Acceptable collateral

Most of the clearing houses for exchanges publish lists of acceptable collateral. Below is an example list of the types of collateral accepted by LCH.Clearnet. It is for illustrative purposes only and clearing houses can and do vary in the types of collateral they will accept. Operations teams would need to check with the relevant clearing house for the current list of acceptable collateral.

LCH.Clearnet Limited Acceptable Collateral

Collateral Acceptable types (Bloomberg Valuation & Haircut Prices

Euros US Dollars Swiss Francs Japanese Yen Swedish Krona Danish Krone

Description & Code)

TRS Code

Cash

Sterling

Nominal Nil

Norwegian Kroner

Bank Guarantees

Limited range of acceptable issuers

Nominal Nil to termination date

Government Securities

United Kingdom GBP

Treasury Bill (UKTB) United Kingdom Gilt Bond (UKT)

Nominal 5%

Market 3% 10 calendar $Gil days-3 years 4% 3-7 years 6% 7-11 years 12% 11+ years

Continued

LCH.Clearnet Limited Acceptable Collateral—cont'd

Collateral

Acceptable types (Bloomberg Description & Code)

Valuation & Haircut

Prices TRS Code

US

US Treasury Bill (B) US Treasury Note/Bond (T)

Current US Treasury Note/Bond (CT)

Nominal 4% Market 3% 2 working days-3 years 4% 3-7 years 6% 7-11 years 7% 11+ years

$Bon

Italian

Buoni Ordinari del Tesoro

(BOTS) Buoni del Tesoro Poliennali

(BTPS) Certificati di Credito del Tesoro (CCTS/ICTZ)

Nominal 3%

Market 5% 3 working days-3 years 8% 3+ years

$Bun

Spanish

Spanish Letras del Tesoro

(SGLT) Spanish Government Bond (SPGB)

Nominal 3%

Market 4% 2 working days-7 years 6% 7-11 years 9% 11+ years

$Bun

German

German Treasury Bill (BUBILL)

Bundesobligationen (OBL) Bundesschatzanweisungen

(BKO) Deutsche Bundesbahn (DBB)

Deutsche Bundesrepublik

(DBR) Treuhandanstalt (THA)

Nominal 3% Market 3% 2 working days-3 years 4% 3-7 years 6% 7-11 years 9% 11+ years

$Bun

French

Bons du Tresor a Taux Fixe et Interet Precompte (BTF) Bons du Tresor a Taux Fixe et Interet Annuel (BTNS) Obligations Assimilables de Tresor (FRTR)

Nominal 3%

Market 3% 4 working days-3 years 4% 3-7 years 6% 7-11 years 8% 11+ years

$Bun

LCH.Clearnet Limited Acceptable Collateral—cont'd

Collateral

Acceptable types (Bloomberg Description & Code)

Valuation & Haircut

Prices TRS Code

Dutch

Dutch Treasury Certificate (DTB)

Dutch Government Bond (NETHER)

Nominal 3%

Market 3% 10 working days-3 years 4% 3-7 years 5% 7-11 years 8% 11+ years

$Bun

Austrian

Austrian Treasury Bill (RATB) Austrian Government Bond (RAGB)

Nominal 5% Market 3% 4 working days-3 years 4% 3-7 years 6% 7-11 years 14% 11+ years

$Bun

Belgian

Belgian Treasury Bill (BGTB) Belgian Government Bond (BGB)

Nominal 3% Market 3% 4 working days-3 years 5% 3-7 years 6% 7-11 years 8% 11+ years

$Bun

Canadian

Canadian Treasury Bill (CTB) Canadian Government Bond (CAN)

Nominal 3%

Market 4% 10 calendar days-3 years 5% 3-7 years 6% 7-11 years 7% 11+ years

$Bon

Swedish

Swedish Treasury Bill (SWTB) Swedish Government Bond (SWED)

Nominal 3% Market 3% 4 working days-3 years 5% 3-7 years 6% 7-11 years 8% 11+ years

$Bun

Australian

Australian Government Bond (ACGB)

Market 3% 13 calendar days-3 years 5% 3-7 years 6% 7+ years

$Bon

Finnish

Finnish Treasury Bill (RFTB) Finnish Government Bonds (RFGB)

Nominal 3% Market 3% 4 working days-3 years 6% 3-7 years

Continued

LCH.Clearnet Limited Acceptable Collateral—cont'd

Collateral

Acceptable types (Bloomberg Description & Code)

Valuation & Haircut

Prices TRS Code

Denmark

Danish Treasury Bill (DGTB)

Nominal 3%

Danish Government Bond

Market 3% 5 working

$Bun

(DGB)

days-3 years 5% 3-7 years

Other Securities

Sterling

Limited range of acceptable

Nominal 5%

CDs

issuers, under 1 year to maturity

US Dollar

Limited range of acceptable

Nominal 5%

CDs

issuers

UK

FT-SE 100 & stocks

$Equ

Equities

underlying equity options SET 1 SET 2

Market 35% Market 50%

Notes:

1. Members should refer to LCH.Clearnet Limited's General Regulations, Default Rules and Procedures, or telephone LCH.Clearnet Limited Treasury Operations on +44 (0)20 7426 7124 for information relating to the acceptance of collateral.

2. Before any securities are accepted, members must complete a legal form of charge, for further information telephone LCH.Clearnet Limited Membership on +44 (0)20 7426 7627.

3. LCH.Clearnet Limited imposes overall limits on CDs, bank guarantees and equities.

4. Certain taxation restrictions and requirements may apply to securities.

5. Any collateral may be used to cover any margin liability with the following restrictions:

(i) US Dollar securities held in New York may not cover equity options (including index options) margins, and EquityClear margins;

(ii) Equities may only cover equity-related margins.

6. To be acceptable, government securities must be issued in the home country of the issuing government and be denominated in its domestic currency (a definition which, for Euroland countries, includes both their legacy currencies and the euro).

7. SET3 Equities will not be accepted as collateral.

8. The list refers to collateral acceptable to LCH.Clearnet Limited as margin cover for all business cleared. Certain European regulators have agreed that OTC instruments registered with LCH.Clearnet Limited should be exempt (following Directive 2000/12/EC of 20 March 2000) from credit equivalent amount add-on. Any such exemption applies to LCH.Clearnet Limited members only where initial margin requirements are met with Cash or the Government Securities acceptable by LCH.Clearnet Limited. Members are responsible for ensuring that they comply fully with regulatory requirements in this respect.

9. Charge and Credits

(i) Cash - Interest is paid on cash at the London Deposit Rate (LDR). This is accrued daily and paid on a monthly basis to your PPS account. LDR can be viewed daily on TRS at $BRT.

(ii) Bank Guarantees - LCH charges 10 basis points (annualised) for utilisation. This is accrued daily and charged on a monthly basis to your PPS account.

(iii) Government Securities, CDs and equities - LCH charges 10 basis points for utilisation. This is accrued daily and charged on a monthly basis to your PPS account.

Source: LCH.Clearnet.

It must be understood that these are lists of collateral accepted from the clearing member. The clearing member may or may not be prepared to accept the same collateral from a client. Even where it does agree, it may levy additional charges to cover the administration costs, just like the clearing house does as we see above.

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