Self-Regulatory Organizations; LCH SA; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Introduction of Clearing of the New Markit iTraxx MSCI ESG Screened Europe Index Contracts, 42959-42962 [2020-15205]
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Federal Register / Vol. 85, No. 136 / Wednesday, July 15, 2020 / Notices
disclosure that describes their material
rules, policies, and procedures
regarding their legal, governance, risk
management, and operating framework,
accurate in all material respects at the
time of publication.37 Section 4.1 of the
Framework currently describes how the
Clearing Agencies provide their
respective participants with information
and incentives to enable them, and,
through them, their customers, to
understand, monitor, manage and
contain the risks they pose to the
respective Clearing Agencies, and
identifies some of the tools the Clearing
Agencies provide to their participants to
facilitate this understanding. The
proposed rule change would revise
Section 4.1 of the Framework to state
that those tools and activities support
the Clearing Agencies’ compliance with
Rule 17Ad–22(e)(23) under the Act.38
By describing these actions, including
the publication of disclosure
frameworks and quantitative
disclosures, the Clearing Agencies
believe that the proposed change to the
Risk Management Framework is
consistent with Rule 17Ad–22(e)(23).39
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(B) Clearing Agency’s Statement on
Burden on Competition
The Clearing Agencies do not believe
that the proposed changes to the
Framework described above would have
any impact, or impose any burden, on
competition. As described above, the
proposed rule changes would improve
the comprehensiveness of the
Framework by including a description
of the Clearing Agencies’ compliance
with Rule 17Ad–22(e)(22) under the Act
and would also improve the clarity and
accuracy of the descriptions of certain
matters within the Framework.
Therefore, the proposed changes are
technical and non-material in nature,
relating mostly to the operation of the
Framework rather than the risk
management functions described
therein. As such, the Clearing Agencies
do not believe that the proposed rule
changes would have any impact on
competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
The Clearing Agencies have not
solicited or received any written
comments relating to this proposal. The
Clearing Agencies will notify the
Commission of any written comments
received by the Clearing Agencies.
37 17
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
(i) Significantly affect the protection
of investors or the public interest;
(ii) impose any significant burden on
competition; and
(iii) become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 40 and Rule 19b–4(f)(6)
thereunder.41
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2020–009 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–DTC–2020–009. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
CFR 240.17Ad–22(e)(23).
40 15
U.S.C. 78s(b)(3)(A).
41 17 CFR 240.19b–4(f)(6).
39 Id.
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17:59 Jul 14, 2020
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of DTC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–DTC–
2020–009 and should be submitted on
or before August 5, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.42
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15206 Filed 7–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89268; File No. SR–LCH
SA–2020–002]
Self-Regulatory Organizations; LCH
SA; Notice of Filing of Proposed Rule
Change, as Modified by Amendment
No. 1, Relating to Introduction of
Clearing of the New Markit iTraxx MSCI
ESG Screened Europe Index Contracts
July 9, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2
notice is hereby given that on June 26,
2020, Banque Centrale de
Compensation, which conducts
business under the name LCH SA (‘‘LCH
SA’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II and III below, which Items
have been prepared primarily by LCH
SA. On July 8, 2020, LCH SA filed
Amendment No. 1 to the proposed rule
change. The Commission is publishing
this notice to solicit comments on the
proposed rule change as modified by
42 17
38 Id.
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42959
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 85, No. 136 / Wednesday, July 15, 2020 / Notices
Amendment No. 1 from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
Banque Centrale de Compensation,
which conducts business under the
name LCH SA (‘‘LCH SA’’), is proposing
the Amendment 1 to the filing LCH SA–
2020–002 in order to (i) explain the few
minor clarifications made below with
respect to both sections 3.2 and 3.8 and
also remove (ii) the non-relevant change
made to the Legal Entity Identifier
Margin in section 6.2 of its Reference
Guide: CDS Margin Framework.
