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LCH Group Holdings Limited | LCH Limited | Banque Centrale de Compensation | LCH.Clearnet LLC

LCH Limited. Registered in England No. 25932 Registered Office: 10 Paternoster Square, London, EC4M 7LS

VIA CFTC PORTAL

26 January 2023

Mr. Christopher Kirkpatrick

Commodity Futures Trading Commission

1155 21st Street NW

Three Lafayette Centre

Washington, DC 20581

LCH Limited Self-Certification: ForexClear Portfolio Margining of Deliverable and Nondeliverable contracts

Dear Mr. Kirkpatrick,

Pursuant to Commodity Futures Trading Commission (“CFTC”) Regulation §40.6(a), LCH Limited 

(“LCH”), a derivatives clearing organization registered with the CFTC, is submitting for selfcertification changes to its Rulebook required to implement a new ForexClear initiative that offers 

portfolio margining between deliverable and non-deliverable contracts. 

Part I: Explanation and Analysis

ForexClear margin requirements and default fund contributions are currently calculated 

independently for contracts in the deliverable and non-deliverable segments. The new ForexClear 

project introduces portfolio margining between deliverable and non-deliverable contracts for the 

eligible G10 currencies1 cleared across both segments by ForexClear Clearing Members2. 

The change was supported by the ForexClear Clearing Members seeking margin efficiency through 

offsetting products across the deliverable and non-deliverable segments. The new offering aims to

also encourage clearing of deliverable products overall. According to ForexClear’s estimations, 

portfolio netting may allow initial margin (IM) offsets to increase by 2%, when measured against 

current levels of total IM across the whole service; higher offsets may be realised by Clearing 

Members that have exposures in both deliverable and non-deliverable, and as volumes in the 

deliverable segment grow. The default fund contributions may also be reduced by more than 5% 

due to expected changes in stress-testing loss and IM requirements.

1 The offering can be further extended to other currencies, beyond G10. This will be subject to appropriate regulatory 

notifications ahead of any future changes. 

2 ForexClear clients will not be able to use this offering as they are currently not eligible to clear deliverable FX. 
Margining 

The initiative does not change the way IM and variation margin (VM) are calculated and settled. 

Non-deliverable products will continue to have their final settlement and daily VM payments made 

via our PPS system. Deliverable products will continue to be settled in conjunction with CLS, with 

daily VM payments made through our PPS system.

LCH considers that there is no basis risk between non-deliverable and deliverable contracts. 

However, the operational cost for the conversion of deliverable forwards into non-deliverable 

forwards (or vice versa), for example for hedging purposes, is addressed by adding a 1bps of addon margin floor. This will be reassessed on a quarterly basis. 

Default Fund

Following the implementation of the proposal, the ForexClear default fund will comprise of the 

combined deliverable and non-deliverable segments. As a result, Clearing Members will only be 

required to provide a minimum default fund contribution of USD 5 million once. The floor of USD 70 

million will remain the same.

There will be no change to how the default fund will be sized, as it will continue to be based on the 

sum of the two worst ForexClear Clearing Members stress-testing losses (‘STLOIM’) under a single 

scenario over the default fund look-back period of 30 business days (including an additional 10% 

buffer). It is expected that the default fund contributions will reduce by more than 5% due to changes 

in stress-testing loss and IM requirements. Stress losses from both segments will be aggregated, 

allowing full offset across the same deliverable and non-deliverable currency pairs under the three 

historical, hypothetical and theoretical scenarios currently applied independently to each segment.

The project is expected to go live on 27 February 2023 and the Rulebook will be updated 

accordingly at that time.

Part II: Description of Rule Changes

The Rulebook changes that accompany this initiative are set out below and are enclosed in the

black-line form in the Appendices. 

The majority of the changes are in the Default Rules, which set out how auction losses will be 

allocated in the event of a default, based on the combined default fund. The defaulter’s margin 

collateral, then the defaulter’s Default Fund Contributions (DFC) and finally the LCH Ltd capital, socalled skin in the game, will continue to be used first in this order in the default waterfall scenario.

As the next step, and once the aforementioned resources are fully exhausted, the non-defaulters’ 

DFC will be used to cover the remaining losses.

The existing Auction Incentive Participation (AIP) structure that allocates losses to each Clearing 

Member based on their performance in the relevant auction remains the same; however, with the 

implementation of the portfolio margining the auction participants will be divided into three 

categories based on the products and contracts that they clear. 
ForexClear non-defaulting Clearing Members will be divided into the following categories:

• Aligned Participants: Non-defaulting members with at least one contract in the same 

currency pair and product category (NDF, NDO, FXO, Forward or Spot) of the auction 

portfolio (see section 1.4 on p66).

• Expected Auction Participants: Non-defaulting members with at least one contract in 

same currency pair and contract category (deliverable or non-deliverable) of the auction 

portfolio (see section 1.4 on p67). 

• Other Participants: Non-defaulting members with at least one contract in same currency 

pair of the auction portfolio (see section 1.4 on p70). 

Each category of ForexClear non-defaulting Clearing Members, as defined above, will further be 

divided into three sub-categories of:

(1) non-bidders (to be allocated losses first; loss allocation will be attributed pro-rata);

(2) other bidders (to be allocated further losses; loss allocation will be based on the relative 

variance between each member’s bid and the winning bid (i.e. members who bid furthest 

away from the winning bid are penalised proportionally more than others)) and;

(3) winning bidders (to be allocated residual losses; loss allocation will be attributed pro-rata). 

The Default Rules Section 2.6 on Auction Losses explains the process of loss allocation, whereby 

(1) non-bidders, (2) other bidders and (3) winning bidders of each ForexClear Clearing Member 

category, i.e. Aligned Participants, Expected Auction Participants and Other Participants, will

respectively be attributed auction losses in the above order.

After the above allocation process, under Section 2.6(c) of the Default Rules, it is explained that 

any remaining Auction Losses will be attributed pro-rata to the remaining funded DFC of nondefaulting Clearing Members. 

Lastly, under section 2.6(d) of the Default Rules, and once all funded DFCs are exhausted, the 

same process will apply to the unfunded DFCs to the extent that that there are any Auction Losses 

outstanding.

In the General Regulations, the definitions of the ForexClear Deliverable Default Fund 

Contribution and ForexClear Option Service Default Fund Contributions have been deleted on 

pages 32 and 33 respectively, as there will be one merged default fund that will accommodate all 

contributions from the ForexClear Clearing Members irrespective of the products that they clear. 

Under section 99 ForexClear Option Service, clarification is added on what ForexClear Option 

Clearing Members can clear. 

The Procedures Section 1 (Clearing Member, Non-member Market Participant and Dealer 

Status) para 1.3.6(vi) clarifies that ForexClear Option Clearing Members do not contribute 

specifically to Option Service Default Fund, as all the contributions will be towards a combined

default fund. Towards the end of section 1.3.4, clarification is added on what ForexClear Option 

Clearing Members can clear, similarly to the changes added in the General Regulations.

The Procedures Section 2I (ForexClear Clearing Service]) para 1.5.6 clarifies that initial margin 

obligations will be calculated on an aggregate basis across the ForexClear contracts within nondeliverable and deliverable segments. Section 1.5.6 (e) clarifies that the Settlement Management 

Margin (SMM) is calculated in respect of FX Deliverable Contracts only. 
The text of the changes is attached hereto as:

Appendix I: Default Rules

Appendix II: General Regulations

Appendix III: Procedure Section 1 [Clearing Member, Non-member Market Participant and 

Dealer Status]

Appendix IV: Procedure Section 2I [ForexClear Clearing Service]

Part III: Core Principle Compliance

LCH has reviewed the proposed changes against the requirements of the Core Principles and finds 

it will continue to comply with all the requirements and standards set forth therein. Specifically, 

these rule changes have relevance to Core Principle D (§39.13) (Risk Management) and Core 

Principle G (§39.16) (Default Procedures) under the CFTC regulations.

The changes described in this filing ensure that LCH meet the objectives of Core Principle D on 

Risk Management, as ForexClear will continue to calculate and collect the appropriate level of 

financial resources from the ForexClear Clearing Members in order to effectively manage the risks

of the positions cleared. In fact, the proposal does not change the way IM and VM are calculated 

and settled. Additional margin to cover portfolio liquidity risk will continue to be collected, while 

taking into account the basis risk between deliverable and non-deliverable pricing. An IM add-on 

will also be charged, as required, in order to keep the level of offset at no more than 80% between 

any currency pair within the separate portfolios of deliverable and non-deliverable contracts. Lastly, 

the default fund will continue to be sized on the basis of the two worst ForexClear Clearing Members 

stress-testing losses. 

The proposed changes are also in line with the Core Principle G on Default Procedure, as a

segregated ForexClear default fund will continue to be maintained. The only difference is that 

ForexClear will combine the deliverable and non-deliverable segments in the same default fund.

LCH continues to maintain a Default Management Policy that provides a step-by-step process and 

procedure for managing a default. 

LCH engages its Clearing Members in the design and testing of new products and services at an 

early stage through working groups, and that was also the case with the ForexClear Portfolio 

Margining project. The changes to the Rulebook were also subject to a consultation with Clearing 

Members.

Part IV: Public Information

LCH has posted a notice of pending certification with the CFTC and a copy of the submission on 

LCH’s website at: https://www.lch.com/resources/rulebooks/proposed-rule-changes.

Part V: Opposing Views

There were no opposing views expressed to LCH by governing board or committee members, 

members of LCH or market participants.
Certification

LCH hereby certifies to the CFTC, pursuant to the procedures set forth in CFTC Regulation §40.6, 

that the attached submission complies with the Commodity Exchange Act, as amended, and the 

regulations promulgated thereunder.

Should you have any questions please contact me at aleksandra.wojcik@lseg.com. 

Yours sincerely,

Aleksandra Wojcik

Compliance Officer, LCH Limited
Appendix I: Default Rules
LCH LIMITED

DEFAULT RULES
 

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SCHEDULE 3

FOREXCLEAR DMP ANNEX

1. Scope and interpretation

1.1 The Clearing House has established a ForexClear DMP which will apply to ForexClear 

Contracts following the Default of a ForexClear Clearing Member and in respect of 

which, for the avoidance of doubt, the Clearing House will have no recourse to the 

process of invoicing-back. The fundamental principles of the ForexClear DMP are 

elaborated to the fullest extent possible in this Annex. Where exhaustive detail cannot 

be laid out in the provisions of this Annex, the ForexClear DMP will be undertaken on 

the basis of the principles contained herein.

1.2 The Clearing House has an obligation to ensure the on-going integrity of the ForexClear 

Service and of the ForexClear Contracts in the interests of the Non-Defaulting 

FXCCMs. When a ForexClear Clearing Member defaults, Non-Defaulting FXCCMs 

are required to supply impartial expertise through the ForexClear DMG and to bid for 

the Auction Portfolios of a Defaulting FXCCM, as laid out in this Annex. In addition, 

most FXCCMs or their parent companies or subsidiaries or fellow subsidiaries, have 

direct interests in that integrity, notably as contributors to the various default funds of 

the Clearing House. Each FXCCM shall take all steps and execute all documents 

necessary or required by the Clearing House to comply with its obligations as an

FXCCM arising out of this ForexClear DMP Annex.

1.3 The initial margining process in respect of ForexClear Contracts will be such so as to 

ensure that the acceptance of bids for the Auction Portfolio of a Defaulting FXCCM 

will recognise risk premiums.

