[Federal Register Volume 82, Number 234 (Thursday, December 7, 2017)]
[Notices]
[Pages 57803-57808]
[FR Doc No: 2017-26320]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82194; File No. SR-LCH SA-2017-010]

Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice
Relating to the Implementation of the Markets in Financial Instruments
Regulation

December 1, 2017.
    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 November 21, 2017, 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 primarily prepared 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

    LCH SA is proposing to amend its (i) CDS Clearing Rulebook (the
``Rulebook'') and CDS Clearing Procedures (the ``Procedures'') to make
conforming and clarifying changes necessary to implement certain
provisions of the Markets in Financial Instruments Regulation
(``MiFIR'') \3\ that are applicable to central counterparties
(``CCPs'') authorized under the European Markets Infrastructure
Regulation (``EMIR'') \4\ (each such CCP, an ``authorized CCP''). In
particular, the Proposed Rule Change implements Article 29 of MiFIR,
which requires authorized CCPs to establish effective systems,
procedures and arrangements to ensure that transactions in cleared
derivatives transactions are submitted and accepted for clearing on a
straight-through processing (``STP'') basis, and Article 30 of MiFIR,
which requires authorized CCPs to establish indirect clearing
arrangements with respect to exchange-traded derivatives (``ETDs'')
that are of ``equivalent effect'' to the corresponding requirements
under EMIR.
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    \3\ Regulation (EU) No 600/2014 of the European Parliament and
of the Council of 15 May 2014 on markets in financial instruments
and amending Regulation (EU) No 648/2012.
    \4\ Regulation (EU) No 648/2012 of the European Parliament and
of the Council of 4 July 2012 on OTC derivatives, central
counterparties and trade reporting.
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    Regulatory technical standards have also been adopted to set more
specific requirements that authorized CCPs must meet to comply with
MiFIR. The regulatory technical standards for straight-through
processing (``RTS 26'') were adopted in late 2016.\5\ More recently,
the European Commission adopted regulatory technical standards, which
align the indirect clearing requirements under EMIR and MiFIR
(``Indirect Clearing RTS'').\6\
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    \5\ Commission Delegated Regulation (EU) 2017/582 of 29.6.2016
supplementing Regulation (EU) No 600/2014 of the European Parliament
and of the Council with regard to regulatory technical standards
specifying the obligation to clear derivatives traded on regulated
markets and timing of acceptance for clearing.
    \6\ Commission Delegated Regulation (EU) of 22.9.2017 amending
Commission Delegated Regulation (EU) No 149/2013 with regard to
regulatory technical standards on indirect clearing arrangements. A
separate, but identical, set of RTS apply to indirect clearing of
exchange-traded derivatives. See, Commission Delegated Regulation
(EU) of 22.9.2017 supplementing Regulation (EU) No 600/2014 with
regard to regulatory technical standards on indirect clearing
arrangements.
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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 such statements.

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

1. Purpose
a. Overview
    As noted above, the principal purpose of the Proposed Rule Change
is to amend LCH SA's Rulebook and Procedures to implement the
provisions of MiFIR applicable to authorized CCPs and the Indirect
Clearing RTS. MiFIR takes effect January 3, 2018 and it is expected
that the Indirect Clearing RTS will take effect on the same date.
    Specifically, Article 29 of MiFIR requires authorized CCPs to
establish effective systems, procedures and arrangements to ensure that
transactions in cleared derivatives are submitted and accepted for
clearing on a straight-through processing basis. Article 4 of EMIR and
the Indirect Clearing RTS set out specific compliance requirements for
entities that participate in ``indirect clearing arrangements'' in
connection with OTC derivatives. As an authorized CCP, LCH SA is
required to amend its rules and procedures to give effect to these
provisions of MiFIR and the Indirect Clearing RTS.
    Set out below is an explanation of the relevant provisions of RTS
26 and the Indirect Clearing RTS followed in each case by a description
of the amendments LCH SA has made to its Rulebook and Procedures to
give effect to each RTS. Capitalized terms not otherwise defined herein
have the meanings ascribed to them in the Rulebook.
b. Straight-Through Processing
    RTS 26 establishes the specific requirements with which authorized
CCPs, trading venues \7\ and clearing

