Self-Regulatory Organizations; LCH SA; Notice of Filing of Proposed Rule Change Relating to the Clearing of Single-Name Credit Default Swaps by U.S. Customers, 23445-23453 [2021-09025]
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Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
arguments concerning the foregoing,
including whether the proposed rule is
consistent with the Act. Comments may
be submitted by any of the following
methods:
[FR Doc. 2021–09027 Filed 4–30–21; 8:45 am]
Electronic Comments
BILLING CODE 8011–01–P
• 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–
ICEEU–2021–008 on the subject line.
Paper Comments
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• 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–ICEEU–2021–008. 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, security-based swap submission
or advance notice that are filed with the
Commission, and all written
communications relating to the
proposed rule change, security-based
swap submission or advance notice
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 such
filings will also be available for
inspection and copying at the principal
office of ICE Clear Europe and on ICE
Clear Europe’s website at https://
www.theice.com/clear-europe/
regulation.
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–ICEEU–2021–008
and should be submitted on or before
May 24, 2021.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91676; File No. SR–LCH
SA–2021–001]
Self-Regulatory Organizations; LCH
SA; Notice of Filing of Proposed Rule
Change Relating to the Clearing of
Single-Name Credit Default Swaps by
U.S. Customers
April 26, 2021.
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 April 13,
2021, 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. The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
(a) Banque Centrale de Compensation,
which conducts business under the
name LCH SA (‘‘LCH SA’’), is proposing
to amend its (i) CDS Clearing Rule Book
(the ‘‘Rule Book’’), (ii) CDS Clearing
Supplement (the ‘‘Clearing
Supplement’’), (iii) some of its CDS
Clearing Procedures (the ‘‘Procedures’’),
and (iv) FCM Clearing Regulations
(‘‘Clearing Regulations’’), to allow LCH
SA to offer clearing services in respect
of single-name credit default swaps
(‘‘CDS’’) that are ‘‘security-based swaps’’
(‘‘SBS’’) (‘‘Single-Name CDS’’) to be
submitted by Clearing Members on
behalf of their U.S. Clients for clearing
by LCH SA.3 LCH SA is also proposing
to revise a number of its rules to make
additional amendments and conforming
and clarifying amendments for
consistency purposes. The text of the
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Capitalized terms used but not defined herein
shall have the meaning specified in the Rule Book,
the Clearing Supplement, the Procedures and the
Clearing Regulations, as applicable.
1 15
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23445
proposed rule change has been annexed
as Exhibit 5. The launch of clearing
Single-Name CDS for U.S. Clients will
be contingent upon LCH SA’s receipt of
all necessary regulatory approvals,
including the approval by the
Commission of the proposed rule
change described herein.
(b) Not applicable.
(c) Not applicable.
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
(a) Purpose
The purpose of the proposed rule
change is to revise LCH SA’s rules and
procedures to (1) allow LCH SA to
extend its clearing services in respect of
Single-Name CDS for U.S. Clients of
Clearing Members and (2) make
additional amendments and conforming
and clarifying amendments for
consistency purposes.
(1) Amendments To Permit LCH SA To
Offer Clearing Services in Relation to
the Clearing of Single-Name CDS for
U.S. Clients
Under the derivatives regulatory
regime established by Title VII of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the
SEC was given regulatory authority over
derivatives that qualify as ‘‘securitybased swaps’’ and the US Commodity
Futures Trading Commission (‘‘CFTC’’)
was given regulatory authority over
derivatives that qualify as ‘‘swaps.’’ As
a result of this division of regulatory
responsibility, certain index CDS that
are not based on a narrow-based
security index constitute ‘‘swaps’’
subject to the regulations of the CFTC.
On the other hand, Single-Name CDS
constitute ‘‘security-based swaps’’
subject to the regulations of the SEC.
Currently, U.S. Clients are permitted to
clear index CDS that qualify as ‘‘swaps’’
at LCH SA but not Single-Name CDS.
A Single-Name CDS is a contract
based on the credit risk of a single issuer
(a ‘‘Reference Entity’’) in which the
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buyer of protection transfers the credit
risk of the Reference Entity to the seller
of protection without transferring the
underlying obligation of the Reference
Entity. The key terms of a Single-Name
CDS include, among other things, (1) the
identity of the Reference Entity, (2) the
agreed upon notional amount, (3) the
maturity date, (4) required payments by
the protection buyer, (5) ‘‘credit events’’
that result in an obligation from the
protection seller to the protection buyer,
and (6) settlement terms. Upon the
launch of clearing of Single-Name CDS
for U.S. Clients, LCH SA will provide
central counterparty services for such
Single-Name CDS that are accepted for
clearing.
The proposed changes described
below would allow U.S. Clients to clear
Single-Name CDS at LCH SA.
i. Rule Book
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a. Changes to Defined Terms
The Rule Book would be amended to
add several new defined terms in order
to accommodate the extension of LCH
SA’s CDS Clearing Services in respect of
Single-Name CDS submitted to LCH SA
for clearing on behalf of U.S. Clients.
Specifically, LCH SA proposes to add a
definition for ‘‘BD’’ as a legal entity that
is a ‘‘broker’’ or ‘‘dealer’’ as defined in
Section 3(a)(4) or 3(a)(5) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’), respectively, and is
registered in such capacity with the SEC
and a member in good standing of
FINRA (a defined term of ‘‘FINRA’’
would be added to the Rule Book and
defined as the Financial Industry
Regulatory Authority, Inc., or any
successor thereto). The term ‘‘FCM
Clearing Member’’ would in turn be
retitled as ‘‘FCM/BD Clearing Member’’
and would be defined as any FCM, BD,
or legal entity that is both an FCM and
BD that has been admitted as a clearing
member. ‘‘FCM Client’’ would likewise
be retitled as ‘‘FCM/BD Client’’ and
would mean any Client that is (i) a
Cleared Swaps Customer of an FCM/BD
Clearing Member to which the FCM/BD
Clearing Member provides CDS Client
Clearing Services with respect to
positions in FCM/BD Cleared
Transactions that are ‘‘Cleared Swaps,’’
or (ii) an SBS Customer of an FCM/BD
Clearing Member to which the FCM/BD
Clearing Member provides CDS Client
Clearing Services with respect to
positions in FCM/BD Cleared
Transactions that are SBS. A defined
term ‘‘SBS Customer’’ would be added
to the Rule Book and would be defined
as ‘‘security-based swap customer’’ (as
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defined in Exchange Act Rule 15c3–3) 4
of an FCM/BD Clearing Member to
which the FCM/BD Clearing Member
provides CDS Client Clearing Services
with respect to positions in FCM/BD
Cleared Transactions that are SBS in
one or more accounts described in the
FCM/BD SBS Client Account Structure.
A new defined term ‘‘Cleared Swap’’
would be added in the Rule Book, in
order to differentiate between ‘‘swaps’’
and ‘‘SBS’’ and the different account
structures for each (as further described
below), to mean an ‘‘FCM/BD Cleared
Transaction’’ (i) constituting a ‘‘Cleared
Swap’’ as defined in CFTC Regulation
22.1 5 or (ii) constituting an SBS that is
held in the FCM/BD Swaps Client
Account Structure.6 A ‘‘Cleared Swaps
Customer,’’ in turn, would be defined as
(i) a ‘‘Cleared Swaps Customer,’’ as
defined in CFTC Regulation 22.1, of an
FCM/BD Clearing Member with respect
to Cleared Swaps that is an eligible
contract participant as defined in
Section 1a(18) of the U.S. Commodity
Exchange Act, other than subparagraph
(C) thereof, or as may be further defined
by CFTC Regulations, and (ii) a person
that would be a ‘‘Cleared Swaps
Customer,’’ as defined in CFTC
Regulation 22.1, of an FCM/BD Clearing
Member with respect to any transaction
constituting an SBS that is a Cleared
Swap, as if such transaction is a Cleared
Swap for purposes of the definition of
‘‘Cleared Swaps Customer’’ in CFTC
Regulation 22.1.7 ‘‘Cleared Swaps
Customer Collateral’’ would be defined
as ‘‘Cleared Swaps Customer
Collateral,’’ as defined in CFTC
Regulation 22.1, with respect to Cleared
Swaps, including with respect to any
transaction constituting an SBS that is a
Cleared Swap, as if such transaction is
a Cleared Swap for purposes of the
definition of ‘‘Cleared Swaps Customer
Collateral’’ in CFTC Regulation 22.1.8
The defined terms in the Rule Book
which relate to the account structure in
which collateral for Cleared Swaps and
SBS would be held would be revised to
accommodate three account structures:
(1) A separate account structure for
4 17
CFR 240.15c3–3.
CFR 22.1
6 SBS held in the FCM/BD Swaps Client Account
structure would include SBS eligible for portfolio
margining as contemplated in the Commission’s
Order Granting Conditional Exemptions under the
Securities Exchange Act of 1934 in connection with
Portfolio Margining of Swaps and Security-Based
Swaps. See Order Granting Conditional Exemptions
Under the Securities Exchange Act of 1934 in
Connection With Portfolio Margining of Swaps and
Security-Based Swaps, Exchange Act Release No.
68433 (Dec. 14, 2012), 77 FR 75211 (Dec. 19, 2012)
(the ‘‘Portfolio Margining Order’’).
7 17 CFR 22.1
8 17 CFR 22.1
5 17
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Cleared Swaps, (2) a separate account
structure for SBS, and (3) an account
structure in which an FCM/BD Clearing
Member that is both an FCM and a BD
may elect to clear and hold margin for
FCM/BD Cleared Transactions that are
SBS for FCM/BD Clients on a
commingled basis with Cleared Swaps
in accordance with the Portfolio
Margining Order. Each account
structure is described in further detail
below and the defined terms (and the
changes to existing defined terms) with
respect to those account structures
would include:
• ‘‘FCM/BD Client Account
Structure’’ would mean the accounts
comprising the FCM/BD Swaps Client
Account Structure and the FCM/BD SBS
Client Account Structure set out in the
Rule Book and registered in the CDS
Clearing System in the name of an FCM/
BD Clearing Member.
• ‘‘FCM/BD Swaps Client Account
Structure’’ would mean the accounts
comprising the FCM/BD Swaps Client
Account Structure and registered in the
CDS Clearing System in the name of an
FCM/BD Clearing Member.
• ‘‘FCM/BD SBS Client Account
Structure’’ would mean the accounts
comprising the FCM/BD SBS Client
Account Structure and registered in the
CDS Clearing System in the name of an
FCM/BD Clearing Member.
• ‘‘FCM/BD Client Collateral
Account’’ would mean an FCM/BD
Swaps Client Collateral Account and/or
an FCM/BD SBS Client Collateral
Account.
• ‘‘FCM/BD Swaps Client Collateral
Account’’ would mean an account
opened in the books of LCH SA to
record the Collateral held by LCH SA for
the benefit of an FCM/BD Clearing
Member’s FCM/BD Clients with respect
to Cleared Swaps, the aggregate value of
such Collateral being divided among,
and recorded in: (i) The FCM/BD Swaps
Client Financial Account; (ii) the FCM/
BD Swaps Buffer Financial Account;
and (iii) the FCM/BD Swaps
Unallocated Client Collateral Financial
Account.
• ‘‘FCM/BD SBS Client Collateral
Account’’ would mean an account
opened in the books of LCH SA to
record the Collateral held by LCH SA for
the benefit of an FCM/BD Clearing
Member’s SBS Customers with respect
to FCM/BD Cleared Transactions that
are SBS (excluding any SBS transactions
held in the FCM/BD Swaps Client
Account Structure as Cleared Swaps),
the aggregate value of such Collateral
being divided among, and recorded in:
(i) The FCM/BD SBS Client Financial
Accounts; (ii) the FCM/BD SBS Buffer
Financial Account; and (iii) the FCM/
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BD SBS Client Excess Collateral
Financial Account.
• ‘‘FCM/BD Client Financial
Account’’ would mean an FCM/BD
Swaps Client Financial Account or an
FCM/BD SBS Client Financial Account.
• ‘‘FCM/BD Swaps Client Financial
Account’’ would mean a segregated
account opened in the books of LCH SA
for each Cleared Swaps Customer of an
FCM/BD Clearing Member with a view
to record the Legally Segregated Value
related to Cleared Swaps of such
Cleared Swaps Customer as determined
by LCH SA in accordance with the CDS
Clearing Rules.
• ‘‘FCM/BD SBS Client Financial
Account’’ would mean a segregated
account opened in the books of LCH SA
for an SBS Customer of an FCM/BD
Clearing Member with a view to record
the Legally Segregated Value related to
SBS (excluding SBS that are held in the
FCM/BD Swaps Client Account
Structure as Cleared Swaps) of such
FCM/BD Clearing Member’s SBS
Customer as determined by LCH SA in
accordance with the CDS Clearing
Rules.
• ‘‘FCM/BD Client Margin Account’’
would mean an FCM/BD Swaps Client
Margin Account or an FCM/BD SBS
Client Margin Account.
• ‘‘FCM/BD Swaps Client Margin
Account’’ would mean an account
opened by LCH SA in the name of an
FCM/BD Clearing Member for the
benefit of each Cleared Swaps Customer
of such FCM/BD Clearing Member in
the CDS Clearing System for risk
management purposes, in which the
FCM/BD Cleared Transactions of such
Client that are Cleared Swaps are netted
and corresponding Open Positions are
registered, and each FCM/BD Client
related Cleared Swaps positions
corresponding to Eligible Intraday
Transactions and Irrevocable
Backloading STM Transactions preregistered in the Account Structure of
such FCM/BD Clearing Member (if so
applicable) are recorded, in order to
calculate the FCM/BD Client Margin
Requirement and Client NPV Payment
Requirement of such FCM/BD Clearing
Member in respect of such FCM/BD
Client.