1.4 In this Annex:

"Accepted" means, in respect of a bid in an Auction, that the Clearing House has 

accepted such bid as one that it may select as the winning bid for such Auction and 

"Accept" and "Accepts" shall have a corresponding meaning;

"AIP" has the meaning given in Rule 2.5 of this Annex;

"AIP Amount" means, in respect of a Non-Defaulting FXCCM and the Auction 

Portfolio(s) in a specific Auction Portfolio Currency Pair and Auction Portfolio 

Category, the product of (a) such Non-Defaulting FXCCM's AIP Ratio applicable to 

the Auction Portfolio Currency Pair and Auction Portfolio Category of such Auction 

Portfolio(s), and (b) the total of its (i) remaining ForexClear Funded Contribution, and 

(ii) remaining ForexClear Unfunded Contributions;

"AIP Ratio" means, in respect of a Non-Defaulting FXCCM and the Auction 

Portfolio(s) in a specific Auction Portfolio Currency Pair and Auction Portfolio 

Category, the ratio that (a) the Undiversified Initial Margin Amount for the ForexClear 

Contracts of such Non-Defaulting FXCCM that are registered in its name at the time of 

the relevant Default and are in such Auction Portfolio Currency Pair and Auction 

Portfolio Category bears to, (b) the aggregate Undiversified Initial Margin Amount for 

all the ForexClear Contracts that are registered in the name of such Non-Defaulting 

FXCCM at the time of the relevant Default;
 

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"Aligned Participant" means, in respect of an Auction Portfolio, a Non-Defaulting 

FXCCM that, at the time of the relevant Default, has at least one Aligned Contract 

registered in its name; 

"Aligned Contract" means, in respect of an Auction Portfolio, a ForexClear Contract 

that (a) is denominated in the same currencies as the Auction Portfolio Currency Pair 

and (b) belongs to the ForexClear Product Category which corresponds to the Auction 

Portfolio Product Category of such Auction Portfolio;

"Auction" means the process of bidding by Non-Defaulting FXCCMs for an Auction 

Portfolio as prescribed by the Clearing House following consultation with the 

ForexClear DMG from time to time in accordance with Rule 2.3 of this Annex;

"Auction Losses" means, in respect of an Auction Portfolio, all losses arising from:

(a) the auction and sale of such Auction Portfolio; and

(b) a change in the net present value of the ForexClear Contracts within such 

Auction Portfolio during the Auction Losses Calculation Period;

"Auction Losses Calculation Period" means, in respect of an Auction Portfolio and 

the business day on which the Clearing House auctions and sells such portfolio, the 

period:

(a) commencing immediately after the end of day margin and settlement call of the 

Clearing House for the previous business day; and

(b) ending at the point at which the Clearing House sells such portfolio;

"Auction Portfolio" means: (a) a Portfolio; or (b) a group of ForexClear Contracts 

resulting from the splitting of a Portfolio pursuant to Rule 2.1 of this Annex, including

in both such cases any connected Hedging ForexClear Contracts concluded by the 

Clearing House through Risk Neutralisation;

"Auction Portfolio Contract Category" means, in relation to an Auction Portfolio, the

ForexClear Contract Category to which the ForexClear Contracts in the Auction

Portfolio belong., provided that if an Auction Portfolio contains (a) ForexClear 

Contracts that belong to one ForexClear Contract Category, and (b) Hedging 

ForexClear Contracts that belong to the other ForexClear Contract Category, the 

Auction Portfolio Contract Category shall be that in sub-paragraph (a);

"Auction Portfolio Currency Pair" means in relation to an Auction Portfolio, the 

Currency Pair in which the ForexClear Contracts in the Auction Portfolio are 

denominated;

"Auction Portfolio Product Category" means, in respect of an Auction Portfolio, the 

ForexClear Product Category to which the ForexClear Contracts in the Auction 

Portfolio belong, provided that if an Auction Portfolio contains (a) ForexClear 

Contracts that belong to one ForexClear Product Category, and (b) Hedging ForexClear 

Contracts that belong to any other ForexClear Product Category, the Auction Portfolio 

Product Category shall be that in sub-paragraph (a); 
 

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"Bankruptcy Code" means the U.S. Bankruptcy Code, as amended;

"CEA" means the U.S. Commodity Exchange Act, as amended;

"CFTC" means the U.S. Commodity Futures Trading Commission;

"Currency Pair" has the meaning set out at Part Ameans any of the currency pairs 

specified in Schedule to the ForexClear Regulations6 of the Product Specific Contract 

Terms and Eligibility Criteria Manual;

"Derivatives Clearing Organization" means an organisation designated and 

registered as such by way of United States Code - Title 7, Chapter 1, paragraph 7a–1;

"Difference" means, in respect of an Auction and a Remaining Short Bidder whoNonDefaulting FXCMM’s Accepted bid in thesuch Auction, the difference between (a)such 

bid and the winning bid for such Auction, and (b) the bid of such Remaining Short 

Bidder in the Auction;the Auction;

"Equal Bid" means an Accepted bid in an Auction, which is equal to another Accepted 

bid in the same Auction;

"Expected Auction Participant" means, in respect of an Auction Portfolio, any NonDefaulting FXCCM whowhich, at the time of the relevant Default, has at least one 

Resembling Contract registered in its name;

"FCM ForexClear Client Business" means the provision of FCM ForexClear Client 

Clearing Services by an FCM Clearing Member to its FCM Clients;

"FCM ForexClear House Business" means the FCM ForexClear Contracts entered 

into by an FCM Clearing Member for its Proprietary Account;

"ForexClear Contract Category" means a category of ForexClear Contracts, being 

either the ForexClear Non-Deliverable Contract Category or the ForexClear 

Deliverable Contract Category;

"ForexClear Default Management Process Completion Date" means the date when 

the ForexClear Default Management Process in relation to a Default has been 

completed as determined by the Clearing House in consultation with the ForexClear 

DMG and notified to all FXCCMs;

"ForexClear Deliverable Clearing Member" means an FXCCM who is designated 

by the Clearing House as a ForexClear Clearing Member eligible to have registered in 

its name ForexClear Deliverable Contracts;

"ForexClear Deliverable Contract Category" means the category of ForexClear 

Contract which comprises ForexClear Deliverable Contracts registered with the 

Clearing House;

"ForexClear Deliverable-Only Clearing Member" means a ForexClear Clearing 

Member who is not also a ForexClear Non-Deliverable Clearing Member;
 

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"ForexClear DMG" means the advisory default management group established by the 

Clearing House pursuant to the terms of this Annex;

"ForexClear DMP" means the processes of the Clearing House outlined in this Annex, 

as may be supplemented and/or amended from time to time in accordance with this 

Annex;

"ForexClear Funded Contribution" means the ForexClear Contribution of a 

ForexClear Clearing Member, excluding any ForexClear Unfunded Contribution in 

respect of the ForexClear Clearing Member;

"ForexClear Non-Deliverable Clearing Member" means an FXCCM who is 

designated by the Clearing House as a ForexClear Clearing Member eligible to have 

registered in its name ForexClear Non-Deliverable Contracts;

"ForexClear Non-Deliverable Contract Category" means the category of ForexClear 

Contracts which comprises ForexClear Non-Deliverable Contracts registered with the 

Clearing House; 

"ForexClear Non-Deliverable-Only Clearing Member" means a ForexClear NonDeliverable Clearing Member who is not also a ForexClear Deliverable Clearing 

Member;

"ForexClear Product Category" means each of the following categories: 

(a) the NDF category, comprising ForexClear NDF Contracts; 

(b) the NDO category, comprising ForexClear NDO Contracts; 

(c) the Deliverable Forward category, comprising ForexClear Deliverable Forward 

Contracts; 

(d) the Option category, comprising ForexClear Option Contracts;

(e) the Spot category, comprising ForexClear Spot Contracts; and 

(f) the Swap category, comprising ForexClear Swap Contracts;

"ForexClear Unfunded Contribution" has the meaning assigned to "Unfunded 

Contribution" in Rule F8 of the ForexClear Default Fund Supplement;

"Guidance" means guidance, in the form of one or more written notices, issued from 

time to time by or on behalf of the Clearing House to FXCCMs, supplementing the 

detail or conduct of any aspect of the ForexClear DMP;

"Hedging ForexClear Contract" has the meaning given in Rule 2.2(b)(ii)(B) of this 

Annex; 

"Hedging ForexClear Service Clearing Member" has the meaning given in Rule 

2.2(b)(i) of this Annex; 
 

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"Loss Portion" means, in respect of an Auction of an Auction Portfolio, a Remaining 

Short Bidder who bid in such Auction, and

(a) a Remaining Aligned Participant Short Bidder for such Auction Portfolio, and

( )(i) Rule 2.6(b)(ii) of this Annex, the amount equal to the product of:

( )(A) the outstanding Auction Losses to be attributed to Remaining 

Aligned Participant Short Bidders under Rule 2.6(b)(ii) of this 

Annex, and

( )(B) the proportion that the Difference in respect of such Remaining 

Aligned Participant Short Bidder and Auction bears to the total 

Differences in respect of all Remaining Aligned Participant

Short Bidders who bid in such Auction, and

( )(ii) Rule 2.6(d)(ii) of this Annex, the amount equal to the product of:

( )(A) the outstanding Auction Losses to be attributed to Remaining 

Aligned Participant Short Bidders under Rule 2.6(d)(ii) of this 

Annex, and

( )(B) the proportion that the Difference in respect of such Remaining 

Aligned Participant Short Bidder and Auction bears to the total 

Differences in respect of all Remaining Aligned Participant

Short Bidders who bid in such Auction;

(b) a Remaining Expected Auction Participant Short Bidder for such Auction 

Portfolio, and 

(i) Rule 2.6(b)(v) of this Annex, the amount equal to the product of:

(A) the outstanding Auction Losses to be attributed to Remaining 

Expected Auction Participant Short Bidders under Rule 2.6(b)(v) 

of this Annex, and

(B) the proportion that the Difference in respect of such Remaining 

Expected Auction Participant Short Bidder and Auction bears to 

the total Differences in respect of all Remaining Expected

Auction Participant Short Bidders who bid in such Auction; and 

(ii) Rule 2.6(d)(v) of this Annex, the amount equal to the product of:

(C) the outstanding Auction Losses to be attributed to Remaining 

Expected Auction Participant Short Bidders under Rule 2.6(d)(v) 

of this Annex, and

(D) the proportion that the Difference in respect of such Remaining 

Expected Auction Participant Short Bidder and Auction bears to 

the total Differences in respect of all Remaining Expected 

Auction Participant Short Bidders who bid in such Auction;
 

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(c) a Remaining Other Participant Short Bidder for such Auction Portfolio, and 

(i) Rule 2.6(b)(viii) of this Annex, the amount equal to the product of:

(A) the outstanding Auction Losses to be attributed to Remaining 

Other Participant Short Bidders under Rule 2.6(b)(viii) of this 

Annex, and

(B) the proportion that the Difference in respect of such Remaining 

Other Participant Short Bidder and Auction bears to the total 

Differences in respect of all Remaining Other Participant Short 

Bidders who bid in such Auction; and 

(ii) Rule 2.6(d)(viii) of this Annex, the amount equal to the product of:

(A) the outstanding Auction Losses to be attributed to Remaining 

Other Participant Short Bidders under Rule 2.6(d)(viii) of this 

Annex, and

(B) the proportion that the Difference in respect of such Remaining 

Other Participant Short Bidder and Auction bears to the total 

Differences in respect of all Remaining Other Participant Short 

Bidders who bid in such Auction;

"Market Losses" means any losses in respect of the implementation of the ForexClear 

DMP, including losses arising from the execution of hedging ForexClear Transactions 

for the purpose of Risk Neutralisation, but excluding Auction Losses;

"Non-Bidder" means, in respect of an Auction, ana non-Defaulting FXCCM, which (a) 

did not bid in such Auction, or (b) bid in such Auction, but whose bid was not Accepted;

"Non-Defaulter" means an FXCCM that is not a Defaulter;

"Non-Defaulters' Contributions" means the ForexClear Contributions made by NonDefaulting FXCCMs to the ForexClear Default Fund;

"Other Participant" means, in respect of an Auction Portfolio, a Non-Defaulting 

FXCCM which, at the time of the relevant Default, has at least one Same Currencies 

Contract registered in its name; 

“Out Bid" means a bid in an Auction, which is Accepted and higher than the winning 

bid in such Auction;

"Out Bidder" means, in respect of an Auction, a Non-Defaulting FXCCM, which 

submitted an Out Bid in such Auction;

"Portfolio" means, in respect of each Currency Pair, the ForexClear Contracts in such 

Currency Pair registered in the name of a Defaulting FXCCM in respect of House 

Clearing Business or the ForexClear Contracts in such Currency Pair registered in the 

name of a Defaulting FXCCM in respect of Client Clearing Business (or, in the case of 

an FCM Clearing Member that is a Defaulter, the FCM ForexClear Contracts in such 

Currency Pair registered in respect of its FCM ForexClear Client Business) and, in both 
 

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such cases includes, where relevant, any Hedging ForexClear Contracts connected to 

the relevant ForexClear Contracts concluded by the Clearing House through Risk 

Neutralisation. For the avoidance of doubt, a Portfolio containing ForexClear Contracts 

relating to the Client Clearing Business or FCM ForexClear Client Business of a 

Defaulting FXCCM will only contain ForexClear Contracts relating to Client Clearing 

Business or FCM ForexClear Client Business, as appropriate. The Clearing House shall 

not be entitled to combine client and house positions in a single Portfolio;

"Recognised Clearing House" mean an organisation which is declared to be a 

recognised clearing house by a recognition order (that is for the time in force) made 

under section 290(1)(b) of the Financial Services and Markets Act 2000;