members \8\ must comply in order to ensure that transactions in cleared
derivatives are submitted and accepted for clearing ``as soon as
technologically practicable using automated systems'', as required by
Article 29(2) of MiFIR. LCH SA must comply with the RTS 26 requirements
applicable to authorized CCPs. For ease of reference these requirements
can be conceptually distinguished into: (i) A CCP's information
requirements; (ii) cleared derivatives transactions concluded on a
trading venue; (iii) cleared derivatives transactions concluded
bilaterally; and (iv) resubmission of cleared derivatives transactions
in the event of clerical error or technical problems.
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    \7\ The term ``trading venue'' as used in RTS 26 refers to EU-
based venues only (i.e., regulated markets, multilateral trading
facilities and organized trading facilities). Accordingly, third-
country venues (e.g., U.S. swap execution facilities, security-based
swap execution facilities, designated contract markets and national
securities exchanges) are not required to comply with the RTS 26
provisions applicable to trading venues. Notwithstanding this
definition, the STP amendments described herein will apply with
respect to all derivatives transactions concluded on swap execution
facilities and designated contract markets registered with the U.S.
Commodity Futures Trading Commission (``CFTC'') and the definition
of the term ``Trading Venue'' has been amended accordingly. See,
Section 1.1.1 of the Rulebook.
    \8\ The term ``clearing member'' is not defined in RTS 26.
However, Article 29 of MiFIR refers to ``investment firms which act
as clearing members in accordance with'' EMIR. The term ``investment
firm'' refers only to those EU firms which are required to be
authorized under the revised Markets in Financial Instruments
Directive (``MiFID II'') and, therefore, third-country firms that
are clearing members of authorized CCPs (e.g., SEC-registered broker
dealers (``BDs'') and futures commission merchants (``FCM'')
registered with the CFTC) are not required to comply with the RTS 26
provisions applicable to clearing members. Nonetheless, it should be
noted that BDs and FCMs are subject to comparable requirements under
SEC and CFTC regulations. See, 17 CFR 240.15Fi-2(f)(2); 17 CFR 1.74
and 17 CFR 23.501. In any event, the STP requirements to which LCH
SA is subject, discussed herein, apply with respect to all
derivatives transactions submitted for clearing by any Clearing
Member, including a Clearing Member that is a BD or FCM.
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i. CCP Information Requirements
    Article 1(2) of RTS 26 requires an authorized CCP to detail in its
rules the information it needs from trading venues and counterparties
to cleared derivatives transactions, and the format such information
must take, in order for the authorized CCP to accept that transaction
for clearing.
    The Rulebook currently provides that all clearing members must be
participants of at least one Approved Trade Source System, i.e., a
middleware provider, which receives Original Transaction Data relating
to Intraday Transactions from the relevant Clearing Members or the
relevant Trading Venue. The Approved Trade Source System is then
responsible for ensuring that the data is then submitted to LCH SA. To
give effect to the CCP information requirements of Article 1(2) of RTS
26, Article <IP_ADDRESS> of the Rulebook has been amended to confirm that
the data relating to such submission must be made in a format
acceptable to, or required by, the relevant Approved Trade Source
System.
ii. Cleared Derivatives Transactions Concluded on a Trading Venue
    For a cleared derivatives transaction concluded on a trading venue,
Article 3(4) of RTS 26 requires an authorized CCP to accept or reject
such transaction for clearing within 10 seconds of receipt of the
relevant information from the trading venue.\9\ Where the authorized
CCP determines to reject the transaction for clearing, it is required
to inform the clearing member and the trading venue on a real-time
basis.
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    \9\ As a CFTC-registered derivatives clearing organization, LCH
SA is currently subject to this same requirement in connection with
its CDS Clearing Service. See, 17 CFR 39.12(b)(7); CFTC Staff
Guidance of Straight-Through Processing, dated September 26, 2013,
available at<EMAIL_ADDRESS>---------------------------------------------------------------------------

