X hits on this document

PDF document

Questionnaire for CDS CCPs on Protection of Customer Initial Margin - page 15 / 32

87 views

0 shares

0 downloads

0 comments

15 / 32

13. In the event of a CM default to the CCP, please detail the risk waterfall among guarantee fund contributions, Required Margin securing CM proprietary positions, Required Margin securing customer positions, and any other applicable source of funds (e.g., CCP Excess Margin, to the extent accessible by the clearinghouse), drawing distinctions between defaulting and non- defaulting parties where relevant.

In the event of a CM default, LCH.C applies the following waterfall:

  • 1.

    Defaulter’s Margin Collateral (cash, securities and bank guarantees)

  • 2.

    Defaulter’s own Default Fund contribution

  • 3.

    LCH.Clearnet Ltd capital (up to a limit)

  • 4.

    Remaining Default Fund

For details of the default protections see the following: http://www.lchclearnet.com/Images/LCH.Clearnet%20Ltd%20- %20default%20protections_tcm6-44534.pdf

As stated above LCH.C only deals with CMs as principal and is not party to CM/customer arrangements.

a. How does the applicable risk waterfall vary (if at all) depending upon whether the default arises from an insolvency event, as opposed to a non- insolvency event?

It does not vary.

b. How does the applicable risk waterfall vary (if at all) depending upon the nature of the IM being applied – i.e., is IM securing customer positions applied in a different manner from IM securing proprietary CM positions?

It does not vary.

c. In the event of a CM default arising from a failure to post sufficient margin, how does the applicable risk waterfall vary (if at all) depending upon whether the failure to post sufficient margin arose in respect of customer positions, rather than proprietary positions?

It does not vary (but see comment above)

i. Please explain (to the extent applicable) how the CCP’s methodology for isolating the origins of the CM default permits the CCP to identify, in a sufficiently precise manner, which risk waterfall applies in any particular instance (especially in

15

Document info
Document views87
Page views87
Page last viewedSun Dec 11 03:00:58 UTC 2016
Pages32
Paragraphs476
Words8853

Comments