LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

VIA CFTC Portal

15 February 2021

Mr Christopher Kirkpatrick

Commodity Futures Trading Commission

115 21st Street NW

Three Lafayette Centre

Washington DC 20581

Dear Mr Kirkpatrick

NDFs in new currency pairs

Pursuant to CFTC regulation §39.5(b), LCH Limited (“LCH”), a derivatives clearing organization 

(“DCO”) registered with the Commodity Futures Trading Commission (the “CFTC”), is submitting the 

following Non-Deliverable Forwards (“NDFs”) currency pairs for determination of whether 

mandatory clearing should apply.

- USD/Canadian Dollar (“CAD”)

- USD/Swedish Krona (“SEK”)

- USD/Danish Krone (“DKK”)

- USD/Norwegian Krone (“NOK”)

- USD/South African Rand (“ZAR”) 

- USD/Singapore Dollar (“SGD”)

- USD/Mexican Peso (MXN)

Background

The ForexClear service currently clears NDFs on five G10 currency pairs and 12 emerging market 

(“EM”) currency pairs. LCH intends to extend the current ForexClear product offering to include NDF 

contracts on the above currency pairs to meet Clearing Members’ demand. The technical 

deployment will be completed on 15 February 2021 and the business launch will be on 22 February 

2021. These dates have been communicated to Clearing Members.

Factors for determination

 

The existence of significant outstanding notional exposures, trading liquidity, and adequate pricing 

data 

 

The FX market is fast paced, global and well established with a clear product set. The majority of FX 

transactions are short dated and volume has grown considerably over the last ten years. Table 1 

shows total average daily volumes for the proposed currency pairs (Source: BIS Triennial FX Survey 

2019); although it should be noted that the bulk of the volume on the proposed currency pairs 

currently trades as deliverable FX, with a small proportion being traded as non-deliverable, as further 
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

set out below. Expanding the clearing eligibility to non-deliverable contracts may help in increasing 

exposures and trading liquidity in this new currency pairs.

Table 1

Currency 

Pair 

USD/CAD USD/DKK USD/NOK USD/SEK USD/SGD USD/ZAR USD/MXN Total

Total ADV 

(USD $bn)

332 42 119 134 119 72 114 932

The price data currently used in the ForexClear service is provided real-time directly by clearing 

members. Price data includes FX spot rates and swap points for specified tenors as well as implied 

volatility points for specified tenors and deltas for all currency pairs. 

The availability of rule framework, capacity, operational expertise and resources, and credit support 

infrastructure to clear the contract on terms that are consistent with the material terms and trading 

conventions on which the contract is then traded 

LCH has a well-developed rule framework and support infrastructure for clearing FX transactions. 

LCH will continue to leverage this existing operational capability to clear the new NDF currency pairs. 

In order to prepare for the launch of this product, LCH has been performing testing, including 

capacity testing. 

Further to this, LCH have notified its Clearing Members of a number of changes to the Product 

Specific Contract Terms and Eligibility Criteria Manuals (or referred to as “Product Manuals”) 

applicable to Clearing Members that are Futures Commission Merchants (“FCM Clearing Members”) 

and non FCM Clearing Members. The changes have been submitted for self-certification to the CFTC 

and are available on the LCH website.

The effect on mitigation of systemic risk, taking into account the size of the market for such contract 

and the resources of the DCO available to clear the contract 

The operational capability to manage the additional NDF currency pairs is already in place in LCH.

LCH expects current ForexClear Clearing Members to start clearing the new currency pairs following 

the go-live date. A subset of existing Clearing Members will be ready on the go live date and plan to 

execute a few trades. More existing Clearing Members are expected to be ready in the near future 

where volumes/open interest in the additional currency pairs are expected to increase. 

Based on the statistics of the latest Triennial Survey of the Bank for International Settlements, the 

daily average turnover of the new currencies represents around 9% of the global FX market daily 

turnover, although only a very small proportion of this 9% is traded as Non-Deliverable Forwards. 

Therefore, allowing clearing of Non-Deliverable Forwards on these additional currency pairs is 

unlikely to have a significant impact on the risk profile or total resources held by the ForexClear 

service. As such, the systemic risk profile of LCH remains unchanged as a result of the new product 

offering.
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

The effect on competition, including appropriate fees and charges applied to clearing 

CME Clearing offers clearing of Cash Settled Forwards in all of the additional currency pairs. LCH is 

not aware of other competitors clearing NDFs on these currency pairs. 

Following the business launch, scheduled for 22 February 2021, the additional NDF currency pairs 

will be subject to the current fee plan applicable to the ForexClear non-deliverable service. The fees 

will differ according to the tariff chosen by Clearing Members and may consist of an annual charge 

and a charge based on the clearing activity. 

