Notice2025-05203
Self-Regulatory Organizations; LCH SA; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Cash Spreads and Fees on Securities Collateral
Primary source
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Published
March 27, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 58 (Thursday, March 27, 2025)</title>
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[Federal Register Volume 90, Number 58 (Thursday, March 27, 2025)]
[Notices]
[Pages 13914-13917]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-05203]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102708; File No. SR-LCH SA-2025-002]
Self-Regulatory Organizations; LCH SA; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to Cash
Spreads and Fees on Securities Collateral
March 21, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\
[[Page 13915]]
notice is hereby given that on March 18, 2025, 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 primarily
prepared by LCH SA. LCH SA has designated this proposal for immediate
effectiveness pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule
19b-4(f) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the Proposed Rule Change from interested persons.
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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).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
LCH SA is proposing to amend the fees it charges clearing members
for cash and securities collateral posted as initial margin for its
clearing services including CDSClear (the ``Proposed Rule Change'').
The text of the Proposed Rule Change has been annexed [SIC] as
Exhibit 5 to File No. SR-LCH SA-2025-002.\5\ The implementation of the
Proposed Rule Change is expected on April 1st, 2025 but will be
contingent on LCH SA's receipt of all necessary regulatory approvals.
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\5\ All capitalized terms not defined herein have the same
definition as in the CDS Clearing Rule Book available at <a href="https://www.lch.com/system/files/media_root/CDSClear_Rule_Book_01.02.2024.pdf">https://www.lch.com/system/files/media_root/CDSClear_Rule_Book_01.02.2024.pdf</a>.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, LCH SA included statements
concerning the purpose of and basis for the Proposed Rule Change and
discussed any comments it received on the Proposed Rule Change. The
text of these statements may be examined at the places specified in
Item IV below. LCH SA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
LCH SA currently applies a spread for clearing member cash
collateral and charges fees on securities collateral posted to cover
initial margin requirements for its CDSClear business. Cash collateral
spreads are primarily based on underlying market conditions for a given
currency and are subtracted from a reference index to determine a total
rate to be applied to CDSClear house and client accounts. Securities
collateral fees are primarily based on a combination of factors,
including, but not limited to operational costs to manage a specific
non-cash collateral type, the liquidation profile and subsequent impact
on LCH SA's liquidity coverage ratio of the securities collateral and
commercial considerations such as competitive landscape. The securities
collateral fees charged to clearing members varies based on the
instrument type (e.g., government securities), whether the securities
collateral is posted on behalf of the CDSClear house account or on
behalf of CDSClear clients and the method of posting the collateral
(i.e., full title transfer, pledge or tri-party). The purpose of the
Proposed Rule Change is for LCH SA to amend the cash spreads and
securities collateral fees for margin collateral posted by clearing
members.
i. Cash Collateral Fees
LCH SA currently accepts EUR, GBP and USD cash to satisfy initial
margin requirements for its CDSClear business and applies the following
cash collateral spreads for CDSClear house and client accounts:
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Cash collateral fee/spread (bps)
Unsecured overnight -----------------------------------------------
Currency index CDSClear
All markets clients Default funds
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EUR................................... [euro]STR............... 19.5 6.5 11.5
GBP................................... SONIA................... 33 20
USD................................... FEDFUND................. 28 15
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In order to ensure the continuation of dynamic collateral pricing
and to incentivize an appropriate collateral mix, LCH SA is proposing
to decrease the cash collateral spread for EUR by 2bps from 19.5 to
17.5. An increased proportion of cash collateral on deposit would be
expected to marginally enhance LCH SA's Liquidity Coverage Ratio
(``LCR'') and further enhance its liquidity risk profile by
incentivizing clearing members to increase the amount of cash to
satisfy margin requirements. The additional cash corresponding to the
haircut amount applied to non-cash securities will add to LCH SA's
total liquid resources, which can be used for the settlement of daily
payment obligations, including with respect to the default of the
participant family generating the largest aggregate payment obligation
for LCH SA.
ii. Securities Collateral Fees
In order to ensure the continuation of dynamic collateral pricing
and to incentivize an appropriate collateral mix, LCH SA is also
proposing to amend the fees it charges clearing members for securities
collateral posted as initial margin. LCH SA currently applies the
following fees for securities collateral for CDSClear house and client
accounts:
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House Client
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Securities Full title CDSClear
transfer Pledge Triparty clients
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Government Securities:
Australia................................... 14 NA NA 10
Austria..................................... 12 25 10.5 10
Belgium..................................... 12 25 10.5 10
Canada...................................... 14 NA NA 10
[[Page 13916]]
Denmark..................................... 14 NA NA 10
Finland..................................... 12 25 10.5 10
France...................................... 12 25 10.5 10
Germany..................................... 12 25 10.5 10
Italy....................................... 12 25 10.5 10
Japan....................................... 14 NA NA 10
Netherlands................................. 12 25 10.5 10
Norway...................................... 14 NA NA 10
Portugal.................................... 12 NA 10.5 10
Spain....................................... 12 25 10.5 10
Sweden...................................... 14 NA NA 10
Switzerland................................. 14 NA NA 10
UK.......................................... 12 25 NA 10
USA......................................... 12 25 NA 10
Supranationals:
European Finanical Stability Facility....... 14 25 12.5 10
European Stability Mechanism................ 14 25 12.5 10
European Investment Bank.................... 14 25 12.5 10
European Union.............................. 14 25 12.5 10
Investment Bank for Reconstruction and 14 25 12.5 10
Development................................