“"Remaining Aligned Participant Short Bidder" means, in respect of an Auction of 

an Auction Portfolio and

either Rule 2.6(b)(ii) or Rule 2.6(d)(ii) of this Annex, (as applicable), a Short Bidder 

in such Auction

(a) that is an Aligned Participant in respect of such Auction Portfolio, and

(b) whose remaining AIP Amount, within the AIP relating to such Auction 

Portfolio, which is in the form of ForexClear Funded Contributions and forms 

part of the AIP relating to such Auction Portfolio, (if Rule 2.6(b)(ii) of this 

Annex applies) or ForexClear Unfunded Contributions (if Rule 2.6(d)(ii) of this 

Annex applies), is greater than zero, and;

Rule 2.6(d)(ii) of this Annex, a"Remaining Expected Auction Participant Short 

Bidder in such Auction " means, in respect of an Auction of an Auction Portfolio and

either Rule 2.6(b)(v) or Rule 2.6(d)(v) of this Annex (as applicable), a Short Bidder in 

such Auction 

(a) that is an Expected Auction Participant in respect of such Auction Portfolio, and

(b) whose remaining AIP Amount, which is in the form of ForexClear Unfunded 

Contributions and forms part of within the AIP relating to such Auction 

Portfolio, which is in the form of ForexClear Funded Contributions (if Rule 

2.6(b)(v) of this Annex applies) or ForexClear Unfunded Contributions (if Rule 

2.6(d)(v) of this Annex applies), is greater than zero;

"Remaining Other Participant Short Bidder" means, in respect of an Auction of an 

Auction Portfolio and either Rule 2.6(b)(viii) or 2.6(d)(viii) of this Annex, a Short 

Bidder in such Auction

(a) that is an Other Participant in respect of such Auction Portfolio, and

(b) whose remaining AIP Amount within the AIP relating to such Auction 

Portfolio, which is in the form of ForexClear Funded Contributions (if Rule

2.6(b)(viii)) of this Annex applies) or ForexClear Unfunded Contributions (if 

Rule 2.6(d)(viii) of this Annex applies), is greater than zero;

"Resembling Contract" means, in respect of the ForexClear Contracts in an Auction 

Portfolio, a ForexClear Contract registered in the name of a Non-Defaulting FXCCM 
 

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that (a) is denominated in the same currencies as the Auction Portfolio Currency Pair 

and (b) belongs to the ForexClear Contract Category which corresponds to the Auction 

Portfolio Contract Category of such Auction Portfolio;

"Risk Neutralisation" means the process of reducing the market risk and/or settlement 

risk associated with a Defaulting FXCCM's obligations to the Clearing House under 

ForexClear Contracts by hedging the exposure before the auction process as described 

in Rule 2.2 of this Annex;

"Same Currencies Contract” means, in respect of an Auction Portfolio, a ForexClear 

Contract that is denominated in the same currencies as the Auction Portfolio Currency 

Pair; 

"Short Bidder" means, in respect of an Auction of an Auction Portfolio, a NonDefaulting FXCCM that (a) is an Expected Auction Participant for such Auction 

Portfolio, and (b) submitted a bid, which is Accepted, but lower than the winning bid, 

in such Auction; and

"Undiversified Initial Margin Amount" means, in respect of the ForexClear Contracts 

in a specific Currency Pair and ForexClear Contract Category, the required initial 

margin amount for such ForexClear Contracts, as determined by the Clearing House.

1.5 Terms used, and not defined, in this Annex shall have the meanings given to them in 

the Regulations or FCM Regulations.

2. ForexClear DMP

The ForexClear DMP in respect of: (a) ForexClear Clearing House Business; (b) 

Relevant Auction Contracts in respect of ForexClear Client Clearing Business; (c) FCM 

ForexClear House Business; and (d) FCM ForexClear Client Business, shall involve 

the stages described in this Rule 2.

Resources will be allocated based on the order and proportions described in Rules 2.4 

to 2.6 of this Annex. Allocation of resources pursuant to a process or the order in which 

processes are carried out may reduce the resources which are available to meet the 

losses in respect of any subsequent process and, consequently, impact the allocation of 

losses amongst Non-Defaulters. For the avoidance of doubt, the Clearing House may 

in its sole and absolute discretion determine the order in which it constructs Auction 

Portfolios and auctions Auction Portfolios.

2.1 Portfolio Splitting

The Clearing House, in consultation with and with the assistance of the ForexClear 

DMG, shall determine the composition of each Auction Portfolio and shall have the 

discretion to divide a Portfolio into two or more individual Auction Portfolios with the 

aim of facilitating the efficiency of, and reducing the risk associated with, the auction 

process provided for in Rule 2.3 of this Annex. The overriding principle behind the 

portfolio splitting process is that the Clearing House will structure Auction Portfolios 

with the intention of ensuring a ForexClear DMP which best protects the resources of 

the Clearing House, subject to compliance with applicable provisions of the CEA and 

the CFTC Regulations regarding segregation of client assets. Therefore, nothing in this 
 

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Rule 2.1 shall be deemed to imply: (a) that the Clearing House is under any obligation 

to split a particular Portfolio of a Defaulting FXCCM (regardless of the number of 

ForexClear Contracts that such Portfolio contains); or (b) any particular requirements 

as to the composition of an individual Auction Portfolio (including in terms of 

combining or separating ForexClear Contracts belonging to different ForexClear

Contract Categories), except that, subject to overriding risk procedures it is broadly 

anticipated that the parameters of any Auction Portfolio shall not be materially different 

to those set out in the Clearing House's fire drill.

2.2 Risk Neutralisation

The Clearing House will, in consultation with and with the assistance of the ForexClear 

DMG, reduce the market risk and/or settlement risk associated with a Defaulting 

FXCCM's obligations to the Clearing House so far as is reasonably practicable by 

hedging the Clearing House's exposure in open ForexClear Contracts to which the 

Defaulting FXCCM is party, where such hedging may be achieved, without limitation, 

by: 

(a) the splitting of Portfolios pursuant to Rule 2.1; and/or

(b) the Clearing House, for the purpose of hedging: 

(i) executing one or more new ForexClear Transactions and/or new FCM 

ForexClear Transactions (as applicable) with Non-Defaulting FXCCMs

(each, a "Hedging ForexClear Service Clearing Member") on the 

basis of a separate agreement between the Clearing House and the 

relevant Hedging ForexClear Service Clearing Member; and

(ii) clearing each such ForexClear Transaction and/or FCM ForexClear 

Transaction (as applicable) in accordance with, and subject to, the 

Rulebook and/or FCM Rulebook (as applicable), such that: 

(A) the Hedging ForexClear Service Clearing Member’s side of such 

transaction is registered as a ForexClear Contract between the 

Clearing House and the Hedging ForexClear Service Clearing 

Member; and

(B) the Clearing House's side of such transaction is registered as a 

ForexClear Contract between the Defaulting ForexClear Service

Clearing Member and the Clearing House (pursuant to the 

Clearing House's rights under Default Rule 6(a)) (any such 

ForexClear Contract, a "Hedging ForexClear Contract"). 

The Clearing House may transfer one or more Hedging ForexClear Service Contracts 

from one account to any other account in accordance with Default Rule 6(g) (including 

any Hedged Account (in the circumstances provided for in the Rulebook)). 

The Clearing House may undertake Risk Neutralisation before, as part of, concurrently 

with and/or subsequent to the splitting of a Portfolio pursuant to Rule 2.12.1. Where a 

Hedging ForexClear Service Clearing Member executes a hedging ForexClear 

Transaction or FCM ForexClear Transaction (as applicable) with the Clearing House, 
 

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it agrees to present such ForexClear Transaction or FCM ForexClear Transaction for 

clearing with the Clearing House in accordance with, and subject to, the Rulebook or 

FCM Rulebook (as applicable) and within the required timeframe under all Applicable 

Law (and, in any event, no later than the time that the ForexClear service closes on the 

day on which it executes such ForexClear Transaction or FCM ForexClear Transaction).

2.3 Auction

(a) Following the completion of Risk Neutralisation, the Clearing House shall 

auction each Auction Portfolio to Non-Defaulting FXCCMs in order to:

(i) seek to re-establish with those Non-Defaulting FXCCMs the positions 

the Clearing House had with the Defaulting FXCCM under the relevant 

ForexClear Contracts; and

(ii) seek to determine the net value of those ForexClear Contracts for the 

purposes of determining the extent of any losses to the Clearing House 

which are to be reduced or borne in the manner provided by Rule 15 of 

the Default Rules or, as the case may be, the extent of any gains to the 

Clearing House.

The Clearing House, in consultation with the ForexClear DMG, shall prescribe 

such procedures (in addition to those set out in this Annex) for the conduct of 

the auction process as it considers reasonably appropriate from time to time.

(b) The Clearing House shall notify each Non-Defaulting FXCCM of all details that 

may be reasonably required in relation to an Auction Portfolio before the 

relevant Auction.

(c) The auction process may take place over a number of days and Auctions of 

different Auction Portfolios may take place at different times.

(d) The relevant Non-Defaulting FXCCMs will submit bids to the Clearing House 

representatives on the ForexClear DMG, who will ensure that the identities of 

the bidders are not revealed to the FXCCM representatives on the ForexClear 

DMG. For the avoidance of doubt, a Non-Defaulting FXCCM is entitled to 

submit a bid on behalf of one or more affiliated Non-Defaulting FXCCMs. The 

ForexClear DMG will oversee the bidding process in a manner which it 

considers best protects the resources of the Clearing House and ensures an 

orderly process.

(e) The Clearing House, in consultation with the ForexClear DMG, will have full 

discretion in deciding whether to Accept a particular bid in an Auction and in 

deciding which Accepted bid it will select as the winning bid.

(f) In the case of an Auction in which no bid is Accepted or received (as the case 

may be), one or more further Auctions will be held in relation to the relevant 

Auction Portfolio. 

(g) As soon as practicable following the submission of bids in an Auction, if:
 

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(i) one or more bid(s) is Accepted, the Clearing House will notify the

Expected Auction Participants together with any other Non-Defaulting 

FXCCMs which participated in the Auction that one or more bid(s) is 

Accepted, and shall notify the FXCCM who submitted the winning bid 

that it is the winner of the Auction; and

(ii) no bid is Accepted, the Clearing House will notify all Non-Defaulting 

FXCCMs of the details of any further Auction.

(h) Each Non-Defaulting FXCCM agrees to use all reasonable efforts to make a bid 

in an Auction for an Auction Portfolio in respect of which it is an Expected 

Auction Participant.

2.4 Market Losses

(a) Market Losses will be met using the available resources as set out in Rule 15 of 

the Default Rules. Where the Clearing House determines that there are 

insufficient resources under Rules 15(a) to 15(d) of the Default Rules (inclusive) 

to meet such losses, they will be attributed to Non-Defaulters' remaining 

ForexClear Contributions in the following order and proportions:

(i) Market Losses will be attributed to the remaining ForexClear Funded 

Contribution of each Non-Defaulter pro rata according to the proportion 

that the remaining ForexClear Funded Contribution of such Non -

Defaulter bears to the total of all such remaining ForexClear Funded 

Contributions; and

(ii) if and to the extent there are Market Losses outstanding after the 

attribution process in Rule 2.4(a)(i) of this Annex, those Market Losses 

will be attributed to the remaining ForexClear Unfunded Contributions 

of each Non-Defaulter pro rata according to the proportion that the 

remaining ForexClear Unfunded Contributions of such Non-Defaulter 

bear to the total of all such remaining ForexClear Unfunded 

Contributions.

(b) The Clearing House will attribute Market Losses (if any) pursuant to Rule 2.4(a) 

of this Annex on each business day during the implementation of the ForexClear 

DMP at the same time as its end of day margin and settlement call.

2.5 Auction Incentive Pools

(a) The Clearing House will calculate an auction incentive pool (each, an "AIP") 

for the Auction Portfolio(s) in a specific Auction Portfolio Currency Pair and 

Auction Portfolio Category.

(b) The AIP for the Auction Portfolio(s) in a specific Auction Portfolio Currency 

Pair and Auction Portfolio Category will be the sum of the AIP Amounts for 

such Auction Portfolio(s).

(c) For the avoidance of doubt, an AIP and the AIP Amounts which comprise such 

AIP will change as the remaining ForexClear Funded Contributions and 
 

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remaining ForexClear Unfunded Contributions change throughout the 

implementation of the ForexClear DMP.