    LCH SA has traditionally imposed a series of controls on Intraday
Transactions, including the following:
     Eligibility Controls, which verify the completeness of the
information relating to the Original Transaction and to determine
whether the Original Transaction meets LCH SA's Eligibility
Requirements;
     Client Transaction Checks, which verify whether, in
respect of an Original Transaction that is a Client Transaction, the
relevant Clearing Member has consented to the registration of the trade
on behalf of its Client; and
     Notional and Collateral Checks, which verify whether
accepting the trade for clearing would exceed the relevant Clearing
Member's Maximum Notional Amount and/or whether the Clearing Member has
sufficient collateral available to satisfy the margin requirement
associated with clearing the trade.
    LCH SA will be able to identify cleared derivatives transactions
concluded on a trading venue--referred to as ``Trading Venue
Transactions'' in the revised Rulebook--and has amended Section 5.3 of
the Procedures to confirm that, in accordance with Article 3(4) of RTS
26, the relevant Clearing Member(s) are not required to provide their
consent to the acceptance of a Trading Venue Transaction for clearing.
    LCH SA will, however, apply the Notional and Collateral Checks to
Trading Venue Transactions. Article <IP_ADDRESS> of the Rulebook has been
amended to make clear that all stages of the intraday clearing process
must occur within the timeframe required by Applicable Law, meaning
that LCH SA must perform the Notional and Collateral Checks within the
10 second time-frame prescribed by Article 3(4) of RTS 26.
    Finally, Article <IP_ADDRESS> of the Rulebook has been amended to
clarify that notice of a Rejected Transaction will be provided to the
relevant Trading Venue and/or Approved Trade Source System in
accordance with Applicable Law.
iii. Cleared Derivatives Transactions Concluded Bilaterally
    For a cleared derivatives transaction concluded bilaterally between
counterparties, Article 4(2) of RTS 26 requires an authorized CCP to
send the information it receives from the relevant counterparties to
the relevant clearing member(s) within 60 seconds of receipt of such
information. Article 4(3) of RTS 26 requires the authorized CCP to
accept or reject such transaction for clearing within 10 seconds of
receipt of the acceptance or non-acceptance by such clearing member(s).
Where the authorized CCP determines to reject the transaction for
clearing, it is required to inform the clearing member on a real-time
basis.
    Cleared derivatives transactions concluded bilaterally will, in
accordance with Section 5.3 of the Procedures, be subject to the Client
Transaction Checks referred to above. In particular, LCH SA will, upon
successful completion of the Eligibility Controls, send a Consent
Request to the relevant Clearing Member(s). Pursuant to Article <IP_ADDRESS>
of the Rulebook, LCH SA is required to send each such Consent Request
in accordance with the timeframe required by Applicable Law (i.e., 60
seconds).
    A Clearing Member then has a choice in how to respond to the
Consent Request. It may opt for a so-called ``Automatic Take-Up
Process'', whereby the Clearing Member effectively pre-approves
specific Clients for automatic acceptance of Consent Requests; in such
circumstances, the Clearing Member will not be required to respond to
the Consent Request. A Clearing Member may also opt for a ``Manual
Take-Up Process'', whereby it must affirmatively respond within the
time frame required by Applicable Law (i.e., 60 seconds) or otherwise
by the end of the real-time clearing session on that day. LCH SA will
then accept or reject the trade, and make the relevant notifications,
within the timeframe required under Applicable Law.
    Finally, Article <IP_ADDRESS> of the Rulebook has been amended to
clarify that notice of a Rejected Transaction will be provided to the
relevant Clearing Member and/or Approved Trade Source System in
accordance with Applicable Law.

