[Federal Register Volume 84, Number 89 (Wednesday, May 8, 2019)]
[Notices]
[Pages 20178-20181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09372]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85763; File No. SR-LCH SA-2019-002]


Self-Regulatory Organizations; LCH SA; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to the 
Extension of the Onboarding Fee Waiver and Introduction of a Fee Rebate 
Scheme for CDSClear Index Swaptions Clearing Activities

May 2, 2019.
    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 April 29, 2019, 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, II and III below, which Items have been prepared 
primarily by LCH SA. LCH SA filed the proposal pursuant to Section 
19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(2) \4\ thereunder, so that 
the proposal was effective upon filing with the Commission. 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)(2).
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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 extend the onboarding fee waiver and 
introduce a fee rebate scheme for CDSClear Index Swaptions clearing 
activities to be effective upon filing with the Commission.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, LCH SA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. LCH SA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. 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
    As specified in the table below, the current CDSClear Index 
Swaptions fee grid includes an onboarding fee and offers both General 
Members and Select Members a choice between the Introductory Tariff and 
the Unlimited Tariff.
    The purpose of the proposed rule change is to:
    (1) Extend the waiver period for the onboarding fee for both 
General Members and Select Members that register to the CDSClear Index 
Swaptions clearing service, and
    (2) introduce a clearing fee rebate applicable to the Index 
Swaptions Unlimited Tariff for both General Members and Select Members.
    As a reminder, under the Unlimited Tariff, Clearing Members pay a 
fixed amount annually that covers all clearing fees for their Index 
Swaptions House activity for the activity of all the Affiliates of 
their Clearing Member group.

    Current LCH SA CDSClear Index Swaptions Clearing Service Fee Grid
------------------------------------------------------------------------
 
------------------------------------------------------------------------
General Member:.........................................................
    Introductory Tariff.................................................
    Cover only one Clearing Member legal entity (no Affiliate coverage).
------------------------------------------------------------------------
    Clearing fees..............             $15  per million of Index
                                                  Swaptions notional on
                                                  U.S. Indices.*
                                       [euro]15  per million of Index
                                                  Swaptions notional on
                                                  European Indices.
    Floor on clearing fees.....      [euro]150k  Per calendar year (no
                                                  pro-rating).
    Cap on clearing fees.......      [euro]600k  Per calendar year (no
                                                  pro-rating).
------------------------------------------------------------------------
    Unlimited Tariff....................................................
    Cover all the Affiliates of a given Clearing Member group...........
    Cover all clearing fees for Index Swaptions House activity for both
     iTraxx and CDX.NA underlying index families..
------------------------------------------------------------------------
    Fixed fee (annual).........      [euro]375k  Per calendar year (no
                                                  pro-rating).
    Onboarding Fees (both             [euro]30k  One-off fee per
     Introductory Tariff &                        Clearing Member legal
     Unlimited Tariff).                           entity under the
                                                  Introductory Tariff or
                                                  per Clearing Member
                                                  group under the
                                                  Unlimited Tariff
                                                  waived until 31-Mar-
                                                  19.
------------------------------------------------------------------------

[[Page 20179]]

 
Select Member:..........................................................
    Introductory Tariff.................................................
    Cover only one Clearing Member legal entity (no Affiliate coverage).
------------------------------------------------------------------------
    Clearing fees..............             $18  per million of Index
                                                  Swaptions notional on
                                                  U.S. Indices.*
                                       [euro]18  per million of Index
                                                  Swaptions notional on
                                                  European Indices.
    Cap on Clearing fees.......      [euro]600k  Per calendar year (no
                                                  pro-rating).
------------------------------------------------------------------------
    Unlimited Tariff....................................................
    Cover all Affiliates of a given Clearing Member group...............
    Cover all clearing fees for Index Swaptions House activity for both
     iTraxx and CDX.NA underlying index families..
------------------------------------------------------------------------
    Fixed fee (annual).........      [euro]400k  Per calendar year (no
                                                  pro-rating).
    Onboarding Fees (both             [euro]30k  One-off fee per
     Introductory Tariff &                        Clearing Member legal
     Unlimited Tariff).                           entity under the
                                                  Introductory Tariff or
                                                  per Clearing Member
                                                  group under the
                                                  Unlimited Tariff
                                                  waived until 31-Mar-
                                                  19.
Client:
    Clearing fees..............             $20  per million of Index
                                                  Swaptions notional on
                                                  U.S. Indices.
                                       [euro]20  per million of Index
                                                  Swaptions notional on
                                                  European Indices.
------------------------------------------------------------------------

    In order to incentivize the Clearing Members to build liquidity in 
the CDSClear Index Swaptions clearing service, LCH SA has decided to 
make the following changes to its Index Swaptions fee grid:
    (1) Extend the waiver period for the onboarding fee from 31 March 
2019 to 20 December 2019 for both General Members and Select Members 
that register to the CDSClear Index Swaptions clearing service, and
    (2) implement a fee rebate scheme, applicable to the Unlimited 
Tariff for both General Members and Select Members, in which discounts 
to the fixed fee will apply depending on the Index Swaptions notional 
cleared by each Clearing Member group as detailed hereinafter.
    The fee rebate scheme will be valid for 2019 only and apply equally 
to all Clearing Members that register to the CDSClear Index Swaptions 
clearing service.
    In order to determine the relevant discount rate to apply, LCH SA 
will consider the total Index Swaptions notional cleared in 2019 
starting from the date on which the fee rebate is deemed effective in 
accordance with any relevant regulatory review and approval process.

