[Federal Register Volume 83, Number 120 (Thursday, June 21, 2018)]
[Notices]
[Pages 28886-28890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13300]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83451; File Nos. SR-LCH SA-2017-012 and SR-LCH SA-2017-
013]


Self-Regulatory Organizations; LCH SA; Order Approving Proposed 
Rule Changes Related to LCH SA's Recovery and Wind Down Plans

June 15, 2018.

I. Introduction

    On November 30, 2017, Banque Centrale de Compensation, which 
conducts business under the name LCH SA (``LCH SA''), filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change (LCH SA-2017-012) 
to adopt a recovery plan (the ``RP''). The proposed rule change was 
published for comment in the Federal Register on December 19, 2017.\3\ 
On December 7, 2017, LCH SA filed with the Commission a proposed rule 
change (LCH SA-2017-013) to adopt a wind down plan (``WDP'').\4\ The 
proposed rule change was published for comment in the Federal Register 
on December 19, 2017.\5\ On January 23, 2018, pursuant to Section 
19(b)(2) of the Act,\6\ the Commission designated a longer period for 
Commission action on both proposed rule changes.\7\ On March 19, 2018 
the Commission instituted proceedings under Section 19(b)(2)(B) of the 
Act \8\ to determine whether to approve or disapprove the proposed rule 
changes.\9\ To date, the Commission has not received any comments on 
the proposed rule changes. For the reasons discussed below, the 
Commission is approving the proposed rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-82316 (Dec. 13, 
2017), 82 FR 60246 (Dec. 19, 2017) (SR-LCH-SA-2017-012) (``Notice 
012'').
    \4\ Capitalized terms used in this order but not defined herein 
have the same meanings specified in LCH SA's rules.
    \5\ Securities Exchange Act Release No. 34-82317 (Dec. 13, 
2017), 82 FR 60238 (Dec. 19, 2017) (SR-LCH SA-2017-013) (``Notice 
013'').
    \6\ 15 U.S.C. 78s(b)(2).
    \7\ Securities Exchange Act Release No. 34-82570 (Jan. 23, 
2018), 83 FR 4088 (Jan. 29, 2018) (SR-LCH-SA-2017-012) and 
Securities Exchange Act Release No. 34-82571 (Jan. 23, 2018), 83 FR 
4081 (Jan. 29, 2018) (SR-LCH SA-2017-013).
    \8\ 15 U.S.C. 78s(b)(2)(B).
    \9\ Securities Exchange Act Release No. 34-82901 (March 19, 
2018), 83 FR 12833 (March 23, 2018) (SR-LCH SA-2017-012; SR-LCH SA-
2017-013).
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II. Description of the Proposed Rule Changes 10
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    \10\ The descriptions of the proposed rule changes are 
substantially excerpted from Notice 012 and Notice 013.
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    As a ``covered clearing agency,'' \11\ LCH SA is required to, among 
other things, ``establish, implement, maintain and enforce written 
policies and procedures reasonably designed to . . . maintain a sound 
risk management framework for comprehensively managing legal, credit, 
liquidity, operational, general business, investment, custody, and 
other risks that arise in or are borne by the covered clearing agency, 
which . . . includes plans for the recovery and orderly wind-down of 
the covered clearing agency necessitated by credit losses, liquidity 
shortfalls, losses from general business risk, or any other losses.'' 
\12\ The Commission has previously clarified that it believes that such 
recovery and wind-down plans are ``rules'' within the meaning of 
Exchange Act Section 19(b) and Rule 19b-4 because such plans would 
constitute changes to a stated policy, practice or interpretation of a 
covered clearing agency.\13\ Accordingly, a covered clearing agency, 
such as LCH SA, must file its RP and WDP with the Commission.
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    \11\ The term ``covered clearing agency'' is defined in SEC Rule 
17Ad-22(a)(5), 17 CFR 240.17Ad-22(a)(5).
    \12\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \13\ Standards for Covered Clearing Agencies, Securities 
Exchange Act Release No. 34-78961 (Sep. 28, 2016), 81 FR 70786, 
70809 (Oct. 13, 2016).
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A. The RP (LCH SA-2017-012)

