Self-Regulatory Organizations; LCH SA; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to 2022 CDSClear Fee Grid, 2647-2650 [2022-00751]
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Federal Register / Vol. 87, No. 11 / Tuesday, January 18, 2022 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–00752 Filed 1–14–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93952; File No. SR–LCH
SA–2021–004]
Self-Regulatory Organizations; LCH
SA; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to 2022 CDSClear Fee
Grid
January 11, 2022.
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 December
28, 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 (‘‘Proposed
Rule Change’’) described in Items I, II
and III below, which Items have been
prepared primarily by LCH SA. LCH SA
filed the proposed rule change pursuant
to Section 19(b)(3)(A) of the Act,3 and
Rule 19b–4(f)(2) 4 thereunder, so that the
proposed rule change was effective
upon filing with the Commission. 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, is proposing to update
the current CDSClear fee grid to be
effective early January 2022 (the
‘‘Proposed Rule Change’’). The text of
the proposed rule change has been
annexed [sic] as Exhibit 5.
The text of the Proposed Rule Change
has been annexed [sic] hereto as Exhibit
5.
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 such statements.
A. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
LCH SA is currently applying the
below fee grid for CDSClear members:
SELF-CLEARING TARIFF FOR CORPORATES AND FINANCIALS INDEX AND SINGLE NAME CDS
Self-clearing/variable fees
Membership
Annual fixed fee
EUR
indices
EUR
single names
USD
indices
USD
single names
General Member—Unlimited
Tariff.
Ö1,350,000 .............................
No Variable Fee.
General Member—Introductory
Tariff.
Ö200,000 if the total annual
gross notional cleared is
under Ö10 billion.
Ö3.5 Per million gross
notional
cleared.
Ö3.5 Per million gross
notional
cleared.
Ö10 Per million
gross notional
cleared.
Ö10 Per million
gross notional
cleared.
$4.5 Per million gross
notional
cleared.
$4.5 Per million gross
notional
cleared.
$13 Per million
gross notional
cleared.
$13 Per million
gross notional
cleared.
Ö4 Per million
gross notional
cleared.
Ö10 Per million
gross notional
cleared.
$5 Per million
gross notional
cleared.
$13 Per million
gross notional
cleared.
Ö400,000 if the total annual
gross notional cleared is
over Ö10 billion.
Select Member .........................
Ö250,000 if the total annual
gross notional cleared is
under Ö20 billion.
Covers all self-clearing Corporate and Financials Index
and Single Name activity
for a Financial Group of a
Clearing Member.
Ö450,000 if the total annual
gross notional cleared is
over Ö20 billion.
OPTIONS TARIFF INCLUDING FEE REBATE
General Member
Introductory Tariff .......................................................................
Can cover either one or multiple legal entities under conditions below (no Affiliate coverage). In-year
switches are not permitted. No EEP usage fees in 2021.
khammond on DSKJM1Z7X2PROD with NOTICES
Clearing Fees ......................................................................
$8
Ö8
Ö115k
Ö150k
Floor on clearing fees ..................................................
Ö190k
16 17
2 17
1 15
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
3 15
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17:00 Jan 14, 2022
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PO 00000
per million of option notional on US Indices.
per million of option notional on European Indices.
Per calendar year (no pro-rating) for 1 entity.
Per calendar year (no pro-rating) for 2 entities of the same Financial Group of a
Clearing Member.
Per calendar year (no pro-rating) for 3 or more entities of the same Financial
Group of a Clearing Member.
CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
Frm 00059
Fmt 4703
4 17
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E:\FR\FM\18JAN1.SGM
CFR 240.19b–4(f)(2).
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Federal Register / Vol. 87, No. 11 / Tuesday, January 18, 2022 / Notices
OPTIONS TARIFF INCLUDING FEE REBATE—Continued
Unlimited Tariff ...........................................................................
Fixed fee (annual) ...............................................................
Discounted Rates* ...............................................................
Cover all Affiliates of a given Financial Group of a Clearing Member. Cover all clearing fees for
Credit Option House activity for both iTraxx and CDX.NA underlying index families. In-year switches
are not permitted. No EEP usage fees in 2021.
Ö375k Per calendar year (no pro-rating).
Ö115k if notionals cleared strictly above Ö15bn.
