Clearing members welcome LME default fund cap
But 2022 nickel crisis still makes hedge funds doubt banks would foot the bill for default at all
Clearing members say changes to the LME Clear default fund calculation should lead to a more rigorous enforcement of the defaulter-pays principle, and avoid banks footing the bill for corporate clients with outsized exposures.
An executive at a bank clearing member says they felt LME’s margin policies historically “leaned towards their corporate clients”, which might have lower levels of cash available for initial margin payments. As a result, clients could be under-margined, potentially leaving
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