[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Notices]
[Pages 25318-25329]
[FR Doc No: 2019-11319]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85940; File No. SR-LCH SA-2019-003]

Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change, as Modified by Amendments No. 1 and 2, To
Implement Settled-to-Market Treatment of Variation Margin, Permit the
Creation of Multiple Account Structures, Permit Select Members To
Provide Clearing Services to Affiliated Firms, and Update the
Onboarding Procedures

May 24, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that
on May 13, 2019, Banque Centrale de Compensation, which conducts
business under the name LCH SA (``LCH SA''), filed with the Securities
and Exchange Commission (``Commission'' or ``SEC'') the proposed rule
change described in Items I, II and III below, which Items have been
prepared primarily by LCH SA. On May 21, 2019, LCH SA filed Amendment
No. 1 to the proposed rule change, and on May 24, 2019, LCH SA filed
Amendment No. 2 to the proposed rule change.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as modified by Amendments No. 1 and 2, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendments No. 1 and 2 both corrected technical issues with
the initial filing of the proposed rule change but did not make any
changes to the substance of the filing or the text of the proposed
rule change.
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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 Rule Book (``Rule
Book''), (ii) CDS Clearing Supplement (``Supplement''), and (iii) CDS
Clearing Procedures (``Procedures'') (collectively the ``CDS Clearing
Rules'') to incorporate new terms and to make conforming, clarifying,
and clean-up changes intended to: (1) Implement a ``settled-to-market''
(``STM'') treatment

of variation margin \4\ as a method for further mitigating counterparty
credit risk related to changes in the market value of transactions; (2)
permit Clearing Members \5\ to create multiple account structures for a
single client and multiple trade accounts per client within a single
omnibus account structure; (3) permit Select Members \6\ to provide
client clearing services to their ``Affiliated Firms'' (discussed
below); and (4) make certain clarifications and enhancements to LCH
SA's existing onboarding procedures to better reflect current business
practices. Capitalized terms not defined or modified in this rule
proposal will have the same meaning as in LCH SA's existing Rule Book,
Supplement, or Procedures.
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    \4\ Lowercase ``variation margin'' in this rule proposal
generically refers to amounts exchanged as a result of a change in
market value of a transaction, irrespective of the legal
characterization of such amounts as settlement or collateral
transfer.
    \5\ Clearing Members include Select Members (defined below) and
General Members as the context requires. General Members are a
``CCM'' (i.e., generally any legal entity admitted as a clearing
member in accordance with the CDS Clearing Rules and party to the
CDS Admission Agreement) or an ``FCM Clearing Member'' (i.e.,
generally any Futures Commission Merchant (``FCM'') that has been
admitted as a clearing member in accordance with the CDS Clearing
Rules and is a party to the CDS Admission Agreement and which has
not elected to become a CCM) that has been admitted by LCH SA as a
General Member in accordance with Section 1 of the Procedures.
    \6\ A Select Member is a CCM or an FCM Clearing Member that: (a)
Does not provide CDS Client Clearing Services to Clients other than
Affiliated Firms (defined herein); and (b) has been admitted by LCH
SA as a Select Member in accordance with Section 1 of the
Procedures.
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    The text of the proposed rule change has been annexed 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 these statements.

