Below you will find some information that can be used by member firms in their queries in relation to the default of Lehman Brothers International (Europe) Limited which was declared at 11:00 on Monday 15 September 2008. The Exchange will continue to update this information.
Administrator information - PricewaterhouseCoopers LLP ("PWC")
Here is a link to PWC's website which provides information in relation to the administration of Lehman Brothers International (Europe).Rules
The Default procedures are covered in paragraphs D010 - D200 of the Rules of the London Stock Exchange. Only transactions effected on the Exchange ("Stock Exchange market contracts") will be subject to the default rules. Trades executed automatically on an Exchange order book are deemed to be Stock Exchange market contracts as described in rule 2000.
Trading on Monday 15 September 2008
The Exchange confirms that Lehmans has not effected any on-Exchange transactions on 15 September, including any transactions on the International Order Book.
Ceasing of settlement
Settlement in CREST has been suspended in all trades that were to due to settle. IOB trades that are settled through DTCC and Euroclear Bank have prompted queries from member firms as the Exchange is aware that some IOB transactions are continuing to settle. To allow the Exchange to deal with such trades under its default procedures, member firms should ensure that no further settlement of their on-Exchange transactions with Lehman takes place.
Trading Positions
Member firms have been asking about their trading positions as a result of the default process. Where Lehman Brothers International (Europe) acted in a principal capacity, member firms receiving a cash settlement will receive either a net loss or profit on the trades as dealt, depending on the difference between the trade price and the hammer price. Member firms will need to consider the actual price of the underlying security in managing their open positions.
Lending Arrangements
Lending arrangements conducted on Exchange are required to have a written agreement between the two parties. The Exchange has authorised standard forms of agreement for this purpose (e.g. Global Master Securities Lending Agreement) which contain provisions in the event of default of either party. It is expected that member firms will follow these provisions when valuing their unsettled lending arrangements with Lehman. Under the default rules, the Exchange is required to include any net amounts arising from these valuations in its net amount for certification. For information on how to supply this data to the Exchange, as well as further information on the Exchange's default rules in relation to lending arrangements, please see Notice N24/08.
Hammer Prices
Please click on this link to review the Exchange's guidance in relation to hammer prices.Counterparty details
Member firms that believe that they are a counterparty to any unsettled on Exchange transactions where Lehman Brothers International (Europe) is a counterparty, should complete the attached excel spreadsheet below and on the right and return this to defaultofficial@londonstockexchange.com. Each member firm's Member ID should be included against each trade and also in the name of the spreadsheet returned to the Exchange. For clarification: this is a blank spreadsheet for completion by member firms , and not the details of Lehman Brothers International (Europe)'s unsettled trades.
Unsettled LEHM trades - Member ID (MS Excel 706Kb)
Contact details
Default Official - Nick Bayley +44 20 7797 4214 (STX 34214)
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