FIA has responded to LME Clear's consultation, which proposes a range of measures aimed at further strengthening the resilience, transparency and fairness of its markets. FIA generally supports the proposed changes to the minimum net capital requirement, default fund mutualisation threshold (DFML) and anti-procyclicality measures. The response, however, highlights a few areas for clarification.
FIA suggests LME Clear provides impact details of the proposed increase of the net capital requirement from $10 million to $30 million, including potential effects on member exits, market concentration and transitional measures to mitigate disruption.
Further, FIA and its members seek further transparency on the rationale for setting the DFML at 14% of average initial margin over six months and stress the need for fair allocation mechanisms for losses beyond the DFML. Additionally, FIA recommends LME Clear considers passing on stress loss over initial margin to clients of clearing members to align with the “defaulter-pays” model and alleviate member clearing capacity concerns.
Read the response in full here.