• ‘‘FCM/BD SBS Client Margin
Account’’ would mean an account
opened by LCH SA in the name of an
FCM/BD Clearing Member for the
benefit of each SBS Customer of such
FCM/BD Clearing Member in the CDS
Clearing System for risk management
purposes, in which the SBS of the SBS
Customers (excluding SBS that are held
in the FCM/BD Swaps Client Account
Structure as Cleared Swaps) are netted
and corresponding Open Positions are
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registered, and each FCM/BD Client
related SBS positions (excluding SBS
transactions that are held in the FCM/
BD Swaps Client Account Structure as
Cleared Swaps) corresponding to
Eligible Intraday Transactions and
Irrevocable Backloading STM
Transactions pre-registered in the
Account Structure of such FCM/BD
Clearing Member (if so applicable) are
recorded, in order to calculate the FCM/
BD Client Margin Requirement and
Client NPV Payment Requirement of
such FCM/BD Clearing Member in
respect of such SBS Customer.
• ‘‘FCM/BD Client Trade Account’’
would mean an FCM/BD Swaps Client
Trade Account or an FCM/BD SBS
Client Trade Account.
• ‘‘FCM/BD Swaps Client Trade
Account’’ would mean an account
opened by LCH SA in the name of an
FCM/BD Clearing Member for the
benefit of a Customer of such FCM/BD
Clearing Member in order to register all
Cleared Swaps (including any SBS that
are held in the FCM/BD Swaps Client
Account Structure as Cleared Swaps) in
relation to such FCM/BD Client.
• ‘‘FCM/BD SBS Client Trade
Account’’ would mean an account
opened by LCH SA in the name of an
FCM/BD Clearing Member for the
benefit of an SBS Customer of such
FCM/BD Clearing Member in order to
register all SBS cleared by such FCM/
BD Clearing Member (excluding SBS
that are held in the FCM/BD Swaps
Client Account Structure as Cleared
Swaps) in relation to such SBS
Customer.
• ‘‘FCM/BD Buffer Financial
Account’’ would mean an FCM/BD
Swaps Buffer Financial Account or an
FCM/BD SBS Buffer Financial Account.
• ‘‘FCM/BD Swaps Buffer Financial
Account’’ would mean a segregated
account opened in the books of LCH SA
to record the value of an FCM/BD
Clearing Member’s FCM/BD Client
Collateral Buffer with respect to Cleared
Swaps.
• ‘‘FCM/BD SBS Buffer Financial
Account’’ would mean a segregated
account opened in the books of LCH SA
to record the value of an FCM/BD
Clearing Member’s FCM/BD SBS Client
Collateral Buffer.
• ‘‘FCM/BD Client Collateral Buffer’’
would mean FCM/BD Swaps Client
Collateral Buffer or FCM/BD SBS Client
Collateral Buffer.
• ‘‘FCM/BD Swaps Client Collateral
Buffer’’ would mean the aggregate value
of Collateral transferred by an FCM/BD
Clearing Member to LCH SA,
comprising such FCM/BD Clearing
Member’s own property, and recorded
in such FCM/BD Clearing Member’s
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FCM/BD Swaps Buffer Financial
Account which may be used by LCH SA
to meet obligations in respect of the
Cleared Swaps of Cleared Swaps
Customers, including for the purpose of
satisfying the Notional and Collateral
Checks performed by LCH SA in respect
of Eligible Intraday Transactions
comprising one or more Client Trade
Leg(s).
• ‘‘FCM/BD SBS Client Collateral
Buffer’’ would mean the aggregate value
of Collateral transferred by an FCM/BD
Clearing Member to LCH SA,
comprising such FCM/BD Clearing
Member’s own property, and recorded
in such FCM/BD Clearing Member’s
FCM/BD SBS Buffer Financial Account
which may be used by LCH SA to meet
obligations in respect of the FCM/BD
Cleared Transactions of SBS Customers,
including for the purpose of satisfying
the Notional and Collateral Checks
performed by LCH SA in respect of
Eligible Intraday Transactions
comprising one or more Client Trade
Leg(s).
• ‘‘FCM/BD Available Client
Collateral Buffer’’ would mean the
FCM/BD Swaps Available Client
Collateral Buffer or the FCM/BD SBS
Available Client Collateral Buffer.
• ‘‘FCM/BD Swaps Available Client
Collateral Buffer’’ would mean the
portion of the FCM/BD Swaps Client
Collateral Buffer which, at the relevant
time, is not allocated to any FCM/BD
Swaps Client Margin Account and is
available to be used to enable the
novation of Client Trade Legs.
• ‘‘FCM/BD SBS Available Client
Collateral Buffer’’ would mean the
portion of the FCM/BD SBS Client
Collateral Buffer which, at the relevant
time, is not allocated to any FCM/BD
SBS Client Margin Account and is
available to be used to enable the
novation of Client Trade Legs.
• ‘‘FCM/BD Swaps Client Excess
Collateral’’ would mean the amount of
any FCM/BD Excess Collateral
attributable to an FCM/BD Swaps Client
Margin Account and held on an
intraday basis prior to the next Morning
Call before it is transferred to the related
FCM/BD Clearing Member’s FCM/BD
Swaps Unallocated Client Collateral
Financial Account.
• ‘‘FCM/BD SBS Client Excess
Collateral’’ would mean the FCM/BD
Client Excess Collateral as set out in the
proposed new Article 6.2.5.2(ii) of the
Rule Book.
• ‘‘FCM/BD SBS Client Excess
Collateral Financial Account’’ would
mean a segregated account opened in
the books of LCH SA to record the value
of FCM/BD SBS Client Excess Collateral
as determined by LCH SA.
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• ‘‘FCM/BD Swaps Unallocated
Client Collateral Financial Account’’
would mean a segregated account
opened in the books of LCH SA to
record the value of FCM/BD Swaps
Unallocated Client Excess Collateral as
determined by LCH SA.
• ‘‘FCM/BD Swaps Unallocated
Client Excess Collateral’’ would mean
the FCM/BD Client Excess Collateral as
set out in the proposed amended
Section 6.2.5 of the Rule Book.
Changes to the Rule Book would also
be made in certain jurisdictional
definitions to reflect that SBS would be
available for Clearing to U.S. Clients.
Specifically, ‘‘Non-U.S. CCM’’ would be
defined, when used in the context of an
Original Transaction, as a CCM that has
its residence in, is organized under the
laws of, or has its principal place of
business located in, a jurisdiction other
than the United States, its territories or
possessions and is not a registered BD
or FCM. A ‘‘Non-U.S. CCM Client’’
would be defined as a CCM Client that
is not a U.S. CCM Client. A ‘‘U.S. CCM
Client’’ would be defined as a Client of
an FCM or a BD or any Client that has
its residence in, is organized under the
laws of, or has its principal place of
business located in the United States, its
territories or possessions.
The following defined terms in
Chapter 1, Section 1.1.1 would also
include conforming changes to
accommodate the clearing of SingleName CDS for U.S. Clients: ‘‘Account
Structure,’’ ‘‘Affiliate,’’ ‘‘Allocated
Client Collateral Buffer,’’ ‘‘Available
Client Collateral Buffer,’’ ‘‘Backup
Clearing Member,’’ ‘‘Carrying Clearing
Member,’’ ‘‘CCM,’’ ‘‘CDS Clearing
Rules,’’ ‘‘CDS Clearing Service,’’
‘‘Cleared Transaction,’’ ‘‘Client,’’ ‘‘Client
Account Structure,’’ ‘‘Client Assets,’’
‘‘Client Collateral Account,’’ ‘‘Client
Collateral Buffer,’’ ‘‘Client Collateral
Buffer Shortfall,’’ ‘‘Client Collateral
Buffer Threshold,’’ ‘‘Client Excess
Collateral,’’ ’’Client Margin Account,’’
’’Client Margin Requirement,’’ ’’Client
Margin Shortfall,’’ ’’Client Termination
Amount,’’ ’’Client Trade Account,’’
‘‘Excess Collateral,’’ ‘‘Excess Collateral
Threshold,’’ ‘‘FCM Allocated Client
Collateral Buffer,’’ ‘‘FCM CDS Clearing
Regulations,’’ ‘‘FCM Cleared
Transaction,’’ ‘‘FCM Client Collateral
Buffer Shortfall,’’ ‘‘FCM Client
Collateral Buffer Threshold,’’ ‘‘FCM
Client Excess Collateral,’’ ‘‘FCM Client
Margin Requirement,’’ ‘‘FCM Client
Margin Shortfall,’’ ‘‘FCM Client
Termination Amount,’’ ‘‘FCM Excess
Collateral,’’ ‘‘FCM House Cleared
Transaction,’’ ‘‘FCM House Collateral
Account,’’ ‘‘FCM House Excess
Collateral,’’ ‘‘FCM House Excess
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Collateral Shortfall,’’ ‘‘FCM House
Excess Collateral Threshold,’’ ‘‘FCM
House Margin Account,’’ ‘‘FCM House
Margin Requirement,’’ ‘‘FCM House
Margin Shortfall,’’ ‘‘FCM Margin
Balance,’’ ‘‘FCM Required Collateral
Amount,’’ ‘‘General Member,’’ ‘‘House
Collateral Account,’’ ‘‘House Excess
Collateral,’’ ‘‘House Excess Collateral
Shortfall,’’ ‘‘House Excess Collateral
Threshold,’’ ‘‘House Margin Account,’’
‘‘House Margin Requirement,’’ ‘‘House
Margin Shortfall,’’ ‘‘Legally Segregated
Value,’’ ‘‘Margin Account,’’ ‘‘Margin
Balance,’’ ‘‘Notional and Collateral
Check,’’ ‘‘Porting FCM Cleared
Transaction,’’ ‘‘Receiving Clearing
Member,’’ ‘‘Required Collateral
Amount,’’ and ‘‘Select Member.’’
In addition to the foregoing changes,
various other conforming and clarifying
changes would be made throughout
Title I (General Provisions & Legal
Framework) to incorporate terms to
accommodate Single-Name CDS cleared
for FCM/BD Clients. Those conforming
and clarifying changes are set forth in
Articles 1.2.10.3(xix) and (xxi),
1.2.10.4(vii), (x) and (xi), 1.2.14.4,
1.2.14.5(iv), 1.3.1.3(vi), 1.3.1.4, 1.3.1.6
(ii)—(iv), 1.3.1.9, and 1.3.1.10.
b. Membership and Clearing Operations
Article 2.1.1.2 of the Rule Book would
be revised to provide that, without
prejudice to the membership
requirements set out in the CDS
Clearing Rules and applicable law, both
FCMs and BDs are eligible to become
FCM/BD Clearing Members.
Additional conforming and clarifying
changes would be made throughout
Title II (Legal Obligations) to include
terms for Single-Name CDS and certain
other clarifying changes, including in
Article 2.2.0.3, 2.2.1.1 (iv), (xxi), (xxiv),
and (xxv), 2.2.1.2, 2.2.2.1, 2.2.3.1,
2.3.4.2, 2.4.2.11, and 3.1.10.9.
c. Risk Management
The procedures with respect to the
return of collateral are set forth in
Article 4.2.2.5 of the Rule Book and
would be revised, in the case of an
FCM/BD Clearing Member, so that if the
FCM/BD Margin Balance of an FCM/BD
Client Financial Account exceeds the
relevant FCM/BD Client Margin
Requirement prior to the Morning Call
or the value of the Collateral attributed
to the FCM/BD Buffer Financial
Account exceeds the FCM/BD Client
Collateral Buffer Threshold, then the
amount of the excess: (1) If related to
Cleared Swaps, will be reclassified as
FCM/BD Swaps Unallocated Client
Excess Collateral; and (2) if related to
SBS (excluding SBS that are held in the
FCM/BD Swaps Client Account
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Structure as Cleared Swaps (as
described below)), will be reclassified as
FCM/BD SBS Client Excess Collateral,
and thereafter may be returned to the
FCM/BD Clearing Member.
Other conforming changes in Title IV
(Risk Management) of the Rule Book are
set forth in Article 4.2.2.1, 4.2.2.4,
4.2.2.6, 4.2.3.1, 4.2.6.3, 4.2.6.4, 4.2.6.6,
4.3.1.3, 4.3.2.3(i), (x), (xv) and (xix),
4.3.2.4, 4.3.2.7, 4.3.3.1(i), 4.3.3.2, and
4.3.3.4.
d. CDS Client Clearing Services
Provided by a CCM
Article 5.1.1.2, which relates to the
provision of CDS Client Clearing
Services and sets limitations on the
scope of services that may be provided
by a Clearing Member that is a CCM,
previously provided, in clause (v), that
a Non-U.S. CCM shall not provide CDS
Client Clearing Services to any U.S.
CCM Client with respect to an Original
Transaction that is SBS and that a U.S.
CCM shall not provide any CDS Client
Clearing Services to any U.S. CCM
Client with respect to an Original
Transaction that is SBS. Clause (v) of
Article 5.1.1.2 would be deleted in its
entirety. Separately, clause (vi) would
be re-numbered as clause (v) and would
provide that a CCM shall not provide
CDS Client Clearing Services to any U.S.
CCM Client with respect to an Original
Transaction (which would include any
SBS) unless such CCM is an FCM and/
or BD.
e. CDS Client Clearing Services
Provided by an FCM/BD Clearing
Member
Article 6.1.1.2(vi) previously provided
that an FCM shall not provide CDS
Client Clearing Services to any FCM
Client with respect to SBS; it would be
revised to delete that restriction.
Article 6.2.1.1 sets forth the required
account structure for FMC/BD Clearing
Members. Article 6.2.1.1(i) would set
forth the required account structure for
an FCM (which may also be a BD) with
respect to any Cleared Swaps, which
would entail:
• An FCM/BD Swaps Client Trade
Account for each Cleared Swaps
Customer.
• An FCM/BD Swaps Client Margin
Account for each Cleared Swaps
Customer.
• An FCM/BD Swaps Client Financial
Account for each Cleared Swaps
Customer.
• An FCM/BD Swaps Unallocated
Client Collateral Financial Account.
• An FCM/BD Swaps Buffer Financial
Account.
• An FCM/BD Swaps Client
Collateral Account.
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For an FCM/BD Clearing Member that
is a BD (which may also be an FCM),
with respect to SBS (excluding SBS that
are permitted to be held in an account
with Cleared Swaps), Article 6.2.1.1(ii)
would require the following account
structure:
• An FCM/BD SBS Client Trade
Account for each SBS Customer. 9
• An FCM/BD SBS Client Margin
Account for each SBS Customer.10
• An FCM/BD SBS Client Financial
Account for each SBS Customer.11
• An FCM/BD SBS Client Excess
Collateral Financial Account.12
• An FCM/BD SBS Buffer Financial
Account.13
• An FCM/BD SBS Client Collateral
Account.14
9 Article 6.2.2.1, which relates to the
establishments of trade accounts, would be revised
to provide for the establishment of FCM/BD SBS
Client Trade Accounts for SBS Customers.
