
[Federal Register Volume 82, Number 68 (Tuesday, April 11, 2017)]
[Notices]
[Pages 17492-17494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07178]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80379; File No. SR-LCH SA-2017-002]


Self-Regulatory Organizations; LCH SA; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Retroactively Apply 
Recently-Revised Fee Schedule

April 5, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 30, 2017, 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 
described in Items I and II below, which Items have been primarily 
prepared by LCH SA. LCH SA filed the proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(6) 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)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice

    The proposed rule change will retroactively apply LCH SA's 
recently-revised fee schedule \5\ from January 1, 2017 through February 
17, 2017, the date that the revised schedule became effective.
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    \5\ Changes to the fee schedule included (1) a modification of 
the annual fixed fee that covers all self-clearing activity for a 
Clearing Member and its affiliates under the Unlimited Tariff, (2) 
addition of an annual fixed fee for all General Members that 
participate in the CDS Clearing Services under the Introductory 
Tariff, and (3) removal of the volume-based discounts previously in 
effect for the client clearing activities of the CDS Clearing 
Service. See Securities Exchange Act Release No. 34-80114 (February 
27, 2017), 82 FR 12481 (March 3, 2017).
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice

    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, Security-Based Swap Submission, or 
Advance Notice

1. Purpose
    The purpose of the proposed rule change is to retroactively apply 
LCH SA's recently-revised fee schedule beginning January 1, 2017.
    The purpose of the CDSClear fee grid revisions was to: (1) Modify 
the annual fixed fee that covers all self-clearing activity for a 
Clearing Member and its affiliates under the Unlimited Tariff, (2) 
establish an annual fixed fee for all General Members that participate 
in the CDS Clearing Services under the Introductory Tariff, and (3) 
remove the volume-based discounts previously in effect for the client 
clearing activities of the CDS Clearing Service.
    LCH SA was registered on December 29, 2016 but had long-standing 
plans to revise the fee schedule with an intended effective date of 
January 1, 2017.
    The need to apply the fees retroactively results from being granted 
registration on December 29, 2016, only one (1) full business day prior 
to the expected effective date on January 1, which, when coupled with 
technological difficulties (including purchase of a digital 
certificate) associated with the filing process, resulted in LCH SA not 
being able to submit the filing on December 30, 2016, as LCH SA 
initially anticipated.
    Because LCH SA had also intended the fee change to become effective 
by January 1, 2017 it had already gone through the member consultation 
process, meaning that members were aware of the pending change in fee 
structure, including the proposed effective date of January 1, 2017.
    Additionally, LCH SA's national competent authorities had been 
advised of the proposed fee change that had already gone through the 
regulatory review process with the Commodity Futures Trading Commission 
(``CFTC'') in a manner that would have permitted the fee change to take 
effect on January 1, 2017.\6\
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    \6\ See http://www.cftc.gov/filings/orgrules/rule121516lchsadco001.pdf.
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    In that way, the proposed fee change was published on LCH SA's Web 
site no later than December 14, 2016, when it was self-certified to the 
CFTC pursuant to CFTC Rule 40.6.
2. Statutory Basis
    LCH SA believes that the proposal is consistent with the provisions 
of Section 17A of the Act, in general and in particular with Section 
17A(b)(3)(D) of the Act requiring the equitable allocation of 
reasonable dues, fees and other charges.\7\
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    \7\ 15 U.S.C. 78q-1(b)(3)(D).
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    LCH believes that applying the fees retroactively is reasonable. 
The fees would have been applicable absent the year end Commission 
registration as well as the technological difficulties LCH SA 
encountered with the submission of the filing. The members of LCH SA 
were consulted in advance and were fully aware that such fees were 
intended to be applicable by January 1, 2017.
    Section 17A(b)(3)(D) of the Act requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues, fees, and other charges.\8\ With respect to the Unlimited Tariff, 
LCH SA has determined that the reduction in the Unlimited Tariff fixed 
fee for General Members with respect to self-clearing activity on 
behalf of the Clearing Member and its affiliates is reasonable and 
appropriate given the costs and expenses to LCH SA. With CDSClear now 
reaching a maturity stage in its development and the introduction of 
mandatory clearing of OTC derivatives

