Notice2026-08109
Self-Regulatory Organizations; LCH SA; Notice of Filing of Proposed Rule Change Relating to the Extension of Eligible Collateral to U.S. Treasury
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Published
April 27, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 80 (Monday, April 27, 2026)</title>
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[Federal Register Volume 91, Number 80 (Monday, April 27, 2026)]
[Notices]
[Pages 22566-22569]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08109]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105287; File No. SR-LCH SA-2026-003]
Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change Relating to the Extension of Eligible Collateral
to U.S. Treasury
April 22, 2026.
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 April
14, 2026, 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, as
described in Items I, II and III below, which Items have been prepared
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 extend the list of eligible collateral
CDSClear Clearing Members \3\ may post to satisfy margin requirements
to include U.S. Treasury Notes (``Notes''), Bonds, Floating Rate Notes
(``FRNs'') and Treasury Inflation
[[Page 22567]]
Protected Securities (``TIPS'') (the ``Proposed Rule Change'').\4\
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\3\ LCH SA will also expand eligibility to members of its
RepoClear and DigitalAssetClear Clearing Services.
\4\ All capitalized terms not defined herein have the same
meaning as in the Rule Book or Procedures, as applicable, in their
version as available on LCH SA's website: <a href="https://www.lch.com/resources/rulebooks/lch-sa">https://www.lch.com/resources/rulebooks/lch-sa</a>.
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The text of the Proposed Rule Change has been annexed as Exhibit 5
to File No. SR-LCH SA-2026-003.
The implementation of the Proposed Rule Change will be contingent
on LCH SA's receipt of all necessary regulatory approvals.
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 Risk Policies and discussed
any comments it received on the Risk Policies. 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
LCH SA is proposing to extend the list of eligible collateral
CDSClear Clearing Members may post as margin to include Notes, Bonds,
FRNs and TIPS. LCH SA is proposing to expand eligibility to further
support the expansion of its CDSClear business, including by addressing
Clearing Member collateral management needs. In addition to U.S.
Treasury Bills (``T-bills''), Notes, Bonds, FRNs and TIPS are backed by
the full faith and credit of the United States government and already
accepted as eligible collateral by LCH SA's sister clearing house, LCH
Limited, part of the LCH group of companies within the London Stock
Exchange Group (``LSEG''). LCH SA already accepts T-bills as eligible
margin collateral and is now proposing to extend the list of eligible
U.S. Treasury securities for CDSClear Clearing Members to satisfy
margin requirements. Extending the list of eligible U.S. Treasury
securities aligns with Clearing Member feedback to expand the
collateral pool of high-quality liquid assets and further supports the
expansion of the CDSClear business in the United States.\5\
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\5\ The Margin Eligible Securities Collateral and Haircut
Schedule contains information on all acceptable margin collateral
and is available at <a href="https://www.lseg.com/content/dam/post-trade/en_us/documents/lch/collateral-management/lch-sa/acceptable-collateral-haircuts-lch-sa.pdf">https://www.lseg.com/content/dam/post-trade/en_us/documents/lch/collateral-management/lch-sa/acceptable-collateral-haircuts-lch-sa.pdf</a>.
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LCH SA accepts as non-cash collateral only highly liquid securities
with low credit and market risk and establishes haircuts and
concentration limits to manage collateral liquidation in the event of a
Clearing Member default.\6\ To complement its current pool of non-cash
securities eligible as margin collateral, LCH SA is proposing to allow
CDSClear Clearing Members to post Notes, Bonds, FRNs and TIPS with a
minimum remaining time to maturity of three days and a maximum
remaining time to maturity of 30 years. In addition, LCH SA is
proposing to amend its concentration limit applicable at the
International Securities Identification Number (``ISIN'') level for all
eligible issuers with an Internal Credit Score (``ICS'') equal to
between 1 and 4. LCH SA is also proposing amending the limit from 25%
to 20% of the ISIN's outstanding amount as updated in the collateral
risk framework section 5.8.4. LCH SA is proposing to amend the
concentration limit to address a model validation recommendation from
LCH SA's independent model validation team.
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\6\ General information regarding eligible non-cash securities
collateral can be found here: <a href="https://www.lseg.com/en/post-trade/clearing/collateral-management/sa-collateral-management/sa-acceptable-collateral/sa-acceptable-securities">https://www.lseg.com/en/post-trade/clearing/collateral-management/sa-collateral-management/sa-acceptable-collateral/sa-acceptable-securities</a>.
