Notice2025-18136
Self-Regulatory Organizations; LCH SA; Notice of Filing of Proposed Rule Change Relating To Revisions to Its Terms of Reference of the Nomination Committee and Board of Directors
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Published
September 19, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 180 (Friday, September 19, 2025)</title>
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[Federal Register Volume 90, Number 180 (Friday, September 19, 2025)]
[Notices]
[Pages 45288-45292]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18136]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103975; File No. SR-LCH SA-2025-008]
Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change Relating To Revisions to Its Terms of Reference of
the Nomination Committee and Board of Directors
September 16, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4,\2\ notice is hereby given that on
September 2, 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''), as described in Items I, II and III below,
which Items have been prepared primarily by the clearing agency. 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.
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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 Terms of Reference (``ToR'') of
the Nomination Committee and the Board of Directors (the ``Board'')
(together, the ``Proposed Rule Change'').\3\ The text of the Proposed
Rule Change is provided in Exhibits 5.1 and 5.2.\4\ The implementation
of the Proposed Rule Change will be contingent on LCH SA's receipt of
all necessary regulatory approvals.
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\3\ LCH SA, a subsidiary of LCH Group and an indirect subsidiary
of the London Stock Exchange Group plc (``LSEG''), manages its
liquidity risk pursuant to, among other policies and procedures, the
Group Liquidity Risk Policy and the Group Liquidity Plan applicable
to each entity within LCH Group. In addition to its CDSClear
service, LCH SA provides clearing services in connection with cash
equities and derivatives listed for trading on Euronext
(EquityClear), commodity derivatives listed for trading on Euronext
(CommodityClear), and tri-party Repo transactions (RepoClear). LCH
SA also maintains an interoperability link with Euronext Clearing,
formerly Cassa di Compensazione e Garanzia, in Milan, Italy.
\4\ All capitalized terms not defined herein have the same
definition as in the Framework, unless otherwise stated.
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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. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The composition of the LCH SA Board is comprised of twelve
directors; five independent directors (which shall include the
Chairman), the LCH SA CEO, the LCH Group CEO, the London Stock Exchange
Group (``LSEG'') CRO, a director nominated by LSEG, two User Directors
and a Director nominated by Euronext in accordance with the provisions
of the Derivatives Clearing Agreement. The term ``User Director''
currently means a director who is nominated by a shareholder of LCH
Group Holdings Limited (``LCH Group'') which is a User or who is
otherwise connected to such User shareholder by virtue of employment or
directorship.
[[Page 45289]]
The Euronext Director is a director that has been nominated by
Euronext.
Pursuant to Exchange Act Rule 17ad-25(b)(1), a majority of the
members of LCH SA's board of directors must be independent, unless a
majority of the voting interests . . . are directly or indirectly held
by participants[.] \5\ The Nomination Committee of LCH SA evaluates
whether a potential candidate of its Board of Directors is independent,
by, among other things, determining whether there are relationships or
circumstances which potentially affect such candidate's judgment \6\ or
preclude the candidate from meeting independence criteria in accordance
with applicable regulatory requirements and internal policies and
procedures.\7\ This includes, among other things, whether a candidate
has or had a material relationship that exists or existed previously
and that LCH SA reasonably determines could affect the independent
judgment or decision-making of the candidate, whether there is a
pattern of behavior that demonstrates an ability to make sound,
objective and independent decisions and judgments and if the candidate
can affectively assess and challenge proposed decisions of other
members of the Board of Directors.\8\ LCH SA reviews the aforementioned
criteria, including by which a candidate meets the independence
requirements, in its appointment process for candidates of its Board of
Directors.\9\
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\5\ 17 CFR 240.17ad-25(b)(1).
\6\ See renumbered Section 6.3 of LCH SA's Nomination Committee
ToR.