The existence of reasonable legal certainty in the event of the insolvency of the relevant DCO or one 

or more of its clearing members with regard to the treatment of customer and swap counterparty 

positions, funds and property 

The level of legal certainty around the clearing of NDF Contracts in the additional currency pairs is in 

all material respects the same as that of the products already cleared in the ForexClear service at 

LCH.

Insofar as legal certainty in the event of the insolvency of the DCO is concerned, LCH would be 

wound up under English law.

 

Further information §39.5(b)(iii-viii) 

The specifications of products eligible for clearing in the ForexClear service are set out in the LCH 

Product Specific Contract Terms and Eligibility Criteria Manuals, which are publicly available on the 

LCH website (link). These will be updated with the specifications of the new NDF Contracts.

The participant eligibility standards for the new NDFs are the same as those for existing ForexClear 

Clearing Members. 

As noted above, the market data is provided real-time directly by Clearing Members.

There are no material changes within the service. In particular, there are no changes to the operational 

model or material risk management changes. Initial Margin calculation, Variation Margin and 

settlement will all be in USD in line with the current NDF offering. ForexClear will be making updates 

and changes to the stress scenarios for each new currency pair, as per usual process for the extensions 

of product offering.

As noted above, LCH will update the following sections of the Product Specific Contract Terms and 

Eligibility Criteria Manuals accordingly:

- Contract terms

- Contract eligibility criteria 

- Contract Templates
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

For the existing emerging market currencies ForexClear follows the contract templates published by 

EMTA1(the “EMTA Contract Templates”) on its website on the relevant Trade Date and for other 

currencies LCH includes its contract templates in the Product Manuals. Currently, the latter are 

referred to as “LCH G10 NDF Contract Templates”. This will now change to “Non-EMTA NDF Contract 

Templates” to cover all the new currency pairs.

The above updates have been submitted to the CFTC for self-certification pursuant to §40.6(a).

LCH engages its Clearing Members in the design and testing of new products at an early stage, 

through regular meetings and working groups. Clearing Members have been formally notified of the 

changes which LCH is required to make to the Product Manuals.

Notice of this submission under CFTC regulation §39.5(b) was given to ForexClear Clearing Members 

on 28 January 2021 and a copy of this notice is provided at Appendix A. Furthermore, this submission 

is publicly available2.

LCH intends to launch these products with its Clearing Members and clients on, or after, 22 February 

2021.

Should you have questions please contact me.

Yours sincerely

P.P. 

Julian Oliver

Chief Compliance Officer

LCH Limited

1 Emerging Markets Trade Association.

2 https://www.lch.com/resources/rules-and-regulations/regulatory-responses
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

Appendix A

Notice to Clearing Members regarding the 39.5 (b) submission on new NDF currencies
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

Memo

To ForexClear Clearing Members

From Loic Moreau, Head of In-Business Risk ForexClear

Date 28 January 2021

Subject Submission on new NDF currency pairs for determination of clearing requirements 

Pursuant to CFTC regulation §39.5(b), LCH Limited (“LCH”), a derivatives clearing organization 

(“DCO”) registered with the Commodity Futures Trading Commission (the “CFTC”), is submitting the 

following Non-Deliverable Forwards (“NDFs”) currency pairs for determination of whether 

mandatory clearing should apply.

- USD/Canadian Dollar (“CAD”)

- USD/Swedish Krona (“SEK”)

- USD/Danish Krone (“DKK”)

- USD/Norwegian Krone (“NOK”)

- USD/South African Rand (“ZAR”) 

- USD/Singapore Dollar (“SGD”)

- USD/Mexican Peso (MXN)

As per CFTC regulation §39.5(b)(viii), LCH is required to notify Clearing Members of its submission. 

This note does not constitute a notification that the products are live for clearing. A notice 

announcing the live date and arrangements for the formal product launch may be published 

separately. 

The ForexClear service currently clears NDFs on five G10 currency pairs and 12 emerging market 

(“EM”) currency pairs. LCH intends to extend the current ForexClear product offering to include NDF 

contracts on the above currency pairs to meet Clearing Members’ demand.

Factors for determination

 

The existence of significant outstanding notional exposures, trading liquidity, and adequate pricing 

data 

 

The FX market is fast paced, global and well established with a clear product set. The majority of FX 

transactions are short dated and volume has grown considerably over the last ten years. Table 1 

shows total average daily volumes for the proposed currency pairs (Source: BIS Triennial FX Survey 

2019).
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

Table 1

Currency 

Pair 

USD/CAD USD/DKK USD/NOK USD/SEK USD/SGD USD/ZAR USD/MXN Total

Total ADV 

(USD $bn)

332 42 119 134 119 72 114 932

The price data currently used in the ForexClear service is provided real-time directly by clearing 

members. Price data includes FX spot rates and swap points for specified tenors as well as implied 

volatility points for specified tenors and deltas for all currency pairs. 