Ö30k
Onboarding Fees (both Introductory & unlimited) ......................
I
One-off fee per Legal Entity under the Introductory tariff or per Financial Group of a
Clearing Member under the Unlimited tariff.
Select Member
Introductory Tariff .......................................................................
Cover only one legal entity (no affiliate coverage). In-year switches are not permitted. No EEP usage
fees in 2021.
Clearing Fees ......................................................................
Unlimited Tariff ...........................................................................
$10
Ö10
per million of option notional on US Indices.
per million of option notional on European Indices.
Cover all Affiliates of a given Financial Group of a Clearing Member. Cover all clearing fees for
Credit Option House activity for both iTraxx and CDX.NA underlying index families. In-year switches
are not permitted. No EEP usage fees in 2021.
Ö400k
Ö115k
Ö30k
Fixed fee (annual) ...............................................................
Discounted Rates ................................................................
Onboarding Fees (both Introductory & unlimited) ......................
Per calendar year (no pro-rating).
if notionals cleared strictly above Ö15bn.
One-off fee per Legal Entity under the Introductory tariff or per Financial Group of a
Clearing Member under the Unlimited tariff.
Clearing Member (Options only)
Up to Ö200,000 fee rebate limited to the total amount of Options clearing fees paid in 2021 for the first two Clearing Members clearing Options for at least one client
by 31-July-2021.
Client
Options Clearing Fees ................................................................
$5
Ö5
per million of option notional on US Indices.
per million of option notional on European Indices.
2021: Full discount of client variable fees.
AFFILIATES CLEARING AS CLIENT (ALL PRODUCTS)
Affiliates clearing as Clients ......................................................
khammond on DSKJM1Z7X2PROD with NOTICES
The purpose of the proposed fee
changes is for LCH SA CDSClear to take
into account the evolution of the
CDSClear business and arrangements.
—Regarding the Index and Single
Names clearing activity: The proposed
fee change reflects the ongoing
development and product scope of the
CDSClear service with the objective to
meet clearing members and clients’
expectations, and
—for the Options: The intent is to adjust
the fee conditions to the new
competitive environment as well as
encourage the development of options
clearing by clients and new market
participants.
Therefore, as specified in the new fee
grid attached [sic] under Exhibit 5, LCH
SA is proposing to amend the CDSClear
fee grid from January 1st, 2022 as
follows.
VerDate Sep<11>2014
17:00 Jan 14, 2022
Jkt 256001
Full rebate on variable clearing fees for the Affiliate of a Clearing Member onboarded as client of
such Clearing Member under the following conditions:
• The Clearing Member is a General Member under the Unlimited Tariff;
• The Affiliate is a legal entity part of the same Financial Group as the Clearing Member;
• The rebate applies to 1 trade account per affiliate and for all clearing services for which the
Clearing Member is under the Unlimited Tariff (i.e., Index & Single Names and/or Options);
• The rebate cannot apply to any account opened for CCM Indirect Clients; and
• A fixed annual account fee of Ö100,000 is charged per affiliate of a Clearing Member
onboarded as a client and benefiting from the full rebate on variable fees.
(1) Clearing Fees for Sovereign Index
and Single Name CDS 5 Activity
LCH SA CDSClear currently offers an
Unlimited Tariff for General Members
that covers all self-clearing Corporate
and Financials CDS Index and Single
Names activity for a Financial Group of
a Clearing Member for an annual fixed
fee of Ö1,350,000 (no variable fees).
CDSClear is also offering an
Introductory Tariff for General and
Select Members that covers all selfclearing corporate and financials CDS
index and single names activity.
LCH SA currently treats fees from all
indexes differently from fees for single
names, reflecting both the difference in
client and member activity in the
products and the nature of the
underlying products. Specifically for
sovereigns, the intended list of cleared
5 Subject
PO 00000
to regulatory approval.
Frm 00060
Fmt 4703
Sfmt 4703
sovereign names is much wider in scope
than purely the constituents of the CDX
EM index.
The Proposed Rule Change consists in
defining the clearing fees associated to
the clearing activity of Sovereign
indices and single names under the
General Members Unlimited Tariff and
Introductory Tariff as well as the Select
Members Tariff. This proposed change
will be effective once this new clearing
activity is duly approved by the relevant
regulators.
