Main navigation Secure Area Search Breadcrumb Home / Services / RepoClear / RepoClear SA / Enhancements / Sponsored Clearing SA Share + Sponsored Clearing SA Unlock capacity, drive efficiencies Sponsored Clearing extends the benefits of direct CCP membership to the buy-side community. By inviting member banks to sponsor buy-side direct access to the CCP, LCH provides an innovative way to enhance existing clearing relationships, while generating operational efficiencies for all participants. Sponsored Clearing seeks to ease the pressure on bank balance sheets by delivering superior capital and margin efficiencies for our membership. This is achieved in part through enhanced netting opportunities across all EUR government markets cleared by RepoClear SA and will be launched from H2 2021*. What is a Sponsored Member? Sponsored Members join under a new membership category that allows buy-side firms to enjoy the full benefits of clearing through LCH. This creates a direct transactional relationship between LCH and the Sponsored Member, making LCH the counterparty to each cleared trade. Sponsored Members are supported by an Agent Member (sponsoring bank) that facilitates margin payments (as paying agent) and provides default fund contributions for each sponsored transaction. Opportunities for all As LCH expands the breadth of its membership, multilateral netting through RepoClear will increasingly provide superior balance sheet, settlement and risk reductions to our members. By helping manage capital costs and simplifying operational workflows, Sponsored Clearing can free up capital and increase trading capacity. The potential benefits of Sponsored Clearing For Agent Members (sponsoring banks): Increased balance sheet optimization and capital efficiencies Opportunities for enhanced customer relationships through the provision of agent services Reduced liquidity risks For Sponsored Members: Increased bank capacity for Sponsored Member activity resulting from capital savings Reduced bilateral credit risk and default exposures Increased operational efficiencies, with settlement netting leading to a reduction in intra-day liquidity requirements World-class risk management Netting benefits Members’ netting opportunities increase as Sponsored Member transactions are cleared, making LCH the counterparty to each trade. The Agent Member role is not restricted to the executing counterparty of the original trade. Roles and responsibilities The Sponsored Clearing model splits the traditional responsibilities of a clearing member between the Sponsored Member and its sponsoring Agent Member. Sponsored Member responsibilities LCH relationship Act as the direct counterparty of LCH for each cleared trade Trade settlement Settle directly with LCH, or through their custodian/settlement agent. The Agent Member does not guarantee performance. Margin liability Post margin payments to the CCP, facilitated by their Agent Member Agent Member responsibilities Default fund contributions / waterfall Provide Default Fund Contributions Agent resources Deliver an additional pre-funded resource to the Sponsored Member’s default waterfall and a buffer for margin cover Margin management Facilitate the payment of the Sponsored Member’s margins in a paying agent capacity via T2 account Who can join? Initially we are opening sponsored membership to regulated funds, insurance companies and credit institutions, but the Sponsored Clearing model be extended to other entities following launch. To find out how to become a Sponsored Member, contact us today at sa.repoclear@lch.com. * Subject to necessary internal governance requirements and regulatory approval Footer Fraud Alert Cookies Privacy Statement Disclaimer Modern Slavery Act SiteMap Whistleblowing © 2021 LCH Cookie Control Icon LCH uses cookies to improve its website. We use necessary cookies to make our site work. We would also like to set optional cookies to improve our site and bring you more features. For more information on how we use cookies please see our cookie policy. View our cookie policies Accept all Choose cookies