    LCH SA's RP seeks to maintain the continuity of critical services 
in times of extreme stress and to facilitate the recovery of LCH SA 
from such stress. In particular, the RP describes (i) the scenarios and 
triggers for initiating recovery measures; (ii) various recovery tools 
used in such recovery; and (iii) the governance framework for managing 
the RP. Each of those aspects of the RP are discussed in more detail 
below.
    The scenarios that could necessitate the implementation of the RP 
include the default of one or more clearing members, liquidity 
shortfalls as a result of the default of an investment counterparty of 
LCH SA or any other investment losses resulting from changes in the 
market value on the investments, a loss resulting from an event which 
impacts the critical services provided by LCH SA (e.g., failure in the 
provision of service by a third party), loss of critical contracts with 
exchanges, or the operational or financial failure of a financial 
market infrastructure such as an allied clearing house or trade 
repository.\14\
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    \14\ See Notice 012, 82 FR at 60247.
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    The default management process is used to re-establish a matched 
book and return to business as usual and therefore LCH SA considers it 
to be a recovery tool.\15\ When pre-funded resources, such as 
defaulter's margin, defaulter's default fund contributions, LCH SA's 
capital, and non-defaulters' default fund contributions, are no longer 
available to meet obligations due to member and non-member losses, the 
RP lists various measures and tools that LCH SA can use to return to 
business as usual.\16\ The RP is organized to discuss each tool 
according to the nature of the loss the tool is designed to address 
(e.g., clearing member default losses, liquidity shortfalls, 
operational, business, and investment risks). The RP also discusses the 
sequence in which these tools would be used and the relative strength 
of each.\17\
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    \15\ Id.
    \16\ Id. at 60249.
    \17\ Id. at 60249-60250.
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    When pre-funded resources have been exhausted after a clearing 
member default, LCH SA can call a default fund assessment up to a cap, 
request voluntary payments from all non-defaulting members, and 
effectuate service closure.\18\ In the event such tools are 
unavailable, certain other business-as-usual tools, such as default 
fund additional margin, may enable LCH SA to collect additional 
resources.
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    \18\ Id. at 60249.
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    In the event of a liquidity shortfall, LCH SA may use its central 
bank credit line to deposit securities received on behalf of defaulting 
clearing members and obtain liquidity.\19\ Other potential tools to 
manage a liquidity stress situation include limits with respect to 
illiquid collateral, the application of increased haircuts on certain 
types of collateral to incentivize the use of more liquid collateral, 
and specific liquidity margins.\20\ LCH SA also could defer funding for 
the settlement platform for a limited period of time, but views this as 
a tool of last resort.\21\
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    \19\ Id.
    \20\ Id.
    \21\ Id.
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    For most investment, business, and operational losses, LCH SA can 
allocate

[[Page 28887]]

its capital surplus against losses.\22\ Further down the list of 
preferable recovery tools for non-clearing member defaults are the 
abilities to raise capital or utilize insurance meant to cover a 
specific operational risk event.\23\ For any disruption or loss of a 
key third-party service provider, LCH SA would be able to exercise 
several contractual rights and maintains exit plans that are intended 
to safeguard the continuity of services.\24\
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    \22\ Id.
    \23\ See Notice 012, 82 FR at 60249.
    \24\ Id. at 60250.
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    The RP discusses the governance surrounding its creation, 
invocation, and operation.\25\ LCH SA relies upon its existing 
governance forums for both the creation and on-going monitoring and 
operation of the RP. Specifically, the LCH SA Management Committee is 
responsible for the preparation of the RP and the monitoring and 
implementation of the recovery tools set forth in the RP.\26\ The LCH 
SA Risk Committee reviews and makes a recommendation to the Board, 
which ultimately has the power to approve the RP.\27\ However, before 
submission to the LCH SA Risk Committee, the RP is reviewed and 
validated by the Executive Risk Committee of LCH SA's parent company, 
LCH Group.\28\
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    \25\ Id.
    \26\ Id.
    \27\ Id.
    \28\ Id.
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    The Default Management Group is responsible for the management of 
clearing member defaults while all critical decisions are escalated and 
submitted to the LCH SA Default Crisis Management Team (``DCMT'').\29\ 
The triggering of recovery measures is subject to discussion in the 
DCMT and approval by the LCH SA CEO.\30\
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    \29\ Id.
    \30\ Id.
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    The management of non-clearing member events will vary based on the 
nature of the event.\31\ For example, investment losses and liquidity 
shortfalls are managed by the departments responsible for controlling 
such risks within the parameters set by the Board.\32\ Similarly, 
operational risks are managed by each business line in accordance with 
the operational risk policy approved by the Board.\33\ Business risk is 
managed by individual business lines, with a second line challenge 
performed by the risk and finance departments to verify if sufficient 
capital buffers are available for the applicable business risks.\34\ 
Matters are escalated to the Management Committee when the RP is 
triggered and the LCH SA Board will approve implementation of the 
RP.\35\
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    \31\ Id.
    \32\ Id.
    \33\ Id.
    \34\ Id.
    \35\ Id.
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B. The WDP (LCH SA-2017-013)

