Notice2026-19873
Self-Regulatory Organizations; LCH SA; Order Approving Proposed Rule Change Relating to the LCH SA CaLM Minimum Cash Collateral Requirement and to LCH Liquidity Risk Policy
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 29, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 187 (Tuesday, September 29, 2026)</title>
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[Federal Register Volume 91, Number 187 (Tuesday, September 29, 2026)]
[Notices]
[Pages 61482-61487]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19873]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106485; File No. SR-LCH SA-2026-007]
Self-Regulatory Organizations; LCH SA; Order Approving Proposed
Rule Change Relating to the LCH SA CaLM Minimum Cash Collateral
Requirement and to LCH Liquidity Risk Policy
September 24, 2026.
I. Introduction
On July 31, 2026, Banque Centrale de Compensation, which conducts
business under the name LCH SA (``LCH SA''), filed with the Securities
and Exchange Commission (the ``Commission''), pursuant to Section
19(b)(1) of the Securities Exchange Act
[[Page 61483]]
of 1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to amend its: (i) CDS Clearing Rule Book (the ``Rule Book''),
(ii) CDS Clearing Procedures (the ``Procedures'') (collectively the
``CDS Clearing Rules''), and (iii) LCH Liquidity Risk Policy (the
``Policy''). The proposed rule change was published for comment in the
Federal Register on August 13, 2026.\3\ The Commission did not receive
comments regarding the proposed rule change. For the reasons discussed
below, the Commission is approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change Relating to the LCH SA CaLM Minimum Cash
Requirement and to LCH Liquidity Risk Policy, Securities Exchange
Act Release No. 106069 (Aug. 10, 2026), 91 FR 52357 (Aug. 13, 2026)
(File No. SR-LCH SA-2026-007) (``Notice'').
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II. Description of the Proposed Rule Change
a. Background
LCH SA is a clearing agency registered with the Commission.\4\
Through its CDSClear business unit, LCH SA provides central
counterparty (``CCP'') services for security-based swaps, including
credit default swaps (``CDS'') and options on CDS. LCH SA is an
affiliate of LCH, Ltd, through common ownership by LCH Group Holdings
Limited. LCH SA's ultimate parent company is London Stock Exchange
Group.
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\4\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in the Rule Book, Procedures, or Policy,
as applicable.
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As a CCP, LCH SA is exposed to certain risks, including the risk
that a Clearing Member may default on its obligations. In that
situation, as a CCP, LCH SA is required to perform the defaulting
Clearing Member's obligations under its CDS. To mitigate the risks
arising from a Clearing Member defaulting on its obligations, LCH SA
determines, and collects from Clearing Members, margin for clearing
each transaction. Clearing Members satisfy their margin requirements by
providing LCH SA collateral, which can take the form of cash in certain
currencies and certain non-cash securities.
The purpose of the proposed rule change is to require Clearing
Members to meet a minimum percentage of their margin requirements with
cash. Specifically. LCH SA is proposing to require Clearing Members to
maintain a minimum amount of cash collateral in each Collateral Account
to ensure that LCH SA has sufficient immediately available liquidity to
meet its payment and settlement obligations. The proposal would amend
the Rule Book, the Procedures, and the Policy. The amendments to each
of these documents are discussed separately below.
b. Amendments to the Rule Book
Currently, Article 4.2.6.4 of the Rule Book provides that LCH SA,
in calculating the value of collateral in a Clearing Member's house and
client accounts, may apply haircuts to non-cash collateral and foreign
exchange adjustments to cash collateral. Haircuts to non-cash
collateral and foreign exchange adjustments to cash collateral reduce
the value of such collateral, to account for potential decreases in
value in liquidating, or in converting, such collateral. Thus, Article
4.2.6.4 as currently written provides LCH SA the authority to reduce
the value of collateral in a Clearing Member's house and client
accounts as needed to manage risks associated with such collateral.
