[Federal Register Volume 87, Number 11 (Tuesday, January 18, 2022)]
[Notices]
[Pages 2647-2650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00751]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93952; File No. SR-LCH SA-2021-004]


Self-Regulatory Organizations; LCH SA; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to 2022 
CDSClear Fee Grid

January 11, 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 December 28, 2021, 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 
(``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

    (a) Banque Centrale de Compensation, which conducts business under 
the name LCH SA, is proposing to update the current CDSClear fee grid 
to be effective early January 2022 (the ``Proposed Rule Change''). The 
text of the proposed rule change has been annexed [sic] as Exhibit 5.
    The text of the Proposed Rule Change has been annexed [sic] hereto 
as Exhibit 5.

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

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

                                      Self-Clearing Tariff for Corporates and Financials Index and Single Name CDS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Self-clearing/variable fees
           Membership              Annual fixed fee  --------------------------------------------------------------------------------
                                                          EUR indices      EUR single names       USD indices      USD single names
--------------------------------------------------------------------------------------------------------------------------------------------------------
General Member--Unlimited Tariff  [euro]1,350,000...  No Variable Fee.                                                                Covers all self-
                                                                                                                                       clearing
                                                                                                                                       Corporate and
                                                                                                                                       Financials Index
                                                                                                                                       and Single Name
                                                                                                                                       activity for a
                                                                                                                                       Financial Group
                                                                                                                                       of a Clearing
                                                                                                                                       Member.
--------------------------------------------------------------------------------------------------------------------------------------------------------
General Member--Introductory      [euro]200,000 if    [euro]3.5 Per       [euro]10 Per        $4.5 Per million    $13 Per million     ..................
 Tariff.                           the total annual    million gross       million gross       gross notional      gross notional
                                   gross notional      notional cleared.   notional cleared.   cleared.            cleared.
                                   cleared is under
                                   [euro]10 billion.
                                  [euro]400,000 if    [euro]3.5 Per       [euro]10 Per        $4.5 Per million    $13 Per million
                                   the total annual    million gross       million gross       gross notional      gross notional
                                   gross notional      notional cleared.   notional cleared.   cleared.            cleared.
                                   cleared is over
                                   [euro]10 billion.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Select Member...................  [euro]250,000 if    [euro]4 Per         [euro]10 Per        $5 Per million      $13 Per million     ..................
                                   the total annual    million gross       million gross       gross notional      gross notional
                                   gross notional      notional cleared.   notional cleared.   cleared.            cleared.
                                   cleared is under
                                   [euro]20 billion.
                                  [euro]450,000 if
                                   the total annual
                                   gross notional
                                   cleared is over
                                   [euro]20 billion.
--------------------------------------------------------------------------------------------------------------------------------------------------------


                   Options Tariff Including Fee Rebate
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                             General Member
------------------------------------------------------------------------
Introductory Tariff............  Can cover either one or multiple legal
                                 entities under conditions below (no
                                 Affiliate coverage). In-year switches
                                 are not permitted. No EEP usage fees in
                                 2021.
                                ----------------------------------------
    Clearing Fees..............              $8  per million of option
                                                  notional on US
                                                  Indices.
                                        [euro]8  per million of option
                                                  notional on European
                                                  Indices.
        Floor on clearing fees.      [euro]115k  Per calendar year (no
                                                  pro-rating) for 1
                                                  entity.
                                     [euro]150k  Per calendar year (no
                                                  pro-rating) for 2
                                                  entities of the same
                                                  Financial Group of a
                                                  Clearing Member.
                                     [euro]190k  Per calendar year (no
                                                  pro-rating) for 3 or
                                                  more entities of the
                                                  same Financial Group
                                                  of a Clearing Member.
                                ----------------------------------------

[[Page 2648]]

