i. Does the answer change if the CM, although not in default, is perceived by the CCP to be in a state of impending financial distress?
LCH.C does not have the authority to mandate CM position transfers pre-default. Where a position transfer would reduce the possibility of a potential default, LCH.C may choose to inform the CM.
ii. To what extent is a default under the CCP’s rules the product of the CCP’s subjective determination, rather than being determined by reference to objectively verifiable events?
As above: Under default rule 3, the CH can declare a default in respect of a member who appears to the CH to be unable or likely to become unable to meet its obligations in respect of one or more contracts.
c. How does the CCP intend to transfer customer positions and initial and variation margin (and any associated contractual relationships) from a defaulting CM to a non-defaulting CM? Please elaborate on the following details (distinguishing between Required Margin, CCP Excess Margin, Dealer Excess Margin and any other categories of margin where relevant):
We are not obliged to transfer customer positions but, if requested to do so in a timely manner by the relevant customer, may do so.
i. The expected timeline from CM default to re-establishment of customer positions and initial and variation margin (and any associated contractual relationships) at a non-defaulting CM;
ii. The mechanism for transferring customer positions and initial and variation margin (and any associated contractual relationships) to a non-defaulting CM, including a description of:
As part of our default management processses customer positions are identified and customers requested to identify an alternative (non-defaulting) CM. With the consent of the customer and the receiving CM customer positions are then transferred.