[Federal Register Volume 84, Number 174 (Monday, September 9, 2019)]
[Notices]
[Pages 47328-47330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19335]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86858; File No. SR-LCH SA-2019-006]


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

September 3, 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 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'') the proposed rule change 
described in Items I, II, and III below, which Items have been prepared 
primarily by LCH SA. 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.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    Banque Centrale de Compensation, which conducts business under the 
name LCH SA (``LCH SA''), is proposing to amend its (i) CDS Clearing 
Rule Book (``Rule Book'') and (ii) CDS Clearing Procedures 
(``Procedures'') (collectively the ``CDS Clearing Rules'') to make 
conforming, clarifying, and clean-up changes intended to: (1) Extend 
the weekly backloading process to Index Swaptions; and (2) amend the 
structure of the documentation in respect of the backloading process. 
Capitalized terms not defined or modified in this rule proposal will 
have the same meaning as in LCH SA's existing Rule Book or Procedures.
    The text of the proposed rule change has been annexed as Exhibit 
5.\3\
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    \3\ All capitalized terms not defined herein have the same 
definition as the Rule Book, Supplement or Procedures, as 
applicable.
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    The implementation of the updated Rule Book and Procedures will be 
contingent on LCH SA's receipt of all necessary regulatory approvals.

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.

1. Purpose
    LCH SA is proposing to amend its CDS Clearing Rules to allow 
clearing

[[Page 47329]]

process of Index Swaptions through the CDSClear Weekly Backloading 
Cycle, in addition to the CDS that are already in the scope of this 
process today.
    Further, this proposed rule change will also amend the CDS Clearing 
Rules in order to review the structure of the rule book documentation 
in respect of the Weekly Backloading Cycle and the Daily Backloading 
Cycle and make consistency changes.
(a) Amendments To Extend the Weekly Backloading Cycle to Index 
Swaptions
    The updated CDS Clearing Rules will permit Clearing Members to 
submit Index Swaptions to LCH SA for clearing through the Weekly 
Backloading Cycle. For the purpose of this extension, existing defined 
terms and provisions in the Rule Book and Sections 4 and 5 of the 
Procedures have been amended as described below.
i. Rule Book
    With respect to the Rule Book, LCH SA proposes to make amendments 
to the existing defined term ''Weekly Backloading Transaction'' 
contained within Title I, Chapter 1, Section 1.1.1. by adding a 
reference to ``Index Swaption''.
ii. Procedures
(A) Section 4
    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.
    Thus, 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''. In addition, 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''.
(B) Section 5
    LCH SA proposes to update Section 5 of the Procedures by adding a 
reference to ``Index Swaptions'' in Section 5.2(b) so that Index 
Swaptions are eligible for the Weekly Backloading Cycle.
(b) Technical Amendments
    The amendments to the Rule Book and Procedures also contain 
typographical corrections and changes made for consistency purpose. 
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'') for consistency purpose as this is operational 
information that does not need to be part of the CDS Clearing Rules. No 
amendment will be made to the content of the provisions moved to these 
new Clearing Notices.
    Therefore, Section 5.2(b) and (c) of the Procedures will refer to a 
Clearing Notice and the timetable applicable to each of the Daily 
Backloading Cycle and Weekly Backloading Cycle is proposed to be 
removed from these paragraphs. 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.
    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''. 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.
    Finally, 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. 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 with the provisions of the previous sentence of this Article.
2. Statutory Basis.
    As more discussed below, LCH SA believes that the Proposed Rule 
Change is consistent with the requirements of Section 17A of the 
Securities Exchange Act of 1934 \4\ (the ``Exchange Act'') and the 
regulations thereunder, including the standards under Exchange Act Rule 
17Ad-22.\5\
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
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    Section 17A(b)(3)(F) of the Exchange Act \6\ requires, among other 
things, that the rules of a clearing agency be designed to promote the 
prompt and accurate clearance and settlement of securities transactions 
and, to the extent applicable, derivative agreements, contracts, and 
transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    By offering Clearing Members the possibility to submit Index 
Swaptions to LCH SA for clearing through the CDSClear Weekly 
Backloading Cycle, the Proposed Rule Change will extend the backloading 
to Index Swaptions and therefore permit cross instruments netting that 
can yield more cost effective margins and would promote the clearance 
process of credit derivatives transactions so that LCH SA believes that 
the proposed amendments are consistent with the requirements of Section 
17A of the Exchange Act.\7\
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    \7\ 15 U.S.C. 78q-1.
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    These proposed rule changes will also provide additional security 
to members who will choose to perform intraday clearing as it will 
enable the capture of trades that would normally be sent as part of 
intraday clearing but that are sent for clearing beyond the current one 
day deadline. This, therefore, will be consistent and align with the 
requirements of Exchange Act Rule 17Ad-22(e)(8) which requires each 
covered clearing agency to establish, implement, maintain and enforce 
written policies and procedures reasonably designed to ``define the 
point at which settlement is final to be no later than the end of the 
day on which the payment or obligation is due and, where necessary or 
appropriate, intraday or in real time.'' \8\
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    \8\ 17 CFR 240.17Ad-22(e)(8).
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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.\9\ LCH SA does 
not believe that the proposed rule change would impose burdens on 
competition that are not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \9\ 15 U.S.C. 78q-1(b)(3)(I).
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    LCH SA is only extending the CDSClear weekly Backloading cycle to 
Index Swaptions.
    Specifically, the proposed rule changes would apply equally to all 
Clearing Members and would generally improve the ability of such market 
participants to engage in cleared transactions and clearing services.
    Therefore, LCH SA does not believe that the proposed rule change 
would impose a burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 47330]]

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2019-006 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-2019-006. 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/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-2019-006 and 
should be submitted on or before September 30, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Jill M. Peterson,
Assistant Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2019-19335 Filed 9-6-19; 8:45 am]
BILLING CODE 8011-01-P