    Revised LCH SA CDSClear Index Swaptions Clearing Service Fee Grid
------------------------------------------------------------------------
 
------------------------------------------------------------------------
          Index Swaptions clearing service fee rebate scheme *
------------------------------------------------------------------------
General Member:
    Unlimited Tariff
    Fixed fee (annual).........      [euro]375k  Per calendar year.
    Discounted Rates...........       [euro]50k  After discount rate of
                                                  86.67% applied to the
                                                  Fixed fee amount if
                                                  Index Swaptions
                                                  notional cleared per
                                                  Clearing Member group
                                                  strictly above
                                                  [euro]12 billion.
                                      [euro]75k  After discount rate of
                                                  80.00% applied to the
                                                  Fixed fee amount if
                                                  Index Swaptions
                                                  notional cleared per
                                                  Clearing Member group
                                                  strictly above [euro]6
                                                  billion but equal or
                                                  below [euro]12
                                                  billion.
                                     [euro]125k  After discount rate of
                                                  67.00% applied to the
                                                  Fixed fee amount if
                                                  Index Swaptions
                                                  notional cleared per
                                                  Clearing Member group
                                                  strictly above [euro]0
                                                  but equal or below
                                                  [euro]6 billion.
------------------------------------------------------------------------
Select Member:
    Unlimited Tariff
    Fixed fee (annual).........      [euro]400k  Per calendar year.
    Discounted Rates...........       [euro]50k  After discount rate of
                                                  87.50% applied to the
                                                  Fixed fee amount if
                                                  Index Swaptions
                                                  notional cleared per
                                                  Clearing Member group
                                                  strictly above
                                                  [euro]12 billion.
                                      [euro]75k  After discount rate of
                                                  81.25% applied to the
                                                  Fixed fee amount if
                                                  Index Swaptions
                                                  notional cleared per
                                                  Clearing Member group
                                                  strictly above [euro]6
                                                  billion but equal or
                                                  below [euro]12
                                                  billion.
                                     [euro]125k  After discount rate of
                                                  68.75% applied to the
                                                  Fixed fee amount if
                                                  Index Swaptions
                                                  notional cleared per
                                                  Clearing Member group
                                                  per year strictly
                                                  above [euro]0 but
                                                  equal or below [euro]6
                                                  billion.
------------------------------------------------------------------------
Cumulative conditions for the Fee rebate:
    (i) application to the Unlimited Tariff only;.......................
    (ii) application to all Clearing Members registering to the Index
     Swaptions clearing service (registration letter or application file
     signature date);.
    (iii) Valid for 2019 only; and......................................

[[Page 20180]]

 
    (iv) Index Swaptions notional cleared for the determination of the
     discount rate to be observed from the regulatory effective date of
     the rebate..
------------------------------------------------------------------------
Onboarding fee (for both              [euro]30k  One-off fee per
 General Members and Select                       Clearing Member group
 Members).                                        waived until 20
                                                  December 2019 under
                                                  the Unlimited Tariff.
------------------------------------------------------------------------
* Subject to regulatory review/approval process.

2. Statutory Basis
    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.\5\
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    \5\ 15 U.S.C. 78q-1(b)(3)(D).
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    LCH SA has determined that the proposed fees are reasonable and 
appropriate to offer and grow CDSClear Index Swaptions clearing 
services.
    Regarding the CDClear Index Swaptions service, LCH SA has already 
rule filed with the SEC the relevant fee grid and believes that the 
proposed discounts for CDSClear Index Swaptions clearing activities 
have been set up at an appropriate level given the costs, expenses and 
revenues to be generated to LCH SA in providing such services.
    All clearing members will have the same opportunity to equally 
benefit from the proposed incentive rebate according to the specified 
conditions.
    LCH SA believes that proposing such clearing fees and rebate are 
consistent with the requirements of Section 17A of the Act \6\ and the 
regulations thereunder applicable to it, and in particular provides for 
the equitable allocation of reasonable fees, dues, and other charges 
among Clearing Members and market participants by ensuring that 
Clearing Members pay reasonable fees and dues for the services provided 
by LCH SA, within the meaning of Section 17A(b)(3)(D) of the Act.
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    \6\ 15 U.S.C. 78q-1.
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B. Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act requires that the rules of a 
clearing agency not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\7\ LCH SA does 
not believe that the proposed rule change would impose any burden on 
competition.
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    \7\ 15 U.S.C. 78q-1(b)(3)(I).
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    As noted above, LCH SA believes that the fees amount and related 
discounts have been set up at an appropriate level given the costs and 
expenses to LCH SA in offering and maintaining the relevant CDSClear 
Index Swaptions clearing services.
    Additionally, the fee waiver and rebate will apply equally to all 
CDSClear Clearing Members and their Affiliates.
    Further, LCH SA does not believe that the proposed rule change 
would have a burden on competition because it does not adversely affect 
the ability of such Clearing Members or other market participants 
generally to engage in cleared transactions or to access clearing 
services as the clearing of Index Swaptions remains not mandatory.

C. Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. LCH SA will notify the Commission of any written 
comments received by LCH SA.

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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) \8\ of the Act and Rule 19b-4(f)(2) \9\ 
thereunder because it establishes a fee or other charge imposed by LCH 
SA on its Clearing Members. At any time within 60 days of the filing of 
the proposed rule change, the Commission summarily may temporarily 
suspend such proposed 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
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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:
     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-2019-002 on the subject line.

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-2019-002. 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 website (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 website 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 website 
at https://www.lch.com/resources/rules-and-regulations/proposed-rule-changes-0. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-LCH SA-2019-002 and should 
be submitted on or before May 29, 2019.


[[Page 20181]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09372 Filed 5-7-19; 8:45 am]
BILLING CODE 8011-01-P


