LME Clear

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LME Clear
LME.jpg
Headquarters London
Key People Adrian Farnham, COO; Chris Jones, Chief Risk Officer

LME Clear is the London Metal Exchange’s self-clearing program, which launched on September 22, 2014. The clearing house clears all trades on the LME and those matched on the over-the-counter matching service. [1]

In August 2014 LME Clear was approved by the Bank of England to operate under the UK's Financial Markets and Insolvency Regulation, a crucial approval for the LME. The approval relates to LME Clear's secure payment system and ensures that all payments made through the system are deemed final, thereby protecting LME Clear clients. [2]

On September 3, 2014, LME Clear was approved by the Bank of England to operate under the European Market Infrastructure Regulation (EMIR), the final regulatory authorization it needed in order to launch as a clearing house. As an authorized clearing house it will be a qualifying central counterparty (QCCP) under Basel III/CRD IV. Financial firms clearing with a QCCP are subject to significantly lower capital requirements compared to a non-QCCP. [3]

LME Clear selected Cinnober as its core technology provider in July of 2012.

History

In December 2011, following an extensive feasibility study, the LME announced that they had decided to pursue self clearing. The exchange said self-clearing would give it greater flexibility in business expansion, improve development options and be accretive to earnings. LME also noted the erosion of the horizontal clearing model.

On June 5, 2013, The London Metal Exchange and LCH.Clearnet agreed to end their clearing relationship and move the LME contracts currently cleared by LCH.Clearnet to LME Clear on Sept. 22, 2014.[4] The London Metal Exchange (LME) said it expects LMEClear will charge members fees similar to those charged by LCH.Clearnet, which tripled its charges for clearing LME trades on June 1.[5]

Products and Services

The LME signed an agreement with Hong Kong Exchanges and Clearing (HKEx) and Bank of China on June 24, 2013 that would enable clearing of metals contracts in renminbi through LME Clear.[6]

In November of 2015, LME Clear announced the launch of 34 new stock futures contracts, some of which began trading on November 30, 2015 and the rest scheduled to begin trading on December 7. The contracts cover the 34 most actively-traded stocks in Southbound trading under Stock Connect, which together account for about 60 percent of Southbound trading turnover. The addition will also bring the total number of stock futures contracts traded in Hong Kong to 71.[7]

Key People

References

  1. New LME clearing house gets BoE 'settlement finality designation'. Platts.
  2. LME Clear passes key legal hurdle to launch. FOW.
  3. LME Clear gains EMIR authorisation. FTSE Global Markets.
  4. LME Clear and LCH.Clearnet agree migration date for LME clearing services. LCH.Clearnet Group.
  5. LME clearing fees will match LCH.Clearnet's just-tripled charges. Reuters.
  6. LME, Hong Kong exchange move closer to offering renminbi clearing. Reuters.
  7. HKEx to Introduce New Stock Option Classes and Stock Futures Contracts. HKEx.