LCH.Clearnet Ltd – Proposed Changes to PPS Arrangements

Report date

Circular No.

LCH Circular No 3588


10th February 2015


All LCH.Clearnet Ltd Members


LCH.Clearnet Limited (LCH.Clearnet) would like to inform you of its intention to implement a change to the current PPS arrangements. In recent years margin values and volumes have sharply increased in line with clearing service activity. Consequently, PPS banks consider that the risks to which they are exposed within PPS have similarly increased particularly when confirming future dated margin calls. LCH.Clearnet has identified two mitigating measures as described below:

  1. Same day currency calls on currency holidays.

On a same day currency (currently these are GBP, EUR, USD, CAD) holiday LCH.Clearnet will call an alternative deliverable major same day currency for both Initial Margin and Variation Margin calls. The alternative currency called will be one of the three major call currencies, EUR, GBP or USD. Due to investment cut-off limitations in EUR, USD then GBP and then EUR will be prioritised as the alternative margin call currencies. Any un-utilised cash or non-cash collateral balances will be taken into account prior to making the alternative currency calls.

Members requesting pre-funding deposits in eligible currencies that are on holiday will be notified via the Collateral Management System (CMS) that it is a holiday and an alternative currency should be deposited.

  1. Where PPS bank cash cut-off times allow, settle currencies same day rather than next day.

NOK and CHF have been identified as the currencies for which PPS bank cut-off times are late enough to allow margin calls to settle on a same day basis. The implementation of this measure is subject to the finalisation of default liquidity arrangements.

It is anticipated that both of these measures will be phased in during Q3 2015

There will be no change to the processing of other next day currencies (being JPY, AUD, CZK, DKK, HKD, HUF, NZD, PLN, SEK, SGD, ZAR). A set of scheduled webinars to target all time zones will be held during March 2015. These will show in detail the impact that the above changes will have on member processes and reporting. All members will be invited to join in these and continued updates will follow prior to implementation

For further information relating to this, please either contact your PPS Bank or use the contacts below –

Laurence Jones
UK Head of Collateral Operations

Martin McCrystal
Senior Manager, Collateral Operations

Stephen Lloyd
Global Head of Collateral Operations