New for 2015
Warrants as CollateralFrom 23 November 2015, LME Clear will be accepting metal warrants as collateral against margin requirements. As the first clearing house to offer this facility, members benefit from our deep, specialist expertise in the metals market and our commitment to deliver efficiency and flexibility for users of the LME.
Warrants provide efficiency and flexibility in collateral management by enabling members and clients to use metal warrants as an alternative to cash and high quality government bonds.
We will accept six warrants for LME approved non-ferrous metals - aluminium, copper, lead, nickel, tin and zinc - against contracts of the same metal.
Key factsGuarantee of LME warrants: All warrants must be LME approved warrants issued by an approved LME warehouse. Must be eligible for delivery under LME rules.
LMEsword: All warrant transfers will be done via LMEsword
Warrant valuation: Warrants valued using the cash settlement value adjusted for rent and weight and subject to an accommodation charge.
Legal basis: We accept warrants under an English law pledge to maintain consistency between the existing LMEsword and LME warrants service.
Haircuts: Separate haircuts will be calculated based on the underlying metal
Concentration margin: Concentration margin is applied on consolidated positions per metal across both collateral and cleared positions.
“Credit events”: For a “credit event” the warrant will be deemed “worthless” and replacement collateral will need to be pledged.
Registration: A pledge over warrants to be delivered by UK members in the future will also give rise to a charge that will need to be registered.
Client Warrants: If a member intends to provide warrants received from a client (“client warrants”), then the member must take title over the client warrants and the relevant rights to pledge the client warrants must be provided to LME Clear.
If you would like more information about LME Clear and using warrants as collateral, please contact us at [email protected] or telephone +44 (0)20 7264 5555 or lme.com/clear.
LME CLEAR LIMITED Tel +44 (0)20 7264 5555 Fax +44 (0)20 7680 0505 [email protected] lme.com/clear
Nothing in this document constitutes an offer or a solicitation of an offer to buy or sell any security or other financial instrument or constitutes any investment advice or recommendation of any security or other financial instrument. To the best of LME Clear’s knowledge and belief, statements made are correct at the time of going to press. All such statements and all opinions expressed herein are published for the
general information of readers but are not to be taken as recommendations of any course of action. LME Clear accepts no liability for the accuracy of any statement or representation. LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are permitted to solicit and accept money
from US futures and options customers for trading on the LME pursuant to CFTC rule 30.10.
© LME Clear Limited. A private limited company, registered in England no 07611628. A member of HKEx Group. LME Clear is a Recognised Clearing House authorised and regulated in the UK by the Bank of England.
Operational process
Lodgement intent instructed in LMEmercury GUI.
Lodgement cut-off received prior to 12.30pm for same day value, then processed next day.
LME warrant transferred into LME Clear’s LMEsword account.
Withdrawals can be processed for top day value if received by 9:00am.
LME warrants valued using the cash settlement value and rent adjustment held in LMEsword.
LME warrants transferred to an LME Clear account, subject to an English law pledge.
LME Clear will return LME warrants via LMEsword to member’s LMEsword account.
LME warrants held under a security interest arrangement.
