After a trade has been ‘matched’ in LMEsmart the next stage is ‘clearing’. Clearing is made up of two processes: registration and novation. These are crucial in allowing the market to function efficiently.
Registration
A legal process where the clearing house, LCH.Clearnet, acknowledges the transaction. It records the trade and makes sure it is correct.
Novation
Here the clearing house puts itself between the two trading parties. It does this by separating the buy or sell contracts and creating a contract with each of the clearing members respectively. Each clearing member now has a contract with the clearing house instead of with each other.
All LME clearing is done through LCH.Clearnet.
LCH.Clearnet margining information