As discussed below, LCH SA is moving these provisions regarding
reducing the value of collateral to Section 3 of the Procedures. LCH SA
is doing so to consolidate in one place all of LCH SA's authority to
potentially reduce the value of collateral, including as needed to meet
a minimum cash requirement.\5\ Thus, as revised, Article 4.2.6.4 of the
Rule Book would provide that LCH SA shall calculate the value of
collateral in a Clearing Member's house and client accounts in
accordance with Section 3 of the Procedures.
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\5\ See Notice, 91 FR at 52357.
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c. Amendments to the Procedures
Section 3 of the Procedures describes, among other things, the
types of collateral that LCH SA accepts from Clearing Members; how
Clearing Members provide that collateral to LCH SA; and the accounts
that LCH SA establishes to hold that collateral for Clearing Members.
As noted above, LCH SA is first amending Section 3.2 to include the
provisions deleted from Article 4.2.6.4 of the Rule Book.
As revised, Section 3.2 would restate the provisions concerning
discounts, haircuts, and foreign-exchange adjustments removed from the
Rule Book and would establish the Minimum Cash Collateral Requirement.
Similar to Article 4.2.6.4, revised Section 3.2 would provide that LCH
SA, in calculating the value of collateral in a Clearing Member's house
and client accounts, is entitled to apply haircuts, foreign exchange
adjustments, and concentration limits. Moreover, revised Section 3.2
would allow LCH SA to apply, if applicable, the requirement for a
minimum amount of cash collateral in a particular currency, as
published on LCH SA's website. This provision would further provide
that LCH SA may only implement a change to the minimum cash requirement
after a 15 calendar days consultation with Clearing Members.
Thus, under revised Section 3.2, LCH SA could reduce the value of
collateral in a Clearing Member's house and client accounts by applying
haircuts and foreign exchange adjustments as well as concentration
limits \6\ and a minimum cash requirement. The minimum cash requirement
would establish a floor on the amount of cash that a Clearing Member
must maintain as collateral with LCH SA to satisfy its margin
requirement. The required amount would be calculated as a percentage of
the Clearing Member's margin requirement.\7\ LCH SA would calculate the
minimum cash amount at the end of each day and, as explained below,
would only allow a Clearing Member to withdraw cash collateral if doing
so would not cause the Clearing Member to breach the minimum.\8\
Intraday, LCH SA would check any withdrawal request against a Clearing
Member's required minimum cash level, preventing withdrawals that would
Cause a breach.\9\
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\6\ Although not directly related to the minimum cash
requirement, LCH SA is adding the provision regarding concentration
limits to clarify that concentration limits on non-cash collateral
can also affect the value of such collateral, because concentration
limits restrict the amount of a particular non-cash collateral that
LCH SA will accept. See Notice, 91 FR at 52358.
\7\ See Notice, 91 FR at 52357.
\8\ See Notice, 91 FR at 52357.
\9\ LCH SA explained that where margin requirements have
materially reduced during the day and subject to appropriate
approvals, LCH SA could permit intraday cash withdrawals based on
intraday exposure, provided all margin requirements remain fully
covered. See Notice, 91 FR at 52357.
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Initially, LCH SA would apply the minimum cash requirement only to
Clearing Members' house accounts.\10\ The proposed amendments, however,
would permit LCH SA to apply the requirement to other accounts, such as
those containing client collateral, based on evolving liquidity-risk
considerations and market conditions. LCH SA could implement such
change by updating the applicable arrangements on its website following
a 15-calendar day consultation with Clearing Members, as noted above.
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\10\ See Notice, 91 FR at 52358.
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In other parts of Section 3 the proposed rule change would clarify
that in returning any cash collateral, LCH SA is entitled to take into
consideration the
[[Page 61484]]
requirement for a minimum amount of cash collateral. These changes
would make withdrawals of the various types of cash collateral that LCH
SA accepts subject to any applicable requirement for minimum cash
collateral. Thus, under these provisions, a Clearing Member could still
request the return of cash collateral, for itself or for a client, but
LCH SA would not return the cash collateral if doing so would cause the
Clearing Member or its client not to satisfy any applicable requirement
for minimum cash collateral.\11\
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\11\ In certain circumstances under Section 3.8 of the
Procedures, LCH SA could return non-Euro cash collateral, even when
doing so could cause the Clearing Member or its client not to
satisfy any applicable requirement for minimum cash collateral cash
collateral. LCH SA would generally only process the return if LCH SA
obtains, through a debit of the Clearing Member's relevant account,
an amount of Euro cash collateral equal to the non-Euro cash
collateral being returned.