10 Article 6.2.3.1, which relates to the
establishment of client margin accounts, would be
revised to provide for the establishment of FCM/BD
SBS Client Margin Accounts for SBS Customers.
Article 6.2.3.2 would be revised to provide that
FCM/BD Cleared Transactions (i) registered in an
FCM/BD Swaps Client Trade Account for a Cleared
Swaps Customer will be allocated to the
corresponding FCM/BD Cleared Swaps Client
Margin Account and (ii) registered in an FCM/BD
SBS Client Trade Account for an SBS Customer will
be allocated to the corresponding FCM/BD SBS
Client Margin Account, for the purpose of the
determination of the Open Positions and NPV
Payment Requirements attributable to such FCM/
BD Client.
11 Article 6.2.4.1, which relates to the
establishment of Client Financial Accounts, would
be revised to include a new clause (ii) (a) setting
forth the establishment of an FCM/BD SBS Client
Financial Account for each SBS Customer, in which
LCH SA will record the value of Collateral provided
by the FCM/BD Clearing Member in respect of such
SBS Customer’s Open Positions in SBS.
12 Article 6.2.4.1(ii)(c) would be added to provide
that LCH SA shall open an FCM/BD SBS Client
Excess Collateral Financial Account, in which LCH
SA will record the value of FCM/BD SBS Client
Excess Collateral. Article 6.2.5.2 (ii) would provide
that an FCM/BD Clearing Member is not permitted
to maintain any FCM/BD Client Excess Collateral
on a day-to-day basis with respect to SBS, but may
hold FCM/BD Client Excess Collateral on an
intraday basis and that LCH SA shall transfer the
value of any FCM/BD Client Excess Collateral that
is reflected in any FCM/BD SBS Client Financial
Account of the FCM/BD Clearing Member prior to
the Morning Call to the FCM/BD Clearing Member’s
FCM/BD SBS Client Excess Collateral Financial
Account. In addition, Article 6.2.5.2(iv) would
provide that LCH SA shall hold FCM/BD SBS Client
Excess Collateral in the FCM/BD SBS Client Excess
Collateral Financial Account for the benefit of FCM/
BD Clearing Member’s FCM/BD Clients that are SBS
customers as a class in accordance with SEC
regulations and Applicable Law and that upon the
request of an FCM/BD Clearing Member, LCH SA
will return FCM/BD SBS Client Excess Collateral to
such FCM/BD Clearing Member.
13 Article 6.2.4.1(ii)(b) would be added to provide
that LCH SA shall open an FCM/BD SBS Buffer
Financial Account, in which LCH SA will record
the value of Collateral provided as FCM/BD SBS
Client Collateral Buffer.
14 Article 6.2.4.1(ii)(d) would be added to provide
that LCH SA shall open an FCM/BD SBS Client
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A new Article 6.2.1.1(iii) would also
be added to provide that an FCM/BD
Clearing Member that is both an FCM
and a BD may elect to clear and hold
margin for FCM/BD Cleared
Transactions that are SBS for FCM/BD
Clients in the FCM/BD Swaps Client
Account Structure on a commingled
basis with Cleared Swaps and margin
such combined positions on a portfolio
basis in compliance with Applicable
Laws, provided that each FCM/BD
Client participating in the portfolio
margining shall be an eligible contract
participant as defined in Section 1a(18)
of the Commodity Exchange Act. Upon
such election, FCM/BD Cleared
Transactions that are SBS will be
included as ‘‘Cleared Swaps’’ and
maintained in the FCM/BD Swaps
Client Account Structure.
Articles 6.1.1.1, 6.1.1.2, 6.1.1.3,
6.1.1.4, 6.1.1.5, 6.2.1.2, 6.2.1.3, 6.2.1.4,
6.2.2.1, 6.2.2.2, 6.2.3.1, 6.2.3.2, 6.2.3.3,
6.2.4.1, 6.2.4.2, 6.2.4.3, 6.2.4.4, 6.2.5.1,
6.2.5.2, 6.2.6.1, 6.2.6.2, 6.3.1.1, 6.3.2.1,
6.3.3.1, 6.3.4.1, 6.3.4.2, 6.3.5.1, 6.3.5.2,
6.4.1.1, and 6.4.1.3 would also include
certain conforming and clarifying
changes.
f. Default Management
Appendix I of the Rule Book (CDS
Default Management Process), Clause
1.1 which provides for the definition of
‘‘Transaction Categories’’ would be
amended to provide that different
categories of Cleared Transactions will
include ‘‘Single Name Cleared
Transactions’’ for consistency purposes.
Clause 3.3 of Appendix I would also be
amended to provide that the CDS
Default Management Process shall be
carried out in a manner consistent with
the requirements of the SIPC (which is
the Securities Investor Protection
Corporation or any successor thereto in
accordance with the proposed definition
of new defined term of ‘‘SIPC’’ in
Section 1.1.1 of the Rule Book),
Exchange Act and SEC Regulations.
Clause 5.4 of Appendix I, which relates
to the Competitive Bidding Process,
would be revised to provide in Clause
5.4.1, that a Non-Defaulting Clearing
Member that is a BD but not an FCM is
not required to participate in
Competitive Bidding for an Auction
Package containing any Cleared Swaps
and that a Non-Defaulting Clearing
Member that is an FCM but not a BD is
not required to participate in
Competitive Bidding for an Auction
Package containing any SBS.
Collateral Account in which LCH SA will record
the Collateral held by LCH SA recorded in the
foregoing accounts.
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Other conforming changes in
Appendix I are set forth in Clauses 3.3,
4.2.1, 4.2.2, 4.2.3, 4.2.5, 4.2.8, 4.3.1,
4.4.3, 4.5.2, 8.1.4, 8.5, 8.7 and 8.9.
ii. Clearing Supplement
Various clarifying and conforming
changes would be made to the Clearing
Supplement to account for the clearing
of SBS for FCM/BD Clients. Specifically,
certain references to ‘‘FCM’’ therein
would be replaced with ‘‘FCM/BD.’’
Those changes are set forth in Sections
1.7 and 9.2(c) of Parts A and B of the
Clearing Supplement and in Sections
1.7 and 6.10(b) and (d) of Part C of the
Clearing Supplement.
iii. Procedures
Section 2 of the Procedures (Margin,
NPV Payment and Price Alignment)
would include conforming changes in
Sections 2.2, 2.3, 2.5, and 2.16.
Section 3 of the Procedures
(Collateral, Variation Margin and Cash
Payment) would be amended, in Section
3.3(b), which relates to the Collateral
Account structure, to add a reference to
the FCM/BD SBS Client Collateral
Account to record the collateral held by
LCH SA for the benefit of an FCM/BD
Clearing Member’s SBS Customers with
respect to SBS (excluding SBS that are
held in an account in the FCM/BD
Swaps Client Account Structure), the
aggregate value of such Collateral being
divided amongst, and recorded in: the
FCM/BD SBS Client Financial Account;
the FCM/BD SBS Buffer Financial
Account; and the FCM/BD SBS Client
Excess Collateral Financial Account.
Section 3.7(a) would be amended to
provide that with respect to the Clients
of a Clearing Member, LCH SA will
perform Collateral Calls, in respect of
SBS, with a ‘‘TARGET2 Account’’ used
to make Collateral Calls in relation to
the Client Margin Requirements with
respect to SBS (excluding SBS held in
the FCM/BD Swaps Client Account
Structure) and FCM/BD Client Collateral
Buffer Threshold of each FCM/BD
Clearing Member, which for the
avoidance of doubt would form part of
the LCH SBS Client Segregated
Depository Account. Section 3.7(b)
would also be amended to provide that
an FCM/BD Clearing Member must hold
three ‘‘TARGET2 Accounts,’’ for
purposes of Collateral Calls in respect of
(i) its FCM/BD House Margin
Requirement and FCM/BD House Excess
Collateral Threshold, (ii) its Client
Margin Requirement(s) with respect to
Cleared Swaps and FCM/BD Client
Collateral Buffer Threshold and (iii) its
Client Margin Requirement(s) with
respect to SBS (excluding SBS that are
held in the FCM/BD Swaps Client
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Account Structure) and FCM/BD Client
Collateral Buffer Threshold. Section
3.7(g) would be amended to provided
that, in respect of an FCM/BD SBS
Client Excess Collateral Financial
Account, the FCM/BD Clearing Member
may request LCH SA to return some or
all FCM/BD SBS Client Excess
Collateral in the form of Euro
denominated Cash Collateral provided
that the requested amount does not
exceed the FCM/BD SBS Client Excess
Collateral recorded in its FCM/BD SBS
Client Collateral Account.
Section 3.8(a)–(b) of the Procedures
would be amended to provide that with
respect to Clients of a Clearing Member,
LCH SA would open (i) a multicurrency account used to credit nonEuro, non-USD Cash Collateral which is
transferred by an FCM/BD Clearing
Member to be recorded in its FCM/BD
SBS Client Collateral Account, which
would form part of the LCH SBS Client
Segregated Depository Account for
purposes of the FCM/BD CDS Clearing
Regulations and (ii) an account used to
credit USD Cash Collateral which is
transferred by FCM/BD Clearing
Members to be recorded in their FCM/
BD SBS Client Collateral Account,
which would also form part of the LCH
SBS Client Segregated Depository
Account for purposes of the FCM/BD
CDS Clearing Regulations. With respect
to excess collateral, Section 3.8(h) and
(i), which relate to the return of
collateral would be amended to provide
for the return of excess collateral in
respect of SBS. Section 3.18(c) would be
amended to provide that LCH SA will
open a cash account used to debit or
credit USD to satisfy Cash Payments
and/or Variation Margin Collateral
Transfer obligations in USD with
respect to all relevant Client Cleared
Transactions of each FCM/BD Clearing
Member that are SBS (excluding SBS
that are held in the FCM/BD Swaps
Client Account Structure). Other
conforming changes in Section 3 of the
Procedures are included in the recital
and Sections 3.2, 3.3, 3.4, 3.7(a), (d), (f)
and (g), 3.8(a), (b), (c), (f), (g), (h) and (i),
3.9(d) and (e), 3.10(b), 3.14, 3.17 and
3.18.
Section 4 of the Procedures
(Eligibility Requirements) would be
amended to delete the provision in
Section 4.1 which previously provided
that (i) in respect of an FCM Client, a
U.S. CCM Client of a Non-U.S. CCM or
a CCM Client of a U.S. CCM, the
Original Transaction may not be a
Single Name CDS or any other SBS
identified as such in a Clearing Notice;
and (ii) in respect of a Non-U.S. CCM
Client, the Original Transaction may not
be a Single Name CDS or any other SBS
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identified as such in a Clearing Notice
unless such transaction is cleared
through a Non-U.S. CCM.
Section 5 of the Procedures (CDS
Clearing Operations) would be revised
to include conforming changes in
Sections 5.6 and 5.11.
iv. Clearing Regulations
The Clearing Regulations, currently
titled as ‘‘FCM CDS Clearing
Regulations,’’ would be retitled as the
‘‘FCM/BD CDS Clearing Regulations.’’
Various defined terms in the Clearing
Regulations would be updated to
accommodate the extension of LCH SA’s
clearing services in respect of SingleName CDS to U.S. Clients. The defined
term ‘‘FCM Cleared Swaps Client
Segregated Depository Account’’ would
be retitled as the ‘‘FCM/BD Cleared
Swaps Client Segregated Depository
Account’’ and references in that
definition to ‘‘FCM Clients’’ would be
replaced with ‘‘Cleared Swap
Customers.’’ Similarly, the references in
the defined term ‘‘LCH Cleared Swaps
Client Segregated Depository Account’’
to ‘‘FCM Clients’’ would be replaced
with ‘‘Cleared Swaps Customers’’ and
references to ‘‘Cleared Transactions’’
therein would refer to Cleared
Transactions that are ‘‘Cleared Swaps.’’
A new defined term ‘‘LCH SBS Client
Segregated Depository Account’’ would
be added and would mean an omnibus
account maintained by an FCM/BD
Clearing Member for its SBS Customers
with a Bank, which is segregated in
accordance with the Exchange Act and
SEC Regulations and contains collateral
deposited by such SBS Customers in
connection with FCM/BD Cleared
Transactions that are SBS cleared for
such SBS Customers by such FCM/BD
Clearing Member, excluding any SBS
held in the FCM/BD Swaps Client
Account Structure that are permitted to
be held in an account with Cleared
Swaps as defined in CFTC Regulation
22.1 under Applicable Law. A new
defined term for ‘‘Bank’’ would also be
added, to refer to a ‘‘Bank’’ as defined
in Section 3(a)(6) of the Exchange Act.
Finally, the defined term ‘‘LCH Cleared
Swaps Proprietary Depository Account’’
would be replaced with the general term
of ‘‘LCH Proprietary Depository
Account’’.
Regulation 1 of the Clearing
Regulations (Governing Law and
Jurisdiction) would be updated to
replace references to ‘‘FCM’’ with
‘‘FCM/BD’’ and to provide that the
Clearing Regulations shall also be
construed in accordance with the
Exchange Act.