 
Unlimited Tariff...............  Cover all Affiliates of a given
                                 Financial Group of a Clearing Member.
                                 Cover all clearing fees for Credit
                                 Option House activity for both iTraxx
                                 and CDX.NA underlying index families.
                                 In-year switches are not permitted. No
                                 EEP usage fees in 2021.
                                ----------------------------------------
    Fixed fee (annual).........  [euro]375k Per calendar year (no pro-
                                 rating).
    Discounted Rates*..........  [euro]115k if notionals cleared
                                 strictly above [euro]15bn.
                                ----------------------------------------
Onboarding Fees (both                 [euro]30k  One-off fee per Legal
 Introductory & unlimited).                       Entity under the
                                                  Introductory tariff or
                                                  per Financial Group of
                                                  a Clearing Member
                                                  under the Unlimited
                                                  tariff.
------------------------------------------------------------------------
                              Select Member
------------------------------------------------------------------------
Introductory Tariff............  Cover only one legal entity (no
                                 affiliate coverage). In-year switches
                                 are not permitted. No EEP usage fees in
                                 2021.
                                ----------------------------------------
    Clearing Fees..............             $10  per million of option
                                                  notional on US
                                                  Indices.
                                       [euro]10  per million of option
                                                  notional on European
                                                  Indices.
                                ----------------------------------------
Unlimited Tariff...............  Cover all Affiliates of a given
                                 Financial Group of a Clearing Member.
                                 Cover all clearing fees for Credit
                                 Option House activity for both iTraxx
                                 and CDX.NA underlying index families.
                                 In-year switches are not permitted. No
                                 EEP usage fees in 2021.
                                ----------------------------------------
    Fixed fee (annual).........      [euro]400k  Per calendar year (no
                                                  pro-rating).
    Discounted Rates...........      [euro]115k  if notionals cleared
                                                  strictly above
                                                  [euro]15bn.
Onboarding Fees (both                 [euro]30k  One-off fee per Legal
 Introductory & unlimited).                       Entity under the
                                                  Introductory tariff or
                                                  per Financial Group of
                                                  a Clearing Member
                                                  under the Unlimited
                                                  tariff.
------------------------------------------------------------------------
                     Clearing Member (Options only)
------------------------------------------------------------------------
  Up to [euro]200,000 fee rebate limited to the total amount of Options
 clearing fees paid in 2021 for the first two Clearing Members clearing
            Options for at least one client by 31-July-2021.
------------------------------------------------------------------------
                                 Client
------------------------------------------------------------------------
Options Clearing Fees..........              $5  per million of option
                                                  notional on US
                                                  Indices.
                                        [euro]5  per million of option
                                                  notional on European
                                                  Indices.
                                ----------------------------------------
                                 2021: Full discount of client variable
                                 fees.
------------------------------------------------------------------------


              Affiliates Clearing as Client (All Products)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Affiliates clearing as Clients.  Full rebate on variable clearing fees
                                  for the Affiliate of a Clearing Member
                                  onboarded as client of such Clearing
                                  Member under the following conditions:
                                     The Clearing Member is a
                                     General Member under the Unlimited
                                     Tariff;
                                     The Affiliate is a legal
                                     entity part of the same Financial
                                     Group as the Clearing Member;
                                     The rebate applies to 1
                                     trade account per affiliate and for
                                     all clearing services for which the
                                     Clearing Member is under the
                                     Unlimited Tariff (i.e., Index &
                                     Single Names and/or Options);
                                     The rebate cannot apply to
                                     any account opened for CCM Indirect
                                     Clients; and
                                     A fixed annual account fee
                                     of [euro]100,000 is charged per
                                     affiliate of a Clearing Member
                                     onboarded as a client and
                                     benefiting from the full rebate on
                                     variable fees.
------------------------------------------------------------------------

    The purpose of the proposed fee changes is for LCH SA CDSClear to 
take into account the evolution of the CDSClear business and 
arrangements.

