LME Clear, the clearing house for the London Metal Exchange (LME) market, has received approval from the Bank of England to accept LME metals warrants as collateral, making it the first clearing house ever to be able to offer this facility.
An LME warrant is a document of possession issued by warehouses for metal held on the owner’s behalf. This latest initiative from LME Clear will allow market participants to post this proof of ownership as collateral as part of the clearing process, giving the LME market a new source of protection against risk.
“LME Clear’s ability to take warrants as collateral further demonstrates our commitment to innovation in clearing services for the metals market,” says Trevor Spanner (pictured), CEO of LME Clear. “This has been a complex project, requiring significant thought and expertise in the design of the service and close collaboration with regulators throughout.”
The initiative is a natural extension of the collateral pool for LME Clear, and comes in direct response to demand from members, who have called for this capability for many years to provide additional flexibility and to help reduce the cost of providing collateral. As the first clearing house designed specifically for the metals industry, LME Clear is well placed to meet this demand and plans to launch the initiative later this year.
