Transactions subject to Default rules
Transactions executed away from the Exchange's order book must be trade reported to the Exchange as in accordance with rules 3000 and 3010. In the case of a Lehman trade with a non-member counterparty, Lehman would have therefore had to trade report that transaction to the Exchange.
If a non-member counterparty had a standing instruction with Lehman that it wanted all of its transactions to be subject to the rules, or that it gave similar instructions on a trade by trade basis, then it is likely that Lehman would have reported it to the Exchange.
Where no such instructions have been agreed, then it is likely, based on the information provided by Lehman, that any trade in a EU regulated market security will have been reported by Lehman as a OTC trade and would not therefore be an Exchange transaction. In contrast, trades in AIM securities and International Order Book (IOB) securities should have been reported to the Exchange as on Exchange transactions.
Reconciliation and Net amounts
London Stock Exchange Notice N19/08 issued on 25th September 2008 provided guidance for LSE non-members who were counterparties to Lehman Brothers International (Europe) (in administration) (“LBIE”).
The LSE is moving towards the closing stages of its default process in relation to its member firms and is now concentrating particularly on any remaining unsettled on Exchange, non-CCP transactions (“market contracts”) between LBIE and non-member counterparties. The LSE's ability to reconcile these remaining unsettled market contracts relies heavily on submissions made by LSE non-members to the LSE identifying such transactions; to date, the LSE has received few such submissions.
To assist the LSE in its reconciliations of these remaining unsettled market contracts, any LSE non-members who have unsettled market contracts with LBIE should contact the LSE's Deputy Default Official, John Newbury, on 0207 797 1615 or via email at email@example.com together with appropriate confirmatory material, no later than Friday 6th August 2010. After this period, the LSE will move to make its final reconciliations on the basis of the information available and finally close out the LBIE default process.
This request for further information has also been published on PricewaterhouseCoopers LLP’s website at http://www.pwc.co.uk/eng/issues/lehman_general_update_150710.html