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(1) Eligibility Criteria
LCH SA is proposing to require that to be eligible, such Notes,
Bonds, FRNs and TIPS have at least a minimum amount outstanding of
$500mn per issuance. Separately, LCH SA is proposing to establish a
concentration limit by asset type, specifically for TIPS of $2bn at the
individual Clearing Member level and at the Clearing Member Group
level. LCH SA performed a liquidation analysis of Notes, Bonds, FRNs
and TIPS using a hypothetical non-cash securities portfolio and found
it appropriate to cap the total amount of TIPS eligible to be pledged
for each Clearing Member and each Clearing Member Group. In case of
default, LCH SA utilizes a number of counterparties to liquidate the
non-cash securities collateral in order to manage the risk of the
defaulting member. Note that when selling the securities, even if the
underlying is not a [euro] denominated bond, LCH requests a quote in
[euro] by its counterparties and therefore LCH will directly receive
[euro] cash. To test its default management capacity, the CCP performed
a simulation of non-cash collateral liquidation for a conservatively
defined hypothetical portfolios. The exercise demonstrated that the
proposed concentration limit for TIPS per individual Clearing Member
and per Clearing Member Group was appropriate as indicated by the fact
that the liquidation cost inferred from bids received from the
counterparties involved in the exercise were lower than the haircut
amount established by the CCP.
In addition, to enhance LCH SA's risk framework, LCH SA is
incorporating the possibility of applying a relative concentration
limit as a percentage of the margin requirement at a Clearing Member
level and applicable to the full set of U.S. securities. As would be
described in the collateral risk framework, in new section 5.8.8, at go
live this limit will be set to 100%--which means it is not intended to
be binding because Clearing Members could meet 100% of their collateral
requirement using the full set of U.S. securities--but such limit may
be utilized by LCH SA to reduce its exposure to U.S. securities if
liquidity or other risk considerations require LCH SA to do so. LCH SA
maintains internal liquidity monitoring and escalation arrangements
designed to support timely management of liquidity risks. In the event
that LCH SA identifies an actual or potential liquidity shortfall, LCH
SA may, consistent with its Rule Book and applicable procedures,
consider a range of liquidity management actions under appropriate
senior management oversight. The Collateral Risk Framework is being
revised to clarify that the process pursuant to which LCH may determine
to apply a limit other than 100% is set forth in the dedicated SLR
Procedure relating to liquidity monitoring.
Among the tools that may be considered (as permitted under the
relevant Rule Book \7\ and Procedures) is the ability to modify
collateral concentration limits following notification to impacted
Clearing Members and, where applicable, publication of a notice.
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\7\ Instruction IV.4.1 Art 8 for Repoclear SA, Instruction
IV.4.1 Art 8 for DigitalAssetClear, CDS Clearing Procedure 3 section
3.9 for CDSClear + notice published on website.
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To further mitigate concentration risk, LCH SA is proposing to
establish a per issue (i.e., per ISIN) concentration limit of 20% at
the individual Clearing Member and Clearing Member Group level.
Further, LCH SA intends to allow both floating rate notes (i.e.,
FRNs) and fixed rates (i.e., other U.S. Treasuries). LCH SA will
continue to exclude from eligibility zero coupon instruments (with the
exception of T-bills),
[[Page 22568]]
``stripped'' bonds or perpetual bonds.\8\ For further clarity \9\, any
securities subject to specific corporate events (e.g., sinkable,
puttable and callable) will also remain ineligible. These eligibility
restrictions are not new and do not introduce new conditions as part of
this Proposed Rule Change; they reflect existing eligibility
limitations already set out in the Margin Eligible Securities
Collateral and Haircut Schedule made available to Clearing Members.
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\8\ For example, Separate Trading of Registered Interest and
Principal of Securities provide investors with the option to hold
and trade the individual interest and principal components of
eligible Notes, Bonds and TIPS separately.