iv. Resubmission
    Where the non-acceptance of a cleared derivatives transaction for
clearing is due to a clerical or technical error, Article 5(3) of RTS
26 permits the trade to be resubmitted within one hour, provided the
original counterparties to the trade agree to such resubmission.
Article <IP_ADDRESS> of the Rulebook has been amended to state that a
Rejected Transaction may be resubmitted for clearing in accordance with
Applicable Law.
v. Treatment of Backloading Transactions
    STP requirements apply to ``cleared derivatives transactions'',
which are defined in Article 29(2) of MiFIR to include derivatives that
are concluded on an EU regulated market, all OTC derivatives that are
subject to an EMIR mandatory clearing requirement, and all other
derivatives which are agreed by the relevant counterparties to be
cleared. LCH SA has amended the Rulebook to designate Backloading
Transactions as out of scope of MiFIR's STP requirements. Specifically,
Article <IP_ADDRESS> now provides that LCH SA is entitled to assume that any
Backloading Transaction submitted for clearing by LCH SA was either
entered into prior to the effective date of MiFIR (i.e., January 3,
2018) or is otherwise not subject to an EMIR mandatory clearing
requirement and that the parties to the Backloading Transaction did not
agree at the time of execution for the Backloading Transaction to be
subject to clearing.
c. Indirect Clearing Arrangements
i. Indirect Clearing RTS
    Article 4(3) of EMIR requires that indirect clearing arrangements
should not increase counterparty risk and ensure protections that are
of ``equivalent effect'' to the protections for client clearing set out
in Articles 39 and 48 of EMIR. The term ``indirect clearing
arrangement'' refers to a set of relationships--also called a
``chain''--where at least two intermediaries are interposed between an
end-client and the relevant authorized CCP. The most basic indirect
clearing chain therefore involves the following four entities: An
authorized CCP; a clearing member of the authorized CCP; the client of
the Clearing Member that is itself an intermediary (``Direct Client'');
and the client of such Direct Client (``Indirect Client''). Longer
chains are permitted in certain circumstances.
    The majority of the obligations under the Indirect Clearing RTS
fall to Clearing Members and Direct Clients. However, authorized CCPs
must comply with new requirements relating to account structures,
default management and risk management.\10\ Because indirect clearing
was a concept introduced in EMIR, the Rulebook already had a number of
features to implement the initial set of indirect clearing
requirements. LCH SA has made the following conforming amendments to
reflect the updated requirements of the Indirect Clearing RTS.
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    \10\ The indirect clearing arrangements for OTC derivatives
described herein, in particular, the requirements relating to
account structures and default management, generally will not be
applicable to Clearing Members that are FCM Clearing Members or U.S.
Clearing Members, i.e., BDs. In this regard, in connection with the
CDS Clearing Service, FCM Clearing Members will continue to be
required to maintain cleared swaps customer accounts in accordance
with the segregation requirements set out in Section 4d(f) of the
Commodity Exchange Act and Part 22 of the CFTC's rules, 17 CFR 22.1
et seq. Similarly, a U.S. Clearing Member that is not also an FCM
Clearing Member will be required to maintain customer security-based
swap accounts in accordance with 17 CFR 240.15c3-3.
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ii. Indirect Client Account Structures
    An authorized CCP must permit a clearing member to open and
maintain at least the following two types of accounts for its Direct
Client(s) that have Indirect Client(s):
     One omnibus segregated account for all Indirect Clients of
all such Direct Clients (``CCP OSA''); and
     one gross (position and margin) segregated account per
Direct Client for all Indirect Clients of that Direct Client that
choose gross segregation (a ``CCP GOSA'').
    Therefore an authorized CCP is expected to maintain at least: (i)
One CCP OSA per clearing member; plus (ii) the requisite number of
Direct Client-specific CCP GOSAs per clearing member.
    The Indirect Clearing RTS do not specify whether the CCP OSA must
be held either gross or net for calling margin or for position-keeping
purposes, leaving the specific arrangements to the discretion of each
authorized CCP. Finally, and for the avoidance of doubt, CCP OSAs and
CCP GOSAs are separate from any Direct Client-specific individual or
omnibus accounts opened pursuant to Article 39 of EMIR.
    The principal indirect clearing-related amendment to the Rulebook
is the introduction of two new account structures that reflect the
requirements of the Indirect Clearing RTS. Specifically, LCH SA has
introduced a new CCM Indirect Client Net Segregated Account Structure
(i.e., a CCP OSA) as well as a new CCM Indirect Client Gross Segregated
Account Structure (i.e., a CCP GOSA), collectively referred to as CCM
Indirect Client Segregated Account Structures.
    A CCM Indirect Client Net Segregated Account Structure contains the
following elements:
     A CCM Client Trade Account per CCM Indirect Client that
belongs to such Account Structure. A CCM Client Trade Account is an
account that records the Cleared Transactions registered in the name of
the relevant CCM Indirect Client;
     a single CCM Indirect Client Net Segregated Margin
Account, in which all Cleared Transactions of all the CCM Indirect
Clients in that Structure are netted to create a single set of Open
Positions per contract for purposes of calculating a single, overall
initial and variation margin requirement in respect of such Account
Structure; and
     a single CCM Client Collateral Account, which records the
Collateral provided by the CCM to satisfy the CCM Client Margin
Requirement(s) in respect of the Account Structure and for purposes of
identifying any CCM Client Excess Collateral in respect of the Account
Structure.
    A CCM Indirect Client Gross Segregated Account Structure contains
the following elements:
     A CCM Client Trade Account per CCM Indirect Client that
belongs to such Account Structure;
     a CCM Indirect Client Gross \11\ Segregated Margin Account
per CCM Indirect Client that belongs to such Account Structure, in
which the Cleared Transactions of such CCM Indirect Client are netted
to create a set of Open Positions for purposes of calculating initial
and variation margin requirements in respect of such CCM Indirect
Client; and
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    \11\ Pursuant to an email from LCH SA's representative dated
November 30, 2017, staff in the Division of Trading and Markets
corrected an incorrect reference to a ``CCM Indirect Client Net
Account.'' LCH SA intended to refer to a ``CCM Indirect Client Gross
Account.''
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     a single CCM Client Collateral Account, which records the
Collateral provided by the CCM to satisfy the CCM Client Margin
Requirement(s) in respect of the Account Structure and for purposes of
identifying any CCM Client Excess Collateral in respect of the Account
Structure.
    Title V, Chapter 2 of the Rulebook has been amended to specify the
circumstances in which such Account Structures may be opened. In
particular, Article <IP_ADDRESS> has been amended to clarify that a given
CCM Client that provides indirect clearing services to

