LME Clear will be implementing Value-at-Risk (VaR) margin methodology, subject to regulatory approval.
VaR is a widely adopted risk methodology, used in many asset classes by various central counterparties and other financial institutions.
As part of our market-wide Discussion Paper engagement process, we outlined the analysis we’ve undertaken into whether members and clients would benefit from a custom-designed VaR methodology to calculate initial margin for the LME market. Both the analysis and the Discussion Paper feedback confirmed that members and their clients are keen for the LME to pursue VaR, and we will work towards this as part of our Strategic Pathway.
We've put together a list of frequently asked questions with further details about VaR and what the change in margin methodology means.
We will update this page as frequently as possible and communicate any changes or further information via the usual channels. Please bookmark this page and check back for more details.
LME Clear Focus session
On Thursday 11 October, as part of LME Week in London, we'll be holding a clearing update session, including an update and more details on the transition to VaR. The session will also feature a VaR panel discussion with key industry stakeholders. The session is free and will begin at 15.00 (London time). If you are interested in finding out more and registering to attend, please visit the event page.
There are a number of events taking place in the next few months where you can hear more about our plans for VaR margin methodology. Use the links below to find out more and register.
Representatives from the LME Clear team will be at our annual metal seminar, which signals the start of LME Week. If you’re attending and have any clearing or margin methodology questions, a member of the team will be happy to answer them.
This year, as part of LME Week, we'll be holding a clearing update session featuring a detailed update on our transition to VaR, including a panel discussion with key industry stakeholders. The session is free and will begin at 15.00 (London time). If you are interested in finding out more and registering to attend, please visit the event page.
You can find out more about VaR as part of our free half-day Singapore Gala taking place at the Westin Singapore. Our team will also be available for meetings so if you’d like to talk to them on an individual basis please get in touch.
We have created two working groups which will be involved in the initial formative phases of the project: the VaR Working Group and the VaR Methodology Working Group. These groups will provide industry input and feedback on the methodology approach, requirements to ensure a smooth transition and the information required by members and clients. Information from the working groups will be shared wherever possible to ensure transparency on our discussions and approach.
VaR Working Group
Representatives from across our member firms have joined the VaR Working Group, which will runs on a regular basis to discuss the LME’s approach to VaR, and to gather feedback on the methodology, timelines, the transition process and the information that will be made available to members and their clients throughout the process.
Attendees are intended to be representative of the wider LME membership.
VaR Methodology Working Group
The VaR Methodology Working Group is open to all clearing members to attend. These meetings focus on the more technical aspects of the methodology changes including the how margins will be calculated under VaR. Attendees are generally technical experts from member risk teams.