Notice2024-14066
Self-Regulatory Organizations; LCH SA; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change Relating to the CDS Select Membership Model
Primary source
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Published
June 27, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 124 (Thursday, June 27, 2024)</title>
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[Federal Register Volume 89, Number 124 (Thursday, June 27, 2024)]
[Notices]
[Pages 53685-53686]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-14066]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100394; File No. SR-LCH SA-2024-002]
Self-Regulatory Organizations; LCH SA; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change Relating to the CDS Select Membership Model
June 21, 2024.
I. Introduction
On March 13, 2024, 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 SR-
LCH SA-2024-002 (``Proposed Rule Change'') pursuant to section 19(b) of
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule
19b-4 \2\ thereunder to amend its CDS Clearing Rule Book (the ``Rule
Book'') and CDS Clearing Procedures (``Procedures'') to incorporate new
terms and to make conforming, clarifying and clean-up changes to
implement a new model of CDSClear select membership. The Proposed Rule
Change was published for public comment in the Federal Register on
March 28, 2024.\3\ The Commission has received no comments regarding
the Proposed Rule Change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Exchange Act Release No. 99847 (Mar. 22, 2024), 89 FR 21579
(Mar. 28, 2024) (File No. SR-LCH SA-2024-002) (``Notice'').
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On May 9, 2024, pursuant to section 19(b)(2) of the Exchange
Act,\4\ the Commission designated a longer period within which to
approve, disapprove, or institute proceedings to determine whether to
approve or disapprove the Proposed Rule Change, until June 26, 2024.\5\
The Commission is instituting proceedings, pursuant to section
19(b)(2)(B) of the Exchange Act,\6\ to determine whether to approve or
disapprove the Proposed Rule Change.
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\4\ 15 U.S.C. 78s(b)(2).
\5\ Exchange Act Release No. 100094 (May 9, 2024), 89 FR 42515
(May 15, 2024) (File No. SR-LCH SA-2024-002).
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change
LCH SA is a clearing agency registered with the Commission.\7\
Through its CDSClear business unit, LCH SA provides central
counterparty services for security-based swaps, including credit
default swaps, and options on credit default swaps.\8\ LCH SA provides
these central counterparty services to its Clearing Members. Some of
these Clearing Members provide clearing services for clients.
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\7\ Capitalized terms used but not defined herein have the
meanings specified in the LCH SA Rule Book or Framework as
applicable.
\8\ What We Clear, <a href="https://www.lch.com/services/cdsclear/what-we-clear">https://www.lch.com/services/cdsclear/what-we-clear</a> (last visited Apr. 30, 2024).
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LCH SA has two types of Clearing Members, General Members and
Select Members. General Members may provide client clearing services to
affiliates and non-affiliates, must participate in Competitive Bidding
for auction packages, and must submit prices to LCH SA.\9\ On the other
hand, Select Members may only provide client clearing services to their
affiliates, must participate in competitive bidding only for a subset
of auction packages, and may choose whether to submit prices.\10\
Select Members and General Members must nominate representatives for
the CDS Default Management Committee and CDS Default Management
Group.\11\
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\9\ Notice, 89 FR at 21579.
\10\ Id. at 21579, 81.
\11\ Id. at 21581.
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The Proposed Rule Change would alter LCH SA's select membership. It
would allow Select Members to provide client clearing services to non-
affiliated firms and choose whether to participate in Competitive
Bidding. LCH SA also proposes to allow Select Members to choose whether
to nominate representatives for both the CDS Default Management
Committee and CDS Default Management Group. Although LCH SA proposes
changes related to Select Members' submission of end-of-day prices, as
currently, the Proposed Rule Change would still allow Select Members to
choose whether to submit prices. LCH SA also proposes a new form
through which Select Members may make certain elections.
[[Page 53686]]
III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to section
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule
Change should be approved or disapproved.\12\ Institution of
proceedings is appropriate at this time in view of the legal and policy
issues raised by the Proposed Rule Change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, the Commission seeks and
encourages interested persons to comment on the Proposed Rule Change,
which would provide the Commission with arguments to support the
Commission's analysis as to whether to approve or disapprove the
Proposed Rule Change.
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\12\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to section 19(b)(2)(B) of the Exchange Act,\13\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to, the
Proposed Rule Change's consistency with Section 17A of the Exchange Act
\14\ and the rules thereunder, including the following provisions:
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\13\ Id.
\14\ 15 U.S.C. 78q-1.
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<bullet> Section 17A(b)(3)(F) of the Exchange Act,\15\ which
requires, among other things, that the rules of a clearing agency are
designed to promote the prompt and accurate clearance and settlement of
securities transactions and derivative agreements, contracts, and
transactions; to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible; to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions;
and, in general, to protect investors and the public interest;
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
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<bullet> Rule 17Ad-22(e)(13) under the Exchange Act,\16\ which
requires that a covered clearing agency 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 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.
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\16\ 17 CFR 240.17Ad-22(e)(13).
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<bullet> Rule 17Ad-22(e)(18) under the Exchange Act,\17\ which
requires, in part, that a covered clearing agency 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.
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\17\ 17 CFR 240.17Ad-22(e)(13).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the Proposed Rule Change. In particular, the Commission invites
the written views of interested persons concerning whether the Proposed
Rule Change is consistent with section 17A(b)(3)(F) \18\ and Rules
17Ad-22(e)(13) \19\ and (e)(18) \20\ of the Exchange Act, or any other
provision of the Exchange Act, or the rules and regulations thereunder.
Although there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4(g) under the Exchange Act,\21\ any request for an opportunity to
make an oral presentation.\22\
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\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17Ad-22(e)(13).
\20\ 17 CFR 240.17Ad-22(e)(18).
\21\ 17 CFR 240.19b-4(g).
\22\ Section 19(b)(2) of the Exchange Act grants to the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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The Commission asks that commenters address the sufficiency of LCH
SA's statements in support of the Proposed Rule Change, which are set
forth in the Notice, in addition to any other comments they may wish to
submit about the Proposed Rule Change.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="196b6c757c347a7674747c776d6a596a7c7a377e766f">[email protected]</span></a>. Please include
file number SR-LCH SA-2024-002 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-2024-002. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of such 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>.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-LCH SA-2024-002 and
should be submitted on or before July 18, 2024. Rebuttal comments
should be submitted by August 1, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(31).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14066 Filed 6-26-24; 8:45 am]
BILLING CODE 8011-01-P
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