Under the proposed change, for
General Members under the Unlimited
Tariff, self-clearing Sovereign indices
activity will be included in the scope of
the fixed fee of Ö1,350,000 per year,
whereas Sovereign single names will
attract variable clearing fees of Ö10/$13
per million Ö/$ of notional cleared
depending on the currency in which
they are denominated.
E:\FR\FM\18JAN1.SGM
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Federal Register / Vol. 87, No. 11 / Tuesday, January 18, 2022 / Notices
For General Members under the
Introductory Tariff, Select Members as
well as Clients, Sovereign indices and
single names clearing activity will be
charged at the same variable clearing
fees currently existing for USD and EUR
denominated Corporate and Financial
indices and single names.
Finally, in order to build liquidity in
the products on the CDSClear service,
all General Members, whether under the
Unlimited or the Introductory Tariff,
will benefit from a fee holiday for their
variable fees from self-clearing
Sovereign single names clearing activity
for 1 year from the product launch date.
(2) Introduction of a New Tariff for the
Options Clearing Service
In order to take into account the new
competitive environment as well as
encourage the development of options
clearing by market participants, LCH SA
is proposing to create a new tariff called
‘New Market Participant Tariff’ (NMP),
based on variable fees, and to which
only members which are new joiners to
the Options clearing service will be
eligible to subscribe, for one calendar
year renewable once only. Under this
NMP Tariff, clearing members will be
charged Ö10/$10 per million of optional
notional cleared depending on the
currency in which the underlying index
is denominated. Because New Market
Participants do not have to pay the fixed
fee, the purpose of this type of tariff is
to attract clearing members who are not
currently on the option service to join
by removing the barrier of the fixed fee,
which is payable even if no option
notional is cleared. This is also in line
with the existing Select Members
variable tariff.
khammond on DSKJM1Z7X2PROD with NOTICES
(3) Reduction of the Client Clearing Fees
for Options, Maintaining the EEP Usage
Free of Charge in 2022 and Extension of
the Fee Holiday Period
Under the proposed change and based
on feedback from the market, the
variable clearing fees to be paid by
Clients for Options clearing would
decrease from Ö5/$5 to Ö4/$4 per
million of option notional cleared.
LCH SA is maintaining for 2022 the
Electronic Exercise Platform (EEP) usage
free of charge to promote and encourage
option clearing take-up.
LCH SA is also proposing to renew
the fee holiday for Clients clearing
Options in 2022.
As specified in the filing LCH SA–
2020–007,6 the proposed Ö200,000 fee
6 Self-Regulatory
Organizations; LCH SA; Notice
of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to the Amendments of the
CDSClear Fee Grid, Release No. 34–90862 (Jan. 6,
VerDate Sep<11>2014
17:00 Jan 14, 2022
Jkt 256001
rebate limited to the total amount of
Options clearing fees paid by a
Financial Group of a Clearing Member
in 2021 for the first two Clearing
Members clearing Options for at least
one Client has expired on 31 July 2021
and was duly removed from the updated
fee grid.
2. Statutory Basis
Section 17A(b)(3)(D) of the Act
requires that the rules of a clearing
agency provide for the equitable
allocation of reasonable dues, fees, and
other charges.7
LCH SA believes that its clearing fees
change proposal is consistent with the
requirements of Section 17A of the Act 8
and the regulations thereunder
applicable to it, and in particular
provides for the equitable allocation of
reasonable fees, dues, and other charges
among clearing members and market
participants by ensuring that clearing
members and clients pay reasonable fees
and dues for the services provided by
LCH SA, within the meaning of Section
17A(b)(3)(D) of the Act.9
Indeed, there’s no change on the
tariffs on which LCH SA CDSClear has
existing activity (i.e., Corporates and
Financials Index and Single Names,
General Members Unlimited and
Introductory tariffs for Index Options).
All of the new products being
introduced will fall into the scope of the
fixed fee for GMs under the Unlimited
Tariff, except for Sovereign Single
Names for which a one year fee holiday
period is offered to both General
Members under the Unlimited and the
Intro Tariffs.
