LMMA SETS OUT ITS RECOMMENDATIONS ON MARKET DISCIPLINE FOR CLEARED TERM DBV

The LMMA has set out its recommendations on market discipline for Cleared Term DBV to the Bank of England’s Securities Lending and Repo Committee (SLRC). The recommendations are:

1 It is in the best interests of the market that no penalties should be imposed for fails.
2 A fails report should be made available on a daily basis so that the market can monitor in real time how Cleared Term DBV is working.
3 EUI and LCH.Clearnet should update their existing procedures to accommodate Cleared Term DBV and investigate whether specific trades could be flagged when input to ensure that stock is not taken out in error.
4 The Bank of England via SLRC should revise and update the Gilt Repo Code of Conduct and/or issue a standalone document to accommodate Cleared Term DBV and include a guide to good market practice.
5 Clearing procedures should be revised to prevent margin calls being made on UK Bank Holidays when the sterling market is closed.

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