On Thursday, LME Clear announced a series of measures, which it says aim to enhance the resilience, transparency, and fairness of its markets.
LME Clear Unveils Proposals to Boost Market Resilience
Outlined in a consultation released on 14 November, the proposals include raising minimum capital requirements for clearing members, capping mutualised default fund contributions, and introducing anti-procyclicality controls.
The company explained in a press release that the proposed increase in minimum net capital requirements for clearing members—from $10 million to $30 million—aims to align LME Clear with peer central counterparties (CCPs).
According to LME Clear CEO Michael Carty, these changes are part of an “ambitious programme of change” to strengthen market stability and predictability.
Following a review of its default fund methodology, LME Clear plans to implement a “defaulter pays” model by capping the mutualised component of pre-funded resources.
The adjustment is said to seek to ensure fairer alignment between mutualised and unmutualised risks, while improving the predictability of member contributions.
An anti-procyclicality control is also proposed, limiting the extent to which the default fund can decrease during recalculations. The measure is expected to stabilise member contributions and complement the default fund cap.
The consultation, which closes on 16 December, also addresses minor rulebook revisions, including refinements to Category 5 membership and administrative updates.
LME Clear has invited feedback from all stakeholders as it continues its efforts to enhance the health and vibrancy of its markets.