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

    LCH SA is proposing to amend its CDS Clearing Rules to add STM as a
way to treat variation margin. Once implemented, non-FCMs and non-US
Clearing Members will be able to treat variation margin either as (i)
collateralized-to-market (``CTM'') or as (ii) STM. FCMs and US Clearing
Members will be required to treat variation margin as STM.
    Under the CTM model, parties make daily payments of variation
margin as collateral transfer as described in LCH SA's CDS Clearing
Rules. LCH SA's CDS Clearing Rules also provide for the payment of
Price Alignment Interest (``PAI'') which a party that receives
collateral typically pays to its counterparty. The CFTC Staff has
stated that, ``[i]n cleared markets, PAI eliminates the basis risk that
would otherwise exist between cleared and uncleared derivatives. Thus,
PAI represents the interest that would be paid on any collateral posted
in connection with an uncleared swap contract.'' \7\ Variation margin
payments collateralize the market exposure on a given day based on the
market price each day but ``the exposure between the counterparties
carries forward through the life of the contract'' with collateral
passing back and forth between the counterparties through future
variation margin payments.\8\
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    \7\ See CFTC Staff Letter No. 17-51 (Oct. 27. 2017) (available
at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/17-51.pdf).
    \8\ Id. at 4.
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    Under the proposed STM model, LCH SA's CDS Clearing Rules will be
amended such that all Clearing Members using the STM model will make
daily payments of variation margin called ``NPV Payments'' and payments
called ``Price Alignment Amount'' (``PAA''). The PAA is economically
equivalent to PAI, and represents the amount that would have been paid
if the variation margin were treated as collateral as opposed to a
settled amount. As the CFTC Staff explained, ``[u]nlike the
collateralized-to-market model . . . these payments settle the
outstanding exposure of the counterparties.'' \9\ Each day, the
outstanding exposure will change, and new payments will be needed to
settle the exposure.
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    \9\ Id.
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    LCH SA has determined to file this proposed rule change in order
to, among other things, amend its CDS Clearing Rules to require the STM
treatment of variation margin paid or received by FCMs and US Clearing
Members, which is intended to promote the prompt and accurate clearance
and settlement of all Cleared Transactions. As a result of the proposed
rule change, FCMs and US Clearing Members that are subject to
regulatory capital requirements promulgated by the federal bank
regulatory agencies, might obtain more favourable regulatory capital
treatment of Cleared Transactions.\10\ The proposed rule change to
require the STM treatment of variation margin would also be consistent
with a recent CFTC staff Interpretive Letter indicating that CTM
variation margin payments would not satisfy CFTC regulations that
require daily settlement that is irrevocable and unconditional.\11\ LCH
SA will also make STM available as an option, but not a requirement,
for non-FCMs and non-US Clearing Members.
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    \10\ See Interagency Guidance on the Regulatory Capital
Treatment of Certain Centrally-Cleared Derivative Contracts Under
Regulatory Capital Rules (August 14, 2017) (available at https://www.federalreserve.gov/supervisionreg/srletters/sr1707a1.pdf).
    \11\ See CFTC Staff Letter No. 17-51 (Oct. 27. 2017).
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    LCH SA's affiliate, LCH Limited, promulgated clearing rules in its
LCH Limited General Regulations which provide at Regulation 57A, among
other sections, for STM for SwapClear Clearing Members established
under the laws of any state of the United States or under the federal
laws of the United States.\12\ Regulation 57A was initially proposed in
2015. At that time, LCH Limited, through its membership in the
International Swaps and Derivatives Association (``ISDA''), approached
the SEC's Office of the Chief Accountant to discuss the accounting
implications associated with implementing STM.\13\ The ISDA dialogue
resulted in a confirmatory letter from ISDA to the SEC's Office of the
Chief Accountant on January 4, 2017 confirming ISDA's understanding
that the SEC did not object to certain tax related views associated
with the implementation of STM variation margin treatment for U.S.
persons. LCH Limited's clearing rules have provided for STM variation
margin treatment since on or around December 2015. Whereas previously
STM variation margin treatment was only available to LCH Limited
members, this rule proposal will implement STM variation margin
treatment for LCH SA, and thereby making it also available to LCH SA
Clearing Members, including FCMs and US Clearing Members for which STM
variation margin treatment is required.
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    \12\ General Regulations of LCH Limited, Regulation 57A (Nov.
2018), available at https://www.lch.com/system/files/media_root/General%20Regulations%20-%2026%20November%202018.pdf.
    \13\ Confirmation Letter Related to ISDA Accounting Committee
White Paper, ISDA (Jan. 4, 2017), available at https://www.isda.org/a/lgiDE/isda-sec-vm-settlement-confirming-letter.pdf.
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    In addition, this rule proposal will amend the CDS Clearing Rules
to permit Clearing Members to create multiple account structures for a
single client and multiple Trade Accounts per client

