How It Works

All existing LCH.Clearnet Clearing Members are eligible to clear OTC Freight products subject to approval.

Clearing operates through a stand alone system know as the “Extensible Clearing System” (ECS).  This is a browser-based system with connection via existing Member leased lines or through a Virtual Private Network (VPN).

All transactions eligible for clearing are entered into ECS by approved Brokers or, in the case of directly traded deals, by the selling participants’ Clearing Member. ECS is open for the registration of trades between 08:00 hrs and 17:00 hrs London time. The system is open until 17:30hrs for confirmation of trades by Clearing Members

On receipt and confirmation of eligible transactions into the ECS system, trades are governed under the rules of LCH.Clearnet Rulebook.

Initial margin rate levels are reviewed periodically by LCH.Clearnet to reflect inherent market volatility. Daily and final settlement of Freight contracts is based on prices provided by the Baltic Exchange. These prices are based on assessments received from the FFABA.

Dry contracts held by LCH.Clearnet are futures style and are subject to initial and variation margining. Wet contracts are forwards style and held at original trade price and as such are subject to initial and contingent variation margin.

On expiry all net positions are cash settled.