FMX and FCM Clearing Members - EMIR client clearing

LCH Limited (“LCH”) began providing clearing services for FMX Futures Exchange, L.P. (“FMX”) on 23 September 2024. LCH is a Derivatives Clearing Organization (“DCO”) registered with the Commodity Futures Trading Commission (“CFTC”). FMX is a Designated Contract Market (“DCM”) registered with the CFTC.

LCH has received questions from FCM Clearing Members regarding their obligations under LCH’s FCM Rulebook in connection with the provision of client clearing services.

FCM Regulation 7(a) (available here) requires that:

Where an FCM Clearing Member offers or provides Client Clearing Services to an Affected Client, it must offer the following arrangement to that Affected Client: If the Affected Client elects EMIR Client Clearing, the FCM Clearing Member must, to the extent permitted and practicable under Applicable Law, procure the availability of EMIR Client Clearing for that Affected Client either through an affiliated Non-FCM Clearing Member or another Clearing Member.

“Affected Client” means a client of an FCM Clearing Member (or potential client of an FCM Clearing Member) in respect of which the application of laws or regulations in the client’s jurisdiction of establishment or applicable in the context of activity on a relevant trading platform do not prevent or prohibit EMIR Client Clearing being provided to such client.

Clients that execute futures contracts on a DCM such as FMX are typically not Affected Clients as US law and regulation prohibits clients from clearing through an entity that is not registered with the CFTC as a Futures Commission Merchant. Therefore, pursuant to LCH’s FCM Rulebook, an FCM Clearing Member is not required to offer EMIR Client Clearing to its clients in relation to their use of such FCM Clearing Member to clear FCM Listed Interest Rate Contracts which arise as a result of trading on FMX.

This circular is provided solely for the purposes of providing an interpretation of the LCH Rulebook and does not constitute advice of any nature (legal or otherwise). Clearing Members should seek their own legal advice regarding the provision of clearing services. Members are reminded that by clearing through LCH Limited, which is both a UK authorised CCP and a CFTC registered DCO, that they may be required to make risk disclosures in connection with the clearing services being provided and the applicable customer protection regime.

Terms used, and not defined, in this circular have the meanings assigned in the FCM Rulebook (available here).