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Is Gold Money? LCH Accepts Shiny Yellow Metal As Collateral

Tyler Durden's picture





 

Whether it is because the CME just did it; or it's all their clients have left; or Gold volatility is lower than EURUSD volatility (9.0% vs 9.6% in last 3 weeks); or they see the painting on the wall of Draghi's grand-plans, the LCH-Clearnet just announced that as of August 28th, unallocated gold will be accepted as collateral for margin cover purposes. This now means all the major exchanges accept worthless barbarous relics as collateral - as well as worthless fiat paper 'money'.

 

Gold as Collateral Acceptable for Margin Cover Purposes

From 28 August 2012 unallocated Gold (Loco London) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) as collateral for margin cover purposes. 

This addition to acceptable margin collateral will be subject to the following criteria;

• Available for members clearing OTC precious metals forwards (LCH EnClear Precious Metals division) or precious metals contracts on the Hong Kong Mercantile Exchange. Acceptable to cover margin requirements for all markets cleared on both House and ‘Segregated’ omnibus Client accounts.

• Daily valuation, with an initial haircut of 14% applied.

• Concentration limits will be applied as follows;

o lodgement not to represent more than 40% of total margin requirement of participating members across all products, including for contingent variation margin (but not realised variation margin), applied at a legal entity sub account level. 
o a maximum lodgement limit per member group of USD 200m (currently approximately 130,000 troy ounces).

• LCH.Clearnet will make an accommodation charge of 20 basis points (bps) on utilised collateral amounts based upon member defined usage ordering rules. Costs incurred from the custodian will be passed on to clearing members on a pro rata basis and based on the value of the collateral lodged. 

• Members who are eligible and wish to lodge gold for margin cover purposes will be required to submit an executed Gold as collateral ‘charge’ document for the ‘House’ and/or ‘Client’ accounts together with supporting paperwork. Please contact the Membership Team to request the relevant legal documentation needed for approval to lodge gold as collateral.

• Procedures and account details can be found in at the link below prior to the live date and thereafter in Section 4 – Collateral, of the LCH.Clearnet Ltd Rulebook. http://www.lchclearnet.com/rules_and_regulations/ltd/proposed_rules.asp

• For further details of acceptable margin collateral please see the following link, which will be updated to reflect the addition of Gold Bullion from 28 August 2012. www.lchclearnet.com/risk_management/ltd/acceptable_collateral.asp

 


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Tue, 08/21/2012 - 14:43 | Link to Comment malikai
malikai's picture

If anyone bites this bait, wow.

Enjoy the coming margin calls.

Tue, 08/21/2012 - 14:47 | Link to Comment knukles
knukles's picture

Unallocated

LOL ....

Talk about shit disappearing with no recourse.
Ah, the fair City of London

This is desperation, deluxe
But then again, is not desperation the English way?

Tue, 08/21/2012 - 14:48 | Link to Comment GeezerGeek
GeezerGeek's picture

Unallocated. Because TPTB know the allocated gold has been vaporized already.

Tue, 08/21/2012 - 14:50 | Link to Comment malikai
malikai's picture

One man's unallocated is another man's rehypothecated.

Tue, 08/21/2012 - 14:50 | Link to Comment youngman
youngman's picture

I wonder if 100 firms can use the same brick of gold to collateral.......that is the London way

Tue, 08/21/2012 - 16:36 | Link to Comment Alea Iactaest
Alea Iactaest's picture

Yes.

Wed, 08/22/2012 - 00:24 | Link to Comment MarcusLCrassus
MarcusLCrassus's picture

I thought it was quite despiration.  

Tue, 08/21/2012 - 14:53 | Link to Comment ACP
ACP's picture

Yeah, what a novel way of stealing gold. I wonder what they have in mind...I wonder...

Tue, 08/21/2012 - 15:01 | Link to Comment Confundido
Confundido's picture

Weird...the Canadian dollar has been retracing all along the hike in gold....can someone offer an explanation?