\7\ Exchange Act Rule 17ad-25(f) sets forth specific
circumstances that preclude directors from being independent
directors, subject to a one-year lookback period. LCH SA maintains
internal Suitability Guidelines that incorporate these regulatory
requirements and other objective criteria, and together with LCH
SA's Nomination Committee ToR, serve as LCH SA's comprehensive
process for assessing director independence.
\8\ The LCH SA Nomination Committee documents its evaluation of
candidates against a set of fitness standards that incorporate the
process stated in Exchange Act Rule 17ad-25(c)(4).
\9\ LCH SA requires that Independent Directors and User
Directors meet the requirements set forth herein, including the
independence criteria.
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Since LSEG's acquisition of a 54% ownership in LCH Group in May
2013, there have been subsequent transactions whereby LSEG acquired
shares from LCH Group minority shareholders. Consequently, the number
of banking institutions on the LCH Group share register who are
eligible to nominate persons to be considered for appointment as User
Directors \10\ has been reduced. At the end of the first quarter in
2024, eleven financial institutions, not including LSEG, remain on the
LCH Group share register. To date, ten of the remaining financial
institutions are banking institutions. By the end of 2024 only six User
Director seats remained across both LCH Limited and LCH SA. Of the ten
remaining banking institutions on the LCH Group share register, five
have not previously indicated a desire to nominate a User Director.
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\10\ A User Director is defined in LCH SA's Board of Directors
ToR as a director who is nominated by a User or who is otherwise
connected to such User by virtue of their employment or
directorship. A User is defined as an Eligible Institution, other
than Exchanges. An Eligible Institution is defined in the LCH Group
Articles of Association and means inter-dealer brokers, clearing
members, financial institutions or investors which are buy-side,
indirect users, including asset managers, Exchanges and any other
category of market participant with a legitimate community of
interest with the business of the LCH Group, as determined by the
Board from time to time.
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To maintain an appropriate number and selection of institutions
that meet the criteria set out for User Director nominations and to
ensure the majority of its Board of Directors is and continues to be
independent, LCH SA is proposing to remove any requirements concerning
a User Director being nominated by an institution that is a shareholder
of LCH Group.\11\ To effect this change, LCH SA is proposing amendments
to the Nomination Committee ToR and the Board ToR.
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\11\ As per the current Nomination Committee ToR, one factor the
Nomination Committee is asked to consider in selecting a new member
of the Board is the size of its shareholding in LCH Group.
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In addition to the changes proposed in relation to User Director
representation, following the recent termination of the Derivatives
Clearing Agreement between LCH SA and Euronext, LCH SA is also
proposing changes to the Nomination Committee and Board ToRs to remove
references to the Euronext Director. To maintain the Board's current
composition of twelve directors, following the removal of the Euronext
Director, LCH SA is proposing to increase the number of User Directors
from two to three.
In addition, the LCH Group CEO (who is appointed by LSEG) has
stepped down as a director of the Company. To maintain the Board's
current composition of twelve directors, LCH SA is proposing that an
alternative senior LSEG executive be appointed to the Board in their
place. LCH SA therefore proposes to simplify the language relating to
the three LSEG nominated directors.
Board ToRs
1. Article 2. Definitions
LCH SA is proposing to make two amendments to its Board ToRs
definitions. LCH SA is clarifying the pronouns of the CEO, as the
current pronouns do not reflect that the CEO may be male or female. The
definition of ``User Director'' is also being amended to state that
User Directors are nominated by a User or are otherwise connected to a
User by virtue of their employment or relationship. As currently
defined, a ``User'' means an Eligible Institution, which includes
inter-dealer brokers, clearing members and any other category of market
participants with a legitimate community of interest (e.g., based on
the number of contracts cleared) with the business of the LCH Group, as
determined by the LCH SA Board from time to time. The Board will
continue to select User Directors based on the current evaluation
criteria, which includes (i) the volumes cleared; (ii) other engagement
with LCH (e.g., new product development, assistance with lobbying); and
(iii) how recently such prospective User Director has held a seat on
one of LCH's Boards (i.e., either one of LCH Ltd. or LCH SA, if
applicable).
