Client Clearing Treatment | LCH

The SwapClear Client Clearing system comprises services provided by LCH.Clearnet Ltd ("LCH") to certain of its members (SwapClear Client Clearing members, each, a "clearing member") and services provided by those members to their clients (each, a "client"). Clients contract with clearing members, and clearing members contract with LCH - LCH does not enter into any direct contractual relationship with clients, but covenants with clearing members and clients that it will act in accordance with its rules. 
 
The SwapClear Client Clearing system is designed so as to enable client positions and collateral in respect of client trades to be transferred to, or replaced by new trades with, a substitute clearing member if the client's clearing member defaults, or, where the client does not have a substitute clearing member that is able to accept the client's trades, to enable positions to be closed out and the resulting net collateral balance to be paid to the client.

The basis of the SwapClear Client Clearing system is that where a client enters into a trade with a clearing member, that clearing member will enter into a matching trade with LCH, and notify LCH of the identity of the client. LCH will then record that trade and its associated collateral in one of a number of different types of accounts designated with the name of the relevant client ("LCH SwapClear Client Clearing accounts"). All LCH SwapClear Client Clearing accounts are segregated from house accounts. Individual segregated client accounts are segregated from other client accounts, but omnibus segregated accounts may also be used, in which the claims of a number of the clients of a clearing member are effectively pooled. You should agree with the clearing member with whom you deal what types of LCH SwapClear Client Clearing account should be used in respect of your business. The use of different types of account may involve different costs or levels of collateral requirement – your decision should reflect your risk appetite as regards the segregation of your collateral and positions.

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LSOC with Excess Model Explained | LCH

LSOC with Excess Model Explained | LCH

skyLSOC without Excess is the U.S. CFTC minimum requirement for swaps to segregate customers assets.  Under this model only the minimum collateral required to meet initial margin requirements of customer cleared swaps.  The FCM holds any excess collateral.  There are no FCM reporting requirements to the DCO.

However, under ESMA requirement the excess collateral has to be kept in DCO, LSOC with Excess model is cater for European requirement.

Margin Calculator on Bloomberg | LCH

skyBloomberg cooperates with LCH Swap Clear to integrates Margin Calculator for Swap Participants.

Functions:
- LCH.Clearnet's margin calculator is integrated with Bloomberg's multi-asset class analytics and trading platforms.
- Portfolio simulation.

SMART fact sheet

 

LCH Rule Change | Real-time Trade Registration

skyLCH.Clearnet is amending its Rulebook for the SwapClear US service to
(1) implement changes required to comply with Commission regulation §39.12(b)(7) for straight-through processing (real time trade registration or RTTR);
(2) implement the strategic Initial Margin (IM) methodology and related rule changes for tenor-basis risk;
(3) implement updated rule changes to comply with Part 22 of the CFTC regulations (LSOC), including FCM debiting instructions, close out of clients and affiliates (and transfer of margin and collateral), and terminology;
(4) implement changes for the introduction of bunched orders under CFTC regulation §1.35;
(5) implement changes resulting from legal advice received regarding the insolvency of either a clearing member or the clearing house and the enforceability of certain rulebook provisions;
(6) implement changes in relation to the delivery and maintenance of collateral; and
(7) provide for clarifying language and conforming changes.

 

Rules and Amendment

 

SwapClear Self-Clearing Fees from 1 April 2013

skyA single tariff will be applied to a Member Group, taking into account all trades cleared by that group within a calendar year.

Tariff A1: Ultimate tariff

  1. A new ultimate tariff (“A1”) of £2,250,000 per year will be applied to a Member Group that clears 30,000 trades per year or more.

Standard Tariff

  1. The standard tariff (“A2”) of £1,500,000 per year will apply for up to 20,000 trades per year. Additional trades beyond 20,000 will incur a booking fee of £75 per new trade but no maintenance fee.
  2. The charges will be collected in equal monthly installments of £125,000 monthly in arrears and an invoice will be posted to the Members’ account. All clearing fees will be payable in GBP.
  3. Member Groups will have a fee cap of £2,250,000 in the calendar year, equating to 30,000 trades annually. A fee holiday is given for the balance of the year if the £2,250,000 cap is reached and the following year will automatically be invoiced at Tariff A1.

Tariff B: Introductory tariff

  1. The introductory Tariff B comprises a reduced annual clearing fee of £500,000 collected in equal monthly installments of £41,667, plus £75 per trade booking fee and a £6 per existing trade maintenance fee per month. An initial fee cap of £1,500,000 will apply.
  2. If a Tariff B Member reaches the initial £1,500,000 cap, a fee holiday will be given for the remainder of the calendar year unless more than 20,000 trades are cleared in the year.
  3. A Tariff B Member that does not reach the Tariff B cap in the calendar year will begin the following year on Tariff B. However, a Tariff B Member who does reach the £1,500,000 cap within the calendar year will automatically begin the following year on Tariff A2.
  4. A Tariff B Member can at any time elect to move to a higher tariff. This enables smoother billing over the rest of the year.

In addition there will be a new one-off onboarding fee of £50,000 for an Affiliate Member.

Client Clearing Fees

Clearing fees under the SwapClear Client Clearing service are charged to the clearing member under a choice of two pricing plans, with effect from Q2 2012.

Standard Pricing Plan

The Standard Pricing Plan has an up-front booking fee and an ongoing maintenance fee.

The booking fee will be:

  • Applied on a per million basis, per the table below

  • Incurred at time of trade and collected monthly in arrears - Further reduced for back-loaded trades through September 9, 2013 (booking fee is one-third of the levels below)

The maintenance fee will be assessed annually on the anniversary date of each trade, at 3 per million notional in the currency of the trade. Maintenance fees will not be charged for trades terminated before their anniversary date.

Standard Pricing Plan - Booking Fee
Transaction Maturity per million notional
0 to 1 0.90
1+ to 3 2.25
3+ to 5 4.05
5+ to 7 5.40
7+ to 10 7.20
10+ to 12 8.10
12+ to 15 9
15+ to 20 13.50
20+ to 25 16.20
25+ to 50 18

Example: a new $100 million 5 year trade would incur a booking fee of $405. At its first anniversary there would be a maintenance fee charge of $300. If the trade is torn up before then, there is no maintenance fee charge.

High Turnover Plan

The High Turnover Plan also has an up-front booking fee and an on-going “risk consumption” fee. The up-front fee is USD 25 per ticket fee (for new and back-loaded trades). The ongoing risk consumption fee is calculated at 10 basis points annualized on the client’s Initial Margin requirement (regardless of type of collateral used to cover IM), calculated daily and billed monthly in arrears. This equals $1,000 per $1 million (annualized). Example: an average IM of $50 million equals an annual risk consumption fee of $50,000.

SwapClear charges clearing members; members individually make pricing arrangements with clients and will confidentially notify SwapClear of the pricing plan for each client. SwapClear is a service of LCH.Clearnet Limited.