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(2) Proposed Haircuts
LCH SA will amend the Margin Eligible Securities Collateral and
Haircut Schedule (the ``Haircut Schedule'') as part of the Proposed
Rule Change. Specifically, LCH SA will add United States Treasury
Notes/Bonds, United States Treasury Floating Rate Notes and United
States Treasury Inflation Protected Securities to the list of eligible
securities and apply the following haircuts by maturity bucket for the
new collateral security types:
<bullet> 3 business days and < = 0,5 year [verbar] 0.50% [verbar] 0.75%
<bullet> > 0.5 and < = 1 year [verbar] 0.75% [verbar] 1.25%
<bullet> > 1 and < = 3 years [verbar] 1.50% [verbar] 2.50%
<bullet> > 3 and < = 5 years [verbar] 2.50% [verbar] 4.00%
<bullet> > 5 and < = 7 years [verbar] 3.50% [verbar] 4.75%
<bullet> > 7 and < = 10 years [verbar] 5.00% [verbar] 6.25%
<bullet> > 10 and < = 15 years [verbar] 7.50% [verbar] 9.25%
<bullet> > 15 and < = 30 years [verbar] 16.25% [verbar] 16.25%
For clarification, LCH SA has already established haircuts for each
maturity bucket for Notes, Bonds and FRNs because the current haircut
methodology in force leverages the U.S. zero coupon curve to define
haircut levels for each specified maturity, including that for U.S. T-
bills, which are currently eligible as margin collateral. With the
inclusion of TIPS as an acceptable collateral type, LCH SA is proposing
separate haircuts per maturity bucket, as they would be calibrated on
the basis of a dedicated real interest rate curve. Therefore, the
proposed haircuts for ``Inflation Protected Securities'' will be
applied as represented in the second percentage column of the list
above.
(3) Revisions to List of Acceptable Securities Collateral and Haircut
Schedule
As part of the Proposed Rule Change, LCH SA is proposing to amend
its website listing eligible collateral concentration limits. As
previously noted, LCH SA is proposing a concentration limit of $2bn for
TIPS at the individual Clearing Member and Clearing Member Group
levels. The website will therefore be amended to incorporate the $2bn
concentration limit at Clearing Member level and separately at a group
level across all Clearing Members.
In addition, as updated in the Collateral Risk Framework section
5.8.4, LCH SA is proposing to amend its concentration limit applicable
at the ISIN level for all eligible issuers with an ICS at or between 1
and 4. LCH SA will also set the limit at 20% instead of 25% of the
ISIN's outstanding amount. The amendment of the concentration limit is
being proposed to address a model validation action raised by the
independent model validation team. In addition, LCH SA will update the
concentration limit of Spain from 10% to 20% to align with its updated
ICS and the concentration limit of International Bank for
Reconstruction and Development Bonds (``IBRDs'') from 10% to 15% as
described in the Collateral Risk Framework section 5.8.7.\10\ Finally,
the text describing the application of the 15% of margin requirement
concentration limit applicable to non-euro non-cash collateral is being
revised to correct a typographical error and to clarify that the non-
euro securities covered by this limit consist of government securities
issued by Norway, Sweden, Denmark, Switzerland, Canada, Australia, and
Japan.
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\10\ See Self-Regulatory Organizations; LCH SA; Notice of Filing
of Proposed Rule Change Relating to Collateral Concentration Limits,
Exchange Act Release No. 102905 (Apr. 22, 2025), 90 FR 17662 (Apr.
28, 2025).
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Please note that LCH provides to its members the Outstanding Amount
limit for each issuer in the Knowledge Center.
2. Statutory Basis
LCH SA believes that the Proposed Rule Change is consistent with
the requirements of Section 17A of the Exchange Act \11\ and the
regulations thereunder, including the clearing agency standards under
Exchange Act Rule 17ad-22.\12\ Section 17A(b)(3)(F) of the Exchange Act
\13\ requires, among other things, that rules of the clearing agency
are designed to promote the prompt and accurate clearance and
settlement of securities 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, and to protect
investors and the public interest.
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\11\ 15 U.S.C. 78q-1.
\12\ 17 CFR 240.17ad-22.
\13\ 15 U.S.C. 78q-1(b)(3)(F).