2. Article 3. Composition of the Board
Following the termination of the contractual relationship between
LCH SA and Euronext, LCH SA is proposing to remove reference to a
Director proposed by Euronext. The composition of the Board will
therefore no longer comprise a representative proposed by Euronext
given the termination of the contractual relationship. To further
effect this change, LCH SA is proposing to remove the paragraph
clarifying that Euronext is contractually entitled to propose a
Director to the Board, so long as the Cash Clearing Agreement or the
Derivatives Clearing Agreement are in force. These agreements are no
longer in force and Euronext will no longer have representation on the
LCH SA Board.
3. Article 12. Powers of the Board and Article 14. Conflicts of
Interest
Similar to the clarifying changes proposed with respect to the
pronouns of the CEO, LCH SA is proposing to clarify that the Chair of
the Board may be either male or female, as it pertains to the authority
of the Board Chair to decide whether certain matters referred to him or
her by the Secretary of the Board are matters that should indeed be
considered by the Board. LCH SA proposes to revise Article 14.18 to
also reflect the correct pronouns. Specifically, LCH SA proposes to
clarify the pronouns in paragraph (a) to state that a Conflicted
Shareholder, as that term is defined in the ToR, may be male or female.
[[Page 45290]]
4. Article 16. Audit Committee
LCH SA is proposing to remove the paragraph stating that a director
of Euronext will be part of the Audit Committee in accordance with
Derivatives Clearing Agreement. This agreement is no longer in effect
following the termination of the contractual relationship between
Euronext and LCH SA.\12\
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\12\ Per the current Audit Committee ToR, Euronext will no
longer be entitled to have a representative at the LCH SA Audit
Committee, as the Derivatives Clearing Agreement is no longer in
force. See <a href="https://www.lseg.com/content/dam/post-trade/en_us/documents/lch/structure-and-governance/lch-sa-auditco-clean.pdf">https://www.lseg.com/content/dam/post-trade/en_us/documents/lch/structure-and-governance/lch-sa-auditco-clean.pdf</a>.
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Nomination Committee ToRs
1. Article 2. Purpose
LCH SA is proposing changes to the composition of the Board to now
include up to three User Directors. In addition, LCH SA is removing
reference to a Euronext director, as the Board will no longer have a
representative director from Euronext (or any of its affiliates),
following the termination of its contractual relationship with LCH SA.
LCH SA is also proposing to clarify in Article 2.1.2 that the
independent Chairman of the Board can count as one of the two
independent directors who shall not serve as an independent director on
the Board of LCH Limited, as is the current practice. Article 2.2 will
also be amended to clarify that the recommendations made by the
Nomination Committee will take into account the criteria set out in the
Nomination Committee ToR and be subject to regulatory requirements or
as agreed by a majority of the directors of the Board, subject to LSEG
consent. LCH SA is specifying the current practice that consent must
come from LSEG (not including LCH Group) for any changes to the
composition of the LCH SA Board.
LCH SA is proposing to amend Article 2.1.4 to show that LSEG can
nominate three directors to the LCH SA Board, such appointments being
subject to the Nomination Committee's processes. Because of the change
to Article 2.1.4, LCH SA proposes to amend Article 2.3 to remove
reference to the LCH Group CEO and LSEG CRO as being members of the
Board.
2. Article 3. LSEG Directors
Article 3 is being updated to reflect that LSEG can nominate three
directors. The Committee will recommend the appointment of directors
nominated by LSEG to the Board.
3. Article 4. Euronext Director
Following the termination of the contractual relationship between
Euronext and LCH SA, Article 4 is being removed in its entirety, as it
is no longer applicable. In making this change, LCH SA proposes to
renumber the remaining Nomination Committee articles. Removal of
Article 4 requires LCH SA to renumber the proceeding articles
accordingly.
4. Article 7. Tenure
Article 7 .1 (formerly Article 8.1) is being updated to reflect the
LSEG Directors are not subject to a maximum tenure.