    In the event a recovery is not successful, LCH SA would invoke its 
WDP to wind down its operations to full service closure in an orderly 
manner, thereby minimizing the disruption to clearing members, market 
participants, and the broader financial system. The WDP would be 
triggered after a determination by the LCH SA Board that all the 
recovery tools have been exhausted and have failed to return LCH SA to 
business as usual.\36\ A voluntary wind-down not precipitated by these 
extreme events is not considered under the WDP.\37\ The WDP would set 
forth clear mechanisms for the transfer of LCH SA's membership and 
business, and would be designed to facilitate continued access to 
critical services and to minimize market impact.\38\
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    \36\ Notice 013, 82 FR at 60239.
    \37\ Id.
    \38\ Id. at 60239-60240.
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    The decision to wind down would be taken by the Board and 
ultimately the LCH SA shareholders, upon advice of the Executive Risk 
Committee and Local Management Committee (``LMC'').\39\ The LMC or DCMT 
would monitor the implementation of the WDP.\40\ LCH SA would consult 
with all relevant regulatory authorities before making a decision to 
wind down and, unless all clearing services have already been closed, 
the French Autorit[eacute] de Contr[ocirc]le Prudentiel et de 
Resolution (``ACPR'') would have to approve such a decision.\41\ LCH SA 
would also keep relevant regulatory authorities regularly informed of 
the plan's implementation.\42\ If LCH SA was in resolution at the time, 
the relevant regulatory authority governing the resolution of LCH SA 
would need to make the decision to wind-down.\43\
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    \39\ Id. at 60239.
    \40\ Id.
    \41\ Id.
    \42\ Id.
    \43\ Id.
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    The WDP assumes that LCH SA's businesses would be wound down until 
full closure, including the closure of all its business lines at the 
same time.\44\ This is a worst case assumption, however, and the WDP 
acknowledges that it is likely that in the phases preceding the 
decision to wind-down, some business lines will have been closed, 
transferred, or scaled down.\45\
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    \44\ Id.
    \45\ Id.
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    The WDP provides that LCH SA would publish written notice to the 
clearing members that a wind-down event has occurred and potential 
dates by which transactions will no longer be accepted for 
clearing.\46\ In a non-default situation or in a situation where the 
corresponding business line is still active, LCH SA would attempt to 
give clearing members the maximum time necessary to clear transactions 
in the normal course, close-out positions, and switch to another 
central counterparty.\47\
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    \46\ Id. at 60239-60240.
    \47\ Id. at 60240
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    In line with the RP, the WDP describes the functions of LCH SA and 
distinguishes critical functions that LCH SA provides to the market 
(all of LCH SA's clearing functions are considered critical); services 
that are critical to the support of LCH SA's critical functions (such 
as IT, risk, operations, and collateral and risk management); and non-
critical support functions (such as finance, legal, and human 
resources). The WDP then provides detail about the closure of these 
functions. For instance, the treasury function would close once all 
clearing services have ceased and monies are paid by LCH SA and its 
members.\48\ Further, once the WDP is implemented, LCH SA would deposit 
remaining cash in central bank accounts or invest the cash in 
instruments with maturities no longer than same-day repos.\49\ LCH SA 
would keep active any other supporting operational, information 
technology, or risk functions until all positions are closed.\50\ 
Finally, the WDP describes the closure of LCH SA's clearing services 
and provides citations to the various clearing services' rule book 
provisions giving a legal basis for the actions taken to effectuate the 
WDP.\51\
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    \48\ Id. at 60240.
    \49\ Id.
    \50\ Id.
    \51\ Id.
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    The WDP further notes that LCH SA's contractual agreements with 
third-party service providers, such as information technology or venue 
providers, contain wind-down provisions that permit LCH SA to exit the 
agreements under particular conditions.\52\
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    \52\ Id.
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    Separately from the WDP, but in line with the processes and 
timeline described in the WDP, LCH SA calculates the costs required for 
a wind down. These costs encompass staff salaries, indemnities for 
staff departure,

