:

     31– Deposit and withdrawal are done at the same time : member pays in T2 system on 8:30 am CET and receives cash coming from deposit around 12:30 CET if deposit match before 12:00 CET;

     32– Deposit done on J-1 (CMS Instruction on J-2) and delay withdrawal on J (CMS Instruction on J-1) to avoid member to provide liquidity on J between 8:30 am to 12:30 CET.

For further information please contact Treasury.Ops.fr@lch.com

CDSClear

Please read the Collateral movements procedure.  For any further questions, please contact either treasury.ops.fr@lch.com or your Business Development & Relationship Manager – cdsclearbusinessdevrm@lch.com.