[Federal Register Volume 84, Number 202 (Friday, October 18, 2019)]
[Notices]
[Pages 55992-55993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22719]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87296; File No. SR-LCH SA-2019-006]


Self-Regulatory Organizations; LCH SA; Order Approving Proposed 
Rule Change Relating to Extension of Weekly Backloading Cycle to Index 
Swaptions

October 11, 2019.

I. Introduction

    On August 20, 2019, 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 to amend its CDS Clearing Rule 
Book (``Rule Book'') and CDS Clearing Procedures (``Procedures'') 
(collectively the ``CDS Clearing Rules'') to make conforming, 
clarifying, and clean-up changes intended to extend the weekly 
backloading process to Index Swaptions and amend the structure of the 
documentation relating to the backloading process (``Weekly Backloading 
Cycle'').\3\ The proposed rule change was published for comment in the 
Federal Register on September 9, 2019.\4\ The Commission has not 
received any comments on the proposed rule change. For the reasons 
discussed below, the Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Capitalized terms used herein but not otherwise defined have 
the meaning set forth in the Rule Book and Procedures.
    \4\ Securities Exchange Act Release No. 34-86858 (September 3, 
2019), 84 FR 47328 (Sept. 9, 2019) (SR-LCH SA-2019-006) 
(``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    LCH SA is proposing to update the CDS Clearing Rules to permit the 
clearing process of Index Swaptions through the Weekly Backloading 
Cycle, which is currently the case for CDS.\5\ For the purpose of this 
proposal, existing defined terms and provisions in the Rule Book and 
Sections 4 and 5 of the Procedures have been amended as described 
below.\6\
---------------------------------------------------------------------------

    \5\ 84 FR at 47328-47329.
    \6\ 84 FR at 47329.
---------------------------------------------------------------------------

    LCH SA proposes to make amendments to the existing defined term 
``Weekly Backloading Transaction'' contained within Title I, Chapter 1, 
Section 1.1.1. of the Rule Book by adding a reference to ``Index 
Swaption.'' \7\
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

    Section 4 of the Procedures will be updated to make the relevant 
eligibility requirements applicable to Index Swaptions to be submitted 
to LCH SA for clearing through the Weekly Backloading Cycle where 
necessary.\8\ Specifically, the reference to an ``Index Swaption 
Intraday Transaction'' in Section 4.1(c)(i)(V) will be replaced by a 
reference to an ``Index Swaption'' and the reference to an ``Index 
Swaption Intraday Transaction'' in Section 4.1(c)(iii)(C) will be 
replaced by a reference to an ``Index Swaption that is an Index 
Swaption Intraday Transaction or a Weekly Backloading Transaction.'' 
\9\
---------------------------------------------------------------------------

    \8\ Id.
    \9\ Id.
---------------------------------------------------------------------------

    Section 5 of the Procedures will be updated by adding a reference 
to ``Index Swaptions'' in Section 5.2 (b) so that Index Swaptions are 
eligible for the Weekly Backloading Cycle.\10\
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

    LCH SA is also proposing to revise the CDS Clearing Rules to make 
typographical corrections and changes made for consistency purposes. 
Specifically, information on the Daily Backloading Cycle and the Weekly 
Backloading Cycle will be moved from the Rule Book and Section 5 of the 
Procedures to new Clearing Notices (i.e., a Clearing Notice named 
``Daily Backloading Cycle'' and a Clearing Notice named ``Weekly 
Backloading Cycle'') rather than leaving them in the CDS Clearing 
Rules.\11\
---------------------------------------------------------------------------

    \11\ Id.
---------------------------------------------------------------------------

    Section 5.2(b) and (c) of the Procedures will refer to a Clearing 
Notice processing schedule for each of the Daily Backloading Cycle and 
Weekly Backloading Cycle is proposed to be removed from these 
paragraphs.\12\ In the Rule Book, defined terms of ``Eligible Weekly 
Backloading Transaction'' and ``Irrevocable Weekly Backloading 
Transaction'' will therefore refer to a Clearing Notice instead of 
Section 5 of the Procedures, as well as Sections 3.1.1 and 3.1.2 of the 
Rule Book.\13\
---------------------------------------------------------------------------

    \12\ Id.
    \13\ Id.
---------------------------------------------------------------------------

    In addition, the definitions of ``Weekly Backloading Start Day'' 
and ``Weekly Backloading Novation Day'' in the Rule Book are proposed 
to be amended in order to make a general reference to a day as 
determined by LCH SA in accordance with Article 3.1.1.10 of the Rule 
Book as these days will be provided for in the new Clearing Notice 
named ``Weekly Backloading Cycle.'' \14\ Article 3.1.1.10 will be 
amended to remove the publication date of this Clearing Notice as the 
provisional calendar, which specifies the Weekly Backloading Cycle, 
will not change each year.\15\
---------------------------------------------------------------------------

    \14\ Id.
    \15\ Id.
---------------------------------------------------------------------------

    Finally, minor typographical corrections will be made to the 
definition of ``Converting Clearing Member'' in the Rule Book and 
Section 4.1(c)(vii)(B) of the Procedures.\16\ The reference to Section 
3 in Article 3.1.1.1 of the Rule Book is also proposed to be deleted as 
it is redundant of the provisions of the previous sentence of this 
Article.\17\
---------------------------------------------------------------------------

    \16\ Id.
    \17\ Id.
---------------------------------------------------------------------------

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.\18\ For the reasons given below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act.\19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(C).
    \19\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires that the rules of LCH SA 
be designed, among other things, 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, in general, to protect investors and the public interest.\20\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission believes that by changing its CDS Clearing Rules as 
described above to allow for the clearing of Index Swaptions trades 
that were not previously cleared, LCH SA's rule proposal would promote 
the prompt and accurate settlement of derivative agreements, contracts, 
and transactions

[[Page 55993]]

by subjecting these products to its clearance system through the 
backloading cycle. The Commission believes that this, in turn, will 
protect investors and the public interest because the proposal ensures 
that trading in these products will adhere to the LCH SA clearing rules 
and procedures.
    Further, the Commission believes that for the same reasons that 
including Index Swaptions into the backloading cycle fosters prompt and 
accurate settlement, moving the processing schedules for the weekly and 
daily backloading cycles from the CDS Clearing Rules to Clearing 
Notices is similarly consistent with an overall prompt system of 
clearance and settlement. Clearing members will continue to have access 
to this processing detail in the Clearing Notice.
    Thus, the Commission believes that the proposal, in general, is 
consistent with Section 17A(b)(3)(F) of the Act.\21\
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

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, Section 17A(b)(3)(F) of the Act.\22\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-LCH SA-2019-006) be, and hereby is, 
approved.\23\
---------------------------------------------------------------------------

    \23\ 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.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22719 Filed 10-17-19; 8:45 am]
 BILLING CODE 8011-01-P