[[Page 28888]]

costs to be paid to suppliers during notice periods, and all 
foreseeable costs that would be due in the event of a wind-down.\53\ 
Based on these calculations, the WDP concludes that these costs would 
be less than the capital LCH SA holds under EU regulations (capital 
equal to the operating expenses for a six (6) month period) and that 
LCH SA would be in a position to close the company within six months of 
the decision to wind-down.\54\
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    \53\ Id.
    \54\ Id.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\55\ For the reasons given below, the Commission finds 
that the proposed rule changes are consistent with Section 17A(b)(3)(F) 
of the Act \56\ and Rules 17Ad-22(e)(2)(i), (iii), and (v), 17Ad-
22(e)(3)(ii), and 17Ad-22(e)(15)(i)-(ii) thereunder.\57\
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    \55\ 15 U.S.C. 78s(b)(2)(C).
    \56\ 15 U.S.C. 78q-1(b)(3)(F).
    \57\ 17 CFR 240.17Ad-22(e)(2)(i), (iii), and (v); (e)(3)(ii); 
(e)(15)(i)-(ii).
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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, as well 
as to assure the safeguarding of securities and funds which are in the 
custody or control of LCH SA or for which it is responsible, and, in 
general, to protect investors and the public interest.\58\
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    \58\ 15 U.S.C. 78q-1(b)(3)(F).
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    As described above, the RP would specify the steps that LCH would 
take in recovery and the governance framework applicable to taking such 
steps. It would analyze the anticipated impact of the recovery tools, 
the incentives created by such tools, and the risks associated with 
using such tools. It would also explain how the tools used in the plan 
are transparent, measurable, manageable, and controllable. The 
Commission believes that by specifying the steps LCH SA would take and 
the tools it would use to bring about recovery in the face of losses, 
the RP would increase the likelihood that recovery would be orderly, 
efficient, and successful. In increasing the likelihood that recovery 
of LCH SA would be orderly, efficient, and successful, the Commission 
believes that the RP would enhance LCH SA's ability to maintain the 
continuity of its critical services (including clearance and settlement 
services) during, through, and following periods of extreme stress 
giving rise to the need for recovery, thereby promoting the prompt and 
accurate clearance and settlement of CDS transactions. The Commission 
also believes that the RP would help assure the safeguarding of 
securities or funds in the custody or control of LCH SA by reducing the 
likelihood of a disorderly or unsuccessful recovery, which could 
otherwise disrupt access to such securities or funds. For the same 
reason, the Commission also believes the RP would be consistent with 
the protection of investors and the public interest.
    Similarly, the Commission believes that the WDP would enhance LCH 
SA's ability to promote the prompt and accurate clearance and 
settlement of securities transactions and to safeguard securities and 
funds in its control by establishing a plan to effectuate an orderly 
wind down. Specifically, the WDP's governance process and notice 
provisions would facilitate the orderly close-out of positions and 
potential transfer of positions to other central counter parties. 
Therefore, the Commission believes that these provisions would enhance 
LCH SA's ability to maintain and continue the prompt and accurate 
clearance and settlement of CDS transactions by assuring that such 
transactions are closed-out and transferred to other central 
counterparties in an orderly and transparent manner. Moreover, by 
specifying in advance the steps LCH SA would take in a wind down, the 
WDP would assure an efficient and orderly wind down of LCH SA. The 
Commission believes that this, in turn, would assure the safeguarding 
of securities or funds in the custody or control of LCH SA by reducing 
the likelihood of an inefficient or disorderly wind down, which could 
disrupt access to such securities or funds. Finally, the Commission 
believes that the WDP's requirement that LCH SA deposit remaining cash 
in central bank accounts and limit investment options to short term 
highly-liquid instruments would further enhance LCH SA's ability to 
safeguard funds in its control by reducing the risk of liquidity 
constraints and investment losses during a wind down.
    Therefore, the Commission finds that the proposed rule changes 
would promote the prompt and accurate clearance and settlement of 
securities transactions, assure the safeguarding of securities and 
funds in LCH SA's custody and control, and, in general, protect 
investors and the public interest, consistent with the Section 
17A(b)(3)(F) of the Act.\59\
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    \59\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rules 17Ad-22(e)(2)(i), (iii), and (v)