5. Article 8. Membership of the Nomination Committee
Article 8.1 (formerly Article 9.1) is being updated to reflect that
one of the LSEG Directors will be a member of the Nomination Committee.
6. Appendix--Mechanism for Appointment of User Directors to the Board
LCH SA is proposing to clarify that ``Eligible Users'', as that
term is defined in the Nomination Committee ToR Appendix, shall
comprise any User that is not connected with an existing director and
has not served notice terminating its clearing relationship with any
member of the LCH Group. Previously, Eligible Users comprised User
Shareholders, however this term no longer applies, as User Directors
are no longer required to be nominated by shareholders of LCH Group.
Article 2(b) will also be amended to remove reference to User
Shareholders and instead state that the Nomination Committee will
recommend a replacement for any User Director that retires or is
removed as a result of the User which nominated then ceasing to be an
Eligible Institutions. This amendment simplifies the criteria for
replacement of a User Director and also eliminates reference to User
Directors being removed following any User Shareholder that nominated
such User Director, no longer meeting the eligibility requirements.
LCH SA is also proposing to remove reference to User Shareholders
in Article 2(c) and 2(d) and instead simplify to Users only. Thus, the
Nomination Committee will recommend a replacement for any User Director
who retires or is removed as a result of their ceasing to be employed
by, or for any other reason upon request by, the User which nominated
them or retires or is removed following a change of role within the
User, if such role change would result in the User Director concerned
no longer being able to maintain the relevant skill and expertise. This
change conforms with the other changes related to User Directors no
longer needing to be shareholders of LCH Group.
Following the removal of the requirement for a User Director to be
nominated by a shareholder of LCH Group, Article 3(a)(iii) is being
removed, as it references the User's specific size of shareholding in
LCH Group as a factor in the decision-making process. All other factors
will remain in effect for purposes of determining eligibility of
potential User Directors.
2. Statutory Basis
LCH SA has determined that the Proposed Rule Change is consistent
with the requirements of Section 17A of the Act \13\ and regulations
thereunder applicable to it. Section 17A(b)(3)(C) of the Act provides
that the rules of a clearing agency must assure fair representation of
its members and participants in the selection of its directors and
administration of its affairs.\14\
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\13\ 15 U.S.C. 78q-1.
\14\ 15 U.S.C. 78q-1(b)(3)(C).
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The Proposed Rule Change will not lead to any material change in
the proportion of independent directors or the number of directors
representing members and participants.\15\ In accordance with its
Statutes, the Board can be comprised of a minimum of three and a
maximum of eighteen Directors. The current composition of the Board
allows for twelve directors, five of which are independent directors
(including the Chairman). Following the termination of the contractual
relationship between LCH SA and Euronext, LCH SA will no longer have a
director proposed by Euronext on the LCH SA Board. To ensure the Board
continues to represent the interests of its members and participants,
and to maintain an overall Board composition of twelve directors, LCH
SA is proposing to increase the maximum number of User Directors from
two to three, this will maintain the overall Board composition of
twelve directors. LCH SA also proposes to remove the requirement that
User Directors hold shares in LSEG and instead be based on the other
factors established in the Nomination Committee ToR (e.g., number of
contracts cleared). LCH SA therefore believes the Proposed Rule Change
continues to assure fair representation of its members and
[[Page 45291]]
participants in the selection of its directors and the administration
of its affairs as provided in section 17A(b)(3)(C) of the Act.\16\
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\15\ The increase of User Directors from will result in a
decrease in the percentage of independent directors from 45.45% to
41.66%.
\16\ 15 U.S.C. 78q-1(b)(3)(C).
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In addition, Commission Rule 17ad-22(e)(2) requires each registered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to provide for governance
arrangements that: (i) are clear and transparent; (ii) clearly
prioritize the safety and efficiency of LCH SA; (iii) support the
public interest requirements in Section 17A of the Act applicable to
LCH SA, and the objectives of owners and participants; (iv) establish
that the Board and senior management have appropriate experience and
skills to discharge their duties and responsibilities; (v) specify
clear and direct lines of responsibility; and (vi) consider the
interests of participants' customers . . . and other relevant
stakeholders of the covered clearing agency.\17\
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\17\ 17 CFR 240.17ad-22(e)(2).
