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Collateral management

Steel rebar

LME Clear has designed a Secure Payment System (SPS), in collaboration with the Bank of England and Settlement Banks.

A clearing member must provide LME Clear with a mandate from one or more of the approved LME Clear Settlement Banks to allow LME Clear to access appropriate funds for margin and associated purposes. All members are required to have contingency payment arrangements in place.

Members can associate any permutation of Standard Settlement Instructions (SSI)s to position accounts within the clearing system, giving them flexibility regarding their cash management. A member does not need separate accounts to fund house business separate from client business or even separate bank accounts for each ISA – however, if that is a requirement, LME Clear can support it.

Members are able to manage their collateral (cash and non cash) through the LME Clear GUI. A variety of drop down lists providing access to real time information re acceptable collateral is available to a member. Choosing the preferred form then creates the appropriate SWIFT instructions to transfer the cash/non cash.

Margin will be called in USD, however, members can prefund their account in USD, EUR, GBP, JPY, CNH or any of the acceptable non cash collateral. A variety of parameters are available to members and include the capability to utilise the auto-repay functionality as appropriate. LME Clear will call any outstanding fund including margin in GBP on a USD bank holiday.

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About collateral management

Steel scrap
Acceptable collateral
Collateral acceptable to cover margin liabilities must be highly liquid with low credit and market risk.
Steel scrap
Haircut methodology
Our haircut methodology is designed to enable stable haircuts, avoid procyclicality and offer protection in stressed market conditions.
Aluminium
Secure payment system
The Secure Payment System (SPS) is operated by LME Clear and ensures the secure and timely transfer of funds between Clearing Members and the Clearing House.
Aluminium
Warrants as collateral
LME Clear has expanded its existing collateral service to Clearing Members to accept Warrants as Collateral against margin requirements.
Tin
Third-party suppliers
To support the delivery of clearing services, LME Clear utilises a combination of internal and third party resources.
Nickel
Margin Collateral Framework 
Download the Margin Collateral Framework document below.
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