[Federal Register Volume 89, Number 124 (Thursday, June 27, 2024)]
[Notices]
[Pages 53685-53686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14066]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100394; File No. SR-LCH SA-2024-002]


Self-Regulatory Organizations; LCH SA; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change Relating to the CDS Select Membership Model

June 21, 2024.

I. Introduction

    On March 13, 2024, 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 SR-
LCH SA-2024-002 (``Proposed Rule Change'') pursuant to section 19(b) of 
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 
19b-4 \2\ thereunder to amend its CDS Clearing Rule Book (the ``Rule 
Book'') and CDS Clearing Procedures (``Procedures'') to incorporate new 
terms and to make conforming, clarifying and clean-up changes to 
implement a new model of CDSClear select membership. The Proposed Rule 
Change was published for public comment in the Federal Register on 
March 28, 2024.\3\ The Commission has received no comments regarding 
the Proposed Rule Change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Exchange Act Release No. 99847 (Mar. 22, 2024), 89 FR 21579 
(Mar. 28, 2024) (File No. SR-LCH SA-2024-002) (``Notice'').
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    On May 9, 2024, pursuant to section 19(b)(2) of the Exchange 
Act,\4\ the Commission designated a longer period within which to 
approve, disapprove, or institute proceedings to determine whether to 
approve or disapprove the Proposed Rule Change, until June 26, 2024.\5\ 
The Commission is instituting proceedings, pursuant to section 
19(b)(2)(B) of the Exchange Act,\6\ to determine whether to approve or 
disapprove the Proposed Rule Change.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ Exchange Act Release No. 100094 (May 9, 2024), 89 FR 42515 
(May 15, 2024) (File No. SR-LCH SA-2024-002).
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change

    LCH SA is a clearing agency registered with the Commission.\7\ 
Through its CDSClear business unit, LCH SA provides central 
counterparty services for security-based swaps, including credit 
default swaps, and options on credit default swaps.\8\ LCH SA provides 
these central counterparty services to its Clearing Members. Some of 
these Clearing Members provide clearing services for clients.
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    \7\ Capitalized terms used but not defined herein have the 
meanings specified in the LCH SA Rule Book or Framework as 
applicable.
    \8\ What We Clear, https://www.lch.com/services/cdsclear/what-we-clear (last visited Apr. 30, 2024).
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    LCH SA has two types of Clearing Members, General Members and 
Select Members. General Members may provide client clearing services to 
affiliates and non-affiliates, must participate in Competitive Bidding 
for auction packages, and must submit prices to LCH SA.\9\ On the other 
hand, Select Members may only provide client clearing services to their 
affiliates, must participate in competitive bidding only for a subset 
of auction packages, and may choose whether to submit prices.\10\ 
Select Members and General Members must nominate representatives for 
the CDS Default Management Committee and CDS Default Management 
Group.\11\
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    \9\ Notice, 89 FR at 21579.
    \10\ Id. at 21579, 81.
    \11\ Id. at 21581.
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    The Proposed Rule Change would alter LCH SA's select membership. It 
would allow Select Members to provide client clearing services to non-
affiliated firms and choose whether to participate in Competitive 
Bidding. LCH SA also proposes to allow Select Members to choose whether 
to nominate representatives for both the CDS Default Management 
Committee and CDS Default Management Group. Although LCH SA proposes 
changes related to Select Members' submission of end-of-day prices, as 
currently, the Proposed Rule Change would still allow Select Members to 
choose whether to submit prices. LCH SA also proposes a new form 
through which Select Members may make certain elections.

[[Page 53686]]

III. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to section 
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule 
Change should be approved or disapproved.\12\ Institution of 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the Proposed Rule Change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, the Commission seeks and 
encourages interested persons to comment on the Proposed Rule Change, 
which would provide the Commission with arguments to support the 
Commission's analysis as to whether to approve or disapprove the 
Proposed Rule Change.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to section 19(b)(2)(B) of the Exchange Act,\13\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis of, and input from commenters with respect to, the 
Proposed Rule Change's consistency with Section 17A of the Exchange Act 
\14\ and the rules thereunder, including the following provisions:
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    \13\ Id.
    \14\ 15 U.S.C. 78q-1.
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     Section 17A(b)(3)(F) of the Exchange Act,\15\ which 
requires, among other things, that the rules of a clearing agency are 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions and derivative agreements, contracts, and 
transactions; to assure the safeguarding of securities and funds which 
are in the custody or control of the clearing agency or for which it is 
responsible; to foster cooperation and coordination with persons 
engaged in the clearance and settlement of securities transactions; 
and, in general, to protect investors and the public interest;
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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     Rule 17Ad-22(e)(13) under the Exchange Act,\16\ which 
requires that a covered clearing agency establish, implement, maintain, 
and enforce written policies and procedures reasonably designed to 
ensure the covered clearing agency has the authority and operational 
capacity to take timely action to contain losses and liquidity demands 
and continue to meet its obligations by, at minimum, requiring the 
covered clearing agency's participants and, when practicable, other 
stakeholders to participate in the testing and review of its default 
procedures, including any close-out procedures, at least annually and 
following material changes thereto.
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    \16\ 17 CFR 240.17Ad-22(e)(13).
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     Rule 17Ad-22(e)(18) under the Exchange Act,\17\ which 
requires, in part, that a covered clearing agency establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to establish objective, risk based, and publicly disclosed 
criteria for participation, which permit fair and open access by direct 
and, where relevant, indirect participants and other financial market 
utilities.
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    \17\ 17 CFR 240.17Ad-22(e)(13).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the Proposed Rule Change. In particular, the Commission invites 
the written views of interested persons concerning whether the Proposed 
Rule Change is consistent with section 17A(b)(3)(F) \18\ and Rules 
17Ad-22(e)(13) \19\ and (e)(18) \20\ of the Exchange Act, or any other 
provision of the Exchange Act, or the rules and regulations thereunder. 
Although there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4(g) under the Exchange Act,\21\ any request for an opportunity to 
make an oral presentation.\22\
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
    \19\ 17 CFR 240.17Ad-22(e)(13).
    \20\ 17 CFR 240.17Ad-22(e)(18).
    \21\ 17 CFR 240.19b-4(g).
    \22\ Section 19(b)(2) of the Exchange Act grants to the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency of LCH 
SA's statements in support of the Proposed Rule Change, which are set 
forth in the Notice, in addition to any other comments they may wish to 
submit about the Proposed Rule Change.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-LCH SA-2024-002 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-2024-002. 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 (https://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 
a.m. and 3 p.m. Copies of such 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.
    Do not include personal identifiable information in submissions; 
you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection.
    All submissions should refer to file number SR-LCH SA-2024-002 and 
should be submitted on or before July 18, 2024. Rebuttal comments 
should be submitted by August 1, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(31).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14066 Filed 6-26-24; 8:45 am]
BILLING CODE 8011-01-P