[Federal Register Volume 87, Number 183 (Thursday, September 22, 2022)]
[Notices]
[Pages 57931-57933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20501]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95808; File No. SR-LCH SA-2022-005]


Self-Regulatory Organizations; LCH SA; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change, as Modified by 
Amendment No. 1, Relating to the CDSClear CCP Switch Programme

September 16, 2022.
    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 September 9, 2022, 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 proposed rule change 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. On 
September 14, 2022, LCH SA filed Amendment No. 1 to the proposed rule 
change.\5\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 1 (hereafter, 
the ``proposed rule change change''), from interested persons.\6\
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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).
    \5\ In Amendment No. 1, LCH SA deleted a sentence from Item II.B 
that was not applicable to the filing.
    \6\ References to the proposed rule change from this point 
forward refer to the proposed rule change as modified by Amendment 
No. 1.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    (a) LCH SA is proposing to offer an incentive fee programme to 
existing and new potential clearing member and clients of CDSClear 
service (the ``Proposed Rule Change'').
    The text of the Proposed Rule Change is in Exhibit 5 [sic].\7\
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    \7\ All capitalized terms not defined herein have the same 
definition as in the CDS Clearing Rule Book, Supplement or 
Procedures, as applicable.
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    The implementation of the Proposed Rule Change will be contingent 
on LCH SA's receipt of all necessary regulatory approvals.
    (b) Not applicable.
    (c) Not applicable.

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 these statements.

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

(a) Purpose
    Following an announcement made at the end of June by an alternate 
credit CCP that it would cease clearing all

[[Page 57932]]