2.6 Auction Losses – Auction Portfolios

(a) Auction Losses, in respect of an Auction Portfolio, will be met using available 

resources as set out in Rule 15 of the Default Rules. Where the Clearing House 

determines there are insufficient resources under Rules 15(a) to (d) of the

Default Rules (inclusive) to meet such losses, they will be attributed to NonDefaulters' remaining ForexClear Contributions in accordance with the loss 

attribution process described in Rules 2.6(b) to 2.6(e) in this Annex.

(b) In the case of an Auction of an Auction Portfolio, for which the Clearing House 

determines there are insufficient resources under Rule 15(a) to 15(d) of the 

Default Rules (inclusive) to meet the Auction Losses for such Auction, such 

losses will be met first by the Non-Defaulters' remaining ForexClear Funded 

Contributions that are included in the AIP relating to the Auction Portfolio in 

the following order and proportions: 

theAligned Participants

(i) The Auction Losses will be attributed to the remaining AIP Amounts of 

those Non-Defaulting FXCCMs whichthat are both Expected 

AuctionAligned Participants, in respect of the Auction Portfolio, and 

Non-Bidders in the Auction. Auction Losses will be attributed to the 

remaining AIP Amount of each such Non-Defaulting FXCCM pursuant 

to this sub-paragraph (i) pro rata according to the proportion that such 

FXCCM's remaining AIP Amount bears to the total of the remaining 

AIP Amounts of all Non-Defaulting FXCCMs whichthat are both 

Expected AuctionAligned Participants, in respect of the Auction 

Portfolio, and Non-Bidders in the Auction;.

(ii) if and to the extent there are Auction Losses outstanding after the 

attribution process in subparagraph (i) above, those Auction Losses will 

be attributed to the remaining AIP Amounts of the Remaining Aligned 

Participant Short Bidders for the Auction Portfolio in accordance with 

this sub-paragraph (ii). Where the Loss Portion applicable to:

(A) the Loss Portion applicable to each Remaining Aligned 

Participant Short Bidder is less than or equal to its remaining AIP 

Amount, then the Clearing House will, in respect of each 

Remaining Aligned Participant Short Bidder, attribute Auction 

Losses equal to the Loss Portion applicable to the Remaining

Aligned Participant Short Bidder to its remaining AIP Amount; 

or

(B) the Loss Portion applicable to one or more Remaining Aligned 

Participant Short Bidders is greater than its remaining AIP 

Amount, then the Clearing House will attribute Auction Losses 

to all of the remaining AIP Amounts of such Remaining Aligned 

Participant Short Bidders only (so that they cease to be 
 

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Remaining Aligned Participant Short Bidders for the purposes of 

this Rule 2.6(b)(ii) and the Auction) and will repeat the loss 

attribution process in this Rule 2.6(b)(ii) for any outstanding 

Auction Losses until the Auction Losses are fully met or the 

remaining AIP Amounts of all Remaining Aligned Participant 

Short Bidders for the Auction Portfolio are fully attributed; and.

(iii) ifIf and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (ii) above, those Auction Losses 

will be attributed to the remaining AIP Amount of the Non-Defaulting 

FXCCM whothat is an Aligned Participant in respect of the Auction 

Portfolio and submitted the winning bid in the Auction, together with 

(where (if applicable) and the remaining AIP Amount of any NonDefaulting FXCCM whothat is an Aligned Participant in respect of the 

Auction Portfolio and submitted a bid which was an Equal Bid or an Out 

Bid in relation to thatthe winning bid. (if applicable). The outstanding 

Auction Losses will be attributed to the remaining AIP Amount of each 

such FXCCM pursuant to this sub-paragraph (iii) pro rata according to 

the proportion that such FXCCM's remaining AIP Amount bears to the 

total of the remaining AIP Amounts of: (A) the FXCCM whichAligned 

Participant thatsubmitted the winning bid in the Auction; (if applicable);

(B) any FXCCMs whichAligned Participants that submitted an Equal 

Bid to such winning bid in the Auction; and (C) any FXCCMs 

whichAligned Participants that were Out Bidders in the Auction.

Expected Auction Participants

(iv) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (iii) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of those NonDefaulting FXCCMs that are both Expected Auction Participants, in 

respect of the Auction Portfolio, and Non-Bidders in the Auction. 

Auction Losses will be attributed to the remaining AIP Amount of each 

such Non-Defaulting FXCCM pursuant to this sub-paragraph (iv) pro 

rata according to the proportion that such FXCCM's remaining AIP 

Amount bears to the total of the remaining AIP Amounts of all NonDefaulting FXCCMs that are both Expected Auction Participants, in 

respect of the Auction Portfolio, and Non-Bidders in the Auction.

(v) If and to the extent there are Auction Losses outstanding after the 

attribution process in subparagraph (iv) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of the Remaining 

Expected Auction Participant Short Bidders for the Auction Portfolio in 

accordance with this sub-paragraph (v). Where the Loss Portion 

applicable to:

(A) each Remaining Expected Auction Participant Short Bidder is 

less than or equal to its remaining AIP Amount, then the Clearing 

House will, in respect of each Remaining Expected Auction

Participant Short Bidder, attribute Auction Losses equal to the 
 

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Loss Portion applicable to the Remaining Expected Auction

Participant Short Bidder to its remaining AIP Amount; or

(B) one or more Remaining Expected Auction Participant Short 

Bidders is greater than its remaining AIP Amount, then the 

Clearing House will attribute Auction Losses to all of the 

remaining AIP Amounts of such Remaining Expected Auction

Participant Short Bidders only (so that they cease to be 

Remaining Expected Auction Participant Short Bidders for the 

purposes of this Rule 2.6(b)(v) and the Auction) and will repeat 

the loss attribution process in this Rule 2.6(b)(v) for any 

outstanding Auction Losses until the Auction Losses are fully 

met or the remaining AIP Amounts of all Remaining Expected 

Auction Participant Short Bidders for the Auction Portfolio are 

fully attributed.

(vi) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (v) above, those Auction Losses 

will be attributed to the remaining AIP Amount of the Non-Defaulting 

FXCCM that is an Expected Auction Participant in respect of the 

Auction Portfolio and submitted the winning bid in the Auction (if 

applicable) and the remaining AIP Amount of any Non-Defaulting 

FXCCM that is an Expected Auction Participant in respect of the 

Auction Portfolio and submitted a bid which was an Equal Bid or an Out 

Bid in relation to the winning bid (if applicable). The outstanding 

Auction Losses will be attributed to the remaining AIP Amount of each 

such FXCCM pursuant to this sub-paragraph (vi) pro rata according to 

the proportion that such FXCCM's remaining AIP Amount bears to the 

total of the remaining AIP Amounts of: (A) the Expected Auction 

Participant that submitted the winning bid in the Auction (if applicable); 

(B) any Expected Auction Participants that submitted an Equal Bid to 

such winning bid in the Auction; and (C) any Expected Auction 

Participants that were Out Bidders in the Auction.

Other Participants

(vii) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (vi) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of those NonDefaulting FXCCMs that are both Other Participants, in respect of the 

Auction Portfolio, and Non-Bidders in the Auction. Auction Losses will 

be attributed to the remaining AIP Amount of each such Non-Defaulting 

FXCCM pursuant to this sub-paragraph (vii) pro rata according to the 

proportion that such FXCCM's remaining AIP Amount bears to the total 

of the remaining AIP Amounts of all Non-Defaulting FXCCMs that are 

both Other Participants, in respect of the Auction Portfolio, and NonBidders in the Auction.

(viii) If and to the extent there are Auction Losses outstanding after the 

attribution process in subparagraph (vii) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of the Remaining Other
 

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Participant Short Bidders for the Auction Portfolio in accordance with 

this sub-paragraph (viii). Where the Loss Portion applicable to:

(A) each Remaining Other Participant Short Bidder is less than or 

equal to its remaining AIP Amount, then the Clearing House will, 

in respect of each Remaining Other Participant Short Bidder, 

attribute Auction Losses equal to the Loss Portion applicable to 

the Remaining Other Participant Short Bidder to its remaining 

AIP Amount; or

(B) one or more Remaining Other Participant Short Bidders is 

greater than its remaining AIP Amount, then the Clearing House 

will attribute Auction Losses to all of the remaining AIP 

Amounts of such Remaining Other Participant Short Bidders 

only (so that they cease to be Remaining Other Participant Short 

Bidders for the purposes of this Rule 2.6(b)(viii) and the Auction) 

and will repeat the loss attribution process in this Rule 2.6(b)(viii) 

for any outstanding Auction Losses until the Auction Losses are 

fully met or the remaining AIP Amounts of all Remaining Other

Participant Short Bidders for the Auction Portfolio are fully 

attributed.

(ix) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (viii) above, those Auction Losses 

will be attributed to the remaining AIP Amount of the Non-Defaulting 

FXCCM that is an Other Participant in respect of the Auction Portfolio 

and submitted the winning bid in the Auction (if applicable) and the 

remaining AIP Amount of any Non-Defaulting FXCCM that is an Other

Participant in respect of the Auction Portfolio and submitted a bid which 

was an Equal Bid or an Out Bid in relation to the winning bid (if 

applicable). The outstanding Auction Losses will be attributed to the 

remaining AIP Amount of each such FXCCM pursuant to this subparagraph (ix) pro rata according to the proportion that such FXCCM's 

remaining AIP Amount bears to the total of the remaining AIP Amounts 

of: (A) the Other Participant that submitted the winning bid in the 

Auction (if applicable); (B) any Other Participants that submitted an 

Equal Bid to such winning bid in the Auction; and (C) any Other 

Participants that were Out Bidders in the Auction.

(c) If and to the extent that there are Auction Losses outstanding following the 

attribution process in Rule 2.6(b) of this Annex, then:

where the Auction Portfolio Category of the Auction Portfolio is the ForexClear 

Non-Deliverable Contract Category, those Auction Losses will be 

attributed:

(A) first, to the remaining ForexClear Funded Contribution of each 

Non-Defaulting ForexClear Non-Deliverable Clearing Member 

pro rata according to the proportion that the remaining 
 

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ForexClear Funded Contribution of such Non-Defaulting 

ForexClear Non-Deliverable Clearing Member bears to the total 

of the remaining ForexClear Funded Contributions of all NonDefaulting ForexClear Non-Deliverable Clearing Members; and

(B) then, to the remaining ForexClear Funded Contribution of each 

Non-Defaulting ForexClear Deliverable-Only Clearing Member 

pro rata according to the proportion that the remaining 

ForexClear Funded Contribution of such Non-Defaulting 

ForexClear Deliverable-Only Clearing Member bears to the total 

of the remaining ForexClear Funded Contributions of all NonDefaulting ForexClear Deliverable-Only Clearing Members; or

(ii) where the Auction Portfolio Category of the Auction Portfolio is the 

ForexClear Deliverable Contract Category, those Auction Losses will 

be attributed:

(A) first, to the remaining ForexClear Funded Contribution of each 

Non-Defaulting ForexClear Deliverable Clearing Member pro 

rata according to the proportion that the remaining ForexClear 

Funded Contribution of such Non-Defaulting ForexClear 

Deliverable Clearing Member bears to the total of the remaining

ForexClear Funded Contributions of all Non-Defaulting 

ForexClear Deliverable Clearing Members; and

then, to the remaining ForexClear Funded Contribution of each 

Non-Defaulting ForexClear Non-Deliverable-Only Clearing 

Member pro rata according to the proportion that the remaining 

ForexClear Funded Contribution of such Non-Defaulting 

ForexClear Non-Deliverable-Only Clearing Member bears to 

the total of the remaining ForexClear Funded Contributions of 

all Non-Defaulting ForexClear Non-Deliverable-Only Clearing 

Members.

(d) If and to the extent there are Auction Losses outstanding following the 

attribution process in Rule 2.6(c) of this Annex, the remaining ForexClear 

Unfunded Contributions that are included in the AIP relating to the Auction 

Portfolio will be used in the following order:

theAligned Participants

(i) The Auction Losses will be attributed to remaining AIP Amounts of 

those Non-Defaulting FXCCMs whichthat are both Expected 

AuctionAligned Participants, in respect of the Auction Portfolio, and 

Non-Bidders in the relevant Auction. Auction Losses will be attributed 

to the remaining AIP Amount of each such Non-Defaulting FXCCM 

pursuant to this sub-paragraph (iv) pro rata according to the proportion 

that such FXCCM's remaining AIP Amount bears to the total of the 

remaining AIP Amounts of all FXCCMs whichthat are both Expected 

AuctionAligned Participants, in respect of the Auction Portfolio, and 

Non-Bidders in the Auction;.
 

