| LCH circular number: | 4304 |
| Date: | April 29, 2024 |
| To: | All LCH Limited Clearing Members |
Currently, LCH Limited (“LCH”) determines the amount of the default fund for each of its services, default fund additional margin (“DFAM”) and default fund contributions based on possible stress-tested losses it may incur in various scenarios less the initial margin it holds.
LCH is updating this methodology such that its determinations also include the following elements:
1. Stressed collateral – what LCH can realise from collateral in stressed market conditions; and
2. Stressed liquidity – the cost of hedging a defaulting clearing member’s portfolio of cleared contracts under stressed conditions, over and above the liquidity margin held by LCH for such clearing member.
These changes will take effect on and from 1 July 2024, in respect of the LCH Rates, EquityClear, ForexClear and RepoClear services, and will be reflected in their respective default fund, DFAM and default fund contribution calculations.
Should you have any questions, please contact the relevant client services team.