Comparing Clearing Service Rulebooks
Clearing Service rulebooks are complex and lengthy documents. In this article I use Google Gemini to compare two rulebooks, ICE Clear Credit and LCH CDSClear to try and understand the differences.
Background
In Capital Markets, all Clearing Service providers such as CME Group or DTCC, publish rulebooks that specify in immense details the rules they operate by. These documents are generally public and are important documents for member firms to understand the detailed rules of the clearing service.
However given their size, complexity and legal language (as need to be precise), such documents are difficult to read and understand.
In my two prior articles, I examined the rulebook for DTCC GSD and the rulebook for CME using Google Gemini.
Today, rather than examine one rulebook, I will compare two, for Clearing services that cover the same product class, in this case ICE Clear Credit and LCH CDSClear for Credit Derivatives.
These rulebooks can be found on the ICE Website and the LSEG Website, both are single PDF documents of 431 pages and 285 pages respectively.
On opening these are daunting to read:
(A short extract from the LCH CDSClear rulebook, showing the legal style).
Let’s Start
I first uploaded both rulebook pdf documents into my Gemini window, with 2.5 Pro (preview) selected as below.
To which the response was:
And then my first prompt:
Assume I work for a clearing member firm, which has membership of ICE Clear Credit and I am familiar with much of the content of the ICE rulebook, my firm is now considering becoming a member of LCH SA CDS Clearing, so I need to become familiar with this new rulebook and in particular with differences in this rulebook that are likely to be material for my firm. First let’s start with membership rules and membership criteria, can you detail the differences that are important and likely to be material for me to consider and why?
Quite verbose, but I keep seeing examples of very long prompts, which I am not a fan of, as surely the goal is a natural language interface for ease of use and not a un-natural language interface, rant over.
The prompt above, makes clear my perspective and intention for the session.
So what did I get back:
A 4-page response, the full text of which you can read here.
This covers differences in Legal Entity types, Capital Requirements, Membership types and Obligations, Default Management Participation, Parent Guarantee and more.
It also includes references to specific articles in the rulebooks and an explanation of why the difference is material.
A good start.
Risk Committees
Clearing Services have Risk Committees with participation from member firms and it is important to understand the role and governance aspects of these. So, lets ask:
How do the Risk Committees differ?
The intro to the response is above, while the full 3-page response is here.
I am really after the detail here and not just short bullet point responses, which are not going to capture the information I am after.
So by asking specific questions, I can get responses that allow me to get a good understanding of the differences and then consult specific paragraphs of the full text as appropriate.
Further Q&A
My further questions were:
Next, looking at Risk Management and specifically Margin, what are the main differences?
Is backloading supported in the same way at LCH?
What about Default management?
I won’t link to the responses here but will leave those of you interested to try out yourself, suffice to say they were as credible and of similar length to the two above.
You get the point, a user can direct the questioning to any aspect of interest to gain understanding and dig deeper as required.
Policy Proposals
Next, lets try something different.
Clearing Houses that operate clearing services are regulated entities and financial regulation is periodically updated to reflect policy and best practice.
BIS and IOSCO are international bodies that regularly publish research, consultations and proposals which are subsequently reviewed and adopted in most jurisdictions by national or supra-national regulators.
In January 2025 BIS IOSCO published a report titled “Transparency and responsiveness of initial margin in centrally cleared markets - review and proposals”, which is available here. This report includes ten policy proposals for clearing services and their members.
So I thought it would be interesting to upload this report and try the following:
This BIS document details 10 Policy Proposals for transparency and responsiveness of initial margin in centrally cleared markets, using these can it be determined from the LCH SA rulebook that it meets these 10 proposals, if so, please list which are satisfied, which are not and which cannot be determined based on the information in the rulebook
When I first did this the end of the response stated the following:
Nice, I should have known that, but great that it is pointed out.
So I uploaded Section 2 of the Procedures (covering Margin) as well as two documents from the CCP Disclosures page.
This time I got a nice summary table at the end of the response, listing each proposal, if it was met or not and an assessment.
Showing that out of the ten proposals,
two were largely met,
three partially met, and
five were not determinable.
Not surprising at all given that these are new proposals and CCPs will need time to address. No doubt I could search for more documents to upload to see if I can get more content to help in the determination, but will leave that for another day.
Let’s end todays blog there.
Learnings
Complex documents can be examined by Large Language Models (LLMs).
Q&A is very useful and instructive.
Allowing you to dig deeper and quicker into specific aspects.
Comparing two different documents, in style and specifics, for similar services is a difficult and time consuming task.
LLM’s certainly make this task easier.
This can be extended to more complex tasks.
Next time, try it out yourself.