LME Clear has introduced a triparty member margin collateral service managed via Euroclear Bank SA to help members to manage their collateral obligations. This service enables collateral to be posted more efficiently, streamlining mobilisation and reducing operational friction, with key LME Clear risk management controls applied at source by Euroclear.
Under a standard bilateral arrangement, when a member wants to lodge or withdraw securities as collateral to/from LME Clear it transfers individual securities from its account to LME Clear’s collateral account. The member is responsible for ensuring that the securities meet LME Clear’s requirements and for the administration and costs of each transfer of securities that is required.
A triparty agent stands in between the member and LME Clear and allocates securities to meet specified amounts on behalf of the member. When the member needs to cover margin requirements via the triparty service or amend the amount that is already covered, it sends an instruction to LME Clear and the triparty agent, which will transfer securities to LME Clear.
This arrangement provides a number of benefits for members, including:
- The agent is responsible for ensuring that securities meet LME Clear’s eligibility criteria and risk requirements
- The member only has to give one instruction for the amount to be covered to the agent which will handle the administration of transferring multiple securities to meet this
- The agent can optimise collateral usage and help make the most capital-efficient decisions when selecting how securities will be allocated
- It enables LME Clear to permit a broader range of acceptable assets as collateral when they are held via the triparty service
Details of our acceptable collateral can be found on this page.
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