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In addition to the changes related to minimum cash collateral. LCH
SA proposes four additional amendments to Sections 3.8(h) and 3.8(i) of
the Procedures to more accurately reflect its existing practices and
operational arrangements. First, LCH SA would remove the transaction
timelines currently specified in those sections and instead refer
Clearing Members to the centralized ``Request Timelines'' published on
LCH SA's website. According to LCH SA, the timelines currently included
in the Procedures have become obsolete because the applicable timelines
are now maintained on its website.\12\
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\12\ See Notice, 91 FR at 52358. See LCH SA Acceptable Cash,
available at <a href="https://www.lseg.com/en/post-trade/clearing/collateral-management/sa-collateral-management/sa-acceptable-collateral/sa-acceptable-cash">https://www.lseg.com/en/post-trade/clearing/collateral-management/sa-collateral-management/sa-acceptable-collateral/sa-acceptable-cash</a> (last visited Sept. 23, 2025).
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Second, LCH SA would remove references to form-based requests for
the return of U.S. dollar Cash Collateral and instead provide for
electronic submission through LCH SA's Collateral Management System or
another operational process designated by LCH SA, including a form-
based process where appropriate.
Third, LCH SA would remove certain references to FCM/BD Clearing
Members and FCM/BD Clients so that the relevant provisions apply to all
Clearing Members and clients.
Finally, LCH SA would remove the outdated, and undefined, term
``Non Euro Cash Collateral Value'' and correct a typographical error in
Section 3.7(d)(iii).
d. Amendments to the Policy
LCH SA also proposes to amend the Policy. The Policy sets forth
standards that LCH SA must meet in managing its liquidity risk, meaning
the risk that LCH SA will not have sufficient liquidity to meet payment
obligations when due.\13\ The amendments would implement the minimum
cash requirement discussed above and make general updates that are not
related to the minimum cash requirement.
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\13\ For further background on the Policy, see Self-Regulatory
Organizations; LCH SA; Order Approving Proposed Rule Change Relating
to LCH SA's Default Management Policy, Investment Risk Policy,
Liquidity Risk Policy, Settlement, Payment and Custody Risk Policy,
Model Governance, Validation and Review Policy and Contract and
Market Acceptability Policy, Securities Exchange Act Release No.
104980 (Mar. 12, 2026), 91 FR 12869 (Mar. 17, 2026) (SR-LCH-SA-2025-
010).
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i. Amendments Related to Minimum Cash Collateral
As part of the standards that LCH SA must meet in managing its
liquidity risk, the Policy includes general standards related to the
liquidity of collateral submitted by Clearing Members. Currently,
Section 6.6.3 of the Policy limits Clearing Members in their use of
non-primary sources of liquidity to satisfy their margin requirements.
A non-primary source of liquidity is collateral other than cash or a
non-cash security that LCH SA can pledge for cash at a central bank.
The proposal would amend Sections 6.6.3 and make related updates to
Section 6.7.1 of the Policy to incorporate the minimum cash
requirement. Instead of limiting Clearing Members' use of non-primary
sources of liquidity, revised Section 6.6.3 would require that LCH SA
have controls in place to ensure a minimum level of margin requirements
are covered in cash. As noted above, LCH SA will establish the
requirement for a minimum amount of cash collateral in a particular
currency by publication on its website. The proposed rule change also
would require LCH SA's Collateral and Liquidity Management (CaLM) team
to immediately escalate to LCH SA's Chief Risk Officer and the head of
CDSClear any breach by a Clearing Member of the minimum cash
requirement, subject to materiality thresholds.