LCH SA is proposing to amend its
Reference Guide: CDS Margin
Framework to permit the clearing of
iTraxx MSCI ESG Screened Europe
index contracts. As further detailed
below, LCH SA is also making a number
of other minor changes unrelated to the
clearing of iTraxx MSCI ESG Screened
Europe index CDS transactions.
The text of the proposed rule change
has been annexed as Exhibit 5.3
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
LCH SA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. LCH SA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of these statements.
A. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
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1. Purpose
LCH SA is proposing to amend its
Reference Guide: CDS Margin
Framework in order to introduce
clearing of the iTraxx MSCI ESG
Screened Europe index CDS
transactions.
Markit launched the iTraxx MSCI ESG
Screened Europe Index (‘‘iTraxx ESG
Index’’) on March 20th, 2020. This
index is a subset of the iTraxx Europe
Main index. The constituents of the
iTraxx MSCI ESG Screened Europe
index must meet various Corporate
Responsibility Criteria. The first series
that launched on March 20th, 2020
(Series 33) has 81 constituents, all are
3 All
capitalized terms not defined herein have
the same definition as the Rule Book, Supplement
or Procedures, as applicable.
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constituents of the iTraxx Europe Main
index Series 33.
To permit participants to submit for
clearing iTraxx ESG Index contracts,
LCH SA needs to modify its Reference
Guide: CDS Margin Framework.
In this regard, LCH SA has made the
following changes to the Reference
Guide: CDS Margin Framework:
(i) Removing references to specific indices
in the document and replacing them with a
generic reference to an index in sections
2.3.3, and 3.8.1.3,
(ii) removing the fixed 24% value and
changing the spread shock formula for it to
be applicable more generically to both iTraxx
Main index and any of its sub index
including financial Single Names.
Clearing of the new iTraxx ESG Index
contracts will not require any other
changes to LCH SA CDSClearing Rule
Book or risk management framework or
other policies and procedures
constituting rules within the meaning of
the Securities Exchange Act of 1934
(‘‘Act’’).
LCH SA is also taking this
opportunity to make the following
changes which are unrelated to the
clearing of iTraxx MSCI ESG Screened
Europe index CDS transactions;
(i) removing the list of Dealers in section
2.3.3 as LCH SA may contact a broader list
of Dealers than that currently listed in this
section;
(ii) correction in section 3.2 of a typing
error to confirm the relevant application of
the Wrong Way Risk Margin to Options;
(iii) correction of the worst 5 day P&L
value per date and the worst P&L value
aggregated per date formulae in section 3.5.6.
to reflect the fact that the same date is
selected to calculate the portfolio P&L for all
contracts in the portfolio;
(iv) the 9M curve has been removed from
the Interest Rate Risk Margin calculation in
section 3.6, reflecting the change of interest
rate curve imposed by ISDA within the
framework of the risk-free rate benchmark
review;
(v) clarification under section 3.8 that the
short charge is covering the risk that at least
one entity defaults;
(vi) the Wrong Way Risk formulae in
section 3.8.1 were incomplete, the second
value ‘‘0’’ to be used to derive the maximum
resulting from these formulae has been
added.
At the request of LCH SA Risk Model
Validation team so that the CDSClear
risk framework can be better assessed,
LCH SA is making the relevant
clarifications specified under the below
subsections (vii) to (xii):
(vii) Adding a note in section 3.8.1.2 that
clarifies that the recovery rate for a Senior
Unsecured Debt (Corporate/Financial)/
Foreign Currency Sovereign Debt
(Government) (SNRFOR) and Senior Loss
Absorbing Capacity (SNRLAC) seniorities are
considered as if they were two different
instruments;
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(viii) adding a note in section 3.8.2 to
explicit the calibration of the shocks
displayed in the table;
(ix) adding a note in section 4.1.3.1 to
describe the parameters used in the formula;
(x) the Average Liquidity Score formula
has been amended and a note inserted in
order to clarify which days are used to
compute the Average Liquidity Score;
(xi) the net notional for the index basis
product p, tenor t used in the formula for the
sum of the 5Y equivalent notional has been
amended to an absolute value;
(xii) in view of the upcoming supervisory/
regulatory transition from the Euro Overnight
Index Average (EONIA) to the new Euro
Short-Term Rate (ESTER or ÖSTR) and the
Fed Funds to the Secured Overnight
Financing Rate (SOFR), references to the
interest rate applied to the Price Alignment
Interest in section 5.2 have been removed.
