FX Haircuts on Collateral - September Update

Report date

Circular No.

LCH Circular No 3977


20th September 2018


All LCH Ltd Clearing Members


Dear LCH Member,

Further to our previous circulars for FX Haircuts on Collateral (Circular No. 3975 - 13th September 2018, Circular No. 3973 - 28th August 2018, Circular No. 3971 – 20th August 2018,  Circular No. 3963 – 19th July 2018, Circular No. 3947 - 19th April 2018), we would like to provide an update on Currency of Risk, member testing and the transition schedule for the project.

The project is intended to enable granular FX haircuts, replacing the current 5.25% flat rate on all securities and zero cash haircuts, with specific haircuts only where there is a FX mis-match between Currency of Risk and currency of collateral.  The go-live is targeted for the 29th October 2018 (subject to regulatory review and approval).  The attached document provides further information and a more detailed timeline for these changes.

Currency of Risk:

  • LCH define Currency of Risk as the primary currency in the cleared trade portfolio of a member, determined using the largest standalone IM at the collateral account level.
  • FX Haircuts are applied to collateral valuations only when the currency of the collateral is different from Currency of Risk.


Members can view their Currency of Risk in a new CMS enquiry screen (Enquiries -> Sub Accounts -> Currency of Risk) and in all three new collateral reports (REP00031, REP00046, and REP00046a), which have been available from the 17th September 2018.

Currency of Risk will be determined at the beginning of each calendar month by LCH’s Risk department using recent position data, and will be fixed until it is reviewed the following month. This gives members certainty over the post haircut value that their collateral will provide as margin cover for each collateral account. We will next be reviewing the current Currency of Risk at the beginning of October, prior to go-live. Any updates will be applied on the 8th October and will then be fixed for two months in support of the initial go-live period. Clearing Members who wish to change their collateral composition and/or margin call preferences in advance of the go-live should submit any such requests by 17th October, using the Banking Preferences Form available here.

From December 2018 onwards (once the initial fix period is over) LCH will notify Clearing Members, via email, in advance (at least 3 days) of a change to any of their accounts’ Currency of Risk.

Member Testing:

In order for Clearing Members to test any changes to their applications, LCH is making all of the collateral changes available in Member Test in advance of the Production (live) implementation as per the attached schedule. If you are conducting member testing, please be aware that Member Test configurations/permissions are maintained independently of Production (live) configurations/permissions, as such you may need to consider the following:

  • Banking Preferences (such as end of day and intraday margin call currencies). If you require any changes to be made to these, please contact CollateralOpsChangeTeam@lch.com
  • Collateral Balances can be changed by having one of your authorised CMS users initiate the corresponding instruction in the CMS Member Test. Please contact servicedesk@lch.com if you need assistance in accessing the Member Test CMS.
  • Access to Banking Reports. Please contact servicedesk@lch.com if you need assistance in accessing the Member Test reports.
  • Triparty Collateral - The Member Test system is not connected to external Custodians/Banks, as such members will not be able see the impact of the new haircuts on triparty transactions.


If you have any questions please contact us at fx.haircut.project.enquiries@lch.com