customers (as a group and individually) and other custodial claimants? Distinguish where applicable between Required Margin, CCP Excess Margin, Dealer Excess Margin and any other categories of margin where relevant.
Are there any applicable regulatory regimes that limit the claims of those who may share in Dealer Margin?
Is it possible to contractually vary the sharing regime that would otherwise apply in any particular instance (e.g., by holding Dealer Margin at a third party custodian)?
Legal Enforceability of Portability Framework
Please discuss the legal enforceability of the CCP’s portability framework in the event of either or both (i) a CM insolvency (or the insolvency of the CM’s custodian) and/or (ii) a customer. In particular, consider how the enforceability of the portability framework is affected by the following:
LCH.C Default Rule 6 deals with transferring a defaulting CM’s positions to a solvent CM who consents to such transfer. Such transfer would be protected under Part VII of the Companies Act 1989. (ii) A customer’s insolvency will not affect LCH.C’s portability framework as LCH.C has no direct relationship with customers.
Whether, if either the CCP or insolvency trustee/receiver of the CM transfers any cleared positions and margin (and any associated contractual relationships) of the defaulted CM with the CCP, it must also transfer the defaulting CM’s (i) other cleared positions and margin (and any associated contractual relationships) with the CCP, and (ii) non-cleared positions (and associated margin and contractual relationships) with customers of the defaulting CM;
The effect of any standstill provisions upon default, and the interplay of such provisions with any statutorily protected termination rights;
c. Any affiliate and third-party liens or cross-margining and netting arrangements;
d. Any setoff rights or limitations between cleared and non-cleared trades;