2. Statutory Basis
LCH SA has determined that
Proposed Rule Change is consistent
with the requirements of Section 17A of
the Securities Exchange Act (‘‘Act’’) 4
and regulations thereunder applicable to
it. Section 17A(b)(3)(F) of the Act
requires, inter alia, that the rules of a
clearing agency ‘‘assure the safeguarding
of securities and funds that are in its
custody or control or for which it is
responsible . . . and, in general, to
protect investors and the public
interest.’’ 5
LCH SA believes that acceptance of
the new iTraxx ESG Index contracts, on
the terms and conditions set out in the
Rules, is consistent with the prompt and
accurate clearance and settlement of
securities transactions and derivative
agreements, contracts and transactions
cleared by LCH SA, the safeguarding of
securities and funds in the custody or
control of LCH SA or for which it is
responsible, and the protection of
investors and the public interest, within
the meaning of Section 17A(b)(3)(F) of
the Act. Indeed, the new iTraxx ESG
Index contracts proposed for clearing
are similar to the other European
Indices contracts currently cleared by
LCH SA CDSClear, and will be cleared
pursuant to LCH SA’s existing clearing
arrangements and related financial
safeguards, protections and risk
management procedures.
Clearing of the iTraxx ESG Index
contracts will also satisfy the relevant
requirements of Rule 17Ad–22,6 as set
forth in the following discussion.
Margin Requirements. Rule 17Ad–
22(e)(4) 7 requires LCH SA to effectively
identify, measure, monitor, and manage
its credit exposures to participants and
4 15
U.S.C. 78q–1.
U.S.C. 78q–1(b)(3)(F).
6 17 CFR 240.17Ad–22.
7 17 CFR 240.17Ad–22(e)(4).
5 15
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Federal Register / Vol. 85, No. 136 / Wednesday, July 15, 2020 / Notices
those arising from its payment, clearing,
and settlement processes. In terms of
financial resources, LCH SA will apply
its existing margin methodology—
including its Wrong Way Risk margin
framework—to the new iTraxx ESG
Index, which are similar to the
European indices currently cleared by
LCH SA. LCH SA believes that this
model will provide sufficient margin
requirements to cover its credit
exposure to its clearing members from
clearing such contracts, consistent with
the requirements of Rule 17Ad–22(e)(4).
Financial Resources. Rule 17Ad–
22(e)(4)(i) 8 requires LCH SA to maintain
sufficient financial resources to cover its
credit exposure to each participant fully
with a high degree of confidence and to
the extent not already maintained
pursuant to paragraph (e)(4)(i), Rule
17Ad–22(e)(4)(ii) 9 requires LCH SA to
maintain additional financial resources
at the minimum to enable it to cover a
wide range of foreseeable stress
scenarios that include, but are not
limited to, the default of the two
participant families that would
potentially cause the largest aggregate
credit exposure for the covered clearing
agency in extreme but plausible market
conditions. LCH SA believes its Default
Fund, under its existing methodology,
will, together with the required margin,
provide sufficient financial resources to
support the clearing of the iTraxx ESG
Index contracts, consistent with the
requirements of Rule 17Ad–22(e)(4).