Agencies:
Rentenbank.................................. 14 25 12.5 10
Kreditanstalt f[uuml]r Wiederaufbau......... 14 25 12.5 10
CADES....................................... 14 25 NA 10
Equities:
All (as listed in Haircut Schedule)......... 14 NA NA NA
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LCH SA is proposing to decrease the fees charged for USD treasuries
to CDSClear clients only, from 10 to 5bps which will support the
expansion of the client clearing activities in the U.S. and also
promote competition on this market. Indeed, LCH SA currently receives a
small proportion of collateral as USD Treasuries. The proposed fee
charged on USD treasuries has been fixed at a competitive level based
on clearing members feedback and competitive market considerations.
LCH SA is also proposing to increase by 2bps the fees charged on
each securities collateral type (excluding any change to Pledge, CBGs
and other CDSClear clients' spreads).
The previous wording ``Effective from 1st November 2024'' which is
not relevant anymore will be removed.
2. Statutory Basis
LCH SA believes that the Proposed Rule Change is consistent with
the requirements of Section 17A of the Exchange Act \6\ and the
regulations thereunder applicable to LCH SA. Section 17A(b)(3)(D) of
the Act \7\ requires that the rules of a clearing agency provide for
the equitable allocation of reasonable dues, fees and other charges
among its participants.
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\6\ 15 U.S.C. 78a et seq.
\7\ 15 U.S.C. 78q-1(b)(3)(D).
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Considering the current competitive market conditions with the
assessment that there won't be any significant impact on the expected
CDSClear revenues, LCH SA believes the proposed amendments to the fees
applied to cash collateral and securities collateral for the CDSClear
business are reasonable.
In addition, LCH SA believes the Proposed Rule Change is equitable
for all participants as all CDSClear members will continue to have the
choice to post either securities collateral or cash collateral to
satisfy initial margin requirements. Clearing members wishing to post
securities collateral via FTT will continue to face a lower fee than
posting via a pledge arrangement. Likewise, clearing members may
continue to post securities collateral via the tri-party option at a
lower fee rate than FTT or via pledge. LCH SA believes the change in
securities collateral fees are equitable for all clearing members and
enables LCH SA to strengthen its liquidity risk profile.
LCH SA also believes the amendments to the spreads applied to cash
collateral and fees applied to securities collateral for the CDSClear
business are consistent with the requirements set forth in Exchange Act
Rule 17Ad-22(e)(7)(i).\8\ Exchange Act Rule 17Ad-22(e)(7)(i) requires
clearing agencies to, inter alia, establish, implement, maintain and
enforce written policies and procedures reasonably designed to . . .
maintain sufficient liquid resources at the minimum in all relevant
currencies to effect same-day and, where appropriate, intraday and
multiday settlement of payment obligations with a high degree of
confidence under a wide range of foreseeable stress scenarios that
includes, but is not limited to, the default of the participant family
that would generate the largest aggregate payment obligation for the
covered clearing agency in extreme but plausible market conditions.\9\
As mentioned, LCH SA is proposing to increase the fees charged on each
securities collateral type posted as initial margin which may create an
additional incentive for clearing members to post EUR cash collateral
to satisfy initial margin requirements. This will benefit to LCR,
improve the LCH SA's liquidity risk profile and meet the requirements
of Exchange Act Rule 17Ad-22(e)(7)(i).\10\
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\8\ Id.
\9\ Id.
\10\ 17 CFR 240.17Ad-22(e)(7)(i).
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For all these reasons, LCH SA believes the Proposed Rule Change is
consistent with the requirements of Section 17A(b)(3)(D) of the Act
\11\ in that the amendments to the cash spreads and securities fees are
reasonable and equitable among its participants. In addition, LCH SA
believes that the Proposed Rule Change is consistent with the
requirements of Exchange Act
[[Page 13917]]
Rule 17Ad-22(e)(7)(i) \12\ by enhancing LCH SA's liquidity risk
profile.
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\11\ 15 U.S.C. 78q-1(b)(3)(D).
\12\ 17 CFR 240.17Ad-22(e)(7)(i).
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B. Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \13\ 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. LCH SA does not
believe that the Proposed Rule Change would impose any burden on
competition.
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\13\ 15 U.S.C. 78q-1(b)(3)(I).
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The Proposed Rule Change will apply equally to all participants
that will continue to have access to the clearing services with the
option of posting securities collateral as initial margin or instead
post cash collateral. The fee decrease on USD treasuries for CDSClear
clients will promote the competition on US client clearing activity.
Therefore, LCH SA does not believe that the Proposed Rule Change
would impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the Proposed Rule Change have not been
solicited or received. LCH SA will notify the Commission of any written
comments received by LCH SA.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act and paragraph (f) of Rule 19b-4 thereunder. At
any time within 60 days of the filing of the proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#acded9c0c981cfc3c1c1c9c2d8dfecdfc9cf82cbc3da"><span class="__cf_email__" data-cfemail="542621383179373b3939313a2027142731377a333b22">[email protected]</span></a>. Please include
file number SR-LCH SA-2025-002 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-2025-002. 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="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 a.m. and 3
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
<a href="http://www.lch.com/resources/rules-and-regulations/proposed-rule-changes-0">http://www.lch.com/resources/rules-and-regulations/proposed-rule-changes-0</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-2025-002 and
should be submitted on or before April 17, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-05203 Filed 3-26-25; 8:45 am]
BILLING CODE 8011-01-P
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