CCM Indirect Clients must be allocated to one CCM Indirect Client Net
Segregated Account Structure but may, upon request, be allocated to one
CCM Indirect Client Gross Segregated Account Structure.
iii. Default Management
    The Indirect Clearing RTS primarily address a Clearing Member's
default management of an insolvent Direct Client and therefore do not
specifically address an authorized CCP's treatment of CCP OSAs and CCP
GOSAs in the event of a Clearing Member default. However, the better
view appears to be that these accounts should be held to the extent
possible in accordance with the requirements of EMIR Articles 39 and
48, which leads to the following obligations for an authorized CCP.
    Porting/Leapfrog Payment. In line with the EMIR requirement that
indirect clearing arrangements be of ``equivalent effect'' to client
clearing protections, in the event of a Clearing Member default, a CCP
is expected to be able to attempt to port the positions of Indirect
Clients in a CCP GOSA to a backup Direct Client or, failing that, to
attempt to make a ``leapfrog'' payment over the insolvency estate of
the defaulted Clearing Member directly to the Direct Client for the
account of its Indirect Clients.
    Value Segregation Only. To facilitate the porting and leapfrog
arrangements set out above, it will be necessary for an authorized CCP
to maintain separate collateral pools for each CCP GOSA. However, in
line with Article 39(10) of EMIR, the term ``assets''--which must be
segregated--refers to collateral held to cover a given set of positions
and includes the right to the return/transfer of equivalent assets.
Accordingly, a CCP is not required to identify the specific collateral
assets posted in respect of a given Indirect Client in a CCP GOSA but
instead may rely on ``value segregation'' only.
    The Rulebook addresses the treatment of CCM Indirect Client
Segregated Account Structures in the event of the default of the CCM,
the CCM Client and of LCH SA itself.
    CCM Default.
     In the event of a CCM default, Clause 4.3 of the CDS
Default Management Process states that LCH SA will attempt in the first
instance to port the Client Cleared Transactions of a CCM Indirect
Gross Segregated Account Client to a single Backup Clearing Member,
provided that certain conditions are met, including that the Backup
Clearing Member has unconditionally agreed to act as Backup Clearing
Member and the instruction is received within the prescribed
timeframe--referred to as the ``Porting Window''--established by LCH SA
for this purpose. In the alternative, LCH SA may liquidate the existing
Client Cleared Transactions and re-establish them with the Backup
Clearing Member. LCH SA will also, upon instruction, transfer the
associated Collateral to the Backup Clearing Member. There will be no
porting attempted for Client Cleared Transactions in a CCM Indirect
Client Net Segregated Account Structure.
     In respect of Client Cleared Transactions in a CCM
Indirect Client Net Segregated Account Structure (or where porting is
not achieved in respect of Client Cleared Transactions in a in a CCM
Indirect Client Gross Segregated Account Structure), Clause 4.4.3 of
the CDS Default Management Process requires LCH SA to calculate an
amount--called the ``CDS Client Clearing Entitlement''--equal to: (1)
The pro rata share of the liquidation of the Non-Ported Cleared
Transactions; plus (2) the pro rata share of the liquidation value of
the Client Assets recorded in the relevant Client Collateral Account;
minus (2) the pro rata share of the costs of any hedging undertaken;
minus (4) the pro rata share of the costs, expenses and liabilities of
LCH SA in implementing the CDS Client Default Management Process, in
each case where such pro rata share is attributable to a given CCM
Indirect Client. The relevant CDS Clearing Entitlement(s) will then be
paid to the CCM Client of the defaulting CCM.
     Upon a CCM default, Article <IP_ADDRESS> of the Rulebook
clarifies that CCM Indirect Clients belonging to a CCM Indirect Client
Gross Segregated Account Structure bear no fellow-customer risk: only
the value of the Collateral referable to a given CCM Indirect Client--
called the ``CCM Indirect Client Gross Account Balance''--will be
available to satisfy any Damages attributable to the liquidation of any
Non-Ported Cleared Transactions referable to such CCM Indirect Client.
By contrast, all Collateral recorded in respect of a given CCM Indirect
Client Net Segregated Account will be available to satisfy any Damages
relating to the liquidation of any Non-Ported Cleared Transactions of
any CCM Indirect Client belonging to such CCM Indirect Client Net
Segregated Account.
    CCM Client Default. In the event of the default of a CCM Client
that has CCM Indirect Clients, LCH SA's normal default management
arrangements for CCMs will not apply. Instead, the defaulting CCM
Client will be default managed by the CCM, which will determine whether
to liquidate the Client Cleared Transactions registered in the relevant
CCM Indirect Client Segregated Account Structures or to attempt to port
the Client Cleared Transactions of the CCM Indirect Clients belonging
to a CCM Indirect Client Gross Segregated Account Structure to a Backup
Client. Porting may occur on a consolidated basis, i.e., where all the
CCM Indirect Clients appoint a single Backup Client, or on a per-CCM
Client Trade Account basis, i.e., where a given CCM Indirect Client
appoints a single Backup Client specific to that CCM Indirect Client.
Article <IP_ADDRESS> of the Rulebook provides that LCH SA will make the
relevant transfers in its records at the instruction of the CCM
undertaking the default management of its defaulting CCM Client.
    LCH SA Default. LCH SA has amended Article <IP_ADDRESS> of the Rulebook
to clarify that, following a default by LCH SA, CCMs shall calculate a
separate CCM Client Termination Amount in respect of each CCM Indirect
Client Net Segregated Account Structure and each CCM Indirect Client
Gross Segregated Account Structure it holds with LCH SA.
iv. Miscellaneous
    Article 3(3) of the Indirect Clearing RTS requires an authorized
CCP to identify, monitor and manage any ``material risks'' arising from
the provision of indirect clearing services that may affect the
resilience of the authorized CCP to adverse market developments. In
addition, Article 2(3) of the Indirect Clearing RTS state that an
authorized CCP may not ``prevent the conclusion of'' indirect clearing
arrangements that are entered into on reasonable commercial terms.
    Article <IP_ADDRESS> of the Rulebook has been amended to clarify that a
CCM may permit its CCM Clients to offer clearing services to their CCM
Indirect Clients provided certain conditions are met. Specifically, the
contractual terms of the indirect clearing arrangements must comply
with the relevant requirements of EMIR and MiFIR and must further
provide for the establishment of CCM Indirect Client Segregated Account
Structures (described in greater detail above) in accordance with the
wishes of the relevant CCM Indirect Clients. LCH SA has also largely
retained Article <IP_ADDRESS>, which sets out the general terms on which LCH
SA facilitates the offering of CDS Clearing Services to CCM Indirect
Clients.
    Article <IP_ADDRESS> of the Rulebook also includes an express
recognition that a given CCM Client may be acting in the