The availability of rule framework, capacity, operational expertise and resources, and credit support 

infrastructure to clear the contract on terms that are consistent with the material terms and trading 

conventions on which the contract is then traded 

LCH has a well-developed rule framework and support infrastructure for clearing FX transactions. 

LCH will continue to leverage this existing operational capability to clear the new NDF currency pairs. 

In order to prepare for the launch of this product, LCH has been performing testing, including 

capacity testing. 

Further to this, LCH have notified its Clearing Members of a number of changes to the Product 

Specific Contract Terms and Eligibility Criteria Manuals (or referred to as “Product Manuals”) 

applicable to Clearing Members that are Futures Commission Merchants (“FCM Clearing Members”) 

and non FCM Clearing Members. The changes will be submitted for self-certification to the CFTC and 

will be made available on the LCH website in due course. 

The effect on mitigation of systemic risk, taking into account the size of the market for such contract 

and the resources of the DCO available to clear the contract 

The operational capability to manage the additional NDF currency pairs is already in place in LCH.

LCH expects current ForexClear Clearing Members to start clearing the new currency pairs following 

the go-live date. A subset of existing Clearing Members will be ready on the go live date and plan to 

execute a few trades. More existing Clearing Members are expected to be ready in the near future 

where volumes/open interest in the additional currency pairs are expected to increase. 

Based on the statistics of the latest Triennial Survey of the Bank for International Settlements, the 

daily average turnover of the new currencies represents around 9% of the global FX market daily 

turnover, although only a very small proportion of this 9% is traded as Non-Deliverable Forwards. 

Therefore, allowing clearing of Non-Deliverable Forwards on these additional currency pairs is 

unlikely to have a significant impact on the risk profile or total resources held by the ForexClear 

service. As such, the systemic risk profile of LCH remains unchanged as a result of the new product 

offering.

The effect on competition, including appropriate fees and charges applied to clearing 

CME Clearing offers clearing of Cash Settled Forwards in all of the additional currency pairs. LCH is 

not aware of other competitors clearing NDFs on these currency pairs. 
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

Following the launch, scheduled for 15 February 2021, the additional NDF currency pairs will be 

subject to the current fee plan applicable to the ForexClear non-deliverable service. The fees will 

differ according to the tariff chosen by Clearing Members and may consist of an annual charge and a 

charge based on the clearing activity. 

The existence of reasonable legal certainty in the event of the insolvency of the relevant DCO or one 

or more of its clearing members with regard to the treatment of customer and swap counterparty 

positions, funds and property 

The level of legal certainty around the clearing of NDF Contracts in the additional currency pairs is in 

all material respects the same as that of the products already cleared in the ForexClear service at 

LCH.

Insofar as legal certainty in the event of the insolvency of the DCO is concerned, LCH would be 

wound up under English law.

 

Further information §39.5(b)(iii-viii) 

The specifications of products eligible for clearing in the ForexClear service are set out in the LCH 

Product Specific Contract Terms and Eligibility Criteria Manuals, which are publicly available on the 

LCH website (link). These will be updated with the specifications of the new NDF Contracts.

The participant eligibility standards for the new NDFs are the same as those for existing ForexClear 

Clearing Members. 

As noted above, the market data is provided real-time directly by Clearing Members.

There are no material changes within the service. In particular, there are no changes to the operational 

model or material risk management changes. Initial Margin calculation, Variation Margin and 

settlement will all be in USD in line with the current NDF offering. ForexClear will be making updates 

and changes to the stress scenarios for each new currency pair, as per usual process for the extensions 

of product offering.

As noted above, LCH will update the following sections of the Product Specific Contract Terms and 

Eligibility Criteria Manuals accordingly:

- Contract terms

- Contract eligibility criteria 

- Contract Templates

For the existing emerging market currencies ForexClear follows the contract templates published by 

EMTA3(the “EMTA Contract Templates”) on its website on the relevant Trade Date and for other 

currencies LCH includes its contract templates in the Product Manuals. Currently, the latter are 

3 Emerging Markets Trade Association.
LCH | Aldgate House | 33 Aldgate High Street | London EC3N 1EA | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

LCH Group Holdings Limited. Registered in England No. 4743602 Registered Office: Aldgate House, 33 Aldgate High Street, London EC3N 1EA

referred to as “LCH G10 NDF Contract Templates”. This will now change to “Non-EMTA NDF Contract 

Templates” to cover all the new currency pairs.

The above updates will be submitted to the CFTC pursuant to §40.6(a) ahead of the launching date 

expected to be 15 February 2021.

LCH engages its Clearing Members in the design and testing of new products at an early stage, 

through regular meetings and working groups. Clearing Members have been formally notified of the 

changes which LCH is required to make to the Product Manuals.

Further information will form part of the full §39.5 filing which will be publicly available on the LCH 

website. 

Please do not hesitate to contact me regarding any questions raised by this submission.