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(ii) ifIf and to the extent there are Auction Losses outstanding after the 

attribution process referred to in sub-paragraph (iv) above, those 

Auction Losses will be attributed to the remaining AIP Amounts of the 

Remaining Aligned Participant Short Bidders for the Auction Portfolio 

in accordance with this sub-paragraph (ii). Where the Loss Portion 

applicable to:

(A) the Loss Portion applicable to each Remaining Aligned 

Participant Short Bidder is less than or equal to its remaining AIP 

Amount, then the Clearing House will, in respect of each 

Remaining Aligned Participant Short Bidder, attribute Auction 

Losses equal to the Loss Portion applicable to the Remaining 

Aligned Participant Short Bidder to its remaining AIP Amount; 

or

(B) the Loss Portion applicable to one or more Remaining Aligned 

Participant Short Bidders is greater than its remaining AIP 

Amount, then the Clearing House will attribute Auction Losses 

to all of the remaining AIP Amounts of such Remaining Aligned 

Participant Short Bidders only (so that they cease to be 

Remaining Aligned Participant Short Bidders for the purposes of 

this Rule 2.6(d)(ii) and the Auction) and will repeat the loss 

attribution process in this Rule 2.6(d)(ii) for any outstanding 

Auction Losses until the Auction Losses are fully met or the 

remaining AIP Amounts of all Remaining Aligned Participant 

Short Bidders for the Auction Portfolio are fully attributed; and.

(iii) ifIf and to the extent there are Auction Losses outstanding after the 

attribution process referred to in sub-paragraph (iv) above, those 

Auction Losses will be attributed to the remaining AIP Amounts of the 

Non-Defaulting FXCCM that is an Aligned Participant in respect of the 

Auction Portfolio and who submitted the winning bid, together with 

(where (if applicable) and the remaining AIP Amount of any NonDefaulting FXCCM an Out whothat is an Aligned Participant in respect 

of the Auction Portfolio and submitted a bid which was an Equal Bid or 

a Higher Bid in relation to thatthe winning bid. (if applicable). The 

outstanding Auction Losses will be attributed to the remaining AIP 

Amount of each such Non-Defaulting FXCCM pursuant to this subparagraph (b) pro rata according to the proportion that such FXCCM's 

remaining AIP Amount bears to the total of the remaining AIP Amounts

of: (A) the FXCCM whichAligned Participant that submitted the 

winning bid in the Auction; (if applicable); (B) any FXCCMs 

whichAligned Participants that submitted an Equal Bid to such winning 

bid in the Auction; and (C) any FXCCMs whichAligned Participants 

that were Out Bidders in the Auction.

Expected Auction Participants

(iv) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (iii) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of those Non-
 

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Defaulting FXCCMs that are both Expected Auction Participants, in 

respect of the Auction Portfolio, and Non-Bidders in the Auction. 

Auction Losses will be attributed to the remaining AIP Amount of each 

such Non-Defaulting FXCCM pursuant to this sub-paragraph (iv) pro 

rata according to the proportion that such FXCCM's remaining AIP 

Amount bears to the total of the remaining AIP Amounts of all NonDefaulting FXCCMs that are both Expected Auction Participants, in 

respect of the Auction Portfolio, and Non-Bidders in the Auction.

(v) If and to the extent there are Auction Losses outstanding after the 

attribution process in subparagraph (iv) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of the Remaining 

Expected Auction Participant Short Bidders for the Auction Portfolio in 

accordance with this sub-paragraph (v). Where the Loss Portion 

applicable to:

(A) each Remaining Expected Auction Participant Short Bidder is 

less than or equal to its remaining AIP Amount, then the Clearing 

House will, in respect of each Remaining Expected Auction

Participant Short Bidder, attribute Auction Losses equal to the 

Loss Portion applicable to the Remaining Expected Auction

Participant Short Bidder to its remaining AIP Amount; or

(B) one or more Remaining Expected Auction Participant Short 

Bidders is greater than its remaining AIP Amount, then the 

Clearing House will attribute Auction Losses to all of the 

remaining AIP Amounts of such Remaining Expected Auction

Participant Short Bidders only (so that they cease to be 

Remaining Expected Auction Participant Short Bidders for the 

purposes of this Rule 2.6(d)(v) and the Auction) and will repeat 

the loss attribution process in this Rule 2.6(d)(v) for any 

outstanding Auction Losses until the Auction Losses are fully 

met or the remaining AIP Amounts of all Remaining Expected 

Auction Participant Short Bidders for the Auction Portfolio are 

fully attributed.

(vi) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (v) above, those Auction Losses 

will be attributed to the remaining AIP Amount of the Non-Defaulting 

FXCCM that is an Expected Auction Participant in respect of the 

Auction Portfolio and submitted the winning bid in the Auction (if 

applicable) and the remaining AIP Amount of any Non-Defaulting 

FXCCM that is an Expected Auction Participant in respect of the 

Auction Portfolio and submitted a bid which was an Equal Bid or an Out 

Bid in relation to the winning bid (if applicable). The outstanding 

Auction Losses will be attributed to the remaining AIP Amount of each 

such FXCCM pursuant to this sub-paragraph (vi) pro rata according to 

the proportion that such FXCCM's remaining AIP Amount bears to the 

total of the remaining AIP Amounts of: (A) the Expected Auction 

Participant that submitted the winning bid in the Auction (if applicable); 

(B) any Expected Auction Participants that submitted an Equal Bid to 
 

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such winning bid in the Auction; and (C) any Expected Auction 

Participants that were Out Bidders in the Auction.

Other Participants

(vii) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (vi) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of those NonDefaulting FXCCMs that are both Other Participants, in respect of the 

Auction Portfolio, and Non-Bidders in the Auction. Auction Losses will 

be attributed to the remaining AIP Amount of each such Non-Defaulting 

FXCCM pursuant to this sub-paragraph (iv) pro rata according to the 

proportion that such FXCCM's remaining AIP Amount bears to the total 

of the remaining AIP Amounts of all Non-Defaulting FXCCMs that are 

both Other Participants, in respect of the Auction Portfolio, and NonBidders in the Auction.

(viii) If and to the extent there are Auction Losses outstanding after the 

attribution process in subparagraph (vii) above, those Auction Losses 

will be attributed to the remaining AIP Amounts of the Remaining Other 

Participant Short Bidders for the Auction Portfolio in accordance with 

this sub-paragraph (viii). Where the Loss Portion applicable to:

(A) each Remaining Other Participant Short Bidder is less than or 

equal to its remaining AIP Amount, then the Clearing House will, 

in respect of each Remaining Other Participant Short Bidder, 

attribute Auction Losses equal to the Loss Portion applicable to 

the Remaining Other Participant Short Bidder to its remaining 

AIP Amount; or

(B) one or more Remaining Other Participant Short Bidders is 

greater than its remaining AIP Amount, then the Clearing House 

will attribute Auction Losses to all of the remaining AIP 

Amounts of such Remaining Other Participant Short Bidders 

only (so that they cease to be Remaining Other Participant Short 

Bidders for the purposes of this Rule 2.6(d)(viii) and the Auction) 

and will repeat the loss attribution process in this Rule 2.6(d)(viii) 

for any outstanding Auction Losses until the Auction Losses are 

fully met or the remaining AIP Amounts of all Remaining Other

Participant Short Bidders for the Auction Portfolio are fully 

attributed.

(ix) If and to the extent there are Auction Losses outstanding after the 

attribution process in sub-paragraph (viii) above, those Auction Losses 

will be attributed to the remaining AIP Amount of the Non-Defaulting 

FXCCM that is an Other Participant in respect of the Auction Portfolio 

and submitted the winning bid in the Auction (if applicable) and the 

remaining AIP Amount of any Non-Defaulting FXCCM that is an Other

Participant in respect of the Auction Portfolio and submitted a bid which 

was an Equal Bid or an Out Bid in relation to the winning bid (if 

applicable). The outstanding Auction Losses will be attributed to the 
 

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remaining AIP Amount of each such FXCCM pursuant to this subparagraph (vi) pro rata according to the proportion that such FXCCM's 

remaining AIP Amount bears to the total of the remaining AIP Amounts 

of: (A) the Other Participant that submitted the winning bid in the 

Auction (if applicable); (B) any Other Participants that submitted an 

Equal Bid to such winning bid in the Auction; and (C) any Other 

Participants that were Out Bidders in the Auction.

(e) If and to the extent there are Auction Losses outstanding following the 

attribution process referred to in Rule 2.6(d) of this Annex, then:

(i) where the Auction Portfolio Category of the Auction Portfolio is the 

ForexClear Non-Deliverable Contract Category, those Auction Losses 

will be attributed:

first, to the remaining ForexClear Unfunded Contributions of 

each Non-Defaulting ForexClear Non-Deliverable Clearing 

Member pro rata according to the proportion that the remaining 

ForexClear Unfunded Contributions of such Non-Defaulting 

ForexClear Non-Deliverable Clearing Member bear to the total 

of the remaining ForexClear Unfunded Contributions of all NonDefaulting ForexClear Non-Deliverable Clearing Members; and.

(B) then, to the remaining ForexClear Unfunded Contributions of 

each Non-Defaulting ForexClear Deliverable-Only Clearing 

Member pro rata according to the proportion that the remaining 

ForexClear Unfunded Contributions of such Non-Defaulting 

ForexClear Deliverable-Only Clearing Member bear to the total 

of the remaining ForexClear Unfunded Contributions of all NonDefaulting ForexClear Deliverable-Only Clearing Members; or

(ii) Where the Auction Portfolio Category of the Auction Portfolio is the 

ForexClear Deliverable Contract Category, those Auction Losses will 

be attributed:

(A) first, to the remaining ForexClear Unfunded Contributions of 

each Non-Defaulting ForexClear Deliverable Clearing Member 

pro rata according to the proportion that the remaining 

ForexClear Unfunded Contributions of such Non-Defaulting 

ForexClear Deliverable Clearing Member bear to the total of the 

remaining ForexClear Unfunded Contributions of all NonDefaulting ForexClear Deliverable Clearing Members; and

(B) then, to the remaining ForexClear Unfunded Contributions of 

each Non-Defaulting ForexClear Non-Deliverable-Only 

Clearing Member pro rata according to the proportion that the 

remaining ForexClear Unfunded Contributions of such NonDefaulting ForexClear Non-Deliverable-Only Clearing Member 

bear to the total of the remaining ForexClear Unfunded 
 

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Contributions of all Non-Defaulting ForexClear NonDeliverable-Only Clearing Member.

2.7 Gains

(a) If, at any point during the ForexClear DMP, but before the implementation of 

the ForexClear Loss Distribution Process, the Clearing House determines that 

gains have accrued in respect of any Auction Portfolio(s), it will reimburse each 

Non-Defaulter (to the extent that Market Losses or Auction Losses have been 

attributed to it pursuant to this Annex) by the amount of such gains in the 

following order and proportions:

(i) The Clearing House will reimburse each Non-Defaulter for such gains 

pro rata according to the proportion that the Market Losses attributed to 

such Non-Defaulter's ForexClear Unfunded Contributions bear to the 

total Market Losses attributed to all Non-Defaulters' ForexClear 

Unfunded Contributions, up to a maximum of the Market Losses 

attributed to such Non-Defaulter's ForexClear Unfunded Contributions.

(ii) If and to the extent there are gains remaining to be reimbursed following 

the process described in Rule 2.7(a)(i) of this Annex, the Clearing House 

will reimburse each Non-Defaulter for such gains pro rata according to 

the proportion that the Auction Losses attributed to such NonDefaulter's ForexClear Unfunded Contributions bear to the total Auction 

Losses attributed to all Non-Defaulters' ForexClear Unfunded 

Contributions, up to a maximum of the Auction Losses attributed to such 

Non-Defaulter's ForexClear Unfunded Contributions.

(iii) If and to the extent there are gains remaining to be reimbursed following 

the process described in Rule 2.7(a)(ii) of this Annex, the Clearing 

House will reimburse each Non-Defaulter for such gains pro rata

according to the proportion that the Market Losses attributed to such 

Non-Defaulter's ForexClear Funded Contribution bear to the total 

Market Losses attributed to all Non-Defaulter's ForexClear Funded

Contributions, up to a maximum of the Market Losses attributed to such 

Non-Defaulter's ForexClear Funded Contribution. 

(iv) If and to the extent there are gains remaining to be reimbursed following 

the process described in Rule 2.7(a)(iii) of this Annex, the Clearing 

House will reimburse each Non-Defaulter for such gains pro rata

according to the proportion that the Auction Loses attributed to such 

Non-Defaulter's ForexClear Funded Contribution bear to the total

Auction Losses attributed to all Non-Defaulter's ForexClear Funded 

Contributions, up to a maximum of the Auction Losses attributed to such 

Non-Defaulter's ForexClear Funded Contribution.