Regulation 2 (Depositary Accounts) of
the Clearing Regulations would be
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revised to provide for the relevant
accounts for SBS. Each FCM/BD would
be required to establish and maintain an
FCM/BD SBS Client Segregated
Depository Account on behalf of its SBS
Customers in accordance with
applicable provisions of the Exchange
Act and SEC regulations, including but
not limited to Section 3E and Section
15(c) of the Exchange Act 15 and
Exchange Act Rule 15c3–3.16 The
Clearing Regulations would require that
the SBS Client Segregated Depository
Account be maintained with a Bank in
accordance with the Exchange Act and
SEC Regulations. The FCM/BD SBS
Client Segregated Depository Account
maintained by each FCM/BD Clearing
Member would be designated as a
‘‘Special Reserve Bank Account for the
Exclusive Benefit of the Cleared
Security-Based Swap Customers’’ of the
FCM/BD Clearing Member as provided
in Exchange Act Rule 15c3–3(p).17 LCH
SA would be required to open an LCH
SBS Client Segregated Depository
Account on behalf of the SBS Customers
of FCM/BD Clearing Members in
accordance with applicable provisions
of the Exchange Act and SEC
Regulations. This account shall be
maintained with a Bank and shall
contain no assets other than Collateral
deposited by FCM/BD Clearing
Members in connection with the
clearing of SBS held in the FCM/BD
SBS Client Account Structure on behalf
of their SBS Customers. The LCH SBS
Client Segregated Depository Account
maintained by LCH SA shall be
designated as a ‘‘Special Clearing
Account for the Exclusive Benefit of the
Cleared Security-Based Swaps
Customers’’ of the FCM/BD Clearing
Member for purposes of the Exchange
Act and SEC Regulations.
Regulation 3 (Collateral) of the
Clearing Regulations would be updated
to provide that securities or cash
deposited will be subject to a security
interest and held in either an LCH
Cleared Swaps Client Segregated
Depository Account or an LCH SBS
Client Segregated Depository Account,
as applicable. Regulation 3 would also
be updated to provide that no collateral
deposited in an FCM/BD Clearing
Member’s LCH Cleared Swaps Client
Segregated Depository Account or LCH
SBS Client Segregated Depository
Account shall be applied on or in
respect of payment or satisfaction of any
of the FCM/BD Clearing Member’s
liabilities to LCH SA as recorded in any
15 15
U.S.C. 78c–5, 78o(c).
CFR 240.15c3–3.
17 17 CFR 240.15c3–3(p).
16 17
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of the FCM/BD Clearing Member’s
Proprietary Accounts.
Regulation 4 (Transfer) of the Clearing
Regulations would be amended to
provide that if an FCM/BD Clearing
Member is a Defaulting Clearing
Member, any action taken by LCH SA
pursuant to the CDS Clearing Rule Book
(including the CDS Default Management
Process appended thereto) would be
taken in compliance with the U.S.
Commodity Exchange Act or the
Exchange Act and SEC Regulation, as
applicable, and applicable bankruptcy
laws regarding the liquidation or
transfer of Cleared Swaps carried by an
FCM on behalf of its Cleared Swaps
Customers or SBS carried by a BD on
behalf of its SBS Customers.
Regulation 5 (Security Interest) of the
Clearing Regulations would be revised
to specify that each FCM/BD Clearing
Member grants LCH SA a first security
interest in and a first priority and
unencumbered first lien upon any and
all cash, securities, receivables, rights
and intangibles and any other Collateral
or assets deposited with or transferred
to LCH SA, or otherwise held by LCH
SA, including all property deposited in
an LCH SBS Client Segregated
Depository Account. Regulation 5
would also clarify that notwithstanding
such security interest, in no event shall
LCH SA’s security interest in the
Collateral in an LCH SBS Client
Segregated Depository Account held on
behalf of the FCM/BD Clearing
Member’s Clients be exercised to satisfy
any obligations or liabilities of such
FCM/BD Clearing Member other than in
connection with obligations or liabilities
relating to Cleared Swaps cleared by
such FCM/BD Clearing Member on
behalf of its Cleared Swaps Customers
or relating to SBS cleared by such FCM/
BD Clearing Member on behalf of its
SBS Customers.
Additional clarifying and conforming
changes in the Clearing Regulations
would be set forth in the Clearing
Regulations, including the use of new
defined terms such as FCM/BD Clearing
Members, FCM/BD Cleared
Transactions, FCM/BD Clients, Cleared
Swaps, Cleared Swaps Customers, FCM/
BD Swaps Client Financial Account.
(2) Additional Amendments
Appendix I of the Rule Book (CDS
Default Management Process) would be
amended to provide that each NonDefaulting Clearing Member would
never be required to bid for more than
100% of the relevant Auction Package.
Therefore, Clause 5.4.4, which relates to
the calculation of the Minimum Bid
Size for each Non-Defaulting Clearing
Member required to bid for an Auction
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Package, is revised by repealing and
replacing the current calculation
formula applied by LCH SA to
determine the Minimum Bid Size with
the following one: MBS = min ([A/B] ×
C; 100%). An equivalent amendment is
proposed to be made to Clause 5.9.1,
which deals with the Recalculated
Minimum Bid Size to be determined in
the context of a second round of
Competitive Bidding, to ensure that
each Non-Defaulting Clearing Member
will not be required to bid for more than
100% of the relevant Residual Auction
Package by adding a reference to the
‘‘maximum value for the Bid Credit of
the Minimum Bid Size’’ at the end of
indent (i).
Clause 8.1.1 of Appendix 1 of the
Rule Book would be amended to remove
a reference to the Early Termination
Trigger Date at the end of the paragraph
for consistency purpose since all
payment and delivery obligations in the
context of the Early Termination process
will be made at the date and times as
set out in the following provisions of
Clause 8.
Regulation 6 (Rules Relating to FCM/
BD Cleared Swaps Client Segregated
Accounts) of the Clearing Regulations
would be also modified to implement
CFTC Letter No 19–17 of July 10, 2019
(‘‘Advisory and Time-Limited NoAction Relief with Respect to the
Treatment of Separate Accounts by
Futures Commission Merchants’’)
pursuant to which a Derivatives
Clearing Organization may permit the
Futures Commission Merchant to treat
the separate accounts of a customer as
accounts of separate entities subject to
a number of conditions provided for in
that letter. Therefore, Regulation 6(e)
would be amended to allow FCM/BD
Clearing Members to benefit from this
no-action relief regarding the
withdrawal of the Cleared Swaps
Customer funds by providing that
references to ‘‘Cleared Swaps Customer’’
shall include all Cleared Swaps
Customers for the same beneficial
owner, unless the FCM/BD Clearing
Member complies with the relevant
conditions set out in CFTC Letter No.
19–17 of July 10, 2019. Other technical
and conforming changes to Regulation 6
are included in Regulation 6(a) and 6(e).
In addition to the foregoing changes,
the amendments to the Rule Book,
Clearing Supplement, Procedures and
Clearing Regulations also contain
typographical corrections, crossreferences corrections, clean-up
changes, and similar technical
corrections as well as various
conforming references to the new or
revised defined terms.
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(b) Statutory Basis
LCH SA believes that the proposed
rule change and the extension of the
CDSClear Service in respect of SingleName CDS for FCM/BD Clients is
consistent with the requirements of
Section 17A of the Exchange Act 18 and
the regulations thereunder, including
the standards under Exchange Act Rule
17Ad–22.19 Section 17A(b)(3)(F) of the
Exchange Act 20 requires, among other
things, that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions and
derivative agreements, contracts, and
transactions. As noted above, the
proposed rule change is designed to
provide for the clearing of Single-Name
CDS to FCM/BD Clients. From a
financial risk management and margin
requirements and an operational point
of view, clearing Single-Name CDS
would not require changes to the
existing operational procedures as
Single-Name CDS transactions are
already cleared by LCH SA for Clearing
Members admitted as CCMs for their
own account and for the account of their
Non U.S. Clients. Therefore, LCH SA
believes that the clearing of SingleName CDS for U.S. Clients and the
related changes described herein are
consistent with the prompt and accurate
clearance and settlement of securities
transactions and derivative agreements,
contracts and transactions, in
accordance with Section 17A(b)(3)(F) of
the Exchange Act.21
In addition, the proposed
amendments also satisfy the relevant
requirements of Exchange Act Rule
17Ad–22 (e)(1), (4), (13), (14), (17) and
(18).22 Exchange Act Rule 17Ad–
22(e)(1) 23 requires that a covered
clearing agency establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
provide for a well-founded, clear,
transparent, and enforceable legal basis
for each aspect of its activities in all
relevant jurisdictions. The proposed
rule change would modify LCH SA’s
existing rules and procedures to clearly
define the requirements for Single-Name
CDS and establish a legal framework for
LCH SA to clear Single-Name CDS on
behalf of U.S. Clients. The proposed
rule change would also make certain
clarifying and conforming changes in
the Rule Book. LCH SA therefore
18 15
U.S.C. 78q–1.
CFR 240.17Ad–22.
20 15 U.S.C. 78q–1(b)(3)(F).
21 15 U.S.C. 78q–1(b)(3)(F).
22 17 CFR 240.17Ad–22(e)(1), (4), (13), (14), (17)
and (18).
23 17 CFR 240.17Ad–22(e)(1).
19 17
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believes that the proposed rule change
is consistent with the requirements of
Exchange Act Rule 17Ad–22(e)(1).24
Exchange Act Rule 17Ad–22(e)(4) 25
requires that a covered clearing agency
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to effectively
identify, measure, monitor, and manage
its credit exposures to participants and
those arising from its payment, clearing,
and settlement processes. Exchange Act
Rule 17Ad–22(e)(14) 26 requires that a
covered clearing agency establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to enable, when the
covered clearing agency provides
central counterparty services for SBS or
engages in activities that the
Commission has determined to have a
more complex risk profile, the
segregation and portability of positions
of a participant’s customers and the
collateral provided to the covered
clearing agency with respect to those
positions and effectively protect such
positions and related collateral from the
default or insolvency of that participant.
Further, Exchange Act Rule 17Ad–
22(e)(13) 27 requires a covered clearing
agency to establish, implement,
maintain, and enforce written policies
and procedures reasonably designed to
ensure the covered clearing agency has
the authority and operational capacity
to take timely action to contain losses
and liquidity demands and continue to
meet its obligations, by, at a minimum,
requiring the covered clearing agency’s
participants and, when practicable,
other stakeholders to participate in the
testing and review of its default
procedures, including any close-out
procedures, at least annually and
following material changes thereto.
Finally, Exchange Act Rule 17Ad–
22(e)(17) 28 requires that a covered
clearing agency establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
manage the covered clearing agency’s
operational risks by, among other
things, identifying the plausible sources
of operational risk, both internal and
external, and mitigating their impact
through the use of appropriate systems,
policies, procedures, and controls.
Consistent with Exchange Act Rule
17Ad–22(e)(4),29 LCH SA will apply its
existing practices, policies, and
procedures with respect to the
24 17
CFR 240.17Ad–22(e)(1).
CFR 240.17Ad–22(e)(4).
26 17 CFR 240.17Ad–22(e)(14).
27 17 CFR 240.17Ad–22(e)(13).
28 17 CFR 240.17Ad–22(e)(17).
29 17 CFR 240.17Ad–22(e)(4).
25 17
VerDate Sep<11>2014
20:34 Apr 30, 2021
identification, measuring, monitoring,
and management of its credit exposures
to Clearing Members for Single-Name
CDS being cleared on behalf of U.S.
Clients, and which, among other things,
give LCH SA the discretion to suspend
a Clearing Member or required Credit
Quality Margin to be paid where LCH
SA deems it necessary to contain its
exposure.
LCH SA will apply its existing margin
methodology, segregation requirements
and existing default management
policies and procedures for Single Name
CDS to be cleared on behalf of U.S.
Clients, including the procedures for
participation in a competitive auction
process for a Defaulting Clearing
Member’s transactions and the
appointment of at least five Clearing
Members to be part of the CDS Default
Management Group, to allow LCH SA to
take timely action to contain losses and
liquidity demands, in accordance with
Exchange Act Rule 17Ad–22(e)(13).30
Similarly, in providing clearing for
Single-Name CDS on behalf of U.S.
Clients, LCH SA will apply its existing
practices, policies, and procedures with
respect to the portability of accounts,
including as to the portability of
accounts from Defaulting Clearing
Members to an appointed Backup
Clearing Member, allowing the
protection of collateral from Clearing
Member default or insolvency
consistent with Exchange Act Rule
17Ad–22(e)(14).31 LCH SA will also
apply its existing practices, policies,
and procedures with respect to the
management of operational risk in
providing clearing for Single-Name CDS
on behalf of U.S. Clients and consistent
with Exchange Act Rule 17Ad–
22(e)(17).32 Finally, Exchange Act Rule
17Ad–22(e)(18) requires a covered
clearing agency to establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
establish objective, risk-based, and
publicly disclosed criteria for
participation, which permit fair and
open access by direct, and where
relevant, indirect participants and other
financial market utilities, require
participants to have sufficient financial
resources and robust operational
capacity to meet obligations arising from
participation in the clearing agency, and
monitor compliance with such
participation requirements on an
ongoing basis. As noted above, the
proposed rule change would extend
existing participation requirements to
persons proposing to enter into SingleCFR 240.17Ad–22(e)(13).
CFR 240.17Ad–22(e)(14).
32 17 CFR 240.17Ad–22(e)(17).
Jkt 253001
Name CDS on behalf of their FCM/BD
Clients and make clear that such
persons must have operational capacity
and the applicable regulatory
registrations in respect of Single-Name
CDS on behalf of their FCM/BD Clients.
Therefore, LCH SA believes that the
proposed rule change is consistent with
the requirements of Exchange Act Rule
17Ad–22(e)(18).33 Further, the
membership requirements applicable to
persons proposing to enter into SingleName CDS on behalf of their FCM/BD
Clients are designed to identify persons
with sufficient operational capacity and
expertise in relation to Single-Name
CDS; such requirements or criteria
apply to every and all persons applying
to enter into Single-Name CDS clearing
service equally and, as such, are not
designed to permit unfair
discrimination in the admission of
participants or among participants in
the use of LCH SA, in accordance with
Section 17A(b)(3)(F) of the Exchange
Act.34
B. Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Exchange
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.35 LCH SA does not
believe that its clearing of Single-Name
CDS on behalf of FCM/BD Clients will
adversely affect competition in the
trading market for those contracts or
CDS generally. By allowing LCH SA to
clear Single-Name CDS for FCM/BD
Clients, market participants will have
additional choices on where to clear and
which products to use for risk
management purposes, which, in turn,
will promote competition and further
the development of CDS for risk
management. In addition, LCH SA will
apply its existing fair and open access
criteria to the clearing of Single-Name
CDS on behalf of FCM/BD Clients and
will apply the same criteria to every
person who proposes to enter into the
clearing of Single-Name CDS on behalf
of their Clients. Such criteria are
designed to identify persons with
sufficient operational capacity and
expertise in relation to Single-Name
CDS as part of the membership
requirements that are necessary and
appropriate for LCH SA to manage the
risk arising from allowing persons to
transact in Single-Name CDS.
