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Warrants as collateral

FAQs

LME Clear has expanded its collateral service for members to pledge LME warrants against their margin requirements.

This is a unique offering from LME Clear – the clearing house purpose-built for the metals market.

This service represents an improved efficiency for the marketplace, and, in certain circumstances serves as a natural hedge against cleared positions. Using LME warrants as collateral may also allow members to optimise assets on their balance sheet in a more cost effective manner.

Warrants of a metal can only be accepted as collateral for the underlying metal i.e. Aluminium warrants will be acceptable as collateral to cover Aluminium positions.

LME Clear is also updating its EMIR Article 39(7) disclosure statement, available on the disclosure and transparency page. 

Members wishing to post non-cash collateral will be required to sign additional documentation. Certain formalities (including registration of security interests) may apply before non-cash collateral is accepted. LME Clear will only accept non-cash collateral from Members where it is satisfied that the arrangements are enforceable without delay in the event of a member default. In relation to warrants, members should note there is a lead time to posting warrants as collateral due to the requirement to obtain legal advice as to the enforceability of the arrangements in the relevant jurisdiction(s).

Disclosure and transparency

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