So, the proposed clearing fees for
Sovereign index and single names, are
consistent with the existing fees for
Corporate and Financial indices and
single names for General Members,
Select Members as well as Clients. In
particular, none of the fixed fee
components of the various tariffs are
impacted, and the variable fees, where
applicable, are the same as the existing
ones excepted for Sovereign single
names products which are not
considered to be part of the unlimited
fixed fee that was designed and
established prior to LCH SA intending
to offer these products. Therefore,
subject to regulatory approvals, only
variable fees coming from new products
being cleared by General Members
under the Introductory Tariffs, Select
2021), 86 FR 2468 (Jan. 12, 2021), File No. SR–LCH
SA–2020–007.
7 15 U.S.C. 78q–1(b)(3)(D).
8 15 U.S.C. 78q–1.
9 15 U.S.C. 78q–1(b)(3)(D).
PO 00000
Frm 00061
Fmt 4703
Sfmt 4703
2649
Members and Clients would be new fees
collected by LCH SA CDSClear.
Besides, the proposed fee holiday for
Sovereign single names self-clearing
activity is equivalent and offered to all
General Members for 1 year only, in
order to help build the dealers’ liquidity
of the LCH SA CDSClear service for
Sovereign CDS which is a critical step
for Clients to be able to clear their
Sovereign CDS activity as well.
Regarding the Options clearing
service, in accordance with the feedback
received from the market, the main
proposed change is the creation of the
New Market Participant Tariff, available
to new joiners for a fixed period of time
only (maximum 2 years) in order to
facilitate the onboarding of new
Members with an option market-making
business to the LCH SA CDSClear
Option clearing service, which in turn is
one element that will contribute to
Clients clearing their options activity as
most if not all of their executing brokers
will be able to clear options. New
Markets Participants are not paying the
fixed fee. As such, LCH SA believes that
this new reasonable tariff consistent
with Section 17A(b)(3)(D) is designed to
encourage Options clearing activity
which is also consistent with the
prompt and accurate clearance in
accordance with Section 17A(b)(3)(F) of
the Exchange Act.10
A second element that will contribute
to growing the options client clearing
activity is the renewal of the fee holiday
for options clearing fees in 2022.
Finally, the decrease in the variable
headline clearing fees to be paid by
Clients for options will also contribute
to the same objective in the longer term.
For all the reasons stated above, LCH
SA believes that the proposed fee rates
are reasonable and appropriate so that
LCH SA can provide the CDSClear
services.
B. Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Act
requires that the rules of a clearing
agency not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.11
LCH SA does not believe that the
Proposed Rule Change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because LCH
SA is offering the possibility for
CDSClear members and clients to obtain
a more appropriate and flexible access
to the clearing services. The Proposed
10 15
11 15
E:\FR\FM\18JAN1.SGM
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78q–1(b)(3)(I).
18JAN1
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Federal Register / Vol. 87, No. 11 / Tuesday, January 18, 2022 / Notices
Rule Change would not affect the ability
of Clearing Members or other market
participants generally to engage in
cleared transactions or to access clearing
services. Additionally, the clearing fee
conditions remain transparent and
equally applicable to any category of
market participant wishing to access the
CDSClear clearing service for all
proposed products including those that
are not mandatory for clearing.
Further, as explained above, LCH SA
believes that the fee rates remain set up
at an appropriate level given the costs
and expenses to LCH SA in offering the
relevant clearing services.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective upon filing
pursuant to Section 19(b)(3)(A) 12 of the
Act and Rule 19b–4(f)(2) 13 thereunder
because it establishes a fee or other
charge imposed by LCH SA on its
Clearing Members. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such proposed rule
change if it appears to the Commission
that such action is necessary or
appropriate in the public interest, for
the protection of investors, or otherwise
in furtherance of the purposes of the
Act.
khammond on DSKJM1Z7X2PROD with NOTICES
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:
• 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–2021–004 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–2021–004. 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/
12 15
13 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
17:00 Jan 14, 2022
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 such
filings will also 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–2021–004 and should be submitted
on or before February 8, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–00751 Filed 1–14–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93953; File No. SR–NSCC–
2021–013]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Provide for
a Passive Acknowledgment Process,
Codify Certain Settlement Processes,
and Make Technical and Conforming
Changes to the NSCC Rules &
Procedures
January 11, 2022.
Jkt 256001
PO 00000
CFR 200.30–3(a)(12).