(b) The Clearing House's calculation of the amount by which a gain that is 

reimbursed to a Non-Defaulter pursuant to Rule 2.7(a)(i), (ii), (iii) and/or (iv) 

of this Annex increases such Non-Defaulter's ForexClear Contributions is 

determinative and final and, after such reimbursement and increase, the totality 
 

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of such Non-Defaulter's ForexClear Contributions will be subject to subsequent 

attribution of losses (if any) pursuant to this Annex.

(c) Rule F12 of the ForexClear Default Fund Supplement will not apply to the gains 

reimbursed pursuant to this Rule 2.7.

3. Default Management in respect of ForexClear Client Clearing Business and FCM 

ForexClearClient Business Client Business

3.1 The ForexClear DMP for any ForexClear Contract in respect of ForexClear Client 

Clearing Business shall be conducted in accordance with the Client Clearing Annex 

(which such stages, for the avoidance of doubt, will result in a ForexClear Client 

Contract in respect of ForexClear Clearing Business being dealt with in accordance 

with Rule 2 above in the event that it cannot be ported by the Clearing House).

3.2 The ForexClear DMP for any FCM ForexClear Contract forming part of a Defaulter's 

FCM ForexClear Client Business shall be conducted in accordance with FCM 

Regulation 13(e) (Transfer). The provisions of Default Rule 10 shall also apply.

4. Transfer of Cash Flows / Registration of Positions

4.1 Following the disposal of an Auction Portfolio by way of Auction (and notwithstanding 

that other Auction Portfolios of the Defaulting FXCCM may not yet have been 

auctioned) the Clearing House, will, with the co-operation of the Non-Defaulting 

FXCCMs, transfer to the Non-Defaulting FXCCM whose bid won the relevant Auction 

Portfolio the rights and obligations, from the Defaulting FXCCM, arising out of the 

positions which that Non-Defaulting FXCCM has successfully bid for under the 

ForexClear DMP. Such transfer may take place by way of registration of new positions 

with the Clearing House in the name of the relevant Non-Defaulting FXCCM, or 

novation of rights and obligations to the relevant Non-Defaulting FXCCM. All such 

registrations shall be made in a way that recognises the Collateral paid or received in 

respect of variation margin and any amounts paid or received in respect of settlement

in relation to the ForexClear Contracts of the Defaulting FXCCM representing such 

new positions.

4.2 In order to effect the transfer of positions, the Clearing House shall prescribe such 

procedures and timetable as it considers reasonably appropriate in the circumstances. 

FXCCMs will be required to exercise best endeavours to comply with such 

requirements as may be established by the Clearing House, after consultation with the 

ForexClear DMG, to effect the transfer of positions, including but not limited to the 

payment of any sums due as a result of the winning bid and the provision of Collateral 

in an amount required by the Clearing House in respect of initial margin and variation 

margin obligations in respect of positions which are to be registered in their names. 

The Clearing House agrees that in such procedures it shall make provision for set-off 

by the Clearing House of amounts owed by the Clearing House to the individual NonDefaulting FXCCMs as a result of the operation of the ForexClear DMP against sums 

owed by those individual Non-Defaulting FXCCMs to the Clearing House in respect 

thereof.

4.3 Where, as a result of an Auction, the Clearing House is required to make a payment to 

a Non-Defaulting FXCCM in respect of a winning bid, the Clearing House shall not be 
 

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SCHEDULE 5

FOREXCLEAR DEFAULT FUND SUPPLEMENT

F1. In accordance with and subject to Rule F2, the amount of each ForexClear Clearing 

Member's ForexClear Contributions shall be determined by the Clearing House as soon 

as practicable after each ForexClear Determination Date as appropriate on the basis of 

information available as at close of business on such ForexClear Determination Date 

and notified to such FXCCM as soon as practicable after such determination in 

accordance with the Procedures.

F2. Each FXCCM's ForexClear Contribution (other than any ForexClear Unfunded 

Contribution or any Supplementary Contribution) shall be determined by the Clearing 

House in accordance with the following provisions:

(a) determinations will be made by the Clearing House on the date that an FXCCM 

joins the ForexClear Service, and at the close of business on the first business 

day of each month, and otherwise in accordance with paragraph (f) below (each,

a "ForexClear Determination Date")"), provided, however, that following a 

Default, any such determinations and any such ForexClear Determination Date 

which might otherwise have occurred under this Rule F2 shall be suspended for 

the duration of the period (the "ForexClear Default Period") commencing on 

the date of such Default and terminating on the last to occur of the following 

dates:

(i) the date which is the close of business on the day falling 30 calendar 

days after the ForexClear Default Management Process Completion 

Date in relation to such Default (or, if such day is not a business day, the 

next succeeding business day); and

(ii) where, prior to the end of the period referred to in (i) above (or such 

period as has already been extended pursuant to this paragraph (ii)), one 

or more subsequent Defaults (each, a "Relevant Default") occur, the 

date which is the close of business on the day falling 30 calendar days 

after the ForexClear Default Management Process Completion Date in 

relation to a Relevant Default which falls latest in time (or, if such day 

is not a business day, the next succeeding business day);

(b) On each business day, the Clearing House will determine aone or more

"Combined Loss Value"Values", and a "Largest Combined Loss Value", in 

respect of each of the 30 preceding business days. The Combined Loss Value 

in respect of a particular day will be the sum of the largest and the second largest 

stress-testing loss incurred on that day in relation to ForexClear Business (for a 

given scenario);, where:

(i) "Combined Loss Value" means, in respect of a business day and a 

scenario, the sum of the largest and second largest stress-testing loss 

determined by the Clearing House in respect of such day, such scenario 

and ForexClear Business; and
 

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(ii) "Largest Combined Loss Value" means, in respect of a business day, 

the largest of the Combined Loss Values determined by the Clearing 

House in respect of such day. 

(c) the "ForexClear Fund Amount" shall equal the sum of (i) the "ForexClear 

Non-Deliverable Sub-Fund Amount"", and (ii) the "ForexClear Deliverable

Sub-Fund Amount" and (iii) the “ForexClear Tolerance Amount”.". The 

ForexClear Non-Deliverable Sub-Fund Amount and ForexClear Deliverable

Sub-Fund Amount shall be calculated in United States dollars ("USD") and, for 

a given ForexClear Determination Date, shall be (i) in relation to the ForexClear 

Non-Deliverable Sub-Fund Amount, the largest of the 30Largest Combined 

Loss Values in respect of ForexClear Non-Deliverable Contracts, and (ii) in 

relation to the ForexClear Deliverable Sub-Fund Amount, the largest of the 30 

Combined Loss Values in respect of ForexClear Contracts other than 

ForexClear Non-Deliverable Contracts, each as determined by the Clearing 

House under paragraph (b) above for the preceding 30 business days, plus 10 

per cent. Each of the ForexClear Non-Deliverable Sub-Fund Amount and 

ForexClear DeliverableThe ForexClear Sub-Fund Amount shall not be less than 

USD 70 million (the "ForexClear Fund Floor"). The “ForexClear Tolerance 

Amount” for a given ForexClear Determination Date shall equal the aggregate 

amount of ForexClear Tolerance provided by the Clearing House, during a time 

period determined by it, to all participating FXCCMs to facilitate the 

registration of ForexClear Contracts, provided that the ForexClear Tolerance 

Amount shall not exceed USD 500 million;

(d) the "ForexClear Margin Weight" means the "ForexClear Non-Deliverable

Margin Weight" or the "ForexClear Deliverable Margin Weight", as 

applicable.

(d)

(i) an FXCCM's “ForexClear Non-Deliverable Margin Weight” shall be 

calculated by dividing (A) the Uncovered Stress Loss Metric associated 

with such FXCCM’s ForexClear Non-Deliverable Contracts by (B) the 

total Uncovered Stress Loss Metric applied to all Non-Defaulting 

FXCCMs with respect to their ForexClear Non-Deliverable Contracts, 

in each case where the ForexClear Non-Deliverable Contracts are (I) 

entered into on the FXCCM’s own behalf or with respect to a ForexClear 

Clearing Client or an FCM Client and (II) open and outstanding during 

the reference period set forth in paragraph (b) above;

(ii)(i) an FXCCM's “ForexClear Deliverable Margin Weight” shall be 

calculated by dividing (A) the Uncovered Stress Loss Metric associated 

with all ofonly for such FXCCM’s ForexClear Contracts other than 

ForexClear Non-Deliverable Contracts by (B) the total Uncovered 

Stress Loss Metric applied to all Non-Defaulting FXCCMs with respect 

to their ForexClear Contracts that are not ForexClear Non-Deliverable

Contracts, in each case where the ForexClear Contracts are (I) entered 

into on the FXCCM’s own behalf or with respect to a ForexClear 

Clearing Client or an FCM Client and (II) open and outstandingopen and 
 

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outstanding at any point during the reference period set forth in 

paragraph (b) above;

(iii)(ii) an FXCCM’s “Uncovered Stress Loss Metric,” as determined in 

accordance withfor the purposes of sub-paragraphsparagraph (i) and/or 

(ii) above, is a risk metric used by the Clearing House in the calculation 

of the FXCCM’s ForexClear Contribution and shall be determined by 

the Clearing House (and notified to each FXCCM) from time to time by, 

inter alia, deducting the amount of eligible margin held by the Clearing 

House with respect to the relevant ForexClear Contracts from the stress 

loss associated with such ForexClear Contracts; provided that the 

Clearing House may, in determining the Uncovered Stress Loss Metric 

of an FXCCM, take into account, inter alia, the number of alternative 

FXCCMs that clear ForexClear Contracts with respect to that FXCCM’s 

ForexClear Clearing Clients or FCM Clients; for the avoidance of doubt, 

the largest and second largest stress-testing losses for purposes of 

determining a Combined Loss Value in accordance with paragraph (b) 

above are not the applicable Uncovered Stress Loss Metrics of the 

relevant FXCCMs for the purposes of this sub-paragraph (iiiii);

(iv)(iii)the provisions of this sub-paragraph (d) shall not apply to New Members 

and, for the avoidance of doubt, New Members shall not constitute NonDefaulting FXCCMs for the purposes of limb (B) of subparagraphsparagraph (i) and (ii);

(e) each FXCCM’s ForexClear Contribution comprises theits "ForexClear NonDeliverable Contribution," the "ForexClear Deliverable Sub-Fund

Contribution" and its ForexClear Tolerance, as applicable. The FXCCM's 

ForexClear Non-Deliverable Sub-Fund Contribution shall be calculated by 

multiplying the ForexClear Non-Deliverable Sub-Fund Amount by the

FXCCM's ForexClear Non-Deliverable Margin Weight, and shall be no less 

than the Minimum ForexClear Contribution. The FXCCM's ForexClear 

Deliverable Contribution shall be calculated by multiplying the ForexClear 

Deliverable Sub-Fund Amount by the FXCCM's ForexClear Deliverable

Margin Weight, and shall be no less than the Minimum ForexClear Contribution; 

and

(f) subject to a suspension pursuant to paragraph (a) above, the Clearing House 

may recalculate the ForexClear Fund Amount on any business day if the largest 

of the Largest Combined Loss ValueValues determined by the Clearing House 

under paragraph (b) above for the 30 business days preceding such business day

differs by more than 25 per cent. from the figure on which the previous 

ForexClear Contribution determination was based.

F3. For the purposes of the calculations under Rule F2:

(a) references to "ForexClear Clearing Members" or "FXCCMs" do not include 

references to Defaulting FXCCMs (apart from any Defaulting FXCCM in 

respect of which the Clearing House permits the application of Rule F2) or 

persons which were formerly FXCCMs but are not FXCCMs at the ForexClear 

Determination Date at which the relevant determination is made;
 

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(b) contributions shall be rounded upwards, if not already such a multiple, to the

next integral multiple of one thousand US dollars;

(c) no account shall be taken, in calculating initial margin or ForexClear Margin 

Weight under Rule F2 of any offsets applied in calculating initial margin 

obligations imposed on an FXCCM in respect of ForexClear Contracts, which 

may otherwise be permissible under the Procedures or other arrangements 

applicable;

(d)(c) provided that the FXCCM is not a Defaulter, the amount of its ForexClear 

Contribution shall be calculated in accordance with and subject to Rule F2. The 

provisions of Rule F1, Rule F2, this Rule F3 and Rule F5 do not apply to a 

Defaulting FXCCM, unless the Clearing House so permits in any particular case; 

and

(e)(d) if (i) an FXCCM (other than an FCM Clearing Member) notifies the Clearing 

House on the ForexClear Default Management Process Completion Date or the 

business day occurring immediately after such date that it wishes to resign from 

the ForexClear Service, (ii) the ForexClear AET Requirement in respect of such 

proposed resignation has been satisfied by the ForexClear Determination Date 

occurring immediately after such ForexClear Default Management Process 

Completion Date, (iii) the FXCCM is not a Defaulter, and (iv) no Default has 

occurred from and including the ForexClear Determination Date referred to in 

Rule F3(ed)(ii) to and including the fourth business day occurring after such 

ForexClear Determination Date (“ForexClear Contribution Payment Date”), 

then the FXCCM shall cease to be an FXCCM on and from such ForexClear 

Contribution Payment Date and the Clearing House shall repay the ForexClear 

Contribution that it holds for such FXCCM (to the extent it has not been applied 

under these Default Rules) in accordance with the Procedures and the FXCCM 

shall not be obliged to make any payment to the Clearing House under Rule 

F5(c). If an FXCCM notifies the Clearing House in accordance with Rule 

F3(ed)(i), but the requirements under Rules F3(ed)(ii), (iii) and/or (iv) are not 

satisfied, then such FXCCM will cease to be a Resigning Member in respect of 

the ForexClear Service.

