Changes to account segregation fuel rising cost, credit concerns

Rising costs, eroded margins, reduced or perhaps zero credit for clients: these are the concerns being voiced by ring dealers as the start date approaches for European Market Infrastructure Regulation (EMIR).

At the heart of their fears is the ruling that non-segregated account facilities must vanish, replaced by new segregation and collateral requirements.
The changes will kick in when the LME’s clearing house, currently LCH.Clearnet and soon to be LMEClear, is reauthorised under EMIR.
For LCH.Clearnet, this could happen as soon as April, market participants believe.
Then it will be all systems go for LME members, who are supposed to have the systems, technical capability and plumbing in place to offer new account structures, as well as having sent the appropriate disclosure documents to clients.
Unpopular ISAs
Why will the changes make it unviable for many brokers to grant credit? Because right now, LME accounts are either segregated or non-segregated.

For non-segregated accounts, a broker keeps the house money separate from the client money – although the line can become blurred because of margin call requirements for clients...

Published

Andrea Hotter

February 07, 2014

09:48 GMT

New York