--Regarding the Index and Single Names clearing activity: The proposed 
fee change reflects the ongoing development and product scope of the 
CDSClear service with the objective to meet clearing members and 
clients' expectations, and
--for the Options: The intent is to adjust the fee conditions to the 
new competitive environment as well as encourage the development of 
options clearing by clients and new market participants.

    Therefore, as specified in the new fee grid attached [sic] under 
Exhibit 5, LCH SA is proposing to amend the CDSClear fee grid from 
January 1st, 2022 as follows.
(1) Clearing Fees for Sovereign Index and Single Name CDS \5\ Activity
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    \5\ Subject to regulatory approval.
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    LCH SA CDSClear currently offers an Unlimited Tariff for General 
Members that covers all self-clearing Corporate and Financials CDS 
Index and Single Names activity for a Financial Group of a Clearing 
Member for an annual fixed fee of [euro]1,350,000 (no variable fees).
    CDSClear is also offering an Introductory Tariff for General and 
Select Members that covers all self-clearing corporate and financials 
CDS index and single names activity.
    LCH SA currently treats fees from all indexes differently from fees 
for single names, reflecting both the difference in client and member 
activity in the products and the nature of the underlying products. 
Specifically for sovereigns, the intended list of cleared sovereign 
names is much wider in scope than purely the constituents of the CDX EM 
index.
    The Proposed Rule Change consists in defining the clearing fees 
associated to the clearing activity of Sovereign indices and single 
names under the General Members Unlimited Tariff and Introductory 
Tariff as well as the Select Members Tariff. This proposed change will 
be effective once this new clearing activity is duly approved by the 
relevant regulators.
    Under the proposed change, for General Members under the Unlimited 
Tariff, self-clearing Sovereign indices activity will be included in 
the scope of the fixed fee of [euro]1,350,000 per year, whereas 
Sovereign single names will attract variable clearing fees of [euro]10/
$13 per million [euro]/$ of notional cleared depending on the currency 
in which they are denominated.

[[Page 2649]]

    For General Members under the Introductory Tariff, Select Members 
as well as Clients, Sovereign indices and single names clearing 
activity will be charged at the same variable clearing fees currently 
existing for USD and EUR denominated Corporate and Financial indices 
and single names.
    Finally, in order to build liquidity in the products on the 
CDSClear service, all General Members, whether under the Unlimited or 
the Introductory Tariff, will benefit from a fee holiday for their 
variable fees from self-clearing Sovereign single names clearing 
activity for 1 year from the product launch date.
(2) Introduction of a New Tariff for the Options Clearing Service
    In order to take into account the new competitive environment as 
well as encourage the development of options clearing by market 
participants, LCH SA is proposing to create a new tariff called `New 
Market Participant Tariff' (NMP), based on variable fees, and to which 
only members which are new joiners to the Options clearing service will 
be eligible to subscribe, for one calendar year renewable once only. 
Under this NMP Tariff, clearing members will be charged [euro]10/$10 
per million of optional notional cleared depending on the currency in 
which the underlying index is denominated. Because New Market 
Participants do not have to pay the fixed fee, the purpose of this type 
of tariff is to attract clearing members who are not currently on the 
option service to join by removing the barrier of the fixed fee, which 
is payable even if no option notional is cleared. This is also in line 
with the existing Select Members variable tariff.
(3) Reduction of the Client Clearing Fees for Options, Maintaining the 
EEP Usage Free of Charge in 2022 and Extension of the Fee Holiday 
Period
    Under the proposed change and based on feedback from the market, 
the variable clearing fees to be paid by Clients for Options clearing 
would decrease from [euro]5/$5 to [euro]4/$4 per million of option 
notional cleared.
    LCH SA is maintaining for 2022 the Electronic Exercise Platform 
(EEP) usage free of charge to promote and encourage option clearing 
take-up.
    LCH SA is also proposing to renew the fee holiday for Clients 
clearing Options in 2022.
    As specified in the filing LCH SA-2020-007,\6\ the proposed 
[euro]200,000 fee rebate limited to the total amount of Options 
clearing fees paid by a Financial Group of a Clearing Member in 2021 
for the first two Clearing Members clearing Options for at least one 
Client has expired on 31 July 2021 and was duly removed from the 
updated fee grid.
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    \6\ Self-Regulatory Organizations; LCH SA; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to the 
Amendments of the CDSClear Fee Grid, Release No. 34-90862 (Jan. 6, 
2021), 86 FR 2468 (Jan. 12, 2021), File No. SR-LCH SA-2020-007.
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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.\7\
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    \7\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

