FCM REGULATIONS OF THE CLEARING HOUSE LCH LIMITED FCM Regulations Contents CONTENTS Regulation Page Regulation 1 Definitions ..................................................................................................... 2 (a) which the Clearing House and the Rates Exchange have agreed will be cleared in accordance with, and subject to, the Rates Exchange Rules and the FCM Rulebook via the FCM Listed Interest Rates Open Offer clearing mechanism (and not via novation under FCM Regulation 54); and ............ 27 (b) regardless of whether such match is described or characterised as a trade, transaction or agreement in the relevant Rates Exchange Rules. ................ 27 Chapter I - SCOPE ................................................................................................................... 33 Regulation 2 Obligations of the Clearing House to each FCM Clearing Member ........... 33 Regulation 3 Performance by the Clearing House of its Obligations under the Terms of an Open Contract; Novation ........................................................................ 34 Chapter II - STATUS ............................................................................................................... 35 Regulation 4 FCM Clearing Member Status and Application of LCH Regulations ......... 35 Regulation 5 Resigning and Retiring Members ................................................................ 38 Regulation 6 Service Withdrawal ...................................................................................... 40 Chapter III - ACCOUNTS AND CLIENT CLEARING ......................................................... 41 Regulation 7 FCM Client Business and FCM Client Account Segregation ..................... 41 Regulation 8 Proprietary Accounts and Trading ............................................................... 62 Regulation 9 Certain General Provisions Applicable to Accounts ................................... 63 Regulation 10 Acknowledgements and Agreements of FCM Clients ................................ 65 Chapter IV - CONTRACT FORMATION, REGISTRATION AND TRANSFER ................ 67 Regulation 11 Designation .................................................................................................. 67 Regulation 12 Trading Information ..................................................................................... 68 Regulation 13 Transfer ........................................................................................................ 69 Chapter V - COLLATERAL AND VALUATIONS ............................................................... 75 Regulation 14 Margin and Collateral .................................................................................. 75 Regulation 15 Margining of Swap Product Client Accounts: Certain Additional Provisions; Without Client Excess Model; With Client Excess Model .......................... 84 Regulation 16 Official Quotations and Reference Price; Settlement and Revaluation ....... 91 Chapter VI - OPTIONS, FCM EXCHANGE CONTRACTS SUBJECT TO DELIVERYNOTICE AND PHYSICALLY-SETTLED FCM CONTRACTS .............................................................................................. 92 Regulation 17 Exercise of Options ...................................................................................... 92 Regulation 18 Physically-Settled FCM Contracts Arising Upon the Exercise of an Option ..................................................................................................................... 94 - i - November 2019 FCM Regulations Contents Regulation 19 Margining of FCM Exchange CONTRACTS AND FCM LISTED INTEREST RATES Contracts..................................................................... 96 Regulation 20 Obligation to Make and Accept Delivery Notice ........................................ 97 Regulation 21 Physically-Settled FCM Contracts Not Requiring A Delivery NOTICE .. 100 Regulation 22 FCM Contracts Subject to Delivery Notice ............................................... 101 Regulation 23 Arrangements for Delivery and Payment of Price (Physically-Settled FCM Contracts) ................................................................................................... 103 Regulation 24 Restrictions on Clearing House’s Obligations and Liability ..................... 104 Regulation 25 Arbitration .................................................................................................. 105 Regulation 26 Collateral in Event of Claim ...................................................................... 107 Regulation 27 Default of a Member: Substituted Obligation ........................................... 108 Regulation 28 Premium Under Option Contracts ............................................................. 109 Chapter VII - DEFAULT, DISORDER, IMPOSSIBILITY AND FORCE MAJEURE ....... 110 Regulation 29 Market Disorders, Impossibility of Performance, Trade Emergency ........ 110 Regulation 30 Force Majeure ............................................................................................ 112 Chapter VIII - INVOICING BACK AND CURRENCY CONVERSION ........................... 113 Regulation 31 Invoicing Back ........................................................................................... 113 Regulation 32 Currency Conversion ................................................................................. 115 Chapter IX - DISCLOSURE, FEES, RECORDS AND AMENDMENTS ........................... 116 Regulation 33 Disclosure and Reporting ........................................................................... 116 Regulation 34 Fees and Other Charges ............................................................................. 118 Regulation 35 Records ...................................................................................................... 119 Regulation 36 Alteration of FCM Regulations and the FCM Procedures ........................ 120 Chapter X - NETTING AND DISTRIBUTION .................................................................... 121 Regulation 37 Netting ....................................................................................................... 121 Regulation 38 Distribution of Assets ................................................................................ 125 Chapter XI - MISCELLANEOUS ......................................................................................... 126 Regulation 39 FCM Procedures ........................................................................................ 126 Regulation 40 Interpretation of these FCM Regulations; Applicable Law; Clearing House Data ............................................................................................................ 127 Regulation 41 Waiver ........................................................................................................ 129 Regulation 42 Validity of FCM Regulations and Action .................................................. 130 Regulation 43 Governing Law and Jurisdiction ................................................................ 131 Regulation 44 Exclusion of Liability ................................................................................ 132 Regulation 45 Solvency Threatening Treasury Default Loss ........................................... 134 Chapter XII - FCM SWAPCLEAR REGULATIONS .......................................................... 136 Regulation 46 Registration of FCM SwapClear Contracts; Novation and Post-Novation Compression; SwapClear Accounts; Portfolio Transfers; bulk events ...... 136 - ii - November 2019 FCM Regulations Contents Regulation 47 Daily settlement of FCM SwapClear Contracts and FCM Forexclear Contracts .................................................................................................... 154 Regulation 48 [reserved.] .................................................................................................. 157 Chapter XIII - FCM FOREXCLEAR REGULATIONS ....................................................... 158 Regulation 49 Registration of FCM ForexClear Contracts; COMPRESSION; ForexClear Accounts .................................................................................................... 158 Regulation 50 Cancellation of FCM ForexClear Contracts .............................................. 167 Regulation 51 [RESERVED.] ........................................................................................... 168 Chapter XIV - FCM LISTED INTEREST RATES REGULATIONS .................................. 169 Regulation 52 REGISTRATION OF FCM LISTED INTEREST RATES CONTRACTS ................................................................................................................... 169 Regulation 53 FCM LISTED INTEREST RATES OPEN OFFER FOR RATES EXCHANGE MATCHES ......................................................................... 171 Regulation 54 FCM LISTED INTEREST RATES NOVATION TRANSACTIONS ........ 174 Regulation 55 ALLOCATION OF FCM LISTED INTEREST RATES NOVATION TRANSACTIONS ..................................................................................... 178 Regulation 56 DAILY SETTLEMENT TO MARKET .................................................... 180 Regulation 57 TERMINATION OF FUNGIBLE FCM LISTED INTEREST RATES CONTRACTS ............................................................................................ 181 Regulation 58 LIMITATION ON LIABILITY ................................................................ 182 Regulation 59