Operational Resources. Rule 17Ad–
22(e)(3) 10 requires LCH SA to maintain
a sound risk management framework for
comprehensively managing legal, credit,
liquidity, operational, general business,
investment, custody, and other risks
that arise in or are borne by the covered
clearing agency. LCH SA believes that
its existing operational and managerial
resources will be sufficient for clearing
of the iTraxx ESG Index contracts,
consistent with the requirements of Rule
17Ad–22(e)(3), as this new index
contract is substantially the same from
an operational perspective as the
existing index contracts.
LCH SA will also apply its existing
default management policies and
procedures for the iTraxx ESG Index
contracts. LCH SA believes that these
procedures allow for it to take timely
action to contain losses and liquidity
pressures and to continue meeting its
obligations in the event of clearing
member insolvencies or defaults in
respect of the additional single names,
in accordance with Rule 17Ad–
22(e)(13).
The proposed change regarding the
transition from EONIA which does not
comply with the recently introduced EU
Benchmarks Regulation to ESTER is
intended to comply with this European
Central Bank (ECB) initiative supported
by regulators. Rule 17Ad–22(e)(1) 11
requires a covered clearing agency to
provide for a well-founded, clear,
transparent and enforceable legal basis
for each aspect of its activities in all
relevant jurisdictions. Rule 17Ad–
22(e)(2)(iii) 12 also requires to support
the objectives of participants.
For all these reasons, LCH SA believes
that the Proposed Rule Change is
consistent with the requirements of
Section 17A of the Act and the
regulations thereunder, including the
standards under Rule 17Ad–22.
B. Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Act
requires that the rules of a clearing
agency not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.13 The iTraxx ESG
Index contracts will be available to all
LCH SA’s CDSClear participants for
clearing. The clearing of these new
iTraxx ESG Index contracts by LCH SA
does not preclude the offering of the
iTraxx ESG Index contracts for clearing
by other market participants.
Accordingly, LCH SA does not believe
that clearance of the new iTraxx ESG
Index contracts will impose any burden
on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments relating to the
proposed rule change have not been
solicited or received. LCH SA will
notify the Commission of any written
comments received by LCH SA.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
8 17
11 17
9 17
CFR 240.17Ad–22(e)(4)(i).
CFR 240.17Ad–22(e)(4)(ii).
10 17 CFR 240.17Ad–22(e).
12 17
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CFR 240.17Ad–22 (e)(1).
CFR 240.17Ad–22(e)(iii).
13 15 U.S.C. 78q–1(b)(3)(I).
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42961
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
LCH SA–2020–002 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–LCH SA–2020–002. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of LCH SA and on LCH SA’s
website at: https://www.lch.com/
resources/rules-and-regulations/
proposed-rule-changes-0. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
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Federal Register / Vol. 85, No. 136 / Wednesday, July 15, 2020 / Notices
to make available publicly. All
submissions should refer to File
Number SR–LCH SA–2020–002 and
should be submitted on or before
August 5, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15205 Filed 7–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33924; File No. 812–15051]
Aspiriant Defensive Allocation Fund
and Aspiriant LLC
July 10, 2020.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
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AGENCY:
Notice of application 1 for an order
under sections 6(c) and 23(c)(3) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from rule 23c–
3 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order under sections 6(c) and
23(c)(3) of the Act for an exemption
from certain provisions of rule 23c–3 to
permit certain registered closed-end
investment companies to make
repurchase offers on a monthly basis.
APPLICANTS: Aspiriant Defensive
Allocation Fund (the ‘‘Fund’’) and
Aspiriant LLC (the ‘‘Adviser’’).
FILING DATES: The application was filed
on July 26, 2019 and amended on April
10, 2020.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing by emailing the
Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants
with a copy of the request, personally or
by mail. Hearing requests should be
received by the Commission by 5:30
p.m. on July 30, 2020, and should be
accompanied by proof of service on the
applicants, in the form of an affidavit,
or, for lawyers, a certificate of service.
Pursuant to rule 0–5 under the Act,
hearing requests should state the nature
of the writer’s interest, any facts bearing
upon the desirability of a hearing on the
14 17
CFR 200.30–3(a)(12).
notice is being reissued solely because the
original notice inadvertently was not published in
the Federal Register.
