Essentials

The repo market currently operates through direct, voice broker transactions or screen trading. All types of trade sources are accepted by LCH SA.

Direct or broker trades are fed into an independent matching system, called ETCMS. Once the trade has been matched and validated to check it is within the RepoClear parameters, it is registered and LCH SA assumes the counterparty risk.

ATS (Automated Trading System) trades are registered with RepoClear when they are “agreed on the screen”. The trade details are sent automatically to LCH SA, supporting STP. Both repo and cash bond trades transacted on ATSs are registered by the Clearing House on a novation basis as soon as the terms of the trade have been checked by LCH SA, thereby facilitating trade anonymity.

On receipt and confirmation of eligible transactions, trades are governed under the rules of LCH Rulebook.

Settlement Netting

At the prescribed times in each market, RepoClear nets and shapes delivery obligations due for settlement (or net balances / Net Position Exposure per Clearing Member and basket for triparty basket repo). Members are then notified of their own specific delivery obligations via Member Reporting.

Payment Netting

If there are no securities delivery obligations, all net cash delivery obligations are aggregated into one amount per market, which is paid through the appropriate depository. Margin obligations from all platform-traded and bilaterally traded contracts, together with any coupon payments, are netted into a single payment per currency per day and paid through the relevant payment system.

Triparty Basket Repo Reuse and Pledge

€GCPlus triparty basket repo market offers full reuse to Clearing Members within the Euroclear CMS environment and access to refinancing at the Banque de France beside triparty reuse.

Member Reporting

Member reporting provides Clearing Members with real-time access to their LCH SA reports.

With regards to triparty basket repo, Clearing Members also have available the Euroclear CMS restitutions in relation with allocations and settlements.

Margin

To guarantee the net positions of Clearing Members and be able to manage its default risk, LCH SA requires its members to deposit initial margin, additional margin to cover specific risks and variation margin.

This overall margin is updated during the day for cash and repo trades and triparty basket allocation changes. It can be deposited in the form of eligible cash or securities.

Default Fund

Mutualised Default Funds are calibrated monthly and tested daily to be sufficient to withstand the default of the two Clearing Members giving rise to the largest losses calculated under scenarios of extreme conditions. Default Funds have a floor and a cap to ensure minimum levels of protection and avoid over-mutualisation.

Clearing Member contributions are subject to a minimum amount and recalibrated monthly in proportion to the risk they introduce.

Market Data

The RepoClear SA uses the price sources below to value the collateral of repo / reverse repo:

• Bloomberg for all cash and repo trades eligible securities, except Italy
• MTS for the cash and repo trades eligible securities of the Italian debt
• Interactive Data for all other eligible securities

On top of the prices indicated above, some other market data like Accrued Coupon are calculated internally.

For €GCplus triparty basket repo, the valuation of the collateral allocated to net positions in the baskets is done by Euroclear and hence uses Euroclear reference prices.