SA Customer Protection

The protection of our Clearing Members and their clients informs absolutely all our thinking about asset segregation here at LCH SA – put simply, your protection comes first.

The manner in which CCPs manage members’ and clients’ assets is one of the most significant areas of change required by regulators amid the market reform commitments agreed by the G20 nations in 2009.

In Europe, the European Market Infrastructure Regulation (EMIR) has been designed to reduce the counterparty risk of OTC derivative markets and increase transparency.

LCH SA offers our Clearing Members a choice of Individually Segregated Accounts 

(ISAs) and Omnibus Segregated Accounts (OSAs) for their clients, in order to meet the EMIR requirements.

Under EMIR, LCH SA offers three different account types that provide either individual segregation (ISA) or omnibus segregation (OSA) in either a net margin or gross margin fashion.

Individually Segregated Account (ISA)

An ISA can only be held by a client that is a known user of LCH, and has completed the account opening procedures via its Clearing Member.

A client in an ISA has no co-mingling with any other client or the house, and is subject to porting procedures entirely independently from any other entity or account.

Our “asset tagging” model for ISAs has two main features to protect client assets.

We can tag specified assets (securities and/or cash sums) to the client’s ISA, which for each individual client identifies what to transfer alongside positions in the event of a default.

In addition, we can port the actual assets of the client, rather than the value of the assets.

Omnibus Segregated Account (OSA) – Gross Margin

This type of OSA is an arrangement in which one or more clients share an account.

This would typically be used for cleared exchange-traded products and is also the basis of the popular value segregation models already used by cleared swaps customers.

A set of positions at LCH can represent the trades (and derived positions) of either:

• a single known client

• a pool of known clients

• a single unknown client

• a pool of unknown clients

The initial margin for each set of positions is calculated independently and the sum of the IM liabilities must be covered by assets in the collateral account.

In the event of porting or liquidation each client has shared claims over the assets in the account.

Omnibus Segregated Account (OSA) – Net Margin

This type of OSA is an arrangement in which one or more clients share an account.

This would typically be used for cleared exchange-traded products.

A set of positions at LCH can contain the trades (and derived positions) of either:

• a single known client

• a pool of known clients

• a single unknown client

• a pool of unknown clients

The initial margin for each set of positions is calculated as a single net liability allowing offsets between all the trades and positions for all the position records inside of the OSA net structure.

The single net IM liability must be covered by assets in the collateral account.

Annual Account Fees

A yearly fee is charged for each ISA or OSA account as indicated in the table below

Legal Implications

It is important that Clearing Members familiarise themselves with the legal implications associated with these ISA and OSA accounts.

Click here to access a document detailing the legal implications of the various account structures produced by LCH SA for the purposes of Article 39(7) or EMIR

This fee model became effective on June 12, 2014, the date on which LCH SA was authorised under EMIR.

On the creation of a new account, the yearly fee becomes immediately payable, and annually on the anniversary of the creation date thereafter.

For existing client accounts, the yearly fee applied upon LCH being authorised under EMIR and annually on the anniversary thereafter.

The fees do not apply to house accounts.

The fees are non-refundable once paid, no refunds for partial years.

No discounts for multiple accounts.

No adjustments for multiple collateral accounts.

The same see model applies to indirect clearing accounts.

Information will be published as it becomes available.

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