Finally, in Section 6.7.1, the Proposal would replace references to
primary sources of liquidity with references to a minimum cash
requirement.
ii. General Updates
The general updates arise from LCH SA's annual review of the Policy
and a review of the Policy conducted by LCH SA's French regulators.\14\
LCH SA states that these other amendments are generally intended to
improve the Policy's accuracy, clarity, consistency, and organization
and do not alter its liquidity-risk management or risk appetite.\15\
These changes are discussed below according to the sections of the
Policy in which they appear.
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\14\ LCH SA adopted these changes in an earlier version 8.4 of
the Policy, which LCH SA is now amending and replacing with version
8.5. As part of this proposed rule change, LCH SA submitted the
changes made in both versions 8.4 and 8.5.
\15\ See Notice, 91 FR at 52358.
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First, LCH SA proposes to amend Section 5 of the Policy to update
references to applicable regulatory requirements. Currently, Section 5
refers to a particular part of the European Market Infrastructure
Regulation and to a particular part of the Commission's requirements
under Rule 17ad-22. As revised, Section 5 would refer to these
regulatory requirements more generally, rather than to a particular
part or portion of these regulatory requirements.
Section 6 of the Policy describes, among other things, LCH SA's
sources of liquidity, requirements for liquidity, and how LCH SA
assesses its liquidity position. Currently, paragraph 10 of Section 6.1
explains that any non-cash collateral which LCH SA can pledge at a
central bank for cash can be a primary source of liquidity. The
proposal would delete this paragraph 10 and move the statement about
non-cash collateral which LCH SA can pledge at a central bank to
paragraph 9, which also describes LCH SA's primary sources of
liquidity. As revised, paragraph 9 would describe LCH SA's primary
sources of liquidity as cash and non-cash securities that LCH SA can
pledge for cash at a central bank for cash. Thus, revised paragraph 9
would describe the primary liquidity resources available to LCH SA in a
single provision, while revised paragraph 10 would continue the
discussion and include a cross-reference to paragraph 9.
LCH SA would also add a footnote to Section 6.1. This footnote
would clarify that the detailed definitions of eligible liquidity
resources for each central counterparty are contained in the applicable
central-counterparty-specific procedures or LCH SA's Liquidity Risk
Modeling Framework.\16\ According to LCH SA, this amendment would not
modify the scope of eligible liquidity resources but would clarify
where those resources are defined.\17\
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\16\ For more information on LCH SA's Liquidity Risk Modeling
Framework, see Self-Regulatory Organizations; LCH SA; Order Granting
Approval of Proposed Rule Change Relating to Revisions to Its
Liquidity Risk Modelling Framework. Exchange Act Release No. 103192
(June 4, 2025), 90 FR 24444 (June 10, 2025) (SR-LCH SA-2025-003).
\17\ See Notice, 91 FR at 52358.
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[[Page 61485]]
The proposal also would revise the description of LCH SA's
liquidity requirements in Section 6.2. Specifically, the proposal would
revise paragraph 16 to explain that the Operational Target measures LCH
SA's operational liquidity requirements in a non-default situation.\18\
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\18\ Generally, LCH SA values its operational liquidity
requirements through determining its Operational Target, which
represents the amount of liquidity LCH SA must hold to satisfy its
liquidity needs arising from operational management in a stressed
environment that does not lead to a Clearing Member's default. See
Self-Regulatory Organizations; LCH SA; Order Granting Approval of
Proposed Rule Change Relating to Revisions to Its Liquidity Risk
Modelling Framework. Exchange Act Release No. 103192 (June 4, 2025),
90 FR 24444 (June 10, 2025) (SR-LCH SA-2025-003).
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Section 6.4 describes how LCH SA assesses its liquidity position.
Among other things, current Section 6.4 requires that LCH SA model the
gross liquidity impact of the default of the two Clearing Member groups
with the largest liquidity requirements. The proposal would clarify
that this assessment must include both Clearing Members and providers
of liquidity to LCH SA, but not central banks. Moreover, the proposal
would clarify that in assessing its liquidity position, LCH SA includes
the liquidity needs arising from its operations. LCH SA states that
these amendments would align the Policy with the methodology and
assumptions already contained in its Liquidity Risk Modeling Framework
but would not otherwise change its methodology for assessing its
liquidity position.\19\
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\19\ See Notice, 91 FR at 52358.