    LCH SA believes that its clearing fees change proposal is 
consistent with the requirements of Section 17A of the Act \8\ 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.\9\
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    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78q-1(b)(3)(D).
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    Indeed, there's 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). All of the new products being introduced will fall into the 
scope of the fixed fee for GMs under the Unlimited Tariff, except for 
Sovereign Single Names for which a one year fee holiday period is 
offered to both General Members under the Unlimited and the Intro 
Tariffs.
    So, the proposed clearing fees for Sovereign index and single 
names, are consistent with the existing fees for Corporate and 
Financial indices and single names for General Members, Select Members 
as well as Clients. In particular, none of the fixed fee components of 
the various tariffs are impacted, and the variable fees, where 
applicable, are the same as the existing ones excepted for Sovereign 
single names products which are not considered to be part of the 
unlimited fixed fee that was designed and established prior to LCH SA 
intending to offer these products. Therefore, subject to regulatory 
approvals, only variable fees coming from new products being cleared by 
General Members under the Introductory Tariffs, Select Members and 
Clients would be new fees collected by LCH SA CDSClear.
    Besides, the proposed fee holiday for Sovereign single names self-
clearing activity is equivalent and offered to all General Members for 
1 year only, in order to help build the dealers' liquidity of the LCH 
SA CDSClear service for Sovereign CDS which is a critical step for 
Clients to be able to clear their Sovereign CDS activity as well.
    Regarding the Options clearing service, in accordance with the 
feedback received from the market, the main proposed change is the 
creation of the New Market Participant Tariff, available to new joiners 
for a fixed period of time only (maximum 2 years) in order to 
facilitate the onboarding of new Members with an option market-making 
business to the LCH SA CDSClear Option clearing service, which in turn 
is one element that will contribute to Clients clearing their options 
activity as most if not all of their executing brokers will be able to 
clear options. New Markets Participants are not paying the fixed fee. 
As such, LCH SA believes that this new reasonable tariff consistent 
with Section 17A(b)(3)(D) is designed to encourage Options clearing 
activity which is also consistent with the prompt and accurate 
clearance in accordance with Section 17A(b)(3)(F) of the Exchange 
Act.\10\
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    A second element that will contribute to growing the options client 
clearing activity is the renewal of the fee holiday for options 
clearing fees in 2022. Finally, the decrease in the variable headline 
clearing fees to be paid by Clients for options will also contribute to 
the same objective in the longer term.
    For all the reasons stated above, LCH SA believes that the proposed 
fee rates are reasonable and appropriate so that LCH SA can provide the 
CDSClear 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.\11\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    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 LCH SA is offering the 
possibility for CDSClear members and clients to obtain a more 
appropriate and flexible access to the clearing services. The Proposed

[[Page 2650]]

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 category of market 
participant wishing to access the CDSClear clearing service for all 
proposed products including those that are not mandatory for clearing.
    Further, as explained above, LCH SA believes that the fee rates 
remain set up at an appropriate level given the costs and expenses to 
LCH SA in offering the relevant clearing services.

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) \12\ of the Act and Rule 19b-4(f)(2) 
\13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 [email protected]. Please include 
File Number SR-LCH SA-2021-004 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-2021-004. 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/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-2021-004 and should 
be submitted on or before February 8, 2022.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00751 Filed 1-14-22; 8:45 am]
BILLING CODE 8011-01-P