Frm 00062
Fmt 4703
II. Description of the Proposed Rule
Change
NSCC proposes to modify its Rules
and Procedures (‘‘Rules’’) 4 in order to
(i) provide for a passive
acknowledgment process whereby any
settling bank that does not timely
acknowledge its intention to pay to or
collect its settlement balance from
NSCC), or refuse to settle for one or
more members for which it is the
designated settling bank and has not
otherwise been in contact with NSCC,
would be deemed to have acknowledged
its settlement balances, (ii) amend the
definition of AIP Settling Bank and
remove AIP Settling Bank Only Member
as a membership category, (iii) codify
certain settlement processes, and (iv)
make certain technical and conforming
changes.
A. Current Settlement Process
NSCC membership consists of
Members that have access to NSCC’s
guaranteed central counterparty services
and Limited Members that have access
to NSCC’s non-guaranteed services,
such as Mutual Fund Services and
Alternative Investment Product Services
(‘‘AIP’’).5 Limited Members that only
have access to AIP are referred to as AIP
Members.6 AIP Non-Member Funds are
entities that are not AIP Members but
that NSCC has approved to settle AIP
Payments.7
NSCC provides two separate
standardized, automated money
settlement processes: (i) End of day
settlement for Members and Limited
Members other than AIP Members
(‘‘EOD Settlement’’), and (ii) daily
settlement for AIP Members and AIP
Non-Member Funds (‘‘AIP
1 15
I. Introduction
On November 18, 2021, National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
14 17
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
proposed rule change SR–NSCC–2021–
013. The proposed rule change was
published for comment in the Federal
Register on December 8, 2021.3 The
Commission did not receive any
comment letters on the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change.
Sfmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 93709
(December 2, 2021), 86 FR 69687 (December 8,
2021) (SR–NSCC–2021–013) (‘‘Notice’’).
4 Capitalized terms not defined herein are defined
in the Rules, available at https://www.dtcc.com/
legal/rules-and-procedures.
5 See Section 2 of Rule 2, supra note 4.
6 Id.
7 See Rule 53, supra note 4. See also definition
of ‘‘AIP Non-Member Fund’’ in Rule 1, id.
2 17
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]]>Agencies
[Federal Register Volume 87, Number 11 (Tuesday, January 18, 2022)]
[Notices]
[Pages 2647-2650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00751]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93952; File No. SR-LCH SA-2021-004]
Self-Regulatory Organizations; LCH SA; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to 2022
CDSClear Fee Grid
January 11, 2022.
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 December 28, 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
(``Proposed Rule Change'') described in Items I, II and III below,
which Items have been prepared primarily by LCH SA. LCH SA filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\3\ and
Rule 19b-4(f)(2) \4\ thereunder, so that the proposed rule change was
effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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, is proposing to update the current CDSClear fee grid
to be effective early January 2022 (the ``Proposed Rule Change''). The
text of the proposed rule change has been annexed [sic] as Exhibit 5.
The text of the Proposed Rule Change has been annexed [sic] hereto
as Exhibit 5.
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 such statements.
A. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
LCH SA is currently applying the below fee grid for CDSClear
members:
Self-Clearing Tariff for Corporates and Financials Index and Single Name CDS
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Self-clearing/variable fees
Membership Annual fixed fee --------------------------------------------------------------------------------
EUR indices EUR single names USD indices USD single names
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General Member--Unlimited Tariff [euro]1,350,000... No Variable Fee. Covers all self-
clearing
Corporate and
Financials Index
and Single Name
activity for a
Financial Group
of a Clearing
Member.
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General Member--Introductory [euro]200,000 if [euro]3.5 Per [euro]10 Per $4.5 Per million $13 Per million ..................
Tariff. the total annual million gross million gross gross notional gross notional
gross notional notional cleared. notional cleared. cleared. cleared.
cleared is under
[euro]10 billion.
[euro]400,000 if [euro]3.5 Per [euro]10 Per $4.5 Per million $13 Per million
the total annual million gross million gross gross notional gross notional
gross notional notional cleared. notional cleared. cleared. cleared.
cleared is over
[euro]10 billion.
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Select Member................... [euro]250,000 if [euro]4 Per [euro]10 Per $5 Per million $13 Per million ..................
the total annual million gross million gross gross notional gross notional
gross notional notional cleared. notional cleared. cleared. cleared.
cleared is under
[euro]20 billion.
[euro]450,000 if
the total annual
gross notional
cleared is over
[euro]20 billion.