Accordingly, LCH SA does not believe
that the proposed rule change will
30 17
33 17
31 17
34 15
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Fmt 4703
Sfmt 4703
CFR 240.17Ad–22(e)(18).
U.S.C. 78q–1(b)(3)(F).
35 15 U.S.C. 78q–1(b)(3)(I).
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Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
impose any burden on competition that
is 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
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:
jbell on DSKJLSW7X2PROD with NOTICES
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–2021–001 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–2021–001. 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
VerDate Sep<11>2014
20:34 Apr 30, 2021
Jkt 253001
23453
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/rulebooks/proposed-rulechanges.
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–LCH SA–2021–001
and should be submitted on or before
May 24, 2021.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
J. Matthew DeLesDernier,
Assistant Secretary.
In its filing with the Commission, the
Exchange 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. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[FR Doc. 2021–09025 Filed 4–30–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91689; File No. SR–CBOE–
2021–025]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To Amend Rule
5.37 and Rule 5.38 in Connection With
Allocations at the Conclusion of the
Exchange’s Automated Improvement
Mechanism (‘‘AIM’’) and Complex AIM
(‘‘C–AIM’’) Auctions
April 27, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 14,
2021, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
36 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
Rule 5.37 and Rule 5.38 in connection
with allocations at the conclusion of the
Exchange’s Automated Improvement
Mechanism (‘‘AIM’’) and Complex AIM
(‘‘C–AIM’’) auctions. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to adopt a
Priority Order Plus status in connection
with the allocation of exclusively
listed 3 index option classes, as
designated by the Exchange, at the
conclusion of an AIM and C–AIM
auction.
The AIM and C–AIM auctions are
electronic auctions intended to provide
an Agency Order with the opportunity
to receive price improvement (over the
3 An ‘‘exclusively listed option’’ is an option that
trades exclusively on an exchange because the
exchange has an exclusive license to list and trade
the option or has the proprietary rights in the
interest underlying the option. An exclusively
listed option is different than a ‘‘singly listed
option,’’ which is an option that is not an
‘‘exclusively listed option’’ but that is listed by one
exchange and not by any other national securities
exchange.
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Agencies
[Federal Register Volume 86, Number 83 (Monday, May 3, 2021)]
[Notices]
[Pages 23445-23453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09025]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91676; File No. SR-LCH SA-2021-001]
Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change Relating to the Clearing of Single-Name Credit
Default Swaps by U.S. Customers
April 26, 2021.
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 April 13, 2021, 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. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
(a) Banque Centrale de Compensation, which conducts business under
the name LCH SA (``LCH SA''), is proposing to amend its (i) CDS
Clearing Rule Book (the ``Rule Book''), (ii) CDS Clearing Supplement
(the ``Clearing Supplement''), (iii) some of its CDS Clearing
Procedures (the ``Procedures''), and (iv) FCM Clearing Regulations
(``Clearing Regulations''), to allow LCH SA to offer clearing services
in respect of single-name credit default swaps (``CDS'') that are
``security-based swaps'' (``SBS'') (``Single-Name CDS'') to be
submitted by Clearing Members on behalf of their U.S. Clients for
clearing by LCH SA.\3\ LCH SA is also proposing to revise a number of
its rules to make additional amendments and conforming and clarifying
amendments for consistency purposes. The text of the proposed rule
change has been annexed as Exhibit 5. The launch of clearing Single-
Name CDS for U.S. Clients will be contingent upon LCH SA's receipt of
all necessary regulatory approvals, including the approval by the
Commission of the proposed rule change described herein.
---------------------------------------------------------------------------
\3\ Capitalized terms used but not defined herein shall have the
meaning specified in the Rule Book, the Clearing Supplement, the
Procedures and the Clearing Regulations, as applicable.
---------------------------------------------------------------------------
(b) Not applicable.
(c) Not applicable.
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
(a) Purpose
The purpose of the proposed rule change is to revise LCH SA's rules
and procedures to (1) allow LCH SA to extend its clearing services in
respect of Single-Name CDS for U.S. Clients of Clearing Members and (2)
make additional amendments and conforming and clarifying amendments for
consistency purposes.
(1) Amendments To Permit LCH SA To Offer Clearing Services in Relation
to the Clearing of Single-Name CDS for U.S. Clients
Under the derivatives regulatory regime established by Title VII of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
the SEC was given regulatory authority over derivatives that qualify as
``security-based swaps'' and the US Commodity Futures Trading
Commission (``CFTC'') was given regulatory authority over derivatives
that qualify as ``swaps.'' As a result of this division of regulatory
responsibility, certain index CDS that are not based on a narrow-based
security index constitute ``swaps'' subject to the regulations of the
CFTC. On the other hand, Single-Name CDS constitute ``security-based
swaps'' subject to the regulations of the SEC. Currently, U.S. Clients
are permitted to clear index CDS that qualify as ``swaps'' at LCH SA
but not Single-Name CDS.
A Single-Name CDS is a contract based on the credit risk of a
single issuer (a ``Reference Entity'') in which the
[[Page 23446]]
buyer of protection transfers the credit risk of the Reference Entity
to the seller of protection without transferring the underlying
obligation of the Reference Entity. The key terms of a Single-Name CDS
include, among other things, (1) the identity of the Reference Entity,
(2) the agreed upon notional amount, (3) the maturity date, (4)
required payments by the protection buyer, (5) ``credit events'' that
result in an obligation from the protection seller to the protection
buyer, and (6) settlement terms. Upon the launch of clearing of Single-
Name CDS for U.S. Clients, LCH SA will provide central counterparty
services for such Single-Name CDS that are accepted for clearing.
The proposed changes described below would allow U.S. Clients to
clear Single-Name CDS at LCH SA.
i. Rule Book
a. Changes to Defined Terms
The Rule Book would be amended to add several new defined terms in
order to accommodate the extension of LCH SA's CDS Clearing Services in
respect of Single-Name CDS submitted to LCH SA for clearing on behalf
of U.S. Clients. Specifically, LCH SA proposes to add a definition for
``BD'' as a legal entity that is a ``broker'' or ``dealer'' as defined
in Section 3(a)(4) or 3(a)(5) of the Securities Exchange Act of 1934
(the ``Exchange Act''), respectively, and is registered in such
capacity with the SEC and a member in good standing of FINRA (a defined
term of ``FINRA'' would be added to the Rule Book and defined as the
Financial Industry Regulatory Authority, Inc., or any successor
thereto). The term ``FCM Clearing Member'' would in turn be retitled as
``FCM/BD Clearing Member'' and would be defined as any FCM, BD, or
legal entity that is both an FCM and BD that has been admitted as a
clearing member. ``FCM Client'' would likewise be retitled as ``FCM/BD
Client'' and would mean any Client that is (i) a Cleared Swaps Customer
of an FCM/BD Clearing Member to which the FCM/BD Clearing Member
provides CDS Client Clearing Services with respect to positions in FCM/
BD Cleared Transactions that are ``Cleared Swaps,'' or (ii) an SBS
Customer of an FCM/BD Clearing Member to which the FCM/BD Clearing
Member provides CDS Client Clearing Services with respect to positions
in FCM/BD Cleared Transactions that are SBS. A defined term ``SBS
Customer'' would be added to the Rule Book and would be defined as
``security-based swap customer'' (as defined in Exchange Act Rule 15c3-
3) \4\ of an FCM/BD Clearing Member to which the FCM/BD Clearing Member
provides CDS Client Clearing Services with respect to positions in FCM/
BD Cleared Transactions that are SBS in one or more accounts described
in the FCM/BD SBS Client Account Structure.
---------------------------------------------------------------------------
\4\ 17 CFR 240.15c3-3.
---------------------------------------------------------------------------
A new defined term ``Cleared Swap'' would be added in the Rule
Book, in order to differentiate between ``swaps'' and ``SBS'' and the
different account structures for each (as further described below), to
mean an ``FCM/BD Cleared Transaction'' (i) constituting a ``Cleared
Swap'' as defined in CFTC Regulation 22.1 \5\ or (ii) constituting an
SBS that is held in the FCM/BD Swaps Client Account Structure.\6\ A
``Cleared Swaps Customer,'' in turn, would be defined as (i) a
``Cleared Swaps Customer,'' as defined in CFTC Regulation 22.1, of an
FCM/BD Clearing Member with respect to Cleared Swaps that is an
eligible contract participant as defined in Section 1a(18) of the U.S.
Commodity Exchange Act, other than subparagraph (C) thereof, or as may
be further defined by CFTC Regulations, and (ii) a person that would be
a ``Cleared Swaps Customer,'' as defined in CFTC Regulation 22.1, of an
FCM/BD Clearing Member with respect to any transaction constituting an
SBS that is a Cleared Swap, as if such transaction is a Cleared Swap
for purposes of the definition of ``Cleared Swaps Customer'' in CFTC
Regulation 22.1.\7\ ``Cleared Swaps Customer Collateral'' would be
defined as ``Cleared Swaps Customer Collateral,'' as defined in CFTC
Regulation 22.1, with respect to Cleared Swaps, including with respect
to any transaction constituting an SBS that is a Cleared Swap, as if
such transaction is a Cleared Swap for purposes of the definition of
``Cleared Swaps Customer Collateral'' in CFTC Regulation 22.1.\8\
---------------------------------------------------------------------------
\5\ 17 CFR 22.1
\6\ SBS held in the FCM/BD Swaps Client Account structure would
include SBS eligible for portfolio margining as contemplated in the
Commission's Order Granting Conditional Exemptions under the
Securities Exchange Act of 1934 in connection with Portfolio
Margining of Swaps and Security-Based Swaps. See Order Granting
Conditional Exemptions Under the Securities Exchange Act of 1934 in
Connection With Portfolio Margining of Swaps and Security-Based
Swaps, Exchange Act Release No. 68433 (Dec. 14, 2012), 77 FR 75211
(Dec. 19, 2012) (the ``Portfolio Margining Order'').
\7\ 17 CFR 22.1
\8\ 17 CFR 22.1
---------------------------------------------------------------------------
The defined terms in the Rule Book which relate to the account
structure in which collateral for Cleared Swaps and SBS would be held
would be revised to accommodate three account structures: (1) A
separate account structure for Cleared Swaps, (2) a separate account
structure for SBS, and (3) an account structure in which an FCM/BD
Clearing Member that is both an FCM and a BD may elect to clear and
hold margin for FCM/BD Cleared Transactions that are SBS for FCM/BD
Clients on a commingled basis with Cleared Swaps in accordance with the
Portfolio Margining Order. Each account structure is described in
further detail below and the defined terms (and the changes to existing
defined terms) with respect to those account structures would include:
``FCM/BD Client Account Structure'' would mean the
accounts comprising the FCM/BD Swaps Client Account Structure and the
FCM/BD SBS Client Account Structure set out in the Rule Book and
registered in the CDS Clearing System in the name of an FCM/BD Clearing
Member.
``FCM/BD Swaps Client Account Structure'' would mean the
accounts comprising the FCM/BD Swaps Client Account Structure and
registered in the CDS Clearing System in the name of an FCM/BD Clearing
Member.
``FCM/BD SBS Client Account Structure'' would mean the
accounts comprising the FCM/BD SBS Client Account Structure and
registered in the CDS Clearing System in the name of an FCM/BD Clearing
Member.
``FCM/BD Client Collateral Account'' would mean an FCM/BD
Swaps Client Collateral Account and/or an FCM/BD SBS Client Collateral
Account.
``FCM/BD Swaps Client Collateral Account'' would mean an
account opened in the books of LCH SA to record the Collateral held by
LCH SA for the benefit of an FCM/BD Clearing Member's FCM/BD Clients
with respect to Cleared Swaps, the aggregate value of such Collateral
being divided among, and recorded in: (i) The FCM/BD Swaps Client
Financial Account; (ii) the FCM/BD Swaps Buffer Financial Account; and
(iii) the FCM/BD Swaps Unallocated Client Collateral Financial Account.
``FCM/BD SBS Client Collateral Account'' would mean an
account opened in the books of LCH SA to record the Collateral held by
LCH SA for the benefit of an FCM/BD Clearing Member's SBS Customers
with respect to FCM/BD Cleared Transactions that are SBS (excluding any
SBS transactions held in the FCM/BD Swaps Client Account Structure as
Cleared Swaps), the aggregate value of such Collateral being divided
among, and recorded in: (i) The FCM/BD SBS Client Financial Accounts;
(ii) the FCM/BD SBS Buffer Financial Account; and (iii) the FCM/
[[Page 23447]]
BD SBS Client Excess Collateral Financial Account.
``FCM/BD Client Financial Account'' would mean an FCM/BD
Swaps Client Financial Account or an FCM/BD SBS Client Financial
Account.
``FCM/BD Swaps Client Financial Account'' would mean a
segregated account opened in the books of LCH SA for each Cleared Swaps
Customer of an FCM/BD Clearing Member with a view to record the Legally
Segregated Value related to Cleared Swaps of such Cleared Swaps
Customer as determined by LCH SA in accordance with the CDS Clearing
Rules.
``FCM/BD SBS Client Financial Account'' would mean a
segregated account opened in the books of LCH SA for an SBS Customer of
an FCM/BD Clearing Member with a view to record the Legally Segregated
Value related to SBS (excluding SBS that are held in the FCM/BD Swaps
Client Account Structure as Cleared Swaps) of such FCM/BD Clearing
Member's SBS Customer as determined by LCH SA in accordance with the
CDS Clearing Rules.
``FCM/BD Client Margin Account'' would mean an FCM/BD
Swaps Client Margin Account or an FCM/BD SBS Client Margin Account.
``FCM/BD Swaps Client Margin Account'' would mean an
account opened by LCH SA in the name of an FCM/BD Clearing Member for
the benefit of each Cleared Swaps Customer of such FCM/BD Clearing
Member in the CDS Clearing System for risk management purposes, in
which the FCM/BD Cleared Transactions of such Client that are Cleared
Swaps are netted and corresponding Open Positions are registered, and
each FCM/BD Client related Cleared Swaps positions corresponding to
Eligible Intraday Transactions and Irrevocable Backloading STM
Transactions pre-registered in the Account Structure of such FCM/BD
Clearing Member (if so applicable) are recorded, in order to calculate
the FCM/BD Client Margin Requirement and Client NPV Payment Requirement
of such FCM/BD Clearing Member in respect of such FCM/BD Client.
