EnClear Futurisation

Report date

Company Circular No:

LCH.Clearnet Ltd: LCH Circular No 3512, EnClear Circular No 409


9 September 2014


All EnClear clearing members


To all EnClear clearing members

LCH.Clearnet Limited ("LCH.Clearnet") will be reclassifying its OTC EnClear contracts as Block Futures in early November, subject to regulatory approval. The initiative is another example of LCH.Clearnet's commitment to responding to market dynamics, clearing member priorities whilst working with multiple exchanges and venues on its open, horizontal platform.

The block futures will be listed on two regulated trading venues:

• Baltex - an FCA approved Multilateral Trading Facility which will list Dry Freight
• Cleartrade Exchange (CLTX) - a MAS regulated Commodities Futures Market which will list all the EnClear products detailed below.

Other trading venues are in the pipeline and will be announced in due course.

LCH.Clearnet's contract specifications will remain the industry standard and will remain economically identical to current contracts. LCH.Clearnet will retain ownership of the open interest for all LCH.Clearnet cleared EnClear contracts.

The EnClear products which will be futurised are Dry Freight, Iron Ore, Steel, Containers and Fertilizers.

EnClear cleared trades will continue to be executed through the OTC Brokers or traded via Baltex or Cleartrade, and will be reported to one of the trading venues before being submitted to clearing. Trades from all the venues will be cleared by LCH.Clearnet in one fungible open interest pool as futures.

There will be no change to the clearing member model. European clients will continue to clear their business through clearing members under the LCH.Clearnet Ltd Rule Book, and will be margined in accordance with the current EnClear margin methodology.

The FCM service will be discontinued following futurisation. FCMs will no longer directly clear for US clients with LCH.Clearnet under the FCM Rulebook. FCMs will instead become clients of an LCH.Clearnet clearing member. US clients will not have direct access to the trading venues but will operate through their FCMs. The contracts will be classified as Foreign Futures and will comply with the CFTC Part 30 regulations.

There will be no changes to the ECS Clearing system. Certain changes will be made to end of day member reports.

Further detailed information on the project can be found here.

Please do not hesitate to contact either Isabella.kurek-smith@lchclearnet.com or David.Barnes@lchclearnet.com if you have any questions.