1 The
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17:59 Jul 14, 2020
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matter, the reason for the request, and
the issues contested. Persons who wish
to be notified of a hearing may request
notification by emailing the
Commission’s Secretary at SecretarysOffice@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Benjamin D. Schmidt, Aspiriant LLC,
111 East Kilbourne Avenue, Suite 1700,
Milwaukee, WI 53202.
FOR FURTHER INFORMATION CONTACT:
Stephan N. Packs, Senior Counsel, at
(202) 551–6853, or David J. Marcinkus,
Branch Chief, at (202) 551–6825
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. The Fund is a Delaware statutory
trust that filed for registration under the
Act on October 22, 2019 as a diversified,
closed-end management investment
company that will be operated as an
interval fund. The Adviser is a Delaware
limited liability company and is
registered as an investment adviser
under the Investment Advisers Act of
1940. The Adviser serves as investment
adviser to the Fund.
2. Applicants request that any relief
granted also apply to any registered
closed-end management investment
company that operates as an interval
fund pursuant to rule 23c–3 for which
the Adviser or any entity controlling,
controlled by, or under common control
with the Adviser, or any successor in
interest to any such entity,2 acts as
investment adviser (the ‘‘Future Funds,’’
and together with the Fund, the
‘‘Funds,’’ and each, individually, a
‘‘Fund’’).3 The Fund’s common shares
are not offered or traded in the
secondary market and are not listed on
any exchange or quoted on any
quotation medium.
3. Applicants request an order to
permit each Fund to offer to repurchase
a portion of its common shares at onemonth intervals, rather than the three,
2 A successor in interest is limited to an entity
that results from a reorganization into another
jurisdiction or a change in the type of business
organization.
3 All entities currently intending to rely on the
requested relief have been named as applicants.
Any entity that relies on the requested order in the
future will do so only in accordance with the terms
and conditions of the application.
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six, or twelve-month intervals specified
by rule 23c–3.
4. Each Fund will disclose in its
prospectus and annual reports its
fundamental policy to make monthly
offers to repurchase a portion of its
common shares at net asset value, less
deduction of a repurchase fee, if any, as
permitted by rule 23c–3(b)(1). The
fundamental policy will be changeable
only by a majority vote of the holders
of such Fund’s outstanding voting
securities. Under the fundamental
policy, the repurchase offer amount will
be determined by the board of trustees
of the applicable Fund (‘‘Board’’) prior
to each repurchase offer. Each Fund will
comply with rule 23c–3(b)(8)’s
requirements with respect to its trustees
who are not interested persons of such
Fund, within the meaning of section
2(a)(19) of the Act (‘‘Disinterested
Trustees’’) and their legal counsel. Each
Fund will make monthly offers to
repurchase not less than 5% of its
outstanding shares at the time of the
repurchase request deadline. The
repurchase offer amounts for the thencurrent monthly period, plus the
repurchase offer amounts for the two
monthly periods immediately preceding
the then-current monthly period, will
not exceed 25% of the outstanding
common shares of the applicable Fund.
5. Each Fund’s fundamental policies
will specify the means to determine the
repurchase request deadline and the
maximum number of days between each
repurchase request deadline and the
repurchase pricing date. Each Fund’s
repurchase pricing date normally will
be the same date as the repurchase
request deadline and pricing will be
determined after close of business on
that date.
6. Pursuant to rule 23c–3(b)(1), each
Fund will repurchase shares for cash on
or before the repurchase payment
deadline, which will be no later than
seven calendar days after the repurchase
pricing date. The Fund (and any Future
Fund) currently intends to make
payment by the fifth business day or
seventh calendar day (whichever period
is shorter) following the repurchase
pricing date. Each Fund will make
payment for shares repurchased in the
previous month’s repurchase offer at
least five business days before sending
notification of the next repurchase offer.