``FCM/BD SBS Client Margin Account'' would mean an account
opened by LCH SA in the name of an FCM/BD Clearing Member for the
benefit of each SBS Customer of such FCM/BD Clearing Member in the CDS
Clearing System for risk management purposes, in which the SBS of the
SBS Customers (excluding SBS that are held in the FCM/BD Swaps Client
Account Structure as Cleared Swaps) are netted and corresponding Open
Positions are registered, and each FCM/BD Client related SBS positions
(excluding SBS transactions that are held in the FCM/BD Swaps Client
Account Structure as Cleared Swaps) corresponding to Eligible Intraday
Transactions and Irrevocable Backloading STM Transactions pre-
registered in the Account Structure of such FCM/BD Clearing Member (if
so applicable) are recorded, in order to calculate the FCM/BD Client
Margin Requirement and Client NPV Payment Requirement of such FCM/BD
Clearing Member in respect of such SBS Customer.
``FCM/BD Client Trade Account'' would mean an FCM/BD Swaps
Client Trade Account or an FCM/BD SBS Client Trade Account.
``FCM/BD Swaps Client Trade Account'' would mean an
account opened by LCH SA in the name of an FCM/BD Clearing Member for
the benefit of a Customer of such FCM/BD Clearing Member in order to
register all Cleared Swaps (including any SBS that are held in the FCM/
BD Swaps Client Account Structure as Cleared Swaps) in relation to such
FCM/BD Client.
``FCM/BD SBS Client Trade Account'' would mean an account
opened by LCH SA in the name of an FCM/BD Clearing Member for the
benefit of an SBS Customer of such FCM/BD Clearing Member in order to
register all SBS cleared by such FCM/BD Clearing Member (excluding SBS
that are held in the FCM/BD Swaps Client Account Structure as Cleared
Swaps) in relation to such SBS Customer.
``FCM/BD Buffer Financial Account'' would mean an FCM/BD
Swaps Buffer Financial Account or an FCM/BD SBS Buffer Financial
Account.
``FCM/BD Swaps Buffer Financial Account'' would mean a
segregated account opened in the books of LCH SA to record the value of
an FCM/BD Clearing Member's FCM/BD Client Collateral Buffer with
respect to Cleared Swaps.
``FCM/BD SBS Buffer Financial Account'' would mean a
segregated account opened in the books of LCH SA to record the value of
an FCM/BD Clearing Member's FCM/BD SBS Client Collateral Buffer.
``FCM/BD Client Collateral Buffer'' would mean FCM/BD
Swaps Client Collateral Buffer or FCM/BD SBS Client Collateral Buffer.
``FCM/BD Swaps Client Collateral Buffer'' would mean the
aggregate value of Collateral transferred by an FCM/BD Clearing Member
to LCH SA, comprising such FCM/BD Clearing Member's own property, and
recorded in such FCM/BD Clearing Member's FCM/BD Swaps Buffer Financial
Account which may be used by LCH SA to meet obligations in respect of
the Cleared Swaps of Cleared Swaps Customers, including for the purpose
of satisfying the Notional and Collateral Checks performed by LCH SA in
respect of Eligible Intraday Transactions comprising one or more Client
Trade Leg(s).
``FCM/BD SBS Client Collateral Buffer'' would mean the
aggregate value of Collateral transferred by an FCM/BD Clearing Member
to LCH SA, comprising such FCM/BD Clearing Member's own property, and
recorded in such FCM/BD Clearing Member's FCM/BD SBS Buffer Financial
Account which may be used by LCH SA to meet obligations in respect of
the FCM/BD Cleared Transactions of SBS Customers, including for the
purpose of satisfying the Notional and Collateral Checks performed by
LCH SA in respect of Eligible Intraday Transactions comprising one or
more Client Trade Leg(s).
``FCM/BD Available Client Collateral Buffer'' would mean
the FCM/BD Swaps Available Client Collateral Buffer or the FCM/BD SBS
Available Client Collateral Buffer.
``FCM/BD Swaps Available Client Collateral Buffer'' would
mean the portion of the FCM/BD Swaps Client Collateral Buffer which, at
the relevant time, is not allocated to any FCM/BD Swaps Client Margin
Account and is available to be used to enable the novation of Client
Trade Legs.
``FCM/BD SBS Available Client Collateral Buffer'' would
mean the portion of the FCM/BD SBS Client Collateral Buffer which, at
the relevant time, is not allocated to any FCM/BD SBS Client Margin
Account and is available to be used to enable the novation of Client
Trade Legs.
``FCM/BD Swaps Client Excess Collateral'' would mean the
amount of any FCM/BD Excess Collateral attributable to an FCM/BD Swaps
Client Margin Account and held on an intraday basis prior to the next
Morning Call before it is transferred to the related FCM/BD Clearing
Member's FCM/BD Swaps Unallocated Client Collateral Financial Account.
``FCM/BD SBS Client Excess Collateral'' would mean the
FCM/BD Client Excess Collateral as set out in the proposed new Article
6.2.5.2(ii) of the Rule Book.
``FCM/BD SBS Client Excess Collateral Financial Account''
would mean a segregated account opened in the books of LCH SA to record
the value of FCM/BD SBS Client Excess Collateral as determined by LCH
SA.
[[Page 23448]]
``FCM/BD Swaps Unallocated Client Collateral Financial
Account'' would mean a segregated account opened in the books of LCH SA
to record the value of FCM/BD Swaps Unallocated Client Excess
Collateral as determined by LCH SA.
``FCM/BD Swaps Unallocated Client Excess Collateral''
would mean the FCM/BD Client Excess Collateral as set out in the
proposed amended Section 6.2.5 of the Rule Book.
Changes to the Rule Book would also be made in certain
jurisdictional definitions to reflect that SBS would be available for
Clearing to U.S. Clients. Specifically, ``Non-U.S. CCM'' would be
defined, when used in the context of an Original Transaction, as a CCM
that has its residence in, is organized under the laws of, or has its
principal place of business located in, a jurisdiction other than the
United States, its territories or possessions and is not a registered
BD or FCM. A ``Non-U.S. CCM Client'' would be defined as a CCM Client
that is not a U.S. CCM Client. A ``U.S. CCM Client'' would be defined
as a Client of an FCM or a BD or any Client that has its residence in,
is organized under the laws of, or has its principal place of business
located in the United States, its territories or possessions.
The following defined terms in Chapter 1, Section 1.1.1 would also
include conforming changes to accommodate the clearing of Single-Name
CDS for U.S. Clients: ``Account Structure,'' ``Affiliate,'' ``Allocated
Client Collateral Buffer,'' ``Available Client Collateral Buffer,''
``Backup Clearing Member,'' ``Carrying Clearing Member,'' ``CCM,''
``CDS Clearing Rules,'' ``CDS Clearing Service,'' ``Cleared
Transaction,'' ``Client,'' ``Client Account Structure,'' ``Client
Assets,'' ``Client Collateral Account,'' ``Client Collateral Buffer,''
``Client Collateral Buffer Shortfall,'' ``Client Collateral Buffer
Threshold,'' ``Client Excess Collateral,'' ''Client Margin Account,''
''Client Margin Requirement,'' ''Client Margin Shortfall,'' ''Client
Termination Amount,'' ''Client Trade Account,'' ``Excess Collateral,''
``Excess Collateral Threshold,'' ``FCM Allocated Client Collateral
Buffer,'' ``FCM CDS Clearing Regulations,'' ``FCM Cleared
Transaction,'' ``FCM Client Collateral Buffer Shortfall,'' ``FCM Client
Collateral Buffer Threshold,'' ``FCM Client Excess Collateral,'' ``FCM
Client Margin Requirement,'' ``FCM Client Margin Shortfall,'' ``FCM
Client Termination Amount,'' ``FCM Excess Collateral,'' ``FCM House
Cleared Transaction,'' ``FCM House Collateral Account,'' ``FCM House
Excess Collateral,'' ``FCM House Excess Collateral Shortfall,'' ``FCM
House Excess Collateral Threshold,'' ``FCM House Margin Account,''
``FCM House Margin Requirement,'' ``FCM House Margin Shortfall,'' ``FCM
Margin Balance,'' ``FCM Required Collateral Amount,'' ``General
Member,'' ``House Collateral Account,'' ``House Excess Collateral,''
``House Excess Collateral Shortfall,'' ``House Excess Collateral
Threshold,'' ``House Margin Account,'' ``House Margin Requirement,''
``House Margin Shortfall,'' ``Legally Segregated Value,'' ``Margin
Account,'' ``Margin Balance,'' ``Notional and Collateral Check,''
``Porting FCM Cleared Transaction,'' ``Receiving Clearing Member,''
``Required Collateral Amount,'' and ``Select Member.''
In addition to the foregoing changes, various other conforming and
clarifying changes would be made throughout Title I (General Provisions
& Legal Framework) to incorporate terms to accommodate Single-Name CDS
cleared for FCM/BD Clients. Those conforming and clarifying changes are
set forth in Articles 1.2.10.3(xix) and (xxi), 1.2.10.4(vii), (x) and
(xi), 1.2.14.4, 1.2.14.5(iv), 1.3.1.3(vi), 1.3.1.4, 1.3.1.6 (ii)--(iv),
1.3.1.9, and 1.3.1.10.
b. Membership and Clearing Operations
Article 2.1.1.2 of the Rule Book would be revised to provide that,
without prejudice to the membership requirements set out in the CDS
Clearing Rules and applicable law, both FCMs and BDs are eligible to
become FCM/BD Clearing Members.
Additional conforming and clarifying changes would be made
throughout Title II (Legal Obligations) to include terms for Single-
Name CDS and certain other clarifying changes, including in Article
2.2.0.3, 2.2.1.1 (iv), (xxi), (xxiv), and (xxv), 2.2.1.2, 2.2.2.1,
2.2.3.1, 2.3.4.2, 2.4.2.11, and 3.1.10.9.
c. Risk Management
The procedures with respect to the return of collateral are set
forth in Article 4.2.2.5 of the Rule Book and would be revised, in the
case of an FCM/BD Clearing Member, so that if the FCM/BD Margin Balance
of an FCM/BD Client Financial Account exceeds the relevant FCM/BD
Client Margin Requirement prior to the Morning Call or the value of the
Collateral attributed to the FCM/BD Buffer Financial Account exceeds
the FCM/BD Client Collateral Buffer Threshold, then the amount of the
excess: (1) If related to Cleared Swaps, will be reclassified as FCM/BD
Swaps Unallocated Client Excess Collateral; and (2) if related to SBS
(excluding SBS that are held in the FCM/BD Swaps Client Account
Structure as Cleared Swaps (as described below)), will be reclassified
as FCM/BD SBS Client Excess Collateral, and thereafter may be returned
to the FCM/BD Clearing Member.
Other conforming changes in Title IV (Risk Management) of the Rule
Book are set forth in Article 4.2.2.1, 4.2.2.4, 4.2.2.6, 4.2.3.1,
4.2.6.3, 4.2.6.4, 4.2.6.6, 4.3.1.3, 4.3.2.3(i), (x), (xv) and (xix),
4.3.2.4, 4.3.2.7, 4.3.3.1(i), 4.3.3.2, and 4.3.3.4.
d. CDS Client Clearing Services Provided by a CCM
Article 5.1.1.2, which relates to the provision of CDS Client
Clearing Services and sets limitations on the scope of services that
may be provided by a Clearing Member that is a CCM, previously
provided, in clause (v), that a Non-U.S. CCM shall not provide CDS
Client Clearing Services to any U.S. CCM Client with respect to an
Original Transaction that is SBS and that a U.S. CCM shall not provide
any CDS Client Clearing Services to any U.S. CCM Client with respect to
an Original Transaction that is SBS. Clause (v) of Article 5.1.1.2
would be deleted in its entirety. Separately, clause (vi) would be re-
numbered as clause (v) and would provide that a CCM shall not provide
CDS Client Clearing Services to any U.S. CCM Client with respect to an
Original Transaction (which would include any SBS) unless such CCM is
an FCM and/or BD.
e. CDS Client Clearing Services Provided by an FCM/BD Clearing Member
Article 6.1.1.2(vi) previously provided that an FCM shall not
provide CDS Client Clearing Services to any FCM Client with respect to
SBS; it would be revised to delete that restriction.
Article 6.2.1.1 sets forth the required account structure for FMC/
BD Clearing Members. Article 6.2.1.1(i) would set forth the required
account structure for an FCM (which may also be a BD) with respect to
any Cleared Swaps, which would entail:
An FCM/BD Swaps Client Trade Account for each Cleared
Swaps Customer.
An FCM/BD Swaps Client Margin Account for each Cleared
Swaps Customer.
An FCM/BD Swaps Client Financial Account for each Cleared
Swaps Customer.
An FCM/BD Swaps Unallocated Client Collateral Financial
Account.
An FCM/BD Swaps Buffer Financial Account.
An FCM/BD Swaps Client Collateral Account.
[[Page 23449]]
For an FCM/BD Clearing Member that is a BD (which may also be an
FCM), with respect to SBS (excluding SBS that are permitted to be held
in an account with Cleared Swaps), Article 6.2.1.1(ii) would require
the following account structure:
An FCM/BD SBS Client Trade Account for each SBS Customer.
\9\
---------------------------------------------------------------------------
\9\ Article 6.2.2.1, which relates to the establishments of
trade accounts, would be revised to provide for the establishment of
FCM/BD SBS Client Trade Accounts for SBS Customers.
---------------------------------------------------------------------------
An FCM/BD SBS Client Margin Account for each SBS
Customer.\10\
---------------------------------------------------------------------------
\10\ Article 6.2.3.1, which relates to the establishment of
client margin accounts, would be revised to provide for the
establishment of FCM/BD SBS Client Margin Accounts for SBS
Customers. Article 6.2.3.2 would be revised to provide that FCM/BD
Cleared Transactions (i) registered in an FCM/BD Swaps Client Trade
Account for a Cleared Swaps Customer will be allocated to the
corresponding FCM/BD Cleared Swaps Client Margin Account and (ii)
registered in an FCM/BD SBS Client Trade Account for an SBS Customer
will be allocated to the corresponding FCM/BD SBS Client Margin
Account, for the purpose of the determination of the Open Positions
and NPV Payment Requirements attributable to such FCM/BD Client.