    Rules 17Ad-22(e)(2)(i), (iii), and (v) require that LCH SA 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to provide for governance arrangements 
that are clear and transparent, that support the public interest 
requirements in Section 17A of the Act applicable to clearing agencies, 
and the objectives of owners and participants, and that specify clear 
and direct lines of responsibility.\60\
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    \60\ 17 CFR 240.17Ad-22(e)(2)(i), (iii), and (v).
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    The RP would identify clear lines of responsibility for its 
preparation and final approval, the monitoring of its use, and the 
functioning of the recovery tools. The RP would also specify the 
process LCH SA would take to receive input from various parties at LCH 
SA, including management committees and the Board. Further, the RP 
would enhance transparency by including member representatives in the 
review of the RP. The Commission believes that these lines of control 
and input from various LCH SA stakeholders can contribute to 
establishing, implementing, maintain and enforcing clear and 
transparent governance arrangements that support the public interest 
requirements in Section 17A of the Act applicable to clearing agencies, 
and the objectives of owners and participants.
    The WDP similarly would identify clear lines of responsibility for 
the invocation, monitoring, and approval of the WDP, and ultimately, a 
wind down. It would enhance transparency by requiring final approval by 
the LCH SA shareholders and providing for communication to clearing 
members and other users of LCH SA's services. The Commission believes 
that both of these features of the WDP would represent clear and 
transparent governance arrangements.
    Therefore, the Commission finds that the proposed rule changes 
would establish clear and transport governance arrangements for the RP 
and WDP,

[[Page 28889]]

consistent with Rules 17Ad-22(e)(2)(i), (iii), and (v).\61\
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    \61\ 17 CFR 240.17Ad-22(e)(2)(i), (iii), and (v).
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C. Consistency With Rule 17Ad-22(e)(3)(ii)

    Rule 17Ad-22(e)(3)(ii) requires that LCH SA establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to maintain a sound risk management framework for 
comprehensively managing legal, credit, liquidity, operational, general 
business, investment, custody, and other risks that arise in or are 
borne by LCH SA, which includes plans for the recovery and orderly 
wind-down of LCH SA necessitated by credit losses, liquidity 
shortfalls, losses from general business risk, or any other losses.\62\
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    \62\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    The Commission believes that the information the RP would provide 
about the steps that LCH SA would take, and the tools it would use, to 
effectuate a recovery of LCH SA would enhance LCH SA's ability to 
recover from credit losses, liquidity shortfalls, general business risk 
losses, or other losses, consistent with Rule 17Ad-22(e)(3)(ii).\63\ 
Specifically, the information from the RP would enable LCH SA to 
prepare in advance for the use of such tools and practice the use of 
such tools, which would in turn enhance LCH SA's ability to use such 
tools effectively to carry out a successful recovery. In addition, by 
establishing a single source of information about, and steps needed to 
effectuate, a recovery of LCH SA, the RP would allow LCH SA personnel 
to effectuate a recovery in a consistent and coordinated fashion, and 
would thereby increase the likelihood of a successful recovery. 
Moreover, by identifying and assessing available recovery tools, the 
Commission believes that the RP would enhance LCH SA's ability to use 
such tools effectively to bring about a recovery by identifying in 
advance which tools may be most effective for different situations or 
needs, consistent with Rule 17Ad-22(e)(3)(ii).\64\
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    \63\ Id.
    \64\ Id.
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    Similarly, in providing detailed information about the governance 
requirements related to triggering and implementing the WDP discussed 
in more detail above, the Commission believes that the WDP would 
enhance LCH SA's ability to effectuate an orderly wind-down, consistent 
with Rule 17Ad-22(e)(3)(ii).\65\ Specifically, by setting out in 
advance the steps LCH SA would take to trigger and effectuate a wind-
down, the WDP would enable LCH SA to prepare in advance for a wind-
down, and practice the steps needed to effectuate a wind-down, which 
the Commission believes would enhance LCH SA's ability to use the WDP 
effectively to carry-out an orderly wind-down. In addition, by 
establishing a single source of information about, and steps needed to 
effectuate, a wind-down of LCH SA, the Commission believes the WDP 
would allow LCH SA personnel to effectuate a wind-down in a consistent 
and coordinated fashion, and would thereby increase the likelihood of 
an orderly wind-down. Finally, the WDP would identify the legal basis 
for LCH's actions with respect to a potential wind-down, including 
relevant citations to provisions of the rule books of its various 
clearing services and contractual agreements, which the Commission 
believes would further facilitate a well-reasoned, legal, and orderly 
wind-down process by providing LCH SA with a single source of 
information and steps needed for a wind-down, consistent with Rule 
17Ad-22(e)(3)(ii).\66\
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    \65\ Id.
    \66\ Id.
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    Therefore, the Commission finds that the proposed rule changes 
would be plans for the orderly recovery and wind down of LCH SA, 
consistent Rule 17Ad-22(e)(3)(ii).\67\
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    \67\ Id.
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D. Consistency With Rules 17Ad-22(e)(15)(i)-(ii)