The Fund intends to, and a Future Fund
may, deduct a repurchase fee in an
amount not to exceed 2% from the
repurchase proceeds payable to
tendering shareholders, in compliance
with rule 23c–3(b)(1).
7. Each Fund will provide common
shareholders with notification of each
repurchase offer no less than seven days
E:\FR\FM\15JYN1.SGM
15JYN1
]]>Agencies
[Federal Register Volume 85, Number 136 (Wednesday, July 15, 2020)]
[Notices]
[Pages 42959-42962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15205]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89268; File No. SR-LCH SA-2020-002]
Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change, as Modified by Amendment No. 1, Relating to
Introduction of Clearing of the New Markit iTraxx MSCI ESG Screened
Europe Index Contracts
July 9, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that
on June 26, 2020, Banque Centrale de Compensation, which conducts
business under the name LCH SA (``LCH SA''), filed with the Securities
and Exchange Commission (``Commission'') the proposed rule change
described in Items I, II and III below, which Items have been prepared
primarily by LCH SA. On July 8, 2020, LCH SA filed Amendment No. 1 to
the proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change as modified by
[[Page 42960]]
Amendment No. 1 from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
Banque Centrale de Compensation, which conducts business under the
name LCH SA (``LCH SA''), is proposing the Amendment 1 to the filing
LCH SA-2020-002 in order to (i) explain the few minor clarifications
made below with respect to both sections 3.2 and 3.8 and also remove
(ii) the non-relevant change made to the Legal Entity Identifier Margin
in section 6.2 of its Reference Guide: CDS Margin Framework.
LCH SA is proposing to amend its Reference Guide: CDS Margin
Framework to permit the clearing of iTraxx MSCI ESG Screened Europe
index contracts. As further detailed below, LCH SA is also making a
number of other minor changes unrelated to the clearing of iTraxx MSCI
ESG Screened Europe index CDS transactions.
The text of the proposed rule change has been annexed as Exhibit
5.\3\
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\3\ All capitalized terms not defined herein have the same
definition as the Rule Book, Supplement or Procedures, as
applicable.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, LCH SA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. LCH SA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of these statements.
A. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
LCH SA is proposing to amend its Reference Guide: CDS Margin
Framework in order to introduce clearing of the iTraxx MSCI ESG
Screened Europe index CDS transactions.
Markit launched the iTraxx MSCI ESG Screened Europe Index (``iTraxx
ESG Index'') on March 20th, 2020. This index is a subset of the iTraxx
Europe Main index. The constituents of the iTraxx MSCI ESG Screened
Europe index must meet various Corporate Responsibility Criteria. The
first series that launched on March 20th, 2020 (Series 33) has 81
constituents, all are constituents of the iTraxx Europe Main index
Series 33.
To permit participants to submit for clearing iTraxx ESG Index
contracts, LCH SA needs to modify its Reference Guide: CDS Margin
Framework.
In this regard, LCH SA has made the following changes to the
Reference Guide: CDS Margin Framework:
(i) Removing references to specific indices in the document and
replacing them with a generic reference to an index in sections
2.3.3, and 3.8.1.3,
(ii) removing the fixed 24% value and changing the spread shock
formula for it to be applicable more generically to both iTraxx Main
index and any of its sub index including financial Single Names.
Clearing of the new iTraxx ESG Index contracts will not require any
other changes to LCH SA CDSClearing Rule Book or risk management
framework or other policies and procedures constituting rules within
the meaning of the Securities Exchange Act of 1934 (``Act'').
