Clearing Member PPS Contingency Arrangements 2016

Report date

Circular No.

LCH Circular No 3775


23rd August 2016


All LCH Clearing Members


Dear Clearing Member,

The LCH and LCH FCM Procedures state that Clearing Members must ensure they have PPS contingency arrangements in place to ensure that margin obligations can continue to be met in the event of a failure of their nominated PPS bank(s). Evidence of these arrangements will be required on an ongoing basis at LCH’s request.   

LCH completed a test of all Clearing Members’ (FCM inclusive) PPS contingency arrangements in 2015 and this notice is to communicate the approach to the 2016 PPS Contingency Test.

The three PPS Contingency options Clearing Members have available remain unchanged:

1.    Direct funding of cash into LCH concentration account
2.    Deliver non-cash collateral
3.    Use an alternative PPS bank(s)

Accordingly, LCH will be conducting a test of Clearing Members' PPS contingency arrangements, starting in September 2016 and completing in November 2016. The testing will be completed in one of the three major call currencies that LCH accepts as cash collateral – EUR, GBP and USD, with the test scenario aiming to simulate an unconfirmed intra-day margin call due to an issue with the clearing member's PPS Bank.

Each Clearing Member will be contacted individually to arrange the date for the testing. Participation from all clearing members will be required.
For further information, please contact the below:

PPS Contingency Test Team
+44 (0) 207 426 7500

Nick McMillan
Senior Manager: Collateral Operations and Client Services