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LCH SA is proposing to extend the list of eligible collateral to
include Notes, Bonds, FRNs and TIPS as described, primarily to expand
eligibility to further support the expansion of its CDSClear business
and thus supporting Clearing Member collateral management needs. The
expansion of the list of additional U.S. government securities will
provide CDSClear Clearing Members with more optionality regarding the
types of non-cash collateral Members may post to satisfy margin
requirements, thus facilitating the prompt and accurate clearance and
settlement of CDSClear products cleared by LCH SA. In addition, LCH SA
already accepts T-bills as eligible collateral and is now proposing to
expand eligibility to include U.S. government securities with longer-
dated maturities Treasury Notes and Treasury Bonds, or those with
floating rates or with principal amounts periodically adjusted based on
changes in the U.S. Consumer Price Index (inflation). Similar to T-
bills, LCH SA will utilize its existing set of counterparties to
safeguard the additional securities in its custody and to liquidate,
should it need to raise liquidity to manage a clearing member default.
Finally, Notes, Bonds, FRNs and TIPS are backed by the full faith and
credit of the United States government and may be utilized to raise
liquidity in the event of a clearing member default. LCH SA therefore
believes the Proposed Rule Change is consistent with Section
17A(b)(3)(F) of the Exchange Act.\14\
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\14\ 15 U.S.C. 78q-1(b)(3)(F).
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LCH SA also believes that the Proposed Rule Change is consistent
with the requirements of Exchange Act Rule 17Ad-22(e)(5) \15\. Rule
17Ad-22(e)(5) provides, inter alia, that a covered clearing agency
limit the assets it accepts as collateral to those with low credit,
liquidity, and market risks, and set and enforce appropriately
conservative haircuts and concentration limits if the covered clearing
agency requires collateral to manage its or its participants' credit
exposure; and require a review of the sufficiency of its collateral
haircuts and concentration limits to be performed not less than
annually.\16\ LCH SA currently limits the non-cash collateral it
accepts to satisfy margin requirements to government, supranational and
agency securities with low credit, liquidity and market risks. The
Proposed Rule Change will expand eligibility to additional U.S.
[[Page 22569]]
government securities that also have low credit, liquidity and market
risks. Likewise, LCH SA is proposing conservative haircuts aligned with
the current Haircut Schedule for U.S. government securities. As part of
the Proposed Rule Change, LCH SA will apply higher haircuts for TIPS to
align with the liquidity profile of such securities and will establish
a fixed dollar concentration at the individual Clearing Member and
Clearing Member Group level. LCH SA will also review the established
haircuts and concentration limits \17\ of the additional U.S.
government securities in its assessment of its non-cash collateral
haircuts on an ongoing basis. Therefore, LCH SA believes that the
Proposed Rule Change is consistent with Rule 17Ad-22(e)(5) \18\.
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\15\ 17 CFR 240.17Ad-22(e)(5).
\16\ Id.
\17\ LCH SA reviews the sufficiency of its collateral haircuts
monthly in accordance with its Collateral Risk Policy and Exchange
Act rule 17Ad-22(e)(5). Collateral haircuts are subject to daily
stress testing and any exceptions are escalated to LCH SA's ERCo.
Changes to collateral haircuts require ERCo approval and material
changes to haircuts are notified to the LCH SA RiskCo.
\18\ Id.
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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.\19\ LCH SA does
not believe that the Proposed Rule Change would impose burdens on
competition that are not necessary or appropriate in furtherance of the
purposes of the Act. The Proposed Rule Change would extend the list of
eligible collateral CDSClear Clearing Members may post as margin to
include Notes, Bonds, FRNs and TIPS. LCH SA is proposing to expand
eligibility to further support the expansion of its CDSClear business,
including by addressing Clearing Member collateral management needs. By
extending the list of eligible collateral to include additional U.S.
government securities to support CDSClear Clearing Member collateral
management needs, LCH SA does not believe that the Proposed Rule Change
would impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
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\19\ 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 were not and are not intended to be solicited with
respect to the Proposed Rule Change and none have been received by LCH
SA.
III. Date of Effectiveness of the Proposed Rule Change
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-regulations/self-regulatory-organization-rulemaking">https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking</a>);
or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0e7c7b626b236d6163636b607a7d4e7d6b6d20696178"><span class="__cf_email__" data-cfemail="e391968f86ce808c8e8e868d9790a3908680cd848c95">[email protected]</span></a>. Please include
file number SR-LCH SA-2026-003 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-2026-003. 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-regulations/self-regulatory-organization-rulemaking">http://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking</a>). Copies of such
filing will 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-2026-003 and
should be submitted on or before May 18, 2026.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Sherry R. Haywood,
Asistant Secretary.
[FR Doc. 2026-08109 Filed 4-24-26; 8:45 am]
BILLING CODE 8011-01-P
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