capacity of clearing its own proprietary transactions as well as in the
capacity of providing clearing services to its CCM Indirect Clients.
Finally, Title V, Chapter 3 of the Rulebook has been amended to provide
for non-default transfers of all Client Cleared Transactions in a given
CCM Indirect Client Segregated Account Structure (accompanied by the
associated Client Assets upon request) or partial transfers of Client
Cleared Transactions in a given CCM Indirect Client Segregated Account
Structure (without the associated Client Assets) to the relevant
accounts of a Receiving Clearing Member.
d. Certain Clarifying Amendments
    LCH SA has also made certain clarifying revisions to the Rulebook,
Procedures and Clearing Notice as described below.
i. Auction Member Representative
    Various provisions of the CDS Default Management Process (Annex 1
of the Rulebook) have been revised to clarify the responsibilities
between a Non-Defaulting Clearing Member and the Auction Member
Representative appointed by the Non-Defaulting Clearing Member to act
in such Clearing Member's place in the competitive bidding process as
described in Clause 5.4 of the CDS Default Management Process.
ii. Member Uncovered Risk
    The definition of ``Member Uncovered Risk'', now ``Group Member
Uncovered Risk'', has been revised to take into account the relevant
LCH Group Risk Policy, which considers whether Clearing Members belong
to the same group for purposes of the relevant risk calculations. The
revisions are set out in Section <IP_ADDRESS> and Section <IP_ADDRESS> of the
Rulebook and Section 2.12, Section 2.16 and Section 6.4 of the
Procedures.
iii. Calculation of Contributed Prices
    Section 5.18.2 of the Procedures has been revised to reflect
changes made to the methodology with regard to the application of the
bid-ask restraint in the calculation of contributed prices. In
addition, the references to a particular time in the Rulebook regarding
the price contribution process have been removed. Consequently, the
definition of ``End of Day'' has been removed from the Rulebook.
Article <IP_ADDRESS> of the Rulebook and Section 5.18.5 (b) and (d) of
Procedure 5 have been amended accordingly.
iv. New Approved Trade Source System
    Clearing Notice no. 2017/064 regarding the Approved Trade Source
Systems has been amended to add a new Approved Trade Source System
which is Bloomberg Trade Facility Ltd.
2. Statutory Basis
    LCH SA has determined that Proposed Rule Change is consistent with
the requirements of Section 17A of the Act \12\ and regulations
thereunder applicable to it. In particular, the amendments implementing
the MiFIR requirements relating to straight-through processing and the
EMIR requirements relating to indirect clearing arrangements for OTC
derivatives promote the prompt and accurate clearance and settlement of
derivatives transactions and ensure the safeguarding of securities and
funds that are within the custody or control of LCH SA, each within the
meaning of Section 17A(b)(3)(F) of the Act.\13\
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    \12\ 15 U.S.C. 78q-1.
    \13\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Clearing Agency's Statement on Burden on Competition

    LCH SA does not believe the Proposed Rule Change would have any
impact, or impose any burden, on competition. The Proposed Rule Change
does not address any competitive issue or have any impact on the
competition among central counterparties. LCH SA operates an open
access model, and the Proposed Rule Change will have no effect on this
model.

