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CME®, London Clearing House® (LCH) and the London International Financial Futures and Options Exchange® (LIFFE) have initiated the world’s first cross-margining program across international borders. The cross-margining program enables CME and LCH to provide substantial risk-based cost savings to clearing member firms and their affiliates who have positions in CME’s Eurodollar contract and LIFFE’s Euribor or Euro LIBOR contracts. CME’s flagship Eurodollar contract is the world’s most actively traded short-term interest rate futures contract, and the related options contracts have similar liquidity. LIFFE’s Euribor futures contract is the world’s most liquid euro-denominated short-term interest rate futures contract, and the related options enjoy the same market dominance. Cross-margining allows members at each exchange using the interest rate contracts to benefit from lower margin requirements wherever there is an offsetting reduction in risk between two contract positions. Those firms establishing in their house accounts a cross-market “spread” between the Eurodollar and Euribor or Euro LIBOR futures or options contracts will receive a reduction in their margin requirements of up to 60 percent. Eight clearing firms have already signed up to participate in the international cross-margining program. Several others are in the process of finalizing documentation in order to participate. The exchanges and LCH worked actively for several months to obtain the necessary regulatory approvals from the U.S. and U.K. regulators – the Commodity Futures Trading Commission and Financial Services Authority – and to obtain satisfactory legal opinions regarding the enforceability of the international agreement in both countries. Cross margin results will be made available on request by CME. The Layout for Results file contains a record layout for the Cross Margin Results. A Sample Layout for Savings Report is also available. Cross-margining is the second initiative CME and LIFFE launched as part of their strategic partnership. Members of each exchange can now also access the electronically traded products of the other exchange. |
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