| Market: | All |
| Products: | Cash |
| Date: | 23 February 2006 |
LCH.Clearnet SA new fining policy
As announced in the 2006 Fee Grid, LCH.Clearnet SA will implement a new structure of the fails management fee on all LCH.Clearnet SA equity segments as of 1st April 2006.
The replacing fail fee policy answers to the members’ request to have a simpler calculation method to facilitate the loading back to final defaulter.
Concretely, the new fail fine is made up of a fixed and a variable part applied on each single sell fail per day with no more increasing scale or aggregation at DA (Delivery
Account) or CMF (Clearing Member Firm) level.
A fixed part of the fine (€15) constitutes the recovery of LCH.Clearnet SA operating costs. And a variable part is a percentage as close as possible to the EONIA rate. This variable fine will be capped to €500 per fail. Cash fails penalty fee is not modified.
Based on a costs plus principal, the collected variable fees will be monthly reimbursed to Clearing Members according to a fair allocation key (i.e. the passing back’s key allocation is calculated in proportion to clearing fees contribution per segment). The fail fee will be charged monthly and collected on the 15th open business day of the following month.
Once implemented, LCH.Clearnet SA will closely follow the evolution of the securities fails ratio on the continental equity segments to eventually adjust the variable part of the fine if necessary.
Still to ease loading back to the final defaulter, LCH.Clearnet SA will include fining information in the monthly clearing fees flat file sent to members’ access means. Two
additional records will detail the cash amounts corresponding to the daily and monthly penalty fees.
A daily record will precise the quantity of fails, the amount of the fails value and the penalty fees calculated per CMF per DA per settlement segment per Fees Schedule (fixed or variable part) per product trading Code and per business day.
A monthly record will provide the quantity of fails, the sum of the fails value amount and the penalty fees amount calculated per CMF per DA per settlement segment per month.
Due to the netting effect between its clients, the only tracking solution for a GCM to isolate fining details of a specific TMF, is to parameterise a dedicated Delivery Account within C21.
LCH.Clearnet SA confirms the availability of the fining information in the Cash clearing flat file in production for the end of Q2 or early Q3 2006. The updated Cash clearing flat file specifications and the firm planning will be disseminated to members in April 2006.
Between the implementation date of the new policy and the update of the flat file, you will still receive the current reporting available on fees and penalties.
For further information, please do not hesitate to contact your LCH.Clearnet SA Relationship manager.