8011-01P
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-42 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.
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

15 U.S.C. 78s(b)(1).

17 CFR 240.19b-4.

Exchange Act Release No. 99847 (Mar. 22, 2024), 89 FR 21579 (Mar. 28, 2024) (File No. SRLCH SA-2024-002) (“Notice”).

15 U.S.C. 78s(b)(2).

Exchange Act Release No. 100094 (May 9, 2024), 89 FR 42515 (May 15, 2024) (File No. SRLCH SA-2024-002).

19(b)(2)(B) of the Exchange Act,6 to determine whether to approve or disapprove the
Proposed Rule Change.
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 securitybased 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.
LCH SA has two types of Clearing Members, General Members and Select
Members. General Members may provide client clearing services to affiliates and nonaffiliates, 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

15 U.S.C. 78s(b)(2)(B).

Capitalized terms used but not defined herein have the meanings specified in the LCH SA Rule
Book or Framework as applicable.

What We Clear, https://www.lch.com/services/cdsclear/what-we-clear (last visited Apr. 30, 2024).

Notice, 89 FR at 21579.

Id. at 21579, 81.

Id. at 21581.

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.
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.
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

15 U.S.C. 78s(b)(2)(B).

Id.

with respect to, the Proposed Rule Change’s consistency with Section 17A of the
Exchange Act14 and the rules thereunder, including the following provisions:
•

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;

•

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.

•

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

15 U.S.C. 78q-1.

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(13).

17 CFR 240.17Ad-22(e)(13).

publicly disclosed criteria for participation, which permit fair and open access by
direct and, where relevant, indirect participants and other financial market
utilities.
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 17Ad22(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
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.

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(13).

17 CFR 240.17Ad-22(e)(18).

17 CFR 240.19b-4(g).

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).

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 e-mail to rule-comments@sec.gov. 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 e-mail 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 am and 3
pm. 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 [INSERT DATE 21 DAYS AFTER DATE OF PUBLICATION
IN THE FEDERAL REGISTER]. Rebuttal comments should be submitted by [INSERT
DATE 35 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].
For the Commission, by the Division of Trading and Markets, pursuant to
delegated authority.23

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14066 Filed: 6/26/2024 8:45 am; Publication Date: 6/27/2024]

17 CFR 200.30-3(a)(31).