Tue, 08/21/2012 - 15:20 | Link to Comment Mark Carney
Mark Carney's picture

Confucious says "Fawk, I give up with this"

Tue, 08/21/2012 - 21:35 | Link to Comment jez
jez's picture

Somebody at CNBC really ought to tell LCH Clearnet that you can't eat gold.

Tue, 08/21/2012 - 14:43 | Link to Comment Hype Alert
Hype Alert's picture

Makes a lot more sense to accept gold than one's and zero's!

Tue, 08/21/2012 - 15:01 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

binary ones and zeros, no?

Tue, 08/21/2012 - 15:06 | Link to Comment knukles
knukles's picture

No, The Count singing one of his songs on Sesame Street for Christ's sake.
About equal value...

Tue, 08/21/2012 - 14:44 | Link to Comment SeverinSlade
SeverinSlade's picture

A lot of interest lately in this barberous relic.  It must be tradition.

Tue, 08/21/2012 - 19:16 | Link to Comment ZeroSpread
ZeroSpread's picture

Tradition is to carry on the flame, not worshiping the ashes. What irony if out of EURUSD's ashes a new GLDstandard rises... 

Tue, 08/21/2012 - 14:45 | Link to Comment TonyCoitus
TonyCoitus's picture

Gold Bitchez, Gold!

Tue, 08/21/2012 - 14:46 | Link to Comment Dr. Engali
Dr. Engali's picture

Yeah sure...I'll be letting them hold my gold for collateral so they can rehypothecate it just before it's vaporized.

Tue, 08/21/2012 - 15:01 | Link to Comment XitSam
XitSam's picture

They can have my gold whey they pry it out of the mud at the bottom of Lake Feneketlen

Tue, 08/21/2012 - 14:47 | Link to Comment Vincent Vega
Vincent Vega's picture

They will hold my gold for me as collateral!? Gee whiz what a swell group of folks. I bet they'd even give me a receipt printed on fancy paper.

Tue, 08/21/2012 - 15:06 | Link to Comment knukles
knukles's picture

e-mail

Tue, 08/21/2012 - 14:47 | Link to Comment AL_SWEARENGEN
Tue, 08/21/2012 - 14:47 | Link to Comment hampsterwheel
hampsterwheel's picture

Paper gold or physical gold?

 

Tue, 08/21/2012 - 14:48 | Link to Comment youngman
youngman's picture

I doubt it will work to well as collateral...but as a payoff it might....do they accept my shares...I don´t have any by the way...of the ETF GLD....which we all know does not have any gold....or just some allocated stuff in a JPM warehouse???

Tue, 08/21/2012 - 14:59 | Link to Comment Yen Cross
Yen Cross's picture

 

"Gold as Collateral Acceptable for Margin Cover Purposes", Daily valuation with a "14% " HAIRCUT!  f..king CROOKS!
Tue, 08/21/2012 - 16:12 | Link to Comment OldE_Ant
OldE_Ant's picture

Hell just send your gold over to the waaay secure Ant Vaults, and we will only give you a 10% hair STYLE FOR FREE.   Hurry now storage space is LIEMITED.

End of Line

Tue, 08/21/2012 - 14:56 | Link to Comment JohnKozac
JohnKozac's picture

No wonder Chinese are loading up on undervalued Gold. Their stock market ha sbeen poor and Housing is a Super-Bubble:

 

The Chinese Stock Market Tumbles To A Post-Crisis Low

The Shanghai Composite closed down 0.38 percent on Monday, to a three-year low. This came after rise in Chinese home prices caused investors to speculate that Beijing would announce more property curbs to maintain a "firm grip" on its real estate market. 

Moreover, a newspaper run by the People's Bank of China said the central bank does not intend to cut reserve requirement ratios (RRR) in the near-term. This also disappointed markets that were looking for more interest rate and RRR cuts and easing following disappointing economic data.

In fact, the Shanghai Composite has diverged vastly from the S&P500. Global Macro Monitor points out "the Shanghai is down 39.2 percent from its post crash high while the S&P500 is up 42.3 percent over the same period"

 

http://www.businessinsider.com/chart-of-the-day-shanghai-composite-post-...