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:
     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-2017-010 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-2017-010. 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 Web site (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 Web site 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 Web site at http://www.lch.com/asset-classes/cdsclear.
    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-2017-010 and should
be submitted on or before December 28, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26320 Filed 12-6-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Notices]
[Pages 12320-12322]
[FR Doc No: 2019-06244]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2010-0203; FMCSA-2016-0011; FMCSA-2016-0313]

Qualification of Drivers; Exemption Applications; Epilepsy and
Seizure Disorders

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice of renewal of exemptions; request for comments.

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SUMMARY: FMCSA announces its decision to renew exemptions for nine
individuals from the requirement in the Federal Motor Carrier Safety
Regulations (FMCSRs) that interstate commercial motor vehicle (CMV)
drivers have ``no established medical history or clinical diagnosis of
epilepsy or any other condition which is likely to cause loss of
consciousness or any loss of ability to control a CMV.'' The exemptions
enable these individuals who have had one or more seizures and are
taking anti-seizure medication to continue to operate CMVs in
interstate commerce.

DATES: The exemptions were applicable on February 3, 2019. The
exemptions expire on February 3, 2021. Comments must be received on or
before May 1, 2019.

ADDRESSES: You may submit comments identified by the Federal Docket
Management System (FDMS) Docket No. FMCSA-2010-0203; FMCSA-2016-0011;
FMCSA-2016-0313 using any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting
comments.
     Mail: Docket Management Facility; U.S. Department of
Transportation, 1200 New Jersey Avenue SE, West Building Ground Floor,
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery: West Building Ground Floor, Room W12-140,
1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m.,
ET, Monday through Friday, except Federal Holidays.
     Fax: 1-202-493-2251.
    To avoid duplication, please use only one of these four methods.
See the ``Public Participation'' portion of the SUPPLEMENTARY
INFORMATION section for instructions on submitting comments.

FOR FURTHER INFORMATION CONTACT: Ms. Christine A. Hydock, Chief,
Medical Programs Division,<PHONE_NUMBER>, [email protected], FMCSA,
Department of Transportation, 1200 New Jersey Avenue SE, Room W64-224,
Washington, DC 20590-0001. Office hours are from 8:30 a.m. to 5 p.m.,
ET, Monday through Friday, except Federal holidays. If you have
questions regarding viewing or submitting material to the docket,
contact Docket Services, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Public Participation

A. Submitting Comments

    If you submit a comment, please include the docket number for this
notice (Docket No. FMCSA-2010-0203; FMCSA-2016-0011; FMCSA-2016-0313),
indicate the specific section of this document to which each comment
applies, and provide a reason for each suggestion or recommendation.
You may submit your comments and material online or by fax, mail, or
hand delivery, but please use only one of these means. FMCSA recommends
that you include your name and a mailing address, an email address, or
a phone number in the body of your document so that FMCSA can contact
you if there are questions regarding your submission.
    To submit your comment online, go to http://www.regulations.gov,
put the docket numbers, FMCSA-2010-0203; FMCSA-2016-0011; FMCSA-2016-
0313, in the keyword box, and click ``Search.'' When the new screen
appears, click on the ``Comment Now!'' button and type your comment
into the text box on the following screen. Choose whether you are
submitting your comment as an individual or on behalf of a third party
and then submit.
    If you submit your comments by mail or hand delivery, submit them
in an unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. If you submit comments by mail and would
like to know that they reached the facility, please enclose a stamped,
self-addressed postcard or envelope.
    FMCSA will consider all comments and material received during the
comment period.

B. Viewing Documents and Comments

    To view comments, as well as any documents mentioned in this notice
as being available in the docket, go to http://www.regulations.gov.
Insert the docket number, FMCSA-2010-0203; FMCSA-2016-0011; FMCSA-2016-
0313, in the keyword box, and click ``Search.'' Next, click the ``Open
Docket Folder'' button and choose the document to review. If you do not
have access to the internet, you may view the docket online by visiting
the Docket Management Facility in Room W12-140 on the ground floor of
the DOT West Building, 1200 New Jersey Avenue SE, Washington, DC 20590,
between 9 a.m. and 5 p.m., ET, Monday through Friday, except Federal
holidays.

C. Privacy Act

    In accordance with 5 U.S.C. 553(c), DOT solicits comments from the
public to better inform its rulemaking process. DOT posts these
comments, without edit, including any personal information the
commenter provides, to www.regulations.gov, as described in the system
of records notice (DOT/ALL-14 FDMS), which can be reviewed at
www.dot.gov/privacy.