F4. Without prejudice to any other requirements which the Clearing House may impose, 

the amount of the ForexClear Contribution of a New Member shall be the sum of (a) 

the Minimum ForexClear Contribution, (b) any supplementary sum determined by the 

Clearing House in its discretion and notified to the New Member and (c) as applicable, 

its ForexClear Tolerance. The Clearing House shall determine the amount of such 

supplementary sum by reference to the actual or expected level of clearing activity of 

the New Member.

F5. Upon determination of the amount of a ForexClear Contribution in accordance with 

Rule F2:

(a) if the amount of the ForexClear Contribution of an FXCCM immediately before 

close of business on the relevant ForexClear Determination Date exceeds the 

amount of the FXCCM's ForexClear Contribution determined under Rule F2 as 

at close of business on that day, the excess shall be paid by the Clearing House 

to such FXCCM in USD in accordance with the Procedures;
Appendix II: General Regulations
Clearing House: General Regulations

- iFebruary March 2022

GENERAL REGULATIONS OF

LCH LIMITED
Clearing House: General Regulations

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February March 2022

"ForexClear Contribution" means an FXCCM's Contribution provided for under the 

ForexClear Default Fund Supplement and shall include (i) 

any relevant ForexClear Unfunded Contributions in respect 

of the FXCCM, and (ii) any relevant Supplementary 

Contribution in respect of the FXCCM. , and (iii) if the 

Clearing Member is a ForexClear Option Clearing Member, 

the ForexClear Deliverable Default Fund Contribution of 

that ForexClear Option Clearing Member. For the avoidance 

of doubt, the ForexClear Contribution shall not include any 

of the ForexClear Liquidity Fund Contributions made by a

ForexClear Option Clearing Member

"ForexClear CTM Contract" means a ForexClear Contract that is not a ForexClear STM 

Contract

"ForexClear Currency" means:

(b) USD;

(c) JPY;

(d) EUR;

(e) GBP;

(f) CHF; or 

(g) AUD

"ForexClear Dealer (FXD)" means a person admitted by the Clearing House to the 

Register of ForexClear Dealers and who has not been 

removed from the Register of ForexClear Dealers

"ForexClear Dealer Clearing 

Agreement (FDC Agreement)"

means a written agreement, in the form and on the terms 

prescribed by the Clearing House between an FXD, an 

FXCCM and the Clearing House

"ForexClear Default Fund 

Supplement"

means the Supplement relating to ForexClear Business

"ForexClear Default 

Management Process"

has the meaning assigned to it in the ForexClear DMP Annex 

in the Default Rules

"ForexClear Default 

Management Process 

Completion Date"

has the meaning assigned to it in the ForexClear DMP Annex 

in the Default Rules

"ForexClear Default Period" has the meaning ascribed to it in Rule F2 of the ForexClear 

Default Fund Supplement
Clearing House: General Regulations

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February March 2022

"ForexClear Deliverable 

Contract”

means a ForexClear Deliverable Forward Contract, 

ForexClear Option Contract, ForexClear Spot Contract or 

ForexClear Swap Contract

"ForexClear Deliverable 

Contract Terms"

means the ForexClear Deliverable Forward Contract Terms, 

ForexClear Option Contract Terms, ForexClear Spot 

Contract Terms or ForexClear Swap Contract Terms

"ForexClear Deliverable

Default Fund Contribution"

means, for any FXCCM which is a ForexClear Option 

Clearing Member, the amount of that FXCCM's 

Contribution attributable to the ForexClear Option Service 

determined in accordance with the ForexClear Default Fund 

Supplement and the Procedures

"ForexClear Deliverable

Forward Contract"

means a Contract entered into by the Clearing House with a 

ForexClear Clearing Member on the ForexClear Deliverable 

Forward Contract Terms which includes, in the case of the 

Default Rules (including the ForexClear DMP Annex but 

excluding, for the avoidance of doubt, the Client Clearing 

Annex), the FCM Default Fund Agreement and any other 

document, rule or procedure as specified by the Clearing 

House from time to time

"ForexClear Deliverable

Forward Contract Terms"

means the terms applicable to each ForexClear Deliverable

Forward Contract as set out from time to time in the Product 

Specific Contract Terms and Eligibility Criteria Manual 

applicable to ForexClear Deliverable Forward Contracts

"ForexClear Deliverable

Forward STM Contract"

means a ForexClear Deliverable Forward Contract that is 

either (i) registered at the Clearing House as a ForexClear 

Deliverable Forward STM Contract pursuant to Regulation 

91, (ii) converted into a ForexClear Deliverable Forward 

STM Contract by the Clearing House pursuant to Regulation 

106A, or (iii) a ForexClear Deliverable Forward STM 

Contract through novation pursuant to Regulation 12(b), in 

each case the terms of which therefore include the 

ForexClear Deliverable Forward STM Terms

"ForexClear Deliverable

Forward STM Terms"

means the part of the ForexClear Deliverable Forward 

Contract Terms designated as the ForexClear Deliverable 

Forward STM Terms by the Clearing House from time to 

time

"ForexClear Deliverable

Forward Transaction"

means a contract, meeting the applicable ForexClear 

Eligibility Criteria for registration as a ForexClear 

Deliverable Forward Contract, entered into between two 

ForexClear Participants, of which particulars are presented 

to the Clearing House for registration in the name of 

ForexClear Clearing Members in accordance with the 

Regulations
Clearing House: General Regulations

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February March 2022

"ForexClear Option Contract" means a Contract entered into by the Clearing House with a 

ForexClear Clearing Member on the ForexClear Option 

Contract Terms which includes, in the case of the Default 

Rules (including the ForexClear DMP Annex but excluding, 

for the avoidance of doubt, the Client Clearing Annex), the

FCM Default Fund Agreement and any other document, rule 

or procedure as specified by the Clearing House from time 

to time

"ForexClear Option Contract 

Terms"

means the terms applicable to each ForexClear Option 

Contract as set out from time to time in the Product Specific 

Contract Terms and Eligibility Criteria Manual applicable to 

ForexClear Option Contracts

"ForexClear Option Party A" means, in respect of ForexClear Deliverable Forward 

Contract, ForexClear Spot Contract or ForexClear Swap 

Contract (as applicable), the ForexClear Option Clearing 

Member identified as “Party A” in the applicable ForexClear 

Deliverable Forward Contract Terms, ForexClear Spot 

Contract Terms or ForexClear Swap Contract Terms (as 

applicable)

"ForexClear Option Party B" means, in respect of ForexClear Deliverable Forward 

Contract, ForexClear Spot Contract or ForexClear Swap 

Contract (as applicable), the ForexClear Option Clearing 

Member identified as “Party B” in the applicable ForexClear 

Deliverable Forward Contract Terms, ForexClear Spot 

Contract Terms or ForexClear Swap Contract Terms (as 

applicable)

"ForexClear Option Service 

Default Fund Contribution"

means, for any FXCCM which is a ForexClear Option 

Clearing Member, the amount of that FXCCM's 

Contribution attributable to the ForexClear Option Service 

determined in accordance with the ForexClear Default Fund 

Supplement and the Procedures

"ForexClear Option Seller" means, in relation to a ForexClear Option Contract, the party 

specified as the ‘Seller’ in the Economic Terms of that 

ForexClear Option Contract

"ForexClear Option Service" means the service provided by the Clearing House under the 

ForexClear Regulations, whereby the Clearing House makes 

available services in respect of ForexClear Option Contracts, 

ForexClear Deliverable Forward Contracts, ForexClear Spot 

Contracts and ForexClear Swap Contracts

"ForexClear Option Service 

Membership Requirements"

has the meaning assigned to it in the Procedures
Clearing House: General Regulations

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February March 2022

REGULATION 99 FOREXCLEAR OPTION SERVICE – MEMBERSHIP 

REQUIREMENTS

(a) A ForexClear Clearing Member that wishes to be designated as a ForexClear Option 

Clearing Member shall apply to the Clearing House in the manner prescribed by the 

Clearing House from time to time. That Clearing Member must, at the point of 

application and at all times thereafter, satisfy, in a manner satisfactory to the Clearing 

House, the ForexClear Option Service Membership Requirements set out in the 

Procedures.

(b) If, in its absolute discretion, the Clearing House determines that a ForexClear Option 

Clearing Member ceases to meet one or more of the ForexClear Option Service 

Membership Requirements in effect at the applicable time, the Clearing House may 

rescind that Clearing Member’s eligibility to have ForexClear Option Contracts, 

ForexClear Deliverable Forward Contracts, ForexClear Spot Contracts and/or 

ForexClear Swap Contracts registered in such Clearing Member’s name, but without 

prejudice to (i) that Clearing Member’s eligibility to have registered in its name, subject 

to the Regulations, any other Contracts in respect of which it continues to meet the 

relevant eligibility criteria, and (ii) the Clearing House’s rights to take the actions 

specified in Regulation 100, Regulation 101 or any other Regulation with respect to 

that ForexClear Option Clearing Member, to the extent such ForexClear Option 

Clearing Member continues to have any ForexClear Contracts (other than ForexClear 

Non-Deliverable Contracts) registered in its name.

(c) For the avoidance of doubt, a ForexClear Clearing Member that the Clearing House has 

designated as a ForexClear Option Clearing Member shall, subject to Regulation 16, 

Regulation 99(b), the ForexClear Procedures and the Default Rules, be eligible to have 

ForexClear Option Contracts, ForexClear Deliverable Forward Contracts, ForexClear 

Spot Contracts and/or ForexClear Swap Contracts registered in its name (and not only

ForexClear Option Contracts). 
Appendix III: Procedure Section 1

[Clearing Member, Non-member Market Participant and Dealer Status]
LCH LIMITED

PROCEDURES SECTION 1

CLEARING MEMBER, NON-MEMBER MARKET 

PARTICIPANT AND DEALER STATUS
Clearing House Procedures Clearing Member and Dealer Status 

LCH Limited © 2022 - 8 -

January March 2022

1.3.2 Supplementary Criteria Applicable to RepoClear Applicants 

In addition to the minimum Net Capital Requirements as set out in Section 1.7.2, 

an applicant must satisfy the following criteria:

(a) be authorised and supervised as either a credit institution or an 

investment firm by the competent authorities of a member state of the 

European Union; or

(b) be authorised and supervised as the equivalent of a credit institution or 

an investment firm by the competent authorities of a country outside the 

European Union and be subject to prudential rules considered to be as 

stringent as those applicable to credit institutions and investment firms.

1.3.3 Supplementary Criteria Applicable to SwapClear Applicants 

In addition to the minimum Net Capital Requirements as set out in Section 1.7.2, 

an applicant must satisfy the following criteria:

(a) successfully participate, or demonstrate that it has: (i) an affiliated 

SwapClear Clearing Member ("SCM") that can successfully participate; 

or (ii) an LCH Approved Outsourcing Party that can successfully 

participate in a SwapClear "fire drill" run by the Clearing House which 

shall involve submitting a bid for a notional portfolio of trades within a 

specific currency in a specified timeframe. Submission of a bid outside 

the timeframe specified by the Clearing House or submitting a bid that 

is unreasonable will constitute a failure of the "fire drill" and the 

applicant's SCM application will not be approved;

(b) be able to participate or demonstrate that it has: (A) an affiliated SCM 

that can participate; or (B) an LCH Approved Outsourcing Party that can 

successfully participate, in the default management process as operated 

by the Clearing House;

(c) have, within its corporate group, at least one credit institution or 

investment firm licensed by the competent authorities of a member state 

of the European Union, or the equivalent of a credit institution or an 

investment firm licensed by the competent authorities of a country 

outside the European Union and which is subject to prudential rules 

considered by the Clearing House to be at least as stringent as those 

applicable to credit institutions and investment firms within the 

European Union; and

(d) in the event of a default, be able to receive from the Clearing House and 

to process SwapClear Contracts, and any associated hedge trades, in 

FPML format or in separated value electronic format.

