Initially, gold will have to be deposited with.

JPMorgan Chase Bank in London but CME

"hopes" to add additional depositories at some

stage, CME Clearing, the exchange's in-house

clearing house, said in an advisory notice to its

members on October 16.

CME is imposing a strict gold collateral limit of

$200 million and a 15-percent asset haircut on

the market value of all gold deposits. Fees for

storage, insurance and handling of the gold

are estimated at 5 basis points of the value of

the collateral, according to the CME notice.

The announcement follows CME's discussions

with the London bullion market on cleared

over-the-counter (OTC) London gold forwards,

which traded for the first time late on Friday.

CME launched the clearing service on

September 20 in an effort to curb counterparty

risks that the credit crisis has exacerbated.

CME Clearing already accepts a wide range of

collateral for deposit into trading accounts,

including US dollars, select foreign currencies,

US Treasuries, select foreign sovereign debt,

asset-backed securities, letters of credit and

agency bonds, according to the exchange's

website

LCH.Clearnet, Europe’s largest clearing

house, is also considering adding gold for

collateral, spokeswoman Sophie Major told

FastMarkets by phone. It plans to launch a

clearing service for London gold forwards and

options by April 2010

now allows physical gold to be used as

collateral for clearing all products traded on the

exchange, it said on Monday.

Gold is the first commodity that can be used

for margins for CME trades, which range from

crude oil to copper or equities, effective

immediately, CME spokesman Jeremy Hughes

told FastMarkets. "