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Options Tariff Including Fee Rebate
------------------------------------------------------------------------
------------------------------------------------------------------------
General Member
------------------------------------------------------------------------
Introductory Tariff............ Can cover either one or multiple legal
entities under conditions below (no
Affiliate coverage). In-year switches
are not permitted. No EEP usage fees in
2021.
----------------------------------------
Clearing Fees.............. $8 per million of option
notional on US
Indices.
[euro]8 per million of option
notional on European
Indices.
Floor on clearing fees. [euro]115k Per calendar year (no
pro-rating) for 1
entity.
[euro]150k Per calendar year (no
pro-rating) for 2
entities of the same
Financial Group of a
Clearing Member.
[euro]190k Per calendar year (no
pro-rating) for 3 or
more entities of the
same Financial Group
of a Clearing Member.
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[[Page 2648]]
Unlimited Tariff............... Cover all Affiliates of a given
Financial Group of a Clearing Member.
Cover all clearing fees for Credit
Option House activity for both iTraxx
and CDX.NA underlying index families.
In-year switches are not permitted. No
EEP usage fees in 2021.
----------------------------------------
Fixed fee (annual)......... [euro]375k Per calendar year (no pro-
rating).
Discounted Rates*.......... [euro]115k if notionals cleared
strictly above [euro]15bn.
----------------------------------------
Onboarding Fees (both [euro]30k One-off fee per Legal
Introductory & unlimited). Entity under the
Introductory tariff or
per Financial Group of
a Clearing Member
under the Unlimited
tariff.
------------------------------------------------------------------------
Select Member
------------------------------------------------------------------------
Introductory Tariff............ Cover only one legal entity (no
affiliate coverage). In-year switches
are not permitted. No EEP usage fees in
2021.
----------------------------------------
Clearing Fees.............. $10 per million of option
notional on US
Indices.
[euro]10 per million of option
notional on European
Indices.
----------------------------------------
Unlimited Tariff............... Cover all Affiliates of a given
Financial Group of a Clearing Member.
Cover all clearing fees for Credit
Option House activity for both iTraxx
and CDX.NA underlying index families.
In-year switches are not permitted. No
EEP usage fees in 2021.
----------------------------------------
Fixed fee (annual)......... [euro]400k Per calendar year (no
pro-rating).
Discounted Rates........... [euro]115k if notionals cleared
strictly above
[euro]15bn.
Onboarding Fees (both [euro]30k One-off fee per Legal
Introductory & unlimited). Entity under the
Introductory tariff or
per Financial Group of
a Clearing Member
under the Unlimited
tariff.
------------------------------------------------------------------------
Clearing Member (Options only)
------------------------------------------------------------------------
Up to [euro]200,000 fee rebate limited to the total amount of Options
clearing fees paid in 2021 for the first two Clearing Members clearing
Options for at least one client by 31-July-2021.
------------------------------------------------------------------------
Client
------------------------------------------------------------------------
Options Clearing Fees.......... $5 per million of option
notional on US
Indices.
[euro]5 per million of option
notional on European
Indices.
----------------------------------------
2021: Full discount of client variable
fees.
------------------------------------------------------------------------
Affiliates Clearing as Client (All Products)
------------------------------------------------------------------------
------------------------------------------------------------------------
Affiliates clearing as Clients. Full rebate on variable clearing fees
for the Affiliate of a Clearing Member
onboarded as client of such Clearing
Member under the following conditions:
The Clearing Member is a
General Member under the Unlimited
Tariff;
The Affiliate is a legal
entity part of the same Financial
Group as the Clearing Member;
The rebate applies to 1
trade account per affiliate and for
all clearing services for which the
Clearing Member is under the
Unlimited Tariff (i.e., Index &
Single Names and/or Options);
The rebate cannot apply to
any account opened for CCM Indirect
Clients; and
A fixed annual account fee
of [euro]100,000 is charged per
affiliate of a Clearing Member
onboarded as a client and
benefiting from the full rebate on
variable fees.
------------------------------------------------------------------------
The purpose of the proposed fee changes is for LCH SA CDSClear to
take into account the evolution of the CDSClear business and
arrangements.
