Notice2022-20501
Self-Regulatory Organizations; LCH SA; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1, Relating to the CDSClear CCP Switch Programme
Primary source
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Published
September 22, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 183 (Thursday, September 22, 2022)</title>
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[Federal Register Volume 87, Number 183 (Thursday, September 22, 2022)]
[Notices]
[Pages 57931-57933]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20501]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95808; File No. SR-LCH SA-2022-005]
Self-Regulatory Organizations; LCH SA; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change, as Modified by
Amendment No. 1, Relating to the CDSClear CCP Switch Programme
September 16, 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 September 9, 2022, 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. 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 proposal was effective upon filing with the Commission. On
September 14, 2022, LCH SA filed Amendment No. 1 to the proposed rule
change.\5\ The Commission is publishing this notice to solicit comments
on the proposed rule change, as modified by Amendment No. 1 (hereafter,
the ``proposed rule change change''), from interested persons.\6\
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\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).
\5\ In Amendment No. 1, LCH SA deleted a sentence from Item II.B
that was not applicable to the filing.
\6\ References to the proposed rule change from this point
forward refer to the proposed rule change as modified by Amendment
No. 1.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
(a) LCH SA is proposing to offer an incentive fee programme to
existing and new potential clearing member and clients of CDSClear
service (the ``Proposed Rule Change'').
The text of the Proposed Rule Change is in Exhibit 5 [sic].\7\
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\7\ All capitalized terms not defined herein have the same
definition as in the CDS Clearing Rule Book, Supplement or
Procedures, as applicable.
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The implementation of the Proposed Rule Change will be contingent
on LCH SA's receipt of all necessary regulatory approvals.
(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
Following an announcement made at the end of June by an alternate
credit CCP that it would cease clearing all
[[Page 57932]]
classes of CDS contracts by the end of March 2023,\8\ but also in light
of the upcoming extension of CDSClear products, LCH SA CDSClear expects
a number of clients and clearing members of alternate credit CCPs to
choose to move their CDS portfolios to LCH SA CDSClear.
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\8\ Circular C22/076 ``Cessation of clearing of CDS Contracts''
published by ICE Clear Europe on 30 June 2022 (C22076.pdf
(<a href="http://theice.com">theice.com</a>).
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Within this context, the purpose of the Proposed Rule Change is for
CDSClear to offer Clearing Members and clients acting through a
Clearing Member, who have, directly or through a Clearing Member as
applicable, signed up to the CCP Switch Programme \9\ as specified in
Exhibit 5 [sic], the opportunity to move their cleared index and single
name credit default swap (``CDS'') or Index Swaption transactions from
alternate credit CCPs to LCH SA at no cost (the ``CCP Switch
Programme'').
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\9\ Clearing Members and clients will be able to enter into the
CCP Switch Programme by completing a written form.
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As detailed in the CDSClear Circular attached as Exhibit 5 [sic]
and also to be published on the LCH website, LCH SA CDSClear is
proposing to implement the CCP Switch Programme that would be offered
to all CDSClear Clearing Members and clients (the ``Switch Programme
Participants'') once effective.
The CCP Switch Programme will apply to all ``Eligible Cleared
Transactions'' which include cleared transactions where there is no
unlimited tariff available for the Switch Programme Participant or the
cleared transaction would attract a non-zero clearing fee. This
includes all CDS transactions for Select Members, but not Index
Swaption transactions where an unlimited tariff is available. It
includes all CDS transactions for clients of Clearing Members, but not
Index Swaption transactions in 2022, where a full discount of client
variable fees is being applied. It currently does not include any
transactions for General Members. General Members have an unlimited
tariff available for CDS apart from sovereign single names. Sovereign
single names are subject to a full discount of clearing fees for
General Members for 1 year from the go-live date. An unlimited tariff
is available to General Members for Index Swaptions, which excludes
these from being an Eligible Cleared Transaction also.
To assist Switch Programme Participants in efficiently closing
positions at alternate credit CCPs and reopening the same positions at
the LCH SA CDSClear service, LCH SA is proposing to allow Switch
Programme Participants to complete these transactions for zero CCP
clearing fees.
In order to facilitate this, LCH SA CDSClear would charge no
clearing fees to enter into the Eligible Cleared Transaction on
CDSClear, known as the ``the CDSClear Transaction Leg''.
Correspondingly, LCH SA would provide a Credit Note for the Assumed
Cost of entering into the close out transaction at the alternate CDS
CCP, known as the ``Alternate CCP Transaction Leg.
The Credit Note would be applied to all non-CCP Switch Eligible
Cleared Transactions of a Switch Programme Participant for a period of
six (6) months beginning at the ``Programme Entry Date'', mentioned in
the relevant Switch Programme registration form provided to LCH SA.
This will effectively make the CCP Switch free of any clearing fees at
either CCP. At the end of the six months period, any unused portion of
the Credit Note would be forfeited.
Fees for both the CCP Switch and any transactions which would have
the Credit Note applied would be charged as normal, then rebated at the
end of each month.
(b) 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.\10\
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\10\ 15 U.S.C. 78q-1(b)(3)(D).
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LCH SA believes that its clearing fee change proposal is consistent
with the requirements of Section 17A of the Act \11\ 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.\12\
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\11\ 15 U.S.C. 78q-1.
\12\ 15 U.S.C. 78q-1(b)(3)(D).
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Indeed, there is 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). Rather the Proposed Rule Change provides for a fee rebate to
Switch Programme Participants who choose to switch CDS positions from
an alternate CCP to the LCH SA CDSClear service, effectively allowing
these switch transactions to have no cost impact to Switch Programme
Participants. Additionally, in no case will the Proposed Rule Change
cause an increase to any fees charged by LCH SA. As such, LCH SA
believes that the Proposed Rule Change consistent with Section
17A(b)(3)(D) and is designed to offer Clearing Members and clients with
cleared CDS and Index Swaption positions, especially those that may
become ineligible to remain at their current CCP, the ability to move
their positions to LCH SA free of charge. LCH SA does not plan to offer
the CCP Switch Programme for cleared transactions where there is an
unlimited tariff available to Switch Programme Participants or where
cleared transactions would not attract a fee.
For all the reasons stated above, LCH SA believes that the proposed
changes to the LCH SA fee grid are reasonable and appropriate.
B. Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\13\
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\13\ 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 the CCP Switch Programme
is meant to facilitate competition and movement between CCPs by
accommodating such positions transfers and reducing the barrier
potentially created by high fees associated with transferring
corresponding positions between clearing houses. LCH SA is offering the
possibility for all CDSClear Clearing Members and clients to utilize
the CCP Switch Programme without prejudice and on identical terms. The
Proposed 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 eligible participant wishing to access the
CDSClear clearing service including those transactions that are not
mandatory for clearing.
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
[[Page 57933]]
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
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(2)
\15\ 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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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d5a7a0b9b0f8b6bab8b8b0bba1a695a6b0b6fbb2baa3"><span class="__cf_email__" data-cfemail="dcaea9b0b9f1bfb3b1b1b9b2a8af9cafb9bff2bbb3aa">[email protected]</span></a>. Please include
File Number SR-LCH SA-2022-005 on the subject line.
Paper Comments
<bullet> 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-2022-005. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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: <a href="https://www.lch.com/resources/rulebooks/proposed-rule-changes">https://www.lch.com/resources/rulebooks/proposed-rule-changes</a>. 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-2022-005 and should
be submitted on or before October 13, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20501 Filed 9-21-22; 8:45 am]
BILLING CODE 8011-01-P
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