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Paragraph 26 of Section 6.4 currently requires that LCH SA to
undertake due diligence on and/or test with each of its liquidity
providers the availability of the relevant liquidity resources. The
proposal would amend Paragraph 26 to clarify that LCH SA tests the
availability of relevant liquidity resources with each liquidity
provider under stressed market conditions.
Section 6.6.1 describes how LCH SA determines the size of its
Liquidity Buffer. Here the proposal would add to paragraph 32 a more
specific definition of Liquidity Buffer, which would mean the excess of
liquid assets over liquidity obligations, determined using the same
assumptions applied to when LCH SA determines its Liquidity Coverage
Ratio. According to LCH SA, this definition reflects the existing
calculation and implementation of the Liquidity Buffer currently and
would not introduce methodological change.\20\ The proposal also would
add to paragraph 30 an explanation that the Liquidity Cover Ratio is
computed in accordance with the general conditions set out in paragraph
22 of the Policy.\21\
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\20\ See Notice, 91 FR at 52359.
\21\ The Liquidity Coverage Ratio is a ratio of available
liquidity resources to liquidity needs. LCH SA uses the Liquidity
Coverage Ratio to ensure it has enough liquid resources to meet
liquidity needs in the case of the default of two Clearing Member
groups with the largest liquidity requirements. See Self-Regulatory
Organizations; LCH SA; Order Granting Approval of Proposed Rule
Change Relating to Revisions to Its Liquidity Risk Modelling
Framework. Securities Exchange Act Release No. 103192 (June 4,
2025), 90 FR 24444 (June 10, 2025) (SR-LCH SA-2025-003).
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LCH SA also proposes to reorganize Section 6.6 of the Policy.
Provisions currently contained in Section 6.6.2 concerning the
monitoring of liquidity resources would be moved to new Section 6.6.3,
and Section 6.6.3 would be revised to take into consideration the
minimum cash requirement, as discussed above.
As a result of the reorganization of Section 6.6, the Policy's
``General Repo Market Disruptions'' provisions would be redesignated as
Section 6.6.2. These provisions describe additional scenarios
considered in LCH SA's liquidity reverse stress-testing framework. The
proposed amendments also would clarify that a central bank facility is
included in the assumptions underlying those scenarios, including an
assumed increase in central bank haircuts under stressed market
conditions. LCH SA states that these amendments would not introduce a
new liquidity facility or otherwise change the existing reverse stress-
testing framework.\22\
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\22\ See Notice, 91 FR at 52360.
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Section 7 of the Policy describes the review cycle for the Policy.
Currently, paragraph 67 provides that the appropriateness of the Policy
relative to the LCH SA Board's defined risk appetite and regulatory
requirements should be reviewed on an annual basis by LCH SA's
Executive Risk Committee, with findings reported to the Board Risk
Committee and Board. The proposal would add that changes to the
appendices of the Policy need only be approved by the Executive Risk
Committee, with notification to the Board Risk Committee. Currently,
the Policy has two appendices, one describing LCH SA's process for
intraday monitoring of liquidity and one describing the general
regulatory requirements that apply to LCH SA. LCH SA believes a more
streamlined approval process is appropriate for changes to these
appendices given the appendices only support and provide additional
detail for the requirements in the Policy.\23\
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\23\ See Notice, 91 FR at 52360.
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Finally, LCH SA also proposes to amend Appendix II of the Policy,
which describes the general regulatory requirements that apply to LCH
SA. Here the proposal would add a reference to a separate LCH SA
procedure that governs LCH SA's review of non-committed funding
arrangements. According to LCH SA, this amendment would identify the
documentation governing such arrangements and would not establish a new
funding arrangement or change the existing methodology.\24\
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\24\ See Notice, 91 FR at 52360.