LCH SA is also taking this opportunity to make the following
changes which are unrelated to the clearing of iTraxx MSCI ESG Screened
Europe index CDS transactions;
(i) removing the list of Dealers in section 2.3.3 as LCH SA may
contact a broader list of Dealers than that currently listed in this
section;
(ii) correction in section 3.2 of a typing error to confirm the
relevant application of the Wrong Way Risk Margin to Options;
(iii) correction of the worst 5 day P&L value per date and the
worst P&L value aggregated per date formulae in section 3.5.6. to
reflect the fact that the same date is selected to calculate the
portfolio P&L for all contracts in the portfolio;
(iv) the 9M curve has been removed from the Interest Rate Risk
Margin calculation in section 3.6, reflecting the change of interest
rate curve imposed by ISDA within the framework of the risk-free
rate benchmark review;
(v) clarification under section 3.8 that the short charge is
covering the risk that at least one entity defaults;
(vi) the Wrong Way Risk formulae in section 3.8.1 were
incomplete, the second value ``0'' to be used to derive the maximum
resulting from these formulae has been added.
At the request of LCH SA Risk Model Validation team so that the
CDSClear risk framework can be better assessed, LCH SA is making the
relevant clarifications specified under the below subsections (vii) to
(xii):
(vii) Adding a note in section 3.8.1.2 that clarifies that the
recovery rate for a Senior Unsecured Debt (Corporate/Financial)/
Foreign Currency Sovereign Debt (Government) (SNRFOR) and Senior
Loss Absorbing Capacity (SNRLAC) seniorities are considered as if
they were two different instruments;
(viii) adding a note in section 3.8.2 to explicit the
calibration of the shocks displayed in the table;
(ix) adding a note in section 4.1.3.1 to describe the parameters
used in the formula;
(x) the Average Liquidity Score formula has been amended and a
note inserted in order to clarify which days are used to compute the
Average Liquidity Score;
(xi) the net notional for the index basis product p, tenor t
used in the formula for the sum of the 5Y equivalent notional has
been amended to an absolute value;
(xii) in view of the upcoming supervisory/regulatory transition
from the Euro Overnight Index Average (EONIA) to the new Euro Short-
Term Rate (ESTER or [euro]STR) and the Fed Funds to the Secured
Overnight Financing Rate (SOFR), references to the interest rate
applied to the Price Alignment Interest in section 5.2 have been
removed.
2. Statutory Basis
LCH SA has determined that Proposed Rule Change is consistent with
the requirements of Section 17A of the Securities Exchange Act
(``Act'') \4\ and regulations thereunder applicable to it. Section
17A(b)(3)(F) of the Act requires, inter alia, that the rules of a
clearing agency ``assure the safeguarding of securities and funds that
are in its custody or control or for which it is responsible . . . and,
in general, to protect investors and the public interest.'' \5\
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\4\ 15 U.S.C. 78q-1.
\5\ 15 U.S.C. 78q-1(b)(3)(F).
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LCH SA believes that acceptance of the new iTraxx ESG Index
contracts, on the terms and conditions set out in the Rules, is
consistent with the prompt and accurate clearance and settlement of
securities transactions and derivative agreements, contracts and
transactions cleared by LCH SA, the safeguarding of securities and
funds in the custody or control of LCH SA or for which it is
responsible, and the protection of investors and the public interest,
within the meaning of Section 17A(b)(3)(F) of the Act. Indeed, the new
iTraxx ESG Index contracts proposed for clearing are similar to the
other European Indices contracts currently cleared by LCH SA CDSClear,
and will be cleared pursuant to LCH SA's existing clearing arrangements
and related financial safeguards, protections and risk management
procedures.
Clearing of the iTraxx ESG Index contracts will also satisfy the
relevant requirements of Rule 17Ad-22,\6\ as set forth in the following
discussion.
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\6\ 17 CFR 240.17Ad-22.
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Margin Requirements. Rule 17Ad-22(e)(4) \7\ requires LCH SA to
effectively identify, measure, monitor, and manage its credit exposures
to participants and
[[Page 42961]]
those arising from its payment, clearing, and settlement processes. In
terms of financial resources, LCH SA will apply its existing margin
methodology--including its Wrong Way Risk margin framework--to the new
iTraxx ESG Index, which are similar to the European indices currently
cleared by LCH SA. LCH SA believes that this model will provide
sufficient margin requirements to cover its credit exposure to its
clearing members from clearing such contracts, consistent with the
requirements of Rule 17Ad-22(e)(4).
