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Questionnaire for CDS CCPs on Protection of Customer Initial Margin - page 21 / 32

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As Initial Margin is held from the CM as principal it cannot be transferred with a customer position. Variation Margin that accrues during the period between the default of a clearing member and the transfer or close out of positions likewise forms part of the margin held by LCH.C against the defaulted clearing member. Any such margin that remains once all positions of the defaulting member are transferred or closed out is returned to the defaulting member or its administrators.

1. How customer positions and initial and variation margin (and any associated contractual relationships) are allocated and how transferee CMs are selected (including whether a non-defaulting CM and its customers can be forced by the CCP to accept a transfer of positions through auction, assignment or other allocation procedures);

Transferee CMs are nominated by the customer. A non defaulting CM cannot be compelled to accept a transfer under the rules of this service. Note that LCH.C operates other services on which there is provision for formal auctions and can, under certain circumstances, be an assignment of positions to non-defaulting CMs.

2. Whether customer positions and initial and variation margin (and any associated contractual relationships) in respect of cleared transactions can be effectively transferred separately from non-cleared transactions between the defaulting CM and its customers;

LCH.C is not a party to non-cleared transactions between the defaulting CM and its customers.

3. Whether the treatment of CCP Margin differs from the treatment of Dealer Margin, from a portability perspective; and

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

4. Any pledge or other arrangements designed to facilitate transfer of customer positions and initial and variation margin (and any associated contractual relationships).

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