have to check with their trustees about whether they have any addi-
tional restrictions.
By physically transferring the collateral into the name of the clear-
ing member or clearing house, the client loses ‘beneficial ownership’
of the collateral. Therefore, there is a credit risk with the clearing
member or wherever the collateral is held, as it is shown as their
asset and may be seized in the event of a default by the organisation,
even though the client is not involved in the default situation.
Acceptable collateral
Most of the clearing houses for exchanges publish lists of acceptable
collateral. Below is an example list of the types of collateral accepted
by LCH.Clearnet. It is for illustrative purposes only and clearing
houses can and do vary in the types of collateral they will accept.
Operations teams would need to check with the relevant clearing
house for the current list of acceptable collateral.
LCH.Clearnet Limited Acceptable Collateral
Collateral Acceptable types (Bloomberg Valuation & Haircut Prices
Description & Code) TRS Code
Cash
Sterling Nominal Nil
Euros
US Dollars
Swiss Francs
Japanese Yen
Swedish Krona
Danish Krone
Norwegian Kroner
Bank Guarantees
Limited range of acceptable Nominal Nil to termination
issuers date
Government Securities
UK United Kingdom GBP Nominal 5%
Treasury Bill (UKTB)
United Kingdom Gilt Market 3% 10 calendar $Gil
Bond (UKT) days–3 years
4% 3–7 years
6% 7–11 years
12% 11 years
Margin and collateral 135
Continued
LCH.Clearnet Limited Acceptable Collateral—cont’d
Collateral Acceptable types (Bloomberg Valuation & Haircut Prices
Description & Code) TRS Code
US US Treasury Bill (B) Nominal 4%
US Treasury Note/Bond (T) Market 3% 2 working $Bon
days–3 years
Current US Treasury 4% 3–7 years
Note/Bond (CT) 6% 7–11 years
7% 11 years
Italian Buoni Ordinari del Tesoro Nominal 3%
(BOTS)
Buoni del Tesoro Poliennali Market 5% 3 working $Bun
(BTPS) days–3 years
Certificati di Credito del 8% 3 years
Tesoro (CCTS/ICTZ)
Spanish Spanish Letras del Tesoro Nominal 3%
(SGLT)
Spanish Government Bond Market 4% 2 working $Bun
(SPGB) days–7 years
6% 7–11 years
9% 11 years
German Nominal 3%
German Treasury Bill Market 3% 2 working $Bun
(BUBILL) days–3 years
4% 3–7 years
Bundesobligationen (OBL) 6% 7–11 years
Bundesschatzanweisungen 9% 11 years
(BKO)
Deutsche Bundesbahn
(DBB)
Deutsche Bundesrepublik
(DBR)
Treuhandanstalt (THA)
French Bons du Tresor a Taux Fixe Nominal 3%
et Interet Precompte (BTF)
Bons du Tresor a Taux Fixe Market 3% 4 working $Bun
et Interet Annuel (BTNS) days–3 years
Obligations Assimilables de 4% 3–7 years
Tresor (FRTR) 6% 7–11 years
8% 11 years
136 Clearing and settlement of derivatives
LCH.Clearnet Limited Acceptable Collateral—cont’d
Collateral Acceptable types (Bloomberg Valuation & Haircut Prices
Description & Code) TRS Code
Dutch Dutch Treasury Certificate Nominal 3%
(DTB)
Dutch Government Bond Market 3% 10 working $Bun
(NETHER) days–3 years
4% 3–7 years
5% 7–11 years
8% 11 years
Austrian Austrian Treasury Bill (RATB) Nominal 5%
Austrian Government Bond Market 3% 4 working $Bun
(RAGB) days–3 years
4% 3–7 years
6% 7–11 years
14% 11 years
Belgian Belgian Treasury Bill (BGTB) Nominal 3%
Belgian Government Bond Market 3% 4 working $Bun
(BGB) days–3 years
5% 3–7 years
6% 7–11 years
8% 11 years
Canadian Canadian Treasury Bill (CTB) Nominal 3%
Canadian Government Bond Market 4% 10 calendar $Bon
(CAN) days–3 years
5% 3–7 years
6% 7–11 years
7% 11 years
Swedish Swedish Treasury Bill (SWTB) Nominal 3%
Swedish Government Bond Market 3% 4 working $Bun
(SWED) days–3 years
5% 3–7 years
6% 7–11 years
8% 11 years
Australian Australian Government Bond Market 3% 13 calendar $Bon
(ACGB) days–3 years
5% 3–7 years
6% 7 years
Finnish Finnish Treasury Bill (RFTB) Nominal 3%
Finnish Government Bonds Market 3% 4 working $Bun
(RFGB) days–3 years
6% 3–7 years
Margin and collateral 137
Continued
LCH.Clearnet Limited Acceptable Collateral—cont’d
Collateral Acceptable types (Bloomberg Valuation & Haircut Prices
Description & Code) TRS Code
Denmark Danish Treasury Bill (DGTB) Nominal 3%
Danish Government Bond Market 3% 5 working $Bun
(DGB) days–3 years
5% 3–7 years
Other Securities
Sterling Limited range of acceptable Nominal 5%
CDs issuers, under 1 year to
maturity
US Dollar Limited range of acceptable Nominal 5%
CDs issuers
UK FT-SE 100 & stocks $Equ
Equities underlying equity options
SET 1 Market 35%
SET 2 Market 50%
Notes:
1. Members should refer to LCH.Clearnet Limited’s General Regulations, Default Rules and
Procedures, or telephone LCH.Clearnet Limited Treasury Operations on 44 (0)20 7426
7124 for information relating to the acceptance of collateral.
2. Before any securities are accepted, members must complete a legal form of charge, for further
information telephone LCH.Clearnet Limited Membership on 44 (0)20 7426 7627.
3. LCH.Clearnet Limited imposes overall limits on CDs, bank guarantees and equities.
4. Certain taxation restrictions and requirements may apply to securities.
5. Any collateral may be used to cover any margin liability with the following restrictions:
(i) US Dollar securities held in New York may not cover equity options (including index
options) margins, and EquityClear margins;
(ii) Equities may only cover equity-related margins.
6. To be acceptable, government securities must be issued in the home country of the issuing
government and be denominated in its domestic currency (a definition which, for Euroland
countries, includes both their legacy currencies and the euro).
7. SET3 Equities will not be accepted as collateral.
8. The list refers to collateral acceptable to LCH.Clearnet Limited as margin cover for all
business cleared. Certain European regulators have agreed that OTC instruments
registered with LCH.Clearnet Limited should be exempt (following Directive 2000/12/EC of
20 March 2000) from credit equivalent amount add-on. Any such exemption applies to
LCH.Clearnet Limited members only where initial margin requirements are met with Cash
or the Government Securities acceptable by LCH.Clearnet Limited. Members are
responsible for ensuring that they comply fully with regulatory requirements in this
respect.
9. Charge and Credits
(i) Cash – Interest is paid on cash at the London Deposit Rate (LDR). This is accrued daily and
paid on a monthly basis to your PPS account. LDR can be viewed daily on TRS at $BRT.
138 Clearing and settlement of derivatives
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