INTERNATIONAL: LCH Clearnet SA Amends CDS Clearing Rules

Thursday March 24 2016

Pursuant to CFTC regulation §40.6(a), LCH.Clearnet SA, a derivatives clearing organisation registered with the Commodity Futures Trading Commission, is submitting for self-certification some amendments to the CDS Clearing Rules related to extension of the CDS clearing service to the clearing of CDX Investment Grade indices and related US Single Names.

LCH.Clearnet intends to add to the list of eligible instruments CDX.NA.IG indices and related US Single Names. The clearing of these US products will be made during the existing European business hours.

Collateral calls will be made in Euro but all product cash flows, variation margin and price alignment interest will be paid in the product native currency i.e. US Dollar, via Bank of New York Mellon. Relevant treasury reports provided to clearing members will be updated to include amounts in US Dollar where appropriate.

LCH.Clearnet will be entitled to convert any US Dollar amount in Euro in any circumstance preventing the cash payments from being performed in US Dollar (i.e. in case of potential liquidity shortage in US Dollar).

The contribution to end of day prices in respect of these new products will be only requested on business days applicable to those products.

Finally, LCH.Clearnet will have the possibility to make an additional collateral call in US Dollar to ensure that LCH.Clearnet would be fully covered on any day where New York is open. A new margin has been also created (extraordinary margin) to cover the risk of any price/spread fluctuations and the contingency variation margin can be called on a business day that is also a holiday in the New York calendar.

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