    Rules 17Ad-22(e)(15)(i)-(ii) require LCH SA to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to identify, monitor, and manage its general 
business risk and hold sufficient liquid net assets funded by equity to 
cover potential general business losses so that LCH SA can continue 
operations and services as a going concern if those losses materialize, 
including by (i) determining the amount of liquid net assets funded by 
equity based upon its general business risk profile and the length of 
time required to achieve a recovery or orderly wind-down, as 
appropriate, of its critical operations and services if such action is 
taken and (ii) holding liquid net assets funded by equity equal to the 
greater of either (x) six months of the LCH SA's current operating 
expenses, or (y) the amount determined by the board of directors to be 
sufficient to ensure a recovery or orderly wind-down of critical 
operations and services.\68\
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    \68\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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    LCH SA's RP would include a quantitative assessment of the 
situations that could necessitate a recovery and related recovery 
tools. This quantitative assessment would consider the potential impact 
to LCH SA's liquid net assets funded by equity, including its surplus 
capital. It would also include an assessment of the time to implement 
the various recovery tools. Thus, the Commission finds that the RP 
would indicate the potential cost and length of recovery, consistent 
with Rules 17Ad-22(e)(15)(i)-(ii).\69\
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    \69\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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    Similarly, LCH SA's WDP would calculate costs related to a wind 
down. These costs would include staffing, technological, facilities, 
legal, and other resources necessary during the actual wind-down 
period. Further, the WDP concludes, based on recently audited amounts, 
that LCH SA would hold highly liquid resources corresponding to six 
months of operating expenses and that this amount would exceed the 
estimated costs of conducting a wind-down. The WDP also concludes that 
the length of time it would take LCH SA to wind-down and close clearing 
services would be six months from the decision to wind-down. Thus, the 
Commission finds that the WDP would indicate LCH SA's ability to 
effectuate a wind down within six months of the decision to wind-down 
at a lower cost than the amount of its liquid resources, consistent 
with Rules 17Ad-22(e)(15)(i)-(ii).\70\
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    \70\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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    Therefore, the Commission finds that the proposed rule changes 
would determine the length of time required to achieve a recovery or 
orderly wind-down of LCH SA and the associated costs and would further 
ensure that LCH SA holds liquid net assets greater than these costs, 
consistent with Rules 17Ad-22(e)(15)(i)-(ii).\71\
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    \71\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule changes are consistent with the requirements of the Act, 
and in particular, Section 17A(b)(3)(F) of the Act \72\ and Rules 17Ad-
22(e)(2)(i), (iii), and (v), 17Ad-22(e)(3)(ii), 17Ad-22(e)(15)(i)-(ii) 
thereunder.\73\
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    \72\ 15 U.S.C. 78q-1(b)(3)(F).
    \73\ 17 CFR 240.17Ad-22(e)(2)(i), (iii), and (v); (e)(3)(ii); 
(e)(15)(i)-(ii).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-LCH SA-

[[Page 28890]]

2017-012) be, and hereby is, approved.\74\
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    \74\ In approving the proposed rule change, the Commission 
considered the proposal's impacts on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-LCH SA-2017-013) be, and hereby is, 
approved.\75\
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    \75\ In approving the proposed rule change, the Commission 
considered the proposal's impacts 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.\76\
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    \76\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13300 Filed 6-20-18; 8:45 am]
BILLING CODE 8011-01-P


