LME Clear has unveiled the full launch of its triparty member margin collateral service, enhancing its collateral offerings and streamlining operations for its members. This new service builds on the pre-existing model that accepted government bonds from approved issuers on a bilateral basis.
The initiative aims to align LME Clear with market standards while offering improved operational efficiency. The triparty service will be powered by Euroclear Bank SA’s platform, which will support a broader range of collateral options for members. The eligible collateral now includes bonds from nine supranational and government-backed organizations, along with inflation-linked bonds from specific government issuers. Notable issuers in this category include the Asian Development Bank, the European Investment Bank, and various UK and US inflation-linked bonds.
Prior to the official launch, a soft launch period began on September 15, allowing members to evaluate the service within controlled parameters. The testing phase has proven successful, highlighting the potential benefits of the triparty service for participants.
To take advantage of the new triparty collateral service, members need to complete several steps. This includes signing two tripartite agreements with LME Clear and Euroclear Bank SA—a Collateral Service Agreement and a Supplemental Agreement to that agreement. Additionally, members must provide further documentation, which may vary based on their existing relationship with Euroclear Bank SA. A security deed governed by Belgian law is also required as part of the process.
It is important to note that even with the introduction of this new service, members must continue to adhere to all collateral-related limits established by LME Clear.