---------------------------------------------------------------------------
An FCM/BD SBS Client Financial Account for each SBS
Customer.\11\
---------------------------------------------------------------------------
\11\ Article 6.2.4.1, which relates to the establishment of
Client Financial Accounts, would be revised to include a new clause
(ii) (a) setting forth the establishment of an FCM/BD SBS Client
Financial Account for each SBS Customer, in which LCH SA will record
the value of Collateral provided by the FCM/BD Clearing Member in
respect of such SBS Customer's Open Positions in SBS.
---------------------------------------------------------------------------
An FCM/BD SBS Client Excess Collateral Financial
Account.\12\
---------------------------------------------------------------------------
\12\ Article 6.2.4.1(ii)(c) would be added to provide that LCH
SA shall open an FCM/BD SBS Client Excess Collateral Financial
Account, in which LCH SA will record the value of FCM/BD SBS Client
Excess Collateral. Article 6.2.5.2 (ii) would provide that an FCM/BD
Clearing Member is not permitted to maintain any FCM/BD Client
Excess Collateral on a day-to-day basis with respect to SBS, but may
hold FCM/BD Client Excess Collateral on an intraday basis and that
LCH SA shall transfer the value of any FCM/BD Client Excess
Collateral that is reflected in any FCM/BD SBS Client Financial
Account of the FCM/BD Clearing Member prior to the Morning Call to
the FCM/BD Clearing Member's FCM/BD SBS Client Excess Collateral
Financial Account. In addition, Article 6.2.5.2(iv) would provide
that LCH SA shall hold FCM/BD SBS Client Excess Collateral in the
FCM/BD SBS Client Excess Collateral Financial Account for the
benefit of FCM/BD Clearing Member's FCM/BD Clients that are SBS
customers as a class in accordance with SEC regulations and
Applicable Law and that upon the request of an FCM/BD Clearing
Member, LCH SA will return FCM/BD SBS Client Excess Collateral to
such FCM/BD Clearing Member.
---------------------------------------------------------------------------
An FCM/BD SBS Buffer Financial Account.\13\
---------------------------------------------------------------------------
\13\ Article 6.2.4.1(ii)(b) would be added to provide that LCH
SA shall open an FCM/BD SBS Buffer Financial Account, in which LCH
SA will record the value of Collateral provided as FCM/BD SBS Client
Collateral Buffer.
---------------------------------------------------------------------------
An FCM/BD SBS Client Collateral Account.\14\
---------------------------------------------------------------------------
\14\ Article 6.2.4.1(ii)(d) would be added to provide that LCH
SA shall open an FCM/BD SBS Client Collateral Account in which LCH
SA will record the Collateral held by LCH SA recorded in the
foregoing accounts.
---------------------------------------------------------------------------
A new Article 6.2.1.1(iii) would also be added to provide that an
FCM/BD Clearing Member that is both an FCM and a BD may elect to clear
and hold margin for FCM/BD Cleared Transactions that are SBS for FCM/BD
Clients in the FCM/BD Swaps Client Account Structure on a commingled
basis with Cleared Swaps and margin such combined positions on a
portfolio basis in compliance with Applicable Laws, provided that each
FCM/BD Client participating in the portfolio margining shall be an
eligible contract participant as defined in Section 1a(18) of the
Commodity Exchange Act. Upon such election, FCM/BD Cleared Transactions
that are SBS will be included as ``Cleared Swaps'' and maintained in
the FCM/BD Swaps Client Account Structure.
Articles 6.1.1.1, 6.1.1.2, 6.1.1.3, 6.1.1.4, 6.1.1.5, 6.2.1.2,
6.2.1.3, 6.2.1.4, 6.2.2.1, 6.2.2.2, 6.2.3.1, 6.2.3.2, 6.2.3.3, 6.2.4.1,
6.2.4.2, 6.2.4.3, 6.2.4.4, 6.2.5.1, 6.2.5.2, 6.2.6.1, 6.2.6.2, 6.3.1.1,
6.3.2.1, 6.3.3.1, 6.3.4.1, 6.3.4.2, 6.3.5.1, 6.3.5.2, 6.4.1.1, and
6.4.1.3 would also include certain conforming and clarifying changes.
f. Default Management
Appendix I of the Rule Book (CDS Default Management Process),
Clause 1.1 which provides for the definition of ``Transaction
Categories'' would be amended to provide that different categories of
Cleared Transactions will include ``Single Name Cleared Transactions''
for consistency purposes. Clause 3.3 of Appendix I would also be
amended to provide that the CDS Default Management Process shall be
carried out in a manner consistent with the requirements of the SIPC
(which is the Securities Investor Protection Corporation or any
successor thereto in accordance with the proposed definition of new
defined term of ``SIPC'' in Section 1.1.1 of the Rule Book), Exchange
Act and SEC Regulations. Clause 5.4 of Appendix I, which relates to the
Competitive Bidding Process, would be revised to provide in Clause
5.4.1, that a Non-Defaulting Clearing Member that is a BD but not an
FCM is not required to participate in Competitive Bidding for an
Auction Package containing any Cleared Swaps and that a Non-Defaulting
Clearing Member that is an FCM but not a BD is not required to
participate in Competitive Bidding for an Auction Package containing
any SBS.
Other conforming changes in Appendix I are set forth in Clauses
3.3, 4.2.1, 4.2.2, 4.2.3, 4.2.5, 4.2.8, 4.3.1, 4.4.3, 4.5.2, 8.1.4,
8.5, 8.7 and 8.9.
ii. Clearing Supplement
Various clarifying and conforming changes would be made to the
Clearing Supplement to account for the clearing of SBS for FCM/BD
Clients. Specifically, certain references to ``FCM'' therein would be
replaced with ``FCM/BD.'' Those changes are set forth in Sections 1.7
and 9.2(c) of Parts A and B of the Clearing Supplement and in Sections
1.7 and 6.10(b) and (d) of Part C of the Clearing Supplement.
iii. Procedures
Section 2 of the Procedures (Margin, NPV Payment and Price
Alignment) would include conforming changes in Sections 2.2, 2.3, 2.5,
and 2.16.
Section 3 of the Procedures (Collateral, Variation Margin and Cash
Payment) would be amended, in Section 3.3(b), which relates to the
Collateral Account structure, to add a reference to the FCM/BD SBS
Client Collateral Account to record the collateral held by LCH SA for
the benefit of an FCM/BD Clearing Member's SBS Customers with respect
to SBS (excluding SBS that are held in an account in the FCM/BD Swaps
Client Account Structure), the aggregate value of such Collateral being
divided amongst, and recorded in: the FCM/BD SBS Client Financial
Account; the FCM/BD SBS Buffer Financial Account; and the FCM/BD SBS
Client Excess Collateral Financial Account.
Section 3.7(a) would be amended to provide that with respect to the
Clients of a Clearing Member, LCH SA will perform Collateral Calls, in
respect of SBS, with a ``TARGET2 Account'' used to make Collateral
Calls in relation to the Client Margin Requirements with respect to SBS
(excluding SBS held in the FCM/BD Swaps Client Account Structure) and
FCM/BD Client Collateral Buffer Threshold of each FCM/BD Clearing
Member, which for the avoidance of doubt would form part of the LCH SBS
Client Segregated Depository Account. Section 3.7(b) would also be
amended to provide that an FCM/BD Clearing Member must hold three
``TARGET2 Accounts,'' for purposes of Collateral Calls in respect of
(i) its FCM/BD House Margin Requirement and FCM/BD House Excess
Collateral Threshold, (ii) its Client Margin Requirement(s) with
respect to Cleared Swaps and FCM/BD Client Collateral Buffer Threshold
and (iii) its Client Margin Requirement(s) with respect to SBS
(excluding SBS that are held in the FCM/BD Swaps Client
[[Page 23450]]
Account Structure) and FCM/BD Client Collateral Buffer Threshold.
Section 3.7(g) would be amended to provided that, in respect of an FCM/
BD SBS Client Excess Collateral Financial Account, the FCM/BD Clearing
Member may request LCH SA to return some or all FCM/BD SBS Client
Excess Collateral in the form of Euro denominated Cash Collateral
provided that the requested amount does not exceed the FCM/BD SBS
Client Excess Collateral recorded in its FCM/BD SBS Client Collateral
Account.
Section 3.8(a)-(b) of the Procedures would be amended to provide
that with respect to Clients of a Clearing Member, LCH SA would open
(i) a multi-currency account used to credit non-Euro, non-USD Cash
Collateral which is transferred by an FCM/BD Clearing Member to be
recorded in its FCM/BD SBS Client Collateral Account, which would form
part of the LCH SBS Client Segregated Depository Account for purposes
of the FCM/BD CDS Clearing Regulations and (ii) an account used to
credit USD Cash Collateral which is transferred by FCM/BD Clearing
Members to be recorded in their FCM/BD SBS Client Collateral Account,
which would also form part of the LCH SBS Client Segregated Depository
Account for purposes of the FCM/BD CDS Clearing Regulations. With
respect to excess collateral, Section 3.8(h) and (i), which relate to
the return of collateral would be amended to provide for the return of
excess collateral in respect of SBS. Section 3.18(c) would be amended
to provide that LCH SA will open a cash account used to debit or credit
USD to satisfy Cash Payments and/or Variation Margin Collateral
Transfer obligations in USD with respect to all relevant Client Cleared
Transactions of each FCM/BD Clearing Member that are SBS (excluding SBS
that are held in the FCM/BD Swaps Client Account Structure). Other
conforming changes in Section 3 of the Procedures are included in the
recital and Sections 3.2, 3.3, 3.4, 3.7(a), (d), (f) and (g), 3.8(a),
(b), (c), (f), (g), (h) and (i), 3.9(d) and (e), 3.10(b), 3.14, 3.17
and 3.18.
Section 4 of the Procedures (Eligibility Requirements) would be
amended to delete the provision in Section 4.1 which previously
provided that (i) in respect of an FCM Client, a U.S. CCM Client of a
Non-U.S. CCM or a CCM Client of a U.S. CCM, the Original Transaction
may not be a Single Name CDS or any other SBS identified as such in a
Clearing Notice; and (ii) in respect of a Non-U.S. CCM Client, the
Original Transaction may not be a Single Name CDS or any other SBS
identified as such in a Clearing Notice unless such transaction is
cleared through a Non-U.S. CCM.
Section 5 of the Procedures (CDS Clearing Operations) would be
revised to include conforming changes in Sections 5.6 and 5.11.
iv. Clearing Regulations
The Clearing Regulations, currently titled as ``FCM CDS Clearing
Regulations,'' would be retitled as the ``FCM/BD CDS Clearing
Regulations.''
Various defined terms in the Clearing Regulations would be updated
to accommodate the extension of LCH SA's clearing services in respect
of Single-Name CDS to U.S. Clients. The defined term ``FCM Cleared
Swaps Client Segregated Depository Account'' would be retitled as the
``FCM/BD Cleared Swaps Client Segregated Depository Account'' and
references in that definition to ``FCM Clients'' would be replaced with
``Cleared Swap Customers.'' Similarly, the references in the defined
term ``LCH Cleared Swaps Client Segregated Depository Account'' to
``FCM Clients'' would be replaced with ``Cleared Swaps Customers'' and
references to ``Cleared Transactions'' therein would refer to Cleared
Transactions that are ``Cleared Swaps.'' A new defined term ``LCH SBS
Client Segregated Depository Account'' would be added and would mean an
omnibus account maintained by an FCM/BD Clearing Member for its SBS
Customers with a Bank, which is segregated in accordance with the
Exchange Act and SEC Regulations and contains collateral deposited by
such SBS Customers in connection with FCM/BD Cleared Transactions that
are SBS cleared for such SBS Customers by such FCM/BD Clearing Member,
excluding any SBS held in the FCM/BD Swaps Client Account Structure
that are permitted to be held in an account with Cleared Swaps as
defined in CFTC Regulation 22.1 under Applicable Law. A new defined
term for ``Bank'' would also be added, to refer to a ``Bank'' as
defined in Section 3(a)(6) of the Exchange Act. Finally, the defined
term ``LCH Cleared Swaps Proprietary Depository Account'' would be
replaced with the general term of ``LCH Proprietary Depository
Account''.
Regulation 1 of the Clearing Regulations (Governing Law and
Jurisdiction) would be updated to replace references to ``FCM'' with
``FCM/BD'' and to provide that the Clearing Regulations shall also be
construed in accordance with the Exchange Act.
Regulation 2 (Depositary Accounts) of the Clearing Regulations
would be revised to provide for the relevant accounts for SBS. Each
FCM/BD would be required to establish and maintain an FCM/BD SBS Client
Segregated Depository Account on behalf of its SBS Customers in
accordance with applicable provisions of the Exchange Act and SEC
regulations, including but not limited to Section 3E and Section 15(c)
of the Exchange Act \15\ and Exchange Act Rule 15c3-3.\16\ The Clearing
Regulations would require that the SBS Client Segregated Depository
Account be maintained with a Bank in accordance with the Exchange Act
and SEC Regulations. The FCM/BD SBS Client Segregated Depository
Account maintained by each FCM/BD Clearing Member would be designated
as a ``Special Reserve Bank Account for the Exclusive Benefit of the
Cleared Security-Based Swap Customers'' of the FCM/BD Clearing Member
as provided in Exchange Act Rule 15c3-3(p).\17\ LCH SA would be
required to open an LCH SBS Client Segregated Depository Account on
behalf of the SBS Customers of FCM/BD Clearing Members in accordance
with applicable provisions of the Exchange Act and SEC Regulations.
This account shall be maintained with a Bank and shall contain no
assets other than Collateral deposited by FCM/BD Clearing Members in
connection with the clearing of SBS held in the FCM/BD SBS Client
Account Structure on behalf of their SBS Customers. The LCH SBS Client
Segregated Depository Account maintained by LCH SA shall be designated
as a ``Special Clearing Account for the Exclusive Benefit of the
Cleared Security-Based Swaps Customers'' of the FCM/BD Clearing Member
for purposes of the Exchange Act and SEC Regulations.