--Regarding the Index and Single Names clearing activity: The proposed
fee change reflects the ongoing development and product scope of the
CDSClear service with the objective to meet clearing members and
clients' expectations, and
--for the Options: The intent is to adjust the fee conditions to the
new competitive environment as well as encourage the development of
options clearing by clients and new market participants.
Therefore, as specified in the new fee grid attached [sic] under
Exhibit 5, LCH SA is proposing to amend the CDSClear fee grid from
January 1st, 2022 as follows.
(1) Clearing Fees for Sovereign Index and Single Name CDS \5\ Activity
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\5\ Subject to regulatory approval.
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LCH SA CDSClear currently offers an Unlimited Tariff for General
Members that covers all self-clearing Corporate and Financials CDS
Index and Single Names activity for a Financial Group of a Clearing
Member for an annual fixed fee of [euro]1,350,000 (no variable fees).
CDSClear is also offering an Introductory Tariff for General and
Select Members that covers all self-clearing corporate and financials
CDS index and single names activity.
LCH SA currently treats fees from all indexes differently from fees
for single names, reflecting both the difference in client and member
activity in the products and the nature of the underlying products.
Specifically for sovereigns, the intended list of cleared sovereign
names is much wider in scope than purely the constituents of the CDX EM
index.
The Proposed Rule Change consists in defining the clearing fees
associated to the clearing activity of Sovereign indices and single
names under the General Members Unlimited Tariff and Introductory
Tariff as well as the Select Members Tariff. This proposed change will
be effective once this new clearing activity is duly approved by the
relevant regulators.
Under the proposed change, for General Members under the Unlimited
Tariff, self-clearing Sovereign indices activity will be included in
the scope of the fixed fee of [euro]1,350,000 per year, whereas
Sovereign single names will attract variable clearing fees of [euro]10/
$13 per million [euro]/$ of notional cleared depending on the currency
in which they are denominated.
[[Page 2649]]
For General Members under the Introductory Tariff, Select Members
as well as Clients, Sovereign indices and single names clearing
activity will be charged at the same variable clearing fees currently
existing for USD and EUR denominated Corporate and Financial indices
and single names.
Finally, in order to build liquidity in the products on the
CDSClear service, all General Members, whether under the Unlimited or
the Introductory Tariff, will benefit from a fee holiday for their
variable fees from self-clearing Sovereign single names clearing
activity for 1 year from the product launch date.
(2) Introduction of a New Tariff for the Options Clearing Service
In order to take into account the new competitive environment as
well as encourage the development of options clearing by market
participants, LCH SA is proposing to create a new tariff called `New
Market Participant Tariff' (NMP), based on variable fees, and to which
only members which are new joiners to the Options clearing service will
be eligible to subscribe, for one calendar year renewable once only.
Under this NMP Tariff, clearing members will be charged [euro]10/$10
per million of optional notional cleared depending on the currency in
which the underlying index is denominated. Because New Market
Participants do not have to pay the fixed fee, the purpose of this type
of tariff is to attract clearing members who are not currently on the
option service to join by removing the barrier of the fixed fee, which
is payable even if no option notional is cleared. This is also in line
with the existing Select Members variable tariff.
(3) Reduction of the Client Clearing Fees for Options, Maintaining the
EEP Usage Free of Charge in 2022 and Extension of the Fee Holiday
Period
Under the proposed change and based on feedback from the market,
the variable clearing fees to be paid by Clients for Options clearing
would decrease from [euro]5/$5 to [euro]4/$4 per million of option
notional cleared.
LCH SA is maintaining for 2022 the Electronic Exercise Platform
(EEP) usage free of charge to promote and encourage option clearing
take-up.
LCH SA is also proposing to renew the fee holiday for Clients
clearing Options in 2022.
As specified in the filing LCH SA-2020-007,\6\ the proposed
[euro]200,000 fee rebate limited to the total amount of Options
clearing fees paid by a Financial Group of a Clearing Member in 2021
for the first two Clearing Members clearing Options for at least one
Client has expired on 31 July 2021 and was duly removed from the
updated fee grid.
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\6\ Self-Regulatory Organizations; LCH SA; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to the
Amendments of the CDSClear Fee Grid, Release No. 34-90862 (Jan. 6,
2021), 86 FR 2468 (Jan. 12, 2021), File No. SR-LCH SA-2020-007.