Tue, 08/21/2012 - 15:13 | Link to Comment onebir
onebir's picture

Also their bank accounts yield less than inflation. And the banks are insolvent... And the biggest cash denomination of the RMB (100RMB) is worth $16, and gets mouldy if you keep wads of them in a drawer in some parts of the country. :P

Tue, 08/21/2012 - 19:44 | Link to Comment SAT 800
SAT 800's picture

The Shanghai Composite has diverged vastly fromt he S&P 500; on the other hand, the S&P 500 has diverged vastly from reality.

Tue, 08/21/2012 - 14:56 | Link to Comment e-man
e-man's picture

I wonder how quickly the collateral gets rehypothecated and ends up in the vaults of some poor victimized bank...

Tue, 08/21/2012 - 15:00 | Link to Comment hannah
hannah's picture

YES...!....now i can buy more FB and short AAPL...WINNING.

Tue, 08/21/2012 - 15:00 | Link to Comment Confundido
Confundido's picture

It still is not money, because it can only be used to cover same metals...We need to see gold being able to be used to cover fiat. That's the catch!

 

Tue, 08/21/2012 - 15:02 | Link to Comment YesWeKahn
YesWeKahn's picture

Wait, Bernanke told the congress that Gold isn't money. Who is right? Did Bernanke lie to the congress? That's the punishment if he is proven to have lied to the US congress?

Tue, 08/21/2012 - 15:10 | Link to Comment knukles
knukles's picture

Congress and the Bernak are ALWAYS right.  Nobody in Congress or the Fed has or will ever lie.  If anybody who is not rich, powerful or connected ever lies to Congress, and those are the only people who do, they will be used for target practice with all the new ammo they're buying.

Tue, 08/21/2012 - 15:02 | Link to Comment NRGIsFree
NRGIsFree's picture


Don't these people know you can't eat gold. Four out of five doctors recommend eating paper over gold.

Tue, 08/21/2012 - 19:46 | Link to Comment SAT 800
SAT 800's picture

Newsflash; "Obamacare doctors reccomend eating paper." "Healthfull, and controls inflation".

Tue, 08/21/2012 - 15:04 | Link to Comment drivenZ
drivenZ's picture

Wouldnt really call this a vote of confidence for gold seeing as LCH also apparently accepts spanish and Italian 10yrs at a 10% haircut. 

Tue, 08/21/2012 - 15:12 | Link to Comment tmosley
tmosley's picture

>unallocated gold

>money

Pick one.

Guess this means they get to use every step of an infinite chain of rehypothecation scheme as collateral.  Fitting, as one oz of gold can back the entire financial system, meaning that gold has an infinite value when "priced" in fiat--any fiat.

Nice.

Tue, 08/21/2012 - 15:30 | Link to Comment debtor of last ...
debtor of last resort's picture

<-- unallocated gold

<-- real money

Tue, 08/21/2012 - 15:15 | Link to Comment Clowns on Acid
Clowns on Acid's picture

LCH is only doing this because of "Tradition".....right BenDover ?

Tue, 08/21/2012 - 15:18 | Link to Comment madcows
madcows's picture

The difference between gold and money is that gold can't easily be printed or created out of thin air.  Therefore, the value of gold may swing greatly in each direction given what people are willing to pay for it, but it will never be worthless... like Federal Reserve Notes.... or Confederate Dollars.  Neat to look at, but not very good for purchasing power.

Tue, 08/21/2012 - 15:27 | Link to Comment drivenZ
drivenZ's picture

this is very true but if you bought gold in the late 70's or early 80's and needed to use that gold anytime in the next 25 years your gold would have got you alot less stuff. So hopefully you have a long time horizon. 

Tue, 08/21/2012 - 15:38 | Link to Comment madcows
madcows's picture

It doesn't earn interest, or return dividends or create a product to sell to people.  It's not there to EARN you moremoney.  It's value is it's inability to be worthless.  It's a way to preserve capital.

I think the US is going to default.  It's currency (the dollar) is going to plummet in value.  I'd like to preserve what I have been able to save and then transfer back into the OldDollar or NewDollar as I need it.

