In accordance with Rule 76, Paragraphs 1 and 5 of its business rules, Japan Securities Clearing Corporation (JSCC), has taken steps to suspend debt assumption related to trades in which Lehman Brothers, Inc. (Lehman Brothers) is a counterparty. In response to this, Tokyo Stock Exchange, Inc. (TSE) has suspended trading of Lehman Brothers, and is now announcing the following decision on the handling of margins and outstanding positions for Lehman Brothers' futures and options contracts.
1. Outstanding Positions
(1) Lehman Brothers' own outstanding positions
Trading participants designated by the JSCC will promptly execute transactions for offsetting after September 17, 2008.
(2) Lehman Brothers customers' position
Customers may choose either of the following options:
- Transactions for offsetting
Customers who seek to conduct transactions for offsetting must submit documentation to Lehman Brothers stating this fact. Trading participants designated by the TSE will execute transactions for such offsetting. - Transfer of outstanding positions
Customers may transfer outstanding positions to other trading participants of the TSE. Those customers who seek to do so must apply to the appropriate trading participant and obtain their consent. Furthermore, the position prices as related to the transfer of outstanding positions will be the settlement price on the previous trading day.
The deadline for transferring outstanding positions is noon (Japan time) September 24, 2008. Please note that if the applied trading participant has not submitted documentation to the TSE on transferring the outstanding positions, transactions for offsetting position of that customer will be conducted automatically.
2. Margins Required for Agency Transactions
Margins on Lehman Brothers' customers will be handled in one of the following ways in accordance with the above methods.
- In cases where there is a transaction for offsetting
Customers have the right to demand restitution directly from the JSCC. - In cases where there is a transfer of outstanding positions to another trading participant
Margins are also transferred to the applied trading participant.
* Points to note for cases Lehman Brothers deposited margins in lieu of customers.
- The JSCC will cash the substitute securities, and margins will then be returned to the customer or transferred to another trading participant.
- Also, the sum of the money that is to be returned to the customer or transferred to another trading participant will be either A or B below, whichever is smaller. (However, in cases where an outstanding debt is owed to Lehman Brothers for futures and options trading, an amount equivalent to this sum will be subtracted from the amount to be returned or transferred.)
- A).The sum of the money or the securities at market value that the customer deposits as margins.
- B).The amount is calculated with the following method.
(Margins that Lehman Brothers deposits with the JSCC in lieu of its customers) - (Commission charges required when the JSCC cashes substitute securities that Lehman Brothers deposited in lieu of its customers) = (1)
Then, the amount is calculated by distributing (1) on a pro rata basis in accordance with the sum of the money or the securities at market value that the respective customers deposited with Lehman Brothers as margins.