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2. Statutory Basis
Section 17A(b)(3)(D) of the Act requires that the rules of a
clearing agency provide for the equitable allocation of reasonable
dues, fees, and other charges.\7\
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\7\ 15 U.S.C. 78q-1(b)(3)(D).
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LCH SA believes that its clearing fees change proposal is
consistent with the requirements of Section 17A of the Act \8\ and the
regulations thereunder applicable to it, and in particular provides for
the equitable allocation of reasonable fees, dues, and other charges
among clearing members and market participants by ensuring that
clearing members and clients pay reasonable fees and dues for the
services provided by LCH SA, within the meaning of Section 17A(b)(3)(D)
of the Act.\9\
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\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78q-1(b)(3)(D).
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Indeed, there's no change on the tariffs on which LCH SA CDSClear
has existing activity (i.e., Corporates and Financials Index and Single
Names, General Members Unlimited and Introductory tariffs for Index
Options). All of the new products being introduced will fall into the
scope of the fixed fee for GMs under the Unlimited Tariff, except for
Sovereign Single Names for which a one year fee holiday period is
offered to both General Members under the Unlimited and the Intro
Tariffs.
So, the proposed clearing fees for Sovereign index and single
names, are consistent with the existing fees for Corporate and
Financial indices and single names for General Members, Select Members
as well as Clients. In particular, none of the fixed fee components of
the various tariffs are impacted, and the variable fees, where
applicable, are the same as the existing ones excepted for Sovereign
single names products which are not considered to be part of the
unlimited fixed fee that was designed and established prior to LCH SA
intending to offer these products. Therefore, subject to regulatory
approvals, only variable fees coming from new products being cleared by
General Members under the Introductory Tariffs, Select Members and
Clients would be new fees collected by LCH SA CDSClear.
Besides, the proposed fee holiday for Sovereign single names self-
clearing activity is equivalent and offered to all General Members for
1 year only, in order to help build the dealers' liquidity of the LCH
SA CDSClear service for Sovereign CDS which is a critical step for
Clients to be able to clear their Sovereign CDS activity as well.
Regarding the Options clearing service, in accordance with the
feedback received from the market, the main proposed change is the
creation of the New Market Participant Tariff, available to new joiners
for a fixed period of time only (maximum 2 years) in order to
facilitate the onboarding of new Members with an option market-making
business to the LCH SA CDSClear Option clearing service, which in turn
is one element that will contribute to Clients clearing their options
activity as most if not all of their executing brokers will be able to
clear options. New Markets Participants are not paying the fixed fee.
As such, LCH SA believes that this new reasonable tariff consistent
with Section 17A(b)(3)(D) is designed to encourage Options clearing
activity which is also consistent with the prompt and accurate
clearance in accordance with Section 17A(b)(3)(F) of the Exchange
Act.\10\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
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A second element that will contribute to growing the options client
clearing activity is the renewal of the fee holiday for options
clearing fees in 2022. Finally, the decrease in the variable headline
clearing fees to be paid by Clients for options will also contribute to
the same objective in the longer term.
For all the reasons stated above, LCH SA believes that the proposed
fee rates are reasonable and appropriate so that LCH SA can provide the
CDSClear services.
B. Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\11\
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\11\ 15 U.S.C. 78q-1(b)(3)(I).
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LCH SA does not believe that the Proposed Rule Change would impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act because LCH SA is offering the
possibility for CDSClear members and clients to obtain a more
appropriate and flexible access to the clearing services. The Proposed
[[Page 2650]]
Rule Change would not affect the ability of Clearing Members or other
market participants generally to engage in cleared transactions or to
access clearing services. Additionally, the clearing fee conditions
remain transparent and equally applicable to any category of market
participant wishing to access the CDSClear clearing service for all
proposed products including those that are not mandatory for clearing.
Further, as explained above, LCH SA believes that the fee rates
remain set up at an appropriate level given the costs and expenses to
LCH SA in offering the relevant clearing services.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A) \12\ of the Act and Rule 19b-4(f)(2)
\13\ thereunder because it establishes a fee or other charge imposed by
LCH SA on its Clearing Members. At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such proposed rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(2).
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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:
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-2021-004 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-2021-004. 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 such filings will also 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-2021-004 and should
be submitted on or before February 8, 2022.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00751 Filed 1-14-22; 8:45 am]
BILLING CODE 8011-01-P
