Business Streams
| Originating department: | Treasury Operations |
| Company Circular No: | LCH.Clearnet Ltd Circular No: 2558 |
| Date: | 11 December 2009 |
| To: | All LCH.Clearnet Limited Members |
PPS Arrangements
Dear Clearing Member,
As part of LCH.Clearnet Ltd’s monitoring of members’ banking arrangements, all members are reminded of the need to have a robust PPS structure in place. Should a PPS Bank be unable to provide the service required, members should have appropriate alternative arrangements to cover any subsequent LCH.Clearnet Ltd margin calls in accordance with the required timeframes.
Members are kindly requested to confirm and detail their arrangements to demonstrate sufficient options are in place.
In your response please provide, where applicable, details of:
• Contingency arrangements with other banks to ensure continuity of PPS function;
• Facility to lodge non-cash collateral with LCH.Clearnet to meet margin requirements; and
• Pre-arranged borrowing facilities with alternative banks (other than your PPS provider) by currency and including the US.
As a reminder, the following text is from the ‘Clearing House Procedures – Financial Transactions (Section 3)’ which, under the Clearing Member agreement, you are obliged to meet:
3.2.1.1
A Clearing Member is required to maintain a PPS bank account(s) in London in GBP and in each currency in which it incurs settlements, at one or more of the bank branches participating in the PPS system in London (see Appendix 3A for a list of the relevant participating banks in London).
Different banks may be used for different currencies.
Any bank charges connected with the holding of any PPS bank account or related to any activity on that account must be paid by the account holding Clearing Member.
The account nominated by the Clearing Member to be the GBP non-segregated PPS account will, inter alia, be used to process Default Fund contributions and share subscription.
3.2.1.6
Clearing Members should note that the PPS (both in London and in the USA) is a system for facilitating payment to the Clearing House of moneys due from Clearing Members to the Clearing House and vice versa. The giving of a commitment by a participating Bank through PPS to make any payment, and the receipt of that commitment by the Clearing House is not to be regarded as satisfaction of any payment due to the Clearing House. Each Clearing Member remains fully responsible for the payment to the Clearing House of all moneys due to the Clearing House as required, inter alia, by the Clearing Membership Agreement, clearing extension documentation and these General Regulations, Default Rules and Procedures. Payment is only completed when the funds have been credited for value to the relevant Clearing House bank account, and any time permitted by the relevant payment settlement system for the recall of any such payment has expired.
3.2.2
Each Clearing Member is required to maintain at least one US dollar PPS account with at least one of the US PPS Banks (a list of the participating branches appears at Appendix 3C of the Rules and Regulations document.)
This requirement is supplemental to and additional to the requirement that each Clearing Member must hold relevant PPS accounts in London.
Members are requested to provide a response no later than 23 December 2009.
Once all responses have been received, LCH.Clearnet will contact each member individually to discuss further.
Please contact Siobhan White on +44 (0)20 7426 7044 or email siobhan.white@lchclearnet.com if you have any questions.
Thank you for your co-operation.
Yours sincerely,
Director
Treasury Operations