Tue, 08/21/2012 - 19:19 | Link to Comment honestann
honestann's picture

To hell with dollars.

And I mean "new dollars", "old dollars", "pesos", "euros", "pounds", "lira" and all other forms of fiat, fake, fraud, fiction, fantasy toilet-paper.  And let me be perfectly clear.  To supposedly "link" a piece of paper to gold or other physical asset is a 100% INTENTIONAL SCAM.

The only honest, ethical way to transact with others is to exchange real, physical, valuable goods for other real, physical, valuable goods.  In practice, this includes bananas and cattle, and also silver and gold.

BOTH sides of transactions must be real, known by both parties, and have value in and of itself.

Tue, 08/21/2012 - 15:43 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Four generations, that's how long it's been since the Federal Reserve mandate was installed.

Three generations, that's how long it's been since FDR made gold possession illegal to US citizens.

Two generations, that's how long it's been since Nixon dispensed altogether with a hard currency "temporarily".  

One generation, that's a bit more than the length of the current bull run.

Tue, 08/21/2012 - 15:20 | Link to Comment ruffian
ruffian's picture

A Question for Tyler or anyone with a coherent thought............

Unallocated gold is imaginary gold , at best only worth a  fractonal value to the nominal amount of the unallocated contract's par value.  LCH must know this, so why would they accept it as collaterall?

 

 

Tue, 08/21/2012 - 15:42 | Link to Comment madcows
madcows's picture

I wonder, do they do Fractional Gold banking?  Do they tell every purchaser that they hold X ounces of their gold in Vaults, but couldn't possibly cover a gold deposit run?  What is their leverage, 40:1?  just Wondering.

Tue, 08/21/2012 - 15:57 | Link to Comment Solarman
Solarman's picture

Sounds like allocated gold, defined by Corzine as unallocatted will find its way to their warehouses, now protected by the U.S. Federal court system.  The theft of gold can begin in earnest.

Tue, 08/21/2012 - 16:42 | Link to Comment billsbest
billsbest's picture
MF'ing Justice - Jon Corzine Living Large

This has the odor of a Corzine operation, no?

Tue, 08/21/2012 - 16:46 | Link to Comment billsbest
billsbest's picture

Any physical gold holder worth his grams wouldn't tough this even with a tungsten tuning fork.

Tue, 08/21/2012 - 17:58 | Link to Comment Aquarius
Aquarius's picture

Money is the measure (a qualitative term) of integrity and or substance of the man

of a transaction,

Gold is the only Universal Standard known to man,

Gold is Royalty; Effect dervived from accomplished Cause,

Yes, indeed, Gold is Money.

The error is to mistake tokens as "money"

http://verbewarp.blogspot.com.au/2012/05/on-money.html

 

No Economist knows this; or it seems, even cares,

Economists are the apologiests of the Major Bankers,

and designers of the efficiency of the transfer of productivity from the people

to their Bankers (the original un-natural system, designed by the Bnakers themselves),

But it is the Bureaucrats that control and destroy Society,

while the politicans who call themselves "leaders",

dine at the expense of those whom pays their wages,

with of course, the Bankers who they live to serve.

 

Government is the natural Enemy and Predator of Society

and Humanity.

Tue, 08/21/2012 - 17:59 | Link to Comment Papasmurf
Papasmurf's picture

unallocated gold is so... fungible.

Tue, 08/21/2012 - 19:13 | Link to Comment honestann
honestann's picture

Is gold money?  Who cares?  So-called "money" is fiction, at least beyond meaning "that real, physical, valuable good that is most commonly adopted to determine exchange rates for other goods".

The only thing that matters is --- that all transactions are an exchange of "real known valuable goods" for "real known valuable goods".  This way both parties know what they traded-for and get what they traded-for.  And no third party has a way to insert their grubby paws into transactions and rip off the owners of those goods.

Wed, 08/22/2012 - 00:23 | Link to Comment MarcusLCrassus
MarcusLCrassus's picture

How barbaric of them. 

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