The Bank of England has approved LME Clear’s application as a central counterparty under the European Markets Infrastructure Regulation (EMIR).
LME Clear’s authorisation is effective from 3 September 2014.
The bank’s decision followed a positive opinion reached on 28 July 2014 by a college of regulators and central banks from France, Germany and the UK.
“This is exciting news for LME Clear. Authorisation means that our risk management framework, governance, capital, client account structures and operating model all meet the high standards required under EMIR,” says Trevor Spanner, chief executive of LME Clear. “It’s the last significant milestone on the path to our launch.”
As an authorised clearing house LME Clear will be a qualifying central counterparty (QCCP) under Basel III/CRD IV. Financial firms clearing with a QCCP are subject to significantly lower capital requirements compared to a non-QCCP.
“As a new entrant in this space we had no legacy systems and processes. LME Clear has been able to take an innovative and inclusive approach to clearing based on cutting edge technology and the advice of LME members. We’ve focused on giving them more control over how they manage their LME business including enhanced option expiry handling and enabling them to view their risk position in real time,” says Spanner.
LME Clear will initially clear all trades on the LME and those matched on the OTC matching service. Members will be able to interact with the new service in real time, benefitting from straight-through processing, integrated collateral management and comprehensive reports.
“Authorisation is a key step towards launch. LME Clear gives us greater control of our destiny – particularly with regard to the speed and flexibility of product launches,” says Charles Li, HKEx chief executive. “HKEx has made a significant investment in LME Clear and we expect it will make immediate and long-term revenue contributions to the HKEx Group.”
LME Clear is scheduled for launch on 22 September.