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\7\ 17 CFR 240.17Ad-22(e)(4).
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Financial Resources. Rule 17Ad-22(e)(4)(i) \8\ requires LCH SA to
maintain sufficient financial resources to cover its credit exposure to
each participant fully with a high degree of confidence and to the
extent not already maintained pursuant to paragraph (e)(4)(i), Rule
17Ad-22(e)(4)(ii) \9\ requires LCH SA to maintain additional financial
resources at the minimum to enable it to cover a wide range of
foreseeable stress scenarios that include, but are not limited to, the
default of the two participant families that would potentially cause
the largest aggregate credit exposure for the covered clearing agency
in extreme but plausible market conditions. LCH SA believes its Default
Fund, under its existing methodology, will, together with the required
margin, provide sufficient financial resources to support the clearing
of the iTraxx ESG Index contracts, consistent with the requirements of
Rule 17Ad-22(e)(4).
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\8\ 17 CFR 240.17Ad-22(e)(4)(i).
\9\ 17 CFR 240.17Ad-22(e)(4)(ii).
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Operational Resources. Rule 17Ad-22(e)(3) \10\ requires LCH SA to
maintain a sound risk management framework for comprehensively managing
legal, credit, liquidity, operational, general business, investment,
custody, and other risks that arise in or are borne by the covered
clearing agency. LCH SA believes that its existing operational and
managerial resources will be sufficient for clearing of the iTraxx ESG
Index contracts, consistent with the requirements of Rule 17Ad-
22(e)(3), as this new index contract is substantially the same from an
operational perspective as the existing index contracts.
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\10\ 17 CFR 240.17Ad-22(e).
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LCH SA will also apply its existing default management policies and
procedures for the iTraxx ESG Index contracts. LCH SA believes that
these procedures allow for it to take timely action to contain losses
and liquidity pressures and to continue meeting its obligations in the
event of clearing member insolvencies or defaults in respect of the
additional single names, in accordance with Rule 17Ad-22(e)(13).
The proposed change regarding the transition from EONIA which does
not comply with the recently introduced EU Benchmarks Regulation to
ESTER is intended to comply with this European Central Bank (ECB)
initiative supported by regulators. Rule 17Ad-22(e)(1) \11\ requires a
covered clearing agency to provide for a well-founded, clear,
transparent and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions. Rule 17Ad-22(e)(2)(iii) \12\
also requires to support the objectives of participants.
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\11\ 17 CFR 240.17Ad-22 (e)(1).
\12\ 17 CFR 240.17Ad-22(e)(iii).
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For all these reasons, LCH SA believes that the Proposed Rule
Change is consistent with the requirements of Section 17A of the Act
and the regulations thereunder, including the standards under Rule
17Ad-22.
B. Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\13\ The iTraxx
ESG Index contracts will be available to all LCH SA's CDSClear
participants for clearing. The clearing of these new iTraxx ESG Index
contracts by LCH SA does not preclude the offering of the iTraxx ESG
Index contracts for clearing by other market participants. Accordingly,
LCH SA does not believe that clearance of the new iTraxx ESG Index
contracts will impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.
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\13\ 15 U.S.C. 78q-1(b)(3)(I).
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C. Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. LCH SA will notify the Commission of any written
comments received by LCH SA.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-LCH SA-2020-002 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-LCH SA-2020-002. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of LCH SA and on LCH SA's website
at: https://www.lch.com/resources/rules-and-regulations/proposed-rule-changes-0. All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish
[[Page 42962]]
to make available publicly. All submissions should refer to File Number
SR-LCH SA-2020-002 and should be submitted on or before August 5, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15205 Filed 7-14-20; 8:45 am]
BILLING CODE 8011-01-P
