[Federal Register Volume 84, Number 224 (Wednesday, November 20, 2019)]
[Notices]
[Pages 64125-64127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25105]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87536; File No. SR-LCH SA-2019-010]


Self-Regulatory Organizations; LCH SA; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to Amendments 
to LCH SA's Fee Grid for Non Cash Collateral

November 14, 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 October 31, 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 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 proposed rule change 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

    Banque Centrale de Compensation, which conducts business under the 
name LCH SA (``LCH SA''), is proposing to review and modify its current 
fee grid applied for Non Cash Collateral (NCC) across all clearing 
services including CDSClear.
    The text of the proposed rule change has been annexed as Exhibit 
5.\5\
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    \5\ All capitalized terms not defined herein have the same 
definition as the Rule Book, Supplement or Procedures, as 
applicable.
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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.

[[Page 64126]]

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

1. Purpose
    LCH SA is currently applying the below fee grid for CDSClear 
members:

----------------------------------------------------------------------------------------------------------------
                                                                FFT                           Pledge
                 Collateral type                 ---------------------------------------------------------------
                                                    House (bps)    Client (bps)     House (bps)    Client (bps)
----------------------------------------------------------------------------------------------------------------
Government Bonds................................              10              10              10              10
Supranational Bonds.............................             N/A             N/A             N/A             N/A
Agency Bonds....................................              10              10              10              10
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    From November 1st, 2019, LCH SA is proposing to extend the scope of 
instruments eligible to margin collateral to EUR denominated bonds 
issued by a number of supranational and agency institutions. LCH SA is 
also proposing to extend the possibility to use the pledge solution in 
Euroclear Bank for the other LCH SA clearing services (namely RepoClear 
and EquityClear the ``Non US Business'' \6\). In this context, LCH SA 
is moving to apply more differentiation in its collateral fee grid and 
thus CDSClear has decided to harmonize its existing non-cash collateral 
fee grid for house collateral with that of the other LCH SA clearing 
services.
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    \6\ See the definition under Order Granting Application for 
Registration as a Clearing Agency and Request for Exemptive Relief, 
Order, Securities Exchange Act Release No. 34-79707; File No. 600-36 
(Dec. 29, 2016), 82 FR 1398 (Jan. 5, 2017) (available at https://www.federalregister.gov/documents/2017/01/05/2016-31940/self-regulatory-organizations-lch-sa-order-granting-application-for-registration-as-a-clearing).
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    The objective of the proposed fee change is to differentiate the 
pricing by type of non-cash collateral accepted by LCH SA and deposit 
facility. These changes will be applicable across all LCH SA clearing 
services with the exception of CDSClear's client collateral fees that 
will differ from house fees and remain at their current level for all 
non-cash securities.
    No amendments to the LCH SA CDS Clearing Rules are required to 
effect these changes.
    As specified in the fee grid attached under Exhibit 5, the proposed 
house collateral fee change is for CDSClear to:
    (i) Increase the fee rate from 10 bps to 11 bps for full title 
transfer of Government issued bonds; \7\
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    \7\ To become effective on April 1st, 2020
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    (ii) introduce a fee rate of 13 bps for full title transfer of 
Supranational issued bonds;
    (iii) increase the fee rate from 10bps to 13bps for full title 
transfer of Agency issued bonds;
    (iv) increase the fee rate from 10bps to 15bps for all pledged 
securities.
    For CDSClear clients, a fee rate of 10 bps will be introduced for 
full title transfer of Supranational bonds. No other changes will be 
made to CDSClear's client collateral fees.
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.\8\
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    \8\ 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 \9\ 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.
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    \9\ 15 U.S.C. 78q-1.
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    The extension of the non-cash eligible securities along with the 
extension of the pledge facility is an improvement of service that 
offers all LCH SA's members and clients more choice and therefore more 
opportunities to better tailor their collateral management to their 
needs but it also does bear consequences on LCH SA's balance sheet as a 
whole and therefore on its liquidity ratio management.
    Currently the pledge facility is only available to CDSClear members 
and clients with a very limited use. However, as a result of the 
broadening of the pledge facility to Non US-Business, the expected 
overall impact on LCH SA's liquidity ratio now needs to be carefully 
monitored and managed. Further, in order to offer this enhanced 
collateral management service, LCH SA has also invested in the 
development of a number of additional systems and controls leading to 
the review and changes of the applicable fee grid.
    Additionally, today, CDSClear members mainly post cash collateral 
and we do not foresee that the fee changes will alter current market 
practice amongst CDSClear's members and clients.
    As an illustration, from January 2018 to September 2019, the 
percentage of collateral posted in securities was less than 20% on 
average for house activity, supporting the assessment that these fee 
changes will not have any material impact on CDSClear's revenues.
    For all the reasons stated above, LCH SA believes that the proposed 
fee rates are reasonable and have been set up at an appropriate level 
given the costs, expenses and revenues generated to LCH SA in providing 
these improved collateral management services.

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.\10\
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    \10\ 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 are not necessary or appropriate in 
furtherance of the purposes of the Act.
    LCH SA is offering the possibility for CDSClear members and clients 
to post a greater scope of instruments as eligible margin collateral. 
Additionally, the proposed fee change will apply equally to all 
CDSClear clearing members. Finally, the fee rate changes will not 
adversely affect the ability of such members or other market 
participants generally to engage in cleared transactions or to access 
LCH SA's clearing services.

[[Page 64127]]

    Further, as explained above, LCH SA believes that the fee rates 
have been set up at an appropriate level given the costs and expenses 
to LCH SA in offering the relevant clearing services.

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 rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and paragraph (f) of Rule 19b-4 thereunder. At 
any time within 60 days of the filing of the proposed rule change, the 
Commission summarily may temporarily suspend such 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.

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-2019-010 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-2019-010. 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-2019-010 and should 
be submitted on or before December 11, 2019.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25105 Filed 11-19-19; 8:45 am]
 BILLING CODE 8011-01-P