[[Page 17493]]

in 2017, which will result in an increase in CDS client clearing 
activities, it is appropriate that the costs and expenses that LCH SA 
will incur in providing the CDS Clearing Service are shared more 
broadly among General Members and their clients that participate in the 
service. For the same reasons, LCH SA has determined that the cap on 
self-clearing fees, inclusive of the annual fixed fee, applicable to 
General Members electing the Introductory Tariff, should be lowered to 
the same amount as the revised Unlimited Tariff.
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    \8\ 15 U.S.C. 78q-1(b)(3)(D).
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    With respect to the annual fixed fee for General Members under the 
Introductory Tariff, LCH SA has determined that implementing an annual 
fixed fee for all General Members that participate in the CDS Clearing 
Service under the Introductory Tariff (which fee is separate from and 
in addition to the self-clearing and client clearing variable fees 
currently assessed), is reasonable and appropriate given the costs and 
expenses to LCH SA in providing the services to General Members. The 
fee assures that all General Members that benefit from the CDS Clearing 
Service pay an appropriate fee for such services, such as being 
consulted on potential rules, product and service changes, as well as 
benefiting from unlimited support for product and system training and 
testing, without regard to whether such General Members engage in CDS 
clearing activities. The proposed rule changes, therefore, are 
consistent with the requirements of Section 17A of the Act \9\ and 
regulations thereunder applicable to it, because they provide for the 
equitable allocation of reasonable fees, dues, and other charges among 
clearing members and market participants by ensuring that General 
Members and their clients pay reasonable fees and dues for the services 
that LCH SA provides.
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    \9\ 15 U.S.C. 78q-1.
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    With respect to the removal of volume-based discounts, LCH SA has 
determined that removing the volume-based discounts for CDS client 
clearing activities is reasonable and appropriate given the costs and 
expenses to LCH SA in providing such services. The elimination of 
volume-based discounts will assure that clients pay an appropriate 
proportionate share of the costs and expenses that LCH SA will incur in 
providing the CDS Clearing Service.

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.\10\
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    \10\ 15 U.S.C. 78q-1(b)(3)(I).
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    LCH SA does not believe that the proposed retroactive application 
of the fee changes from January 1, 2017 would impose any burden on 
competition. LCH SA believes that the reduction in the annual Tariffs 
assessed on General Members with respect to self-clearing activity are 
reasonable and appropriate, as the Tariffs will apply equally to all 
General Members that self-clear CDS under the Unlimited Tariff. 
Additionally, LCH SA believes that an annual fixed fee for all General 
Members that participate in the CDS Clearing Service under the 
Introductory Tariff, which fee is separate from and in addition to the 
self-clearing and client clearing variable fees currently assessed, is 
appropriate in light of the expenses incurred by LCH SA in providing 
its services. Further, LCH SA believes that removing the volume-based 
discounts for CDS client clearing activities is reasonable and 
appropriate, as the clearing fees will apply equally to all clients 
that participate in the CDS Clearing Service.
    The retroactive application of the fee changes will apply to all 
CDSClear members and will not adversely affect their ability to engage 
in cleared transactions or to access clearing services.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) \11\ of the 
Act and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    LCH SA has asked the Commission to waive the 30-day operative delay 
so that the proposed rule change may become operative immediately upon 
filing. According to LCH SA, the proposed retroactive application of 
the recently-revised fee schedule does not significantly affect the 
protection of investors or the public interest because LCH SA, its 
members, and its other regulators all expected that the revised fee 
schedule would apply starting on January 1, 2017.
    After careful consideration, the Commission agrees that a waiver of 
the 30-day operative delay is appropriate under the particular facts 
and circumstances concerning this proposed rule change. The only reason 
LCH SA could not implement its revised fee schedule as planned was the 
Commission's approval of its registration on December 29, 2016, which 
did not leave LCH SA sufficient time to satisfy all of the technical 
requirements to file proposed rule changes with the Commission. 
Moreover, the Commission notes that the retroactive fee change will 
have no impact on U.S. customers or members, further lessening any 
investor protection or public interest concerns associated with the 
retroactive application of a fee schedule to the date all parties 
expected it would become effective. Accordingly, the Commission 
designates the proposed rule change to be operative upon filing.\13\
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    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-LCH SA-2017-002 on the subject line.

[[Page 17494]]

Paper Comments

     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-2017-002. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site 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 
10:00 a.m. and 3:00 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 Web site at http://www.lch.com/asset-classes/cdsclear. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-LCH SA-2017-002 and 
should be submitted on or before May 2, 2017.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07178 Filed 4-10-17; 8:45 am]
 BILLING CODE 8011-01-P