II. Background

    Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption
for up to five years if it finds such exemption would likely achieve a
level of safety that is equivalent to, or greater than, the level that
would be achieved absent such exemption. The statute also allows the
Agency to renew exemptions at the end of the five-year period. FMCSA
grants exemptions from the FMCSRs for a two-year period to align with
the maximum duration of a driver's medical certification.
    The physical qualification standard for drivers regarding epilepsy
found in 49 CFR 391.41(b)(8) states that a person is physically
qualified to drive a CMV if that person has no established medical
history or clinical diagnosis of epilepsy or any other condition which
is likely to cause the loss of consciousness or any loss of ability to
control a CMV.
    In addition to the regulations, FMCSA has published advisory
criteria to assist Medical Examiners in determining whether drivers
with certain medical conditions are qualified to operate a CMV in
interstate commerce. [49 CFR part 391, APPENDIX A TO PART 391--MEDICAL
ADVISORY CRITERIA, section H. Epilepsy: Sec.  391.41(b)(8), paragraphs
3, 4, and 5.]
    The nine individuals listed in this notice have requested renewal
of their exemptions from the epilepsy and seizure disorders prohibition
in 49 CFR 391.41(b)(8), in accordance with FMCSA procedures.
Accordingly, FMCSA has evaluated these applications for renewal on
their merits and decided to extend each exemption for a renewable two-
year period.

III. Request for Comments

    Interested parties or organizations possessing information that
would otherwise show that any, or all, of these drivers are not
currently achieving the statutory level of safety should immediately
notify FMCSA. The Agency will evaluate any adverse evidence submitted
and, if safety is being compromised or if continuation of the exemption
would not be consistent with the goals and objectives of 49 U.S.C.
31136(e) and 31315, FMCSA will take immediate steps to revoke the
exemption of a driver.

IV. Basis for Renewing Exemptions

    In accordance with 49 U.S.C. 31136(e) and 31315, each of the nine
applicants has satisfied the renewal conditions for obtaining an
exemption from the epilepsy and seizure disorders prohibition. The nine
drivers in this notice remain in good standing with the Agency, have
maintained their medical monitoring and have not exhibited any medical
issues that would compromise their ability to safely operate a CMV
during the previous two-year exemption period. In addition, for
Commercial Driver's License (CDL) holders, the Commercial Driver's
License Information System (CDLIS) and the Motor Carrier Management
Information System (MCMIS) are searched for crash and violation data.
For non-CDL holders, the Agency reviews the driving records from the
State Driver's Licensing Agency (SDLA). These factors provide an
adequate basis for predicting each driver's ability to continue to
safely operate a CMV in interstate

commerce. Therefore, FMCSA concludes that extending the exemption for
each renewal applicant for a period of two years is likely to achieve a
level of safety equal to that existing without the exemption.
    As of February 3, 2019, and in accordance with 49 U.S.C. 31136(e)
and 31315, the following nine individuals have satisfied the renewal
conditions for obtaining an exemption from the epilepsy and seizure
disorders prohibition in the FMCSRs for interstate CMV drivers:

Ryan Babler (WI)
James Connelly (NJ)
Ricky Conway, Jr. (MO)
Bradley Hollister (PA)
Henrietta Ketcham (NY)
Michael Merical (NY)
Elvin P. Morgan (CA)
Larry Nicholson (NC)
Daniel Zielinski (OR)

    The drivers were included in docket numbers FMCSA-2010-0203; FMCSA-
2016-0011; FMCSA-2016-0313. Their exemptions are applicable as of
February 3, 2019 and will expire on February 3, 2021.

V. Conditions and Requirements

    The exemptions are extended subject to the following conditions:
(1) Each driver must remain seizure-free and maintain a stable
treatment during the two-year exemption period; (2) each driver must
submit annual reports from their treating physicians attesting to the
stability of treatment and that the driver has remained seizure-free;
(3) each driver must undergo an annual medical examination by a
certified Medical Examiner, as defined by 49 CFR 390.5; and (4) each
driver must provide a copy of the annual medical certification to the
employer for retention in the driver's qualification file, or keep a
copy of his/her driver's qualification file if he/she is self-employed.
The driver must also have a copy of the exemption when driving, for
presentation to a duly authorized Federal, State, or local enforcement
official. The exemption will be rescinded if: (1) The person fails to
comply with the terms and conditions of the exemption; (2) the
exemption has resulted in a lower level of safety than was maintained
before it was granted; or (3) continuation of the exemption would not
be consistent with the goals and objectives of 49 U.S.C. 31136(e) and
31315.

VI. Preemption

    During the period the exemption is in effect, no State shall
enforce any law or regulation that conflicts with this exemption with
respect to a person operating under the exemption.

VII. Conclusion

    Based on its evaluation of the nine exemption applications, FMCSA
renews the exemptions of the aforementioned drivers from the epilepsy
and seizure disorders prohibition in 49 CFR 391.41(b)(8). In accordance
with 49 U.S.C. 31136(e) and 31315, each exemption will be valid for two
years unless revoked earlier by FMCSA.

    Issued on: March 22, 2019.
Larry W. Minor,
Associate Administrator for Policy.
[FR Doc. 2019-06244 Filed 3-29-19; 8:45 am]
 BILLING CODE 4910-EX-P