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\15\ 15 U.S.C. 78c-5, 78o(c).
\16\ 17 CFR 240.15c3-3.
\17\ 17 CFR 240.15c3-3(p).
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Regulation 3 (Collateral) of the Clearing Regulations would be
updated to provide that securities or cash deposited will be subject to
a security interest and held in either an LCH Cleared Swaps Client
Segregated Depository Account or an LCH SBS Client Segregated
Depository Account, as applicable. Regulation 3 would also be updated
to provide that no collateral deposited in an FCM/BD Clearing Member's
LCH Cleared Swaps Client Segregated Depository Account or LCH SBS
Client Segregated Depository Account shall be applied on or in respect
of payment or satisfaction of any of the FCM/BD Clearing Member's
liabilities to LCH SA as recorded in any
[[Page 23451]]
of the FCM/BD Clearing Member's Proprietary Accounts.
Regulation 4 (Transfer) of the Clearing Regulations would be
amended to provide that if an FCM/BD Clearing Member is a Defaulting
Clearing Member, any action taken by LCH SA pursuant to the CDS
Clearing Rule Book (including the CDS Default Management Process
appended thereto) would be taken in compliance with the U.S. Commodity
Exchange Act or the Exchange Act and SEC Regulation, as applicable, and
applicable bankruptcy laws regarding the liquidation or transfer of
Cleared Swaps carried by an FCM on behalf of its Cleared Swaps
Customers or SBS carried by a BD on behalf of its SBS Customers.
Regulation 5 (Security Interest) of the Clearing Regulations would
be revised to specify that each FCM/BD Clearing Member grants LCH SA a
first security interest in and a first priority and unencumbered first
lien upon any and all cash, securities, receivables, rights and
intangibles and any other Collateral or assets deposited with or
transferred to LCH SA, or otherwise held by LCH SA, including all
property deposited in an LCH SBS Client Segregated Depository Account.
Regulation 5 would also clarify that notwithstanding such security
interest, in no event shall LCH SA's security interest in the
Collateral in an LCH SBS Client Segregated Depository Account held on
behalf of the FCM/BD Clearing Member's Clients be exercised to satisfy
any obligations or liabilities of such FCM/BD Clearing Member other
than in connection with obligations or liabilities relating to Cleared
Swaps cleared by such FCM/BD Clearing Member on behalf of its Cleared
Swaps Customers or relating to SBS cleared by such FCM/BD Clearing
Member on behalf of its SBS Customers.
Additional clarifying and conforming changes in the Clearing
Regulations would be set forth in the Clearing Regulations, including
the use of new defined terms such as FCM/BD Clearing Members, FCM/BD
Cleared Transactions, FCM/BD Clients, Cleared Swaps, Cleared Swaps
Customers, FCM/BD Swaps Client Financial Account.
(2) Additional Amendments
Appendix I of the Rule Book (CDS Default Management Process) would
be amended to provide that each Non-Defaulting Clearing Member would
never be required to bid for more than 100% of the relevant Auction
Package. Therefore, Clause 5.4.4, which relates to the calculation of
the Minimum Bid Size for each Non-Defaulting Clearing Member required
to bid for an Auction Package, is revised by repealing and replacing
the current calculation formula applied by LCH SA to determine the
Minimum Bid Size with the following one: MBS = min ([A/B] x C; 100%).
An equivalent amendment is proposed to be made to Clause 5.9.1, which
deals with the Recalculated Minimum Bid Size to be determined in the
context of a second round of Competitive Bidding, to ensure that each
Non-Defaulting Clearing Member will not be required to bid for more
than 100% of the relevant Residual Auction Package by adding a
reference to the ``maximum value for the Bid Credit of the Minimum Bid
Size'' at the end of indent (i).
Clause 8.1.1 of Appendix 1 of the Rule Book would be amended to
remove a reference to the Early Termination Trigger Date at the end of
the paragraph for consistency purpose since all payment and delivery
obligations in the context of the Early Termination process will be
made at the date and times as set out in the following provisions of
Clause 8.
Regulation 6 (Rules Relating to FCM/BD Cleared Swaps Client
Segregated Accounts) of the Clearing Regulations would be also modified
to implement CFTC Letter No 19-17 of July 10, 2019 (``Advisory and
Time-Limited No-Action Relief with Respect to the Treatment of Separate
Accounts by Futures Commission Merchants'') pursuant to which a
Derivatives Clearing Organization may permit the Futures Commission
Merchant to treat the separate accounts of a customer as accounts of
separate entities subject to a number of conditions provided for in
that letter. Therefore, Regulation 6(e) would be amended to allow FCM/
BD Clearing Members to benefit from this no-action relief regarding the
withdrawal of the Cleared Swaps Customer funds by providing that
references to ``Cleared Swaps Customer'' shall include all Cleared
Swaps Customers for the same beneficial owner, unless the FCM/BD
Clearing Member complies with the relevant conditions set out in CFTC
Letter No. 19-17 of July 10, 2019. Other technical and conforming
changes to Regulation 6 are included in Regulation 6(a) and 6(e).
In addition to the foregoing changes, the amendments to the Rule
Book, Clearing Supplement, Procedures and Clearing Regulations also
contain typographical corrections, cross-references corrections, clean-
up changes, and similar technical corrections as well as various
conforming references to the new or revised defined terms.
(b) Statutory Basis
LCH SA believes that the proposed rule change and the extension of
the CDSClear Service in respect of Single-Name CDS for FCM/BD Clients
is consistent with the requirements of Section 17A of the Exchange Act
\18\ and the regulations thereunder, including the standards under
Exchange Act Rule 17Ad-22.\19\ Section 17A(b)(3)(F) of the Exchange Act
\20\ requires, among other things, that the rules of a clearing agency
be designed to promote the prompt and accurate clearance and settlement
of securities transactions and derivative agreements, contracts, and
transactions. As noted above, the proposed rule change is designed to
provide for the clearing of Single-Name CDS to FCM/BD Clients. From a
financial risk management and margin requirements and an operational
point of view, clearing Single-Name CDS would not require changes to
the existing operational procedures as Single-Name CDS transactions are
already cleared by LCH SA for Clearing Members admitted as CCMs for
their own account and for the account of their Non U.S. Clients.
Therefore, LCH SA believes that the clearing of Single-Name CDS for
U.S. Clients and the related changes described herein are consistent
with the prompt and accurate clearance and settlement of securities
transactions and derivative agreements, contracts and transactions, in
accordance with Section 17A(b)(3)(F) of the Exchange Act.\21\
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\18\ 15 U.S.C. 78q-1.
\19\ 17 CFR 240.17Ad-22.
\20\ 15 U.S.C. 78q-1(b)(3)(F).
\21\ 15 U.S.C. 78q-1(b)(3)(F).
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In addition, the proposed amendments also satisfy the relevant
requirements of Exchange Act Rule 17Ad-22 (e)(1), (4), (13), (14), (17)
and (18).\22\ Exchange Act Rule 17Ad-22(e)(1) \23\ requires that a
covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to provide for a
well-founded, clear, transparent, and enforceable legal basis for each
aspect of its activities in all relevant jurisdictions. The proposed
rule change would modify LCH SA's existing rules and procedures to
clearly define the requirements for Single-Name CDS and establish a
legal framework for LCH SA to clear Single-Name CDS on behalf of U.S.
Clients. The proposed rule change would also make certain clarifying
and conforming changes in the Rule Book. LCH SA therefore
[[Page 23452]]
believes that the proposed rule change is consistent with the
requirements of Exchange Act Rule 17Ad-22(e)(1).\24\
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\22\ 17 CFR 240.17Ad-22(e)(1), (4), (13), (14), (17) and (18).
\23\ 17 CFR 240.17Ad-22(e)(1).
\24\ 17 CFR 240.17Ad-22(e)(1).
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Exchange Act Rule 17Ad-22(e)(4) \25\ requires that a covered
clearing agency establish, implement, maintain and enforce written
policies and procedures reasonably designed to effectively identify,
measure, monitor, and manage its credit exposures to participants and
those arising from its payment, clearing, and settlement processes.
Exchange Act Rule 17Ad-22(e)(14) \26\ requires that a covered clearing
agency establish, implement, maintain and enforce written policies and
procedures reasonably designed to enable, when the covered clearing
agency provides central counterparty services for SBS or engages in
activities that the Commission has determined to have a more complex
risk profile, the segregation and portability of positions of a
participant's customers and the collateral provided to the covered
clearing agency with respect to those positions and effectively protect
such positions and related collateral from the default or insolvency of
that participant. Further, Exchange Act Rule 17Ad-22(e)(13) \27\
requires a covered clearing agency to establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
ensure the covered clearing agency has the authority and operational
capacity to take timely action to contain losses and liquidity demands
and continue to meet its obligations, by, at a minimum, requiring the
covered clearing agency's participants and, when practicable, other
stakeholders to participate in the testing and review of its default
procedures, including any close-out procedures, at least annually and
following material changes thereto. Finally, Exchange Act Rule 17Ad-
22(e)(17) \28\ requires that a covered clearing agency establish,
implement, maintain and enforce written policies and procedures
reasonably designed to manage the covered clearing agency's operational
risks by, among other things, identifying the plausible sources of
operational risk, both internal and external, and mitigating their
impact through the use of appropriate systems, policies, procedures,
and controls.
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\25\ 17 CFR 240.17Ad-22(e)(4).
\26\ 17 CFR 240.17Ad-22(e)(14).
\27\ 17 CFR 240.17Ad-22(e)(13).
\28\ 17 CFR 240.17Ad-22(e)(17).
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Consistent with Exchange Act Rule 17Ad-22(e)(4),\29\ LCH SA will
apply its existing practices, policies, and procedures with respect to
the identification, measuring, monitoring, and management of its credit
exposures to Clearing Members for Single-Name CDS being cleared on
behalf of U.S. Clients, and which, among other things, give LCH SA the
discretion to suspend a Clearing Member or required Credit Quality
Margin to be paid where LCH SA deems it necessary to contain its
exposure.
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\29\ 17 CFR 240.17Ad-22(e)(4).
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LCH SA will apply its existing margin methodology, segregation
requirements and existing default management policies and procedures
for Single Name CDS to be cleared on behalf of U.S. Clients, including
the procedures for participation in a competitive auction process for a
Defaulting Clearing Member's transactions and the appointment of at
least five Clearing Members to be part of the CDS Default Management
Group, to allow LCH SA to take timely action to contain losses and
liquidity demands, in accordance with Exchange Act Rule 17Ad-
22(e)(13).\30\ Similarly, in providing clearing for Single-Name CDS on
behalf of U.S. Clients, LCH SA will apply its existing practices,
policies, and procedures with respect to the portability of accounts,
including as to the portability of accounts from Defaulting Clearing
Members to an appointed Backup Clearing Member, allowing the protection
of collateral from Clearing Member default or insolvency consistent
with Exchange Act Rule 17Ad-22(e)(14).\31\ LCH SA will also apply its
existing practices, policies, and procedures with respect to the
management of operational risk in providing clearing for Single-Name
CDS on behalf of U.S. Clients and consistent with Exchange Act Rule
17Ad-22(e)(17).\32\ Finally, Exchange Act Rule 17Ad-22(e)(18) requires
a covered clearing agency to establish, implement, maintain and enforce
written policies and procedures reasonably designed to establish
objective, risk-based, and publicly disclosed criteria for
participation, which permit fair and open access by direct, and where
relevant, indirect participants and other financial market utilities,
require participants to have sufficient financial resources and robust
operational capacity to meet obligations arising from participation in
the clearing agency, and monitor compliance with such participation
requirements on an ongoing basis. As noted above, the proposed rule
change would extend existing participation requirements to persons
proposing to enter into Single-Name CDS on behalf of their FCM/BD
Clients and make clear that such persons must have operational capacity
and the applicable regulatory registrations in respect of Single-Name
CDS on behalf of their FCM/BD Clients. Therefore, LCH SA believes that
the proposed rule change is consistent with the requirements of
Exchange Act Rule 17Ad-22(e)(18).\33\ Further, the membership
requirements applicable to persons proposing to enter into Single-Name
CDS on behalf of their FCM/BD Clients are designed to identify persons
with sufficient operational capacity and expertise in relation to
Single-Name CDS; such requirements or criteria apply to every and all
persons applying to enter into Single-Name CDS clearing service equally
and, as such, are not designed to permit unfair discrimination in the
admission of participants or among participants in the use of LCH SA,
in accordance with Section 17A(b)(3)(F) of the Exchange Act.\34\
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\30\ 17 CFR 240.17Ad-22(e)(13).
\31\ 17 CFR 240.17Ad-22(e)(14).
\32\ 17 CFR 240.17Ad-22(e)(17).
\33\ 17 CFR 240.17Ad-22(e)(18).
\34\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Exchange 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.\35\ LCH SA does
not believe that its clearing of Single-Name CDS on behalf of FCM/BD
Clients will adversely affect competition in the trading market for
those contracts or CDS generally. By allowing LCH SA to clear Single-
Name CDS for FCM/BD Clients, market participants will have additional
choices on where to clear and which products to use for risk management
purposes, which, in turn, will promote competition and further the
development of CDS for risk management. In addition, LCH SA will apply
its existing fair and open access criteria to the clearing of Single-
Name CDS on behalf of FCM/BD Clients and will apply the same criteria
to every person who proposes to enter into the clearing of Single-Name
CDS on behalf of their Clients. Such criteria are designed to identify
persons with sufficient operational capacity and expertise in relation
to Single-Name CDS as part of the membership requirements that are
necessary and appropriate for LCH SA to manage the risk arising from
allowing persons to transact in Single-Name CDS. Accordingly, LCH SA
does not believe that the proposed rule change will
[[Page 23453]]
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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\35\ 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-2021-001 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-2021-001. 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/rulebooks/proposed-rule-changes.
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-LCH SA-2021-001 and should
be submitted on or before May 24, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09025 Filed 4-30-21; 8:45 am]
BILLING CODE 8011-01-P