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III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act requires the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to the
organization.\25\ Under the Commission's Rules of Practice, the
``burden to demonstrate that a proposed rule change is consistent with
the [Act] and the rules and regulations issued thereunder . . . is on
the self-regulatory organization [`SRO'] that proposed the rule
change.'' \26\
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\25\ 15 U.S.C. 78s(b)(2)(C).
\26\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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The description of a proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements must all be sufficiently detailed and specific
to support an affirmative Commission finding,\27\ and any failure of an
SRO to provide this information may result in the Commission not having
a sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Act and the applicable rules and
regulations.\28\ Moreover, ``unquestioning reliance'' on an SRO's
representations in a proposed rule change is not sufficient to justify
Commission approval of a proposed rule change.\29\
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\27\ Id.
\28\ Id.
\29\ Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 447 (D.C. Cir. 2017).
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After carefully considering the proposed rule change, the
Commission finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to LCH SA. More specifically, for the reasons given below,
the Commission finds that the proposed rule change is consistent with
Section
[[Page 61486]]
17A(b)(3)(F) of the Act,\30\ and Rule 17ad-22(e)(7) under the Act.\31\
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\30\ 15 U.S.C. 78q-1(b)(3)(F).
\31\ 17 CFR 240.17ad-22(e)(7).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of LCH SA be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions.\32\
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\32\ 15 U.S.C. 78q-1(b)(3)(F).
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As discussed above, the proposed rule change would require Clearing
Members to maintain a minimum amount of cash as Collateral. LCH SA
would determine the amount as a percentage of a Clearing Member's
exposure or overall margin requirement. LCH SA would calculate the
required amount each day and, as noted above, would not permit a
withdrawal that would cause a Clearing Member's Cash Collateral to fall
below the applicable minimum.
Absent a requirement for a minimum amount of cash collateral,
Clearing Members could strive to meet their margin requirements through
non-cash collateral, subject to any applicable haircuts and
concentration limits. Reliance on non-cash collateral poses a liquidity
risk, because LCH SA would need to liquidate the collateral when it
needs cash to satisfy payment and settlement obligations. LCH SA's
ability to liquidate non-cash collateral could be affected by market
conditions, including stressed conditions in which liquidity may be
limited or the value of collateral may change. On other hand, requiring
a minimum amount of cash collateral could reduce LCH SA's liquidity
risk, by providing LCH SA access to a minimum amount of cash that it
could use to meet payment and settlement obligations without first
liquidating non-cash collateral. By requiring Clearing Members to
maintain a minimum amount of Cash Collateral, the proposal would help
LCH SA to manage its liquidity risk and support LCH SA's ability to
meet its obligations when due, furthering its ability promptly and
accurately clear and settle securities transactions, both during
business-as-usual operations and following a Clearing Member's default.
The withdrawal controls described above would further support this
objective. LCH SA would assess each withdrawal request against the
applicable minimum cash collateral requirement and prevent withdrawals
that would result in a breach. Although LCH SA could permit an intraday
withdrawal following a material reduction in a Clearing Member's
exposure, LCH SA could do so only with the appropriate approvals and if
the Clearing Member's remaining collateral continued to cover all
applicable margin requirements. These controls would help ensure that
LCH SA maintains sufficient immediately available liquidity while
allowing Clearing Members to withdraw cash that is no longer necessary
to support their exposures.
The proposed amendments to the Procedures would make other updates,
as discussed above. These changes would consolidate provisions
concerning collateral haircuts and foreign-exchange adjustments,
centralize applicable withdrawal timelines on LCH SA's website, update
the process for submitting withdrawal requests, and remove outdated
terminology. By making the Procedures more consistent with LCH SA's
existing collateral-management practices and operational arrangements,
these amendments should reduce ambiguity and facilitate the timely and
consistent processing of collateral transactions, thereby supporting
LCH SA's ability to promptly and accurately clear and settle securities
transactions.