classes of CDS contracts by the end of March 2023,\8\ but also in light 
of the upcoming extension of CDSClear products, LCH SA CDSClear expects 
a number of clients and clearing members of alternate credit CCPs to 
choose to move their CDS portfolios to LCH SA CDSClear.
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    \8\ Circular C22/076 ``Cessation of clearing of CDS Contracts'' 
published by ICE Clear Europe on 30 June 2022 (C22076.pdf 
(theice.com).
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    Within this context, the purpose of the Proposed Rule Change is for 
CDSClear to offer Clearing Members and clients acting through a 
Clearing Member, who have, directly or through a Clearing Member as 
applicable, signed up to the CCP Switch Programme \9\ as specified in 
Exhibit 5 [sic], the opportunity to move their cleared index and single 
name credit default swap (``CDS'') or Index Swaption transactions from 
alternate credit CCPs to LCH SA at no cost (the ``CCP Switch 
Programme'').
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    \9\ Clearing Members and clients will be able to enter into the 
CCP Switch Programme by completing a written form.
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    As detailed in the CDSClear Circular attached as Exhibit 5 [sic] 
and also to be published on the LCH website, LCH SA CDSClear is 
proposing to implement the CCP Switch Programme that would be offered 
to all CDSClear Clearing Members and clients (the ``Switch Programme 
Participants'') once effective.
    The CCP Switch Programme will apply to all ``Eligible Cleared 
Transactions'' which include cleared transactions where there is no 
unlimited tariff available for the Switch Programme Participant or the 
cleared transaction would attract a non-zero clearing fee. This 
includes all CDS transactions for Select Members, but not Index 
Swaption transactions where an unlimited tariff is available. It 
includes all CDS transactions for clients of Clearing Members, but not 
Index Swaption transactions in 2022, where a full discount of client 
variable fees is being applied. It currently does not include any 
transactions for General Members. General Members have an unlimited 
tariff available for CDS apart from sovereign single names. Sovereign 
single names are subject to a full discount of clearing fees for 
General Members for 1 year from the go-live date. An unlimited tariff 
is available to General Members for Index Swaptions, which excludes 
these from being an Eligible Cleared Transaction also.
    To assist Switch Programme Participants in efficiently closing 
positions at alternate credit CCPs and reopening the same positions at 
the LCH SA CDSClear service, LCH SA is proposing to allow Switch 
Programme Participants to complete these transactions for zero CCP 
clearing fees.
    In order to facilitate this, LCH SA CDSClear would charge no 
clearing fees to enter into the Eligible Cleared Transaction on 
CDSClear, known as the ``the CDSClear Transaction Leg''. 
Correspondingly, LCH SA would provide a Credit Note for the Assumed 
Cost of entering into the close out transaction at the alternate CDS 
CCP, known as the ``Alternate CCP Transaction Leg.
    The Credit Note would be applied to all non-CCP Switch Eligible 
Cleared Transactions of a Switch Programme Participant for a period of 
six (6) months beginning at the ``Programme Entry Date'', mentioned in 
the relevant Switch Programme registration form provided to LCH SA. 
This will effectively make the CCP Switch free of any clearing fees at 
either CCP. At the end of the six months period, any unused portion of 
the Credit Note would be forfeited.
    Fees for both the CCP Switch and any transactions which would have 
the Credit Note applied would be charged as normal, then rebated at the 
end of each month.
(b) 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.\10\
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    \10\ 15 U.S.C. 78q-1(b)(3)(D).
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    LCH SA believes that its clearing fee change proposal is consistent 
with the requirements of Section 17A of the Act \11\ 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 and clients pay reasonable fees and dues for the 
services provided by LCH SA, within the meaning of Section 17A(b)(3)(D) 
of the Act.\12\
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    \11\ 15 U.S.C. 78q-1.
    \12\ 15 U.S.C. 78q-1(b)(3)(D).
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    Indeed, there is no change on the tariffs on which LCH SA CDSClear 
has existing activity (i.e. Corporates and Financials Index and Single 
Names, General Members Unlimited and Introductory tariffs for Index 
Options). Rather the Proposed Rule Change provides for a fee rebate to 
Switch Programme Participants who choose to switch CDS positions from 
an alternate CCP to the LCH SA CDSClear service, effectively allowing 
these switch transactions to have no cost impact to Switch Programme 
Participants. Additionally, in no case will the Proposed Rule Change 
cause an increase to any fees charged by LCH SA. As such, LCH SA 
believes that the Proposed Rule Change consistent with Section 
17A(b)(3)(D) and is designed to offer Clearing Members and clients with 
cleared CDS and Index Swaption positions, especially those that may 
become ineligible to remain at their current CCP, the ability to move 
their positions to LCH SA free of charge. LCH SA does not plan to offer 
the CCP Switch Programme for cleared transactions where there is an 
unlimited tariff available to Switch Programme Participants or where 
cleared transactions would not attract a fee.
    For all the reasons stated above, LCH SA believes that the proposed 
changes to the LCH SA fee grid are reasonable and appropriate.

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.\13\
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    \13\ 15 U.S.C. 78q-1(b)(3)(I).
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    LCH SA does not believe that the Proposed Rule Change would impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the CCP Switch Programme 
is meant to facilitate competition and movement between CCPs by 
accommodating such positions transfers and reducing the barrier 
potentially created by high fees associated with transferring 
corresponding positions between clearing houses. LCH SA is offering the 
possibility for all CDSClear Clearing Members and clients to utilize 
the CCP Switch Programme without prejudice and on identical terms. The 
Proposed Rule Change would not affect the ability of Clearing Members 
or other market participants generally to engage in cleared 
transactions or to access clearing services.
    Additionally, the clearing fee conditions remain transparent and 
equally applicable to any eligible participant wishing to access the 
CDSClear clearing service including those transactions that are not 
mandatory for clearing.

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

[[Page 57933]]

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) \14\ of the Act and Rule 19b-4(f)(2) 
\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-LCH SA-2022-005 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-2022-005. 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 the filing also will 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/rulebooks/proposed-rule-changes. 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-2022-005 and should 
be submitted on or before October 13, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20501 Filed 9-21-22; 8:45 am]
BILLING CODE 8011-01-P