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The Proposed Rule Change is being adopted to ensure LCH SA
continues to support the public interest requirements for clearing
agencies and the objectives of owners and participants. LCH SA benefits
from having representation from its User Directors, as such Board
members contribute valuable insight regarding the operations of the
clearing agency and the impact of any changes to its rules, policies
and procedures. The appointment of an additional User Director will
help ensure there is a diverse range of insights. LCH SA defines a User
Director as a director who is nominated by a User or who is otherwise
connected to such User by virtue of their employment or directorship.
Users comprise Eligible Institutions, which include inter-dealer
brokers, clearing members and market participants that have a
legitimate community of interest with the business of LCH Group, as
determined by the Board. User Directors therefore have the requisite
experience and skills to carry out their responsibilities on behalf of
LCH SA and its participants. Therefore, LCH SA believes the Proposed
Rule Change is consistent with Exchange Act rule 17ad-22(e)(2).\18\
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\18\ Id.
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Finally, Commission Rule 17ad-25(b)(1) \19\ requires a majority of
the members of the board of directors of a registered clearing agency
[to] be independent directors, unless a majority of the voting
interests issued as of the immediately prior record date are directly
or indirectly held by participants[.] Exchange Act Rule 17ad-25(f) \20\
further enumerates a set of circumstances that preclude a director from
being an independent director, subject to a lookback period of one
year.
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\19\ 17 CFR 240.17ad-25(b)(1).
\20\ 17 CFR 240.17ad-25(f).
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LCH SA is proposing to increase the number of User Directors to its
Board of Directors and amend the definition of a User Director to
ensure the majority of its Board of Directors is and continues to be
independent by removing any requirements concerning a User Director
being nominated by an institution that is a shareholder of LCH Group.
As discussed herein, the Nomination Committee of LCH SA reviews
specific criteria when considering candidates for the Board of
Directors, including whether the candidate satisfies independence
requirements in accordance with regulatory requirements and through LCH
SA's appointment process for candidates of its Board of Directors. The
Board of Directors of LCH SA currently has five Independent Directors
and two User Directors. LCH SA believes increasing the number of
directors to include an additional User Director (i.e., from two to
three) and removing the requirement that such User Directors be
shareholders of LCH SA will expand the eligible pool of candidates and
ensure LCH SA continues to maintain a majority of independent directors
in accordance with Exchange Act Rule 17ad-22(b)(1).\21\
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\21\ 17 CFR 240.17ad-25(b)(1).
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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.\22\ LCH SA does
not believe the Proposed Rule Change would have any impact, or impose
any burden, on competition. The Proposed Rule Change does not address
any competitive issue or have any impact on the competition among
central counterparties. LCH SA operates an open access model, and the
Proposed Rule Change will have no effect on this model.
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\22\ 15 U.S.C. 78q-1(b)(3)(I).
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C. Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the Proposed Rule Change have not been
solicited or received. LCH SA will notify the Commission of any written
comments received by LCH SA.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#146661787139777b7979717a6067546771773a737b62"><span class="__cf_email__" data-cfemail="2c5e594049014f4341414942585f6c5f494f024b435a">[email protected]</span></a>. Please include
file number SR-LCH SA-2025-008 on the subject line.
Paper Comments
Send paper comments in triplicate to Vanessa Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.
All submissions should refer to file number SR-LCH SA-2025-008. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing 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 materials that is obscene or subject to copyright protection.
All submissions should refer to file number SR-LCH SA-2025-008 and
should be submitted on or before October 10, 2025.
[[Page 45292]]
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)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-18136 Filed 9-18-25; 8:45 am]
BILLING CODE 8011-01-P
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