Finally, as discussed above, the proposed amendments to the Policy
would help to establish the basis for the minimum cash collateral
requirement. The proposed amendments to the Policy also would make
other updates, such as clarifying the resources included in LCH SA's
liquidity framework; improving the descriptions of the Operational
Target, Liquidity Coverage Ratio, and Liquidity Buffer; and better
describing LCH SA's monitoring, assessment, and testing processes. The
Policy would also clarify that LCH SA tests the availability of
resources from its liquidity providers under stressed market
conditions. Clearer and more comprehensive documentation should support
LCH SA's ability to identify and respond to potential liquidity
shortfalls and continue meeting its payment and settlement obligations,
thereby supporting LCH SA's ability to promptly and accurately clear
and settle securities transactions.
Accordingly, the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(F) of the Act.\33\
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\33\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17ad-22(e)(7) Under the Act
Rule 17ad-22(e)(7) requires, among other things, a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to effectively measure, monitor, and
manage the liquidity risk that arises in or is borne by the covered
clearing agency, including measuring, monitoring, and managing its
settlement and funding flows on an ongoing and timely basis, and its
use of intraday liquidity.\34\
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\34\ 17 CFR 240.17ad-22(e)(7).
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The changes to the Policy are consistent with this requirement
because they would help to establish the basis for the minimum cash
collateral requirement. As discussed above, the proposal would require
Clearing Members to maintain a minimum amount of cash collateral as
part of the collateral supporting their margin obligations. The
required amount would be calculated as a percentage of each Clearing
Member's exposure or margin requirement, such that the minimum cash
requirement would vary based on the size of the Clearing Member's
obligations rather than impose a fixed amount.
LCH SA would calculate the minimum cash requirement at the end of
each day and would permit a Clearing Member to withdraw only cash
collateral exceeding the applicable minimum. LCH SA would also monitor
cash withdrawals intraday and would not permit a withdrawal that would
cause a Clearing Member's cash collateral to fall below the applicable
minimum. Although LCH SA could permit an intraday withdrawal following
a material reduction in a Clearing Member's exposure, LCH SA could do
so only with the appropriate approvals and if the Clearing Member's
remaining collateral continued to cover all applicable margin
requirements.
Absent a requirement for a minimum amount of cash collateral,
Clearing Members could satisfy their margin requirements through non-
cash collateral, subject to applicable haircuts and concentration
limits. Reliance on non-cash collateral poses a liquidity risk because
LCH SA would need to liquidate such collateral when it needs cash to
satisfy payment and settlement obligations. LCH SA's ability to
liquidate non-cash collateral could be affected by market conditions,
including stressed conditions in which liquidity may be limited or the
value of collateral may change.
[[Page 61487]]
Thus, by requiring Clearing Members to maintain a minimum amount of
cash collateral and restricting withdrawals that would cause cash
collateral to fall below the applicable minimum, the proposal would
provide LCH SA access to a minimum amount of cash that it could use to
meet payment and settlement obligations without first liquidating non-
cash collateral. The proposed changes therefore would help LCH SA to
manage its liquidity risk and support LCH SA's management of its
settlement and funding flows and use of intraday liquidity, consistent
with Rule 17ad-22(e)(7) under the Act.\35\
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\35\ Id.
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The proposed amendments to the Policy would also make other
clarifications and updates, as discussed above. Clearer and more
comprehensive documentation should support LCH SA's ability to use the
Policy in measuring, monitoring, and managing its liquidity risk,
consistent with Rule 17ad-22(e)(7) under the Act.\36\
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\36\ Id.
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Accordingly, the proposed rule change is consistent with the
requirements Rule 17ad-22(e)(7) under the Act.\37\
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\37\ 17 CFR 240.17ad-22(e)(7).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act,\38\ and Rule 17ad-22(e)(7) under the Act.\39\
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\38\ 15 U.S.C. 78q-1(b)(3)(F).
\39\ 17 CFR 240.17ad-22(e)(7).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\40\ that the proposed rule change (SR-LCH SA-2026-007) be, and hereby
is, approved.\41\
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\40\ 15 U.S.C. 78s(b)(2).
\41\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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\42\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-19873 Filed 9-28-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on September 29, 2026.
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