Membership criteria for FCM Clearing Member status are contained in the 

Clearing House's FCM Regulations.

1.3.4 Supplementary Criteria Applicable to ForexClear Option Service Applicants 
Clearing House Procedures Clearing Member and Dealer Status 

LCH Limited © 2022 - 9 -

January March 2022

In addition to the criteria set out in these Procedures as being applicable to 

ForexClear Clearing Members, a Clearing Member that wishes to use the 

ForexClear Option Service must satisfy the requirements in this section, which 

shall be without prejudice to any other membership or participation 

requirements applicable to a Clearing Member under the Regulations, the 

Procedures and/or any Clearing Membership Agreement.

A ForexClear Clearing Member that wishes to be designated as a ForexClear 

Option Clearing Member shall apply to the Clearing House in the manner 

prescribed by the Clearing House from time to time. That Clearing Member 

must, at the point of application and at all times thereafter, satisfy, in a manner 

satisfactory to the Clearing House, the following conditions (together, the 

"ForexClear Option Service Membership Requirements"):

(i) the Clearing Member must be a ForexClear Clearing Member;

(ii) the Clearing Member must at all times have primary nostro accounts 

in place with a bank satisfactory to the Clearing House to record, 

effect and receive payments denominated in each ForexClear 

Currency;

(iii) the Clearing Member must at all times be able to demonstrate to the 

Clearing House that it or its designated settlement agent is capable of 

effecting timely payments within the applicable real-time gross 

settlement system for each ForexClear Currency;

(iv) the Clearing Member must at all times be able to demonstrate to the 

Clearing House that it has back-up account arrangements in place 

with a bank satisfactory to the Clearing House to record, effect and

receive payments denominated in each ForexClear Currency in the 

event that its primary nostro is unavailable;

(v) prior to the date on which the Clearing Member is designated as a 

ForexClear Option Clearing Member, the Clearing Member shall pay 

to the Clearing House:

(A) an amount of cash denominated in Australian Dollars 

equal to the AUD ForexClear Liquidity Fund 

Contribution applicable to that Clearing Member;

(B) an amount of cash denominated in Euros equal to the 

EUR ForexClear Liquidity Fund Contribution applicable 

to that Clearing Member;

(C) an amount of cash denominated in Sterling equal to the 

GBP ForexClear Liquidity Fund Contribution applicable 

to that Clearing Member; and

(D) an amount of cash denominated in Swiss Francs equal to 

the CHF ForexClear Liquidity Fund Contribution 

applicable to that Clearing Member.
Clearing House Procedures Clearing Member and Dealer Status 

LCH Limited © 2022 - 10 -

January March 2022

(vi) prior to the date on which the Clearing Member is designated as a 

ForexClear Option Clearing Member, the Clearing Member shall pay 

to the Clearing House the ForexClear Option Service Default Fund 

Contribution (to the extent it has not already paid this to the Clearing 

House);

(vii) the Clearing Member must at all times either:

(A) have access to, and have all necessary documentation (if 

any) in place with, a third party provider approved by the 

Clearing House as being responsible for communicating, 

matching and facilitating the exercise and/or expiry of 

each ForexClear Option Contract to which it is a party; 

and

(B) have direct access to the ClearLink API, or similar direct 

communication methods as offered under the ForexClear 

Service, for the purpose of communicating directly with 

the Clearing House regarding exercise and/or expiry of 

each ForexClear Option Contract to which it is a party,

(viii) the Clearing Member must enter into, deliver, and maintain, any 

agreement, deed, form or other document that is required by the 

Clearing House from time to time in connection with the ForexClear 

Option Service;

(ix) the Clearing Member must not be a Defaulting Clearing Member;

(x) the Clearing Member must participate in testing and trialling as 

requested by the Clearing House from time to time in connection with 

the ForexClear Option Service;

(xi) the Clearing Member must be an “institution” or a “participant” 

within the meaning of the Financial Markets and Insolvency 

(Settlement Finality) Regulations 1999 (S.I. 1999 No. 2979), as 

amended; and

(xii) the Clearing Member must satisfy all other requirements and 

eligibility criteria that may be applicable to it from time to time under 

the Regulations, the Procedures and/or the Clearing Membership 

Agreement.

A Clearing Member’s status as a ForexClear Option Clearing Member is, at all 

times, subject to the condition precedent that it satisfies, in a manner satisfactory 

to the Clearing House, the ForexClear Option Service Membership 

Requirements in effect at the applicable time.

The Clearing House may, from time to time, publish a list of Clearing Members 

who are eligible to use the ForexClear Option Service.

For the avoidance of doubt, a ForexClear Clearing Member that the Clearing 

House has designated as a ForexClear Option Clearing Member shall, subject 
Clearing House Procedures Clearing Member and Dealer Status 

LCH Limited © 2022 - 11 -

January March 2022

to Regulation 16, Regulation 99(b), the ForexClear Procedures and the Default 

Rules, be eligible to have ForexClear Option Contracts, ForexClear 

Deliverable Forward Contracts, ForexClear Spot Contracts and/or ForexClear 

Swap Contracts registered in its name (and not only ForexClear Option 

Contracts).

1.3.5 Supplementary Criteria Applicable to ForexClear Applicants 

In addition to the minimum Net Capital Requirements as set out in Section 1.7.2, 

an applicant must satisfy the following criteria:

(a) successfully participate, or demonstrate that it has: (i) an affiliated 

ForexClear Clearing Member ("FXCCM") that can successfully 

participate; or (ii) an LCH Approved Outsourcing Party that can 

successfully participate, in a ForexClear "fire drill" run by the Clearing 

House which shall involve submitting a bid for a notional portfolio of 

trades within specific currency pairs in a specified 

timeframe. Submission of a bid outside the timeframe specified by the 

Clearing House or submitting a bid that is unreasonable will constitute 

a failure of the "fire drill" and the applicant's FXCCM application will 

not be approved;

(b) be able to participate or demonstrate that it has: (A) an affiliated 

FXCCM that can successfully participate; or (B) an LCH Approved 

Outsourcing Party that can successfully participate, in the ForexClear 

default management process as operated by the Clearing House;

(c) have, within its corporate group, at least one credit institution or 

investment firm licensed by the competent authorities of a member state 

of the European Union, or the equivalent of a credit institution or an 

investment firm licensed by the competent authorities of a country 

outside the European Union and which is subject to prudential rules 

considered by the Clearing House to be at least as stringent as those 

applicable to credit institutions and investment firms within the 

European Union; and

(d) in the event of a default, be able to receive from the Clearing House and 

process ForexClear Contracts, and any associated hedge trades, in 

FPML format or, separated value electronic format.

1.3.6 Supplementary Criteria Applicable to Special Clearing Member Applicant 

The Clearing House may agree with an applicant for Special Clearing Member 

status, in addition to or in place of requirements set out in these Procedures, 

such further terms as it deems appropriate in the circumstances of the applicant 

and its business and these shall be reflected in the Clearing Membership 

Agreement.

1.3.7 Supplementary Criteria Applicable to Clearing Members subject to certain U.S. 

laws
Appendix IV: Procedure Section 2I

[ForexClear Clearing Service]
LCH LIMITED

PROCEDURES SECTION 2I

FOREXCLEAR CLEARING SERVICE
Clearing House Procedures ForexClear Service 

LCH Limited © 20221 - 38 - October March 20221

(C) Accrual Factor (factor used to convert the PAA Rate 

from an annual rate to a daily rate, on a basis of a year 

of 360 days).

(iii) So:

(A) PAA T = PAAT Rate x MTMT-1 x Accrual Factor.

The Clearing House uses the PAA Rate from the relevant EOD 

overnight index swap curves, which is sourced from the Clearing 

House.

1.5.6 Initial Margin: The Clearing House will require FXCCMs to transfer 

Collateral to the Clearing House in respect of their initial margin obligations.

Each FXCCM’s initial margin obligation will comprise the aggregate of the 

initial margin obligations separatelybe calculated on an aggregate basis across 

its ForexClear Contracts within in relation to (i) the ForexClear NonDeliverable Service and (ii) the ForexClear Deliverable Service.

(a) Calculation of Initial Margin: Separate initial margin calculations are 

performed for an FXCCM's Proprietary Account, each Client Account

(other than an Indirect Gross Account) and each Indirect Gross SubAccount within an Indirect Gross Account. No offset between the

Proprietary Accounts and the Client Accounts is allowed (except 

pursuant to Rule 8(d) of the Default Rules or any Insufficient 

Resources Determination Rule) and no offset between any Client 

Accounts is allowed (except pursuant to Rule 15(a)(ii) of the Default 

Rules, a Cross-ISA Client Excess Deduction or any Insufficient 

Resources Determination Rule).

The initial margin obligation is calculated on a real-time (or near realtime) basis throughout each day. With respect to each FXCCM, it is 

calculated for the portfolio of open ForexClear Contracts and 

ForexClear Transactions using ForexClear's Portfolio Analysis and 

Risk ("FxPAR") margining model. FxPAR is based on a modified 

historical simulation expected shortfall methodology. All open 

ForexClear Contracts and ForexClear Transactions in each Currency 

Pair are re-valued under a series of FX rate and yield curve scenarios 

to estimate the potential portfolio profit and loss and therefore the 

initial margin requirement.

The adequacy of the initial margin calculation is reviewed daily. 

ForexClear Clearing Members will usually be notified by the Clearing 

House of alterations to margin model parameters no later than the day 

before calls are made based on the new parameters. Further details of 

this method are available upon request from the ForexClear Risk team.

FxPAR uses the market data submitted by FXCCMs pursuant to 

paragraph 1.5.1(a) (Product Valuation).
Clearing House Procedures ForexClear Service 

LCH Limited © 20221 - 39 - October March 20221

Initial Margin Add-ons: Credit risk, liquidity risk and sovereign risk 

margin add-ons are measured and applied to FXCCMs as part of the 

initial margin requirement calculation.

(b) Credit Risk Margin ("CRiM"): CRiM reflects the additional risk 

related to the FXCCM’s credit quality. The CRiM calculation 

considers the FXCCM's credit worthiness, initial margin obligation 

level and/or stress testing exposures in accordance with LCH Credit 

Risk Policy.

(c) Liquidity Risk Margin (“LRM”): LRM reflects the additional risk due 

to the FXCCM having concentrated risk exposures above set 

thresholds in a particular Currency Pair or ForexClear Currency Pair or

tenor of ForexClear Contracts. The LRM is calculated in accordance 

with parameters set by the ForexClear Default Management Group (the 

"FXDMG").

(d) Sovereign Risk Margin ("SRM"): SRM reflects the additional risk

related to a potential country default or a change in a country's 

currency regime, including risk relating to a country’s external debt or 

level of foreign exchange reserves, which would impact ForexClear 

Contracts transacted in certain Reference Currencies. The SRM 

calculation considers the probability of sovereign default occurring and

the depreciation or appreciation risk of the Reference Currencies.

(e) Settlement Management Margin ("SMM"): SMM reflects the 

additional risk associated with a potential settlement failure. The SMM 

calculation considers the FXCCM’s future settlement obligations in

each of the relevant currencies and the potential cost of utilising and 

replenishing liquidity provisions, where required, to fulfil those 

settlement obligations. The SMM is calculated in respect of ForexClear 

Deliverable Contracts only. 

(f) Default Fund Additional Margin: The Clearing House may from time 

to time require an FXCCM to transfer Collateral to the Clearing House 

to meet the default fund additional margin requirement as determined 

and notified by the Clearing House to such FXCCM ("DFAM"). The 

methodology by which the Clearing House determines DFAM is 

available on the secure area of the Clearing House website. The 

Clearing House will record any Collateral an FXCCM has provided to 

meet its DFAM obligation to the FXCCM’s Proprietary Account.

(g) Additional Margin: The Clearing House may require an FXCCM to 

transfer additional Collateral to the Clearing House (in addition to

amounts of Collateral already transferred to the Clearing House in 

respect of any initial margin and variation margin obligations) as 

security for the performance by an FXCCM of its obligations to the 

Clearing House in respect of ForexClear Contracts to which such 

FXCCM is a party in accordance with Regulation 20 (Margin and 

Collateral). This may be required from time to time where, in the 

opinion of the Clearing House, the risk inherent in ForexClear