within a single omnibus account structure. This rule proposal will also
permit Select Members to provide clearing services to their Affiliated
Firms and make clarifying changes to LCH SA's onboarding procedures to
reflect current business practices.
1. Amendments To Permit Settled-to-Market Treatment for Cleared
Transactions
    The updated CDS Clearing Rules will permit non-FCMs and non-US
Clearing Members to utilize either the STM accounting method or CTM
accounting method where permitted and will require FCMs and US Clearing
Members to utilize the STM treatment. To implement the STM treatment of
variation margin, the Rule Book, Supplement, and Procedures will be
amended by adding new and amending existing defined terms and
provisions as described below.
i. Rule Book
    With respect to the Rule Book, LCH SA proposes to add additional
defined terms and make amendments to existing defined terms contained
within Title I, Chapter 1, Section 1.1.1.
    The term ``Client NPV Payment Requirement'' will be added to
describe the NPV Amount (defined below) that LCH SA will calculate as
payment by a Clearing Member to LCH SA or by LCH SA to a Clearing
Member in relation to certain STM Cleared Transactions and as the case
may be, Irrevocable Backloading STM Transactions which are not Rejected
Transactions, allocated to a relevant Client Margin Account.
    The term ``Converting Clearing Member'' will be added to capture a
framework whereby a Clearing Member submits a written request to LCH SA
to convert all of the CTM Cleared Transactions registered in a CTM
Trade Account into STM Cleared Transactions by converting the
underlying account from a CTM Trade Account into an STM Trade Account.
This is a one-way conversion from CTM to STM and, once complete, is
irrevocable.
    The term ``CTM Cleared Transactions'' will be added to cross
reference a Cleared Transaction that is registered in a CTM Trade
Account as described in Title III, Chapter 1, Section 3.1.10.
    The term ``CTM Trade Account'' will be added to describe a Trade
Account that a Clearing Member elects to classify as a CTM Trade
Account in accordance with Section 5 of the Procedures.
    The term ``House NPV Payment Requirement'' will be added to
describe the NPV Amount (defined below) that LCH SA will calculate as
payment by a Clearing Member to LCH SA or by LCH SA to a Clearing
Member in relation to certain STM Cleared Transactions, and as the case
may be, Irrevocable Backloading STM Transactions which are not Rejected
Transactions, allocated to the relevant Clearing Member's House Margin
Account.
    The term ``Irrevocable Backloading STM Transaction'' will be added
to clarify the definition of Irrevocable Backloading Transaction, which
after novation by LCH SA will be registered in the relevant Account
Structure as an STM Cleared Transaction.
    The term ``Irrevocable Backloading CTM Transaction'' will be added
to clarify the definition of Irrevocable Backloading Transaction which
after novation by LCH SA will be registered in the relevant Account
Structure as a CTM Cleared Transaction.
    The term ``NPV Amount'' will be added to define the relevant
amounts computed in accordance with Section 2 of the Procedures.
    The term ``NPV Payment'' will be added to describe the amount of
cash paid by a Clearing Member to LCH SA to satisfy the NPV Payment
Requirement.
    The term ``NPV Payment Requirement'' will be added as a collective
definition of both House NPV Payment Requirement or a Client NPV
Payment Requirement.
    The term ``Price Alignment Amount'' will be added to define the
relevant amounts computed in accordance with Section 2 of the
Procedures.
    The term ``STM Cleared Transaction'' will be added to define a
Cleared Transaction that is registered in an STM Trade Account in
accordance with Title III, Chapter 1, Section 3.1.10.
    The term ``STM Trade Account'' will be added to describe a Trade
Account that a Clearing Member elects to classify as an STM Trade
Account in accordance with Section 5 of the Procedures.
    The term ``Variation Margin Collateral Transfer'' will be added to
describe the amount of cash transferred by a Clearing Member or LCH SA
by way of full title transfer to satisfy a Variation Margin
Requirement. The definition also includes an affirmative statement that
Variation Margin Collateral Transfer is subject to the provisions of
article L. 211-38 of the French Monetary and Financial Code.
    The term ``Backloading Failure'' will be amended to add the concept
of Variation Margin Collateral Transfers as an additional possible
transfer that may need to be made at the same time as the Morning Call.
    The term ``Cash Payment'' will be amended for consistency purposes
to eliminate the reference to Variation Margin which has been replaced
by reference to NPV Payments and to add a reference to ``Price
Alignment Amount'', as a parallel to the reference to ``Price Alignment
Interest''.
    The term ``CCM Gross Omnibus Multi Sub-Account Client Margin
Account'' will be amended to add the concept of Client NPV Payment
Requirement as a possible value that will be calculated, as applicable.
    The term ``CCM Gross Omnibus Single Sub-Account Client Margin
Account'' will be amended to add the concept of Client NPV Payment
Requirement as a possible value that will be calculated, as applicable.
The definition will also be modified to account for the concept of
Account Structure.
    The term ``CCM House Margin Account'' will be amended to add the
concept of House NPV Payment Requirement as a possible value that will
be calculated, as applicable.
    The term ``CCM Indirect Client Gross Segregated Margin Account''
will be amended to add Client NPV Payment Requirement as a possible
value that will be calculated, as applicable. The definition will also
be modified to account for the concept of Account Structure.
    The term ``CCM Indirect Client Net Segregated Margin Account'' will
be amended to add Client NPV Payment Requirement as a possible value
that will be calculated, as applicable.
    The term ``CCM Individual Segregated Client Margin Account'' will
be amended to add Client NPV Payment Requirement as a possible value
that will be calculated, as applicable. The definition will also be
modified to account for the concept of Account Structure.
    The term ``CCM Net Omnibus Segregated Client Margin Account'' will
be amended to add Client NPV Payment Requirement as a possible value
that will be calculated, as applicable.
    The term ``Client Assets'' will be amended to add NPV Amounts, as
applicable, as an additional component of accruals which will be
considered Client Assets.
    The term ``Client Variation Margin Requirement'' will be amended to
clarify that in practice, Variation Margin will be calculated on a
transaction-by-transaction basis rather than on an Open Position basis.
In order to affect this clarification, LCH SA proposes to replace Open
Positions with CTM Cleared Transactions in the definition of Client
Variation Margin Requirement. Conforming changes will be made
throughout the Rule Book. The same

amendments will also be made to the term ``House Variation Margin
Requirement.''
    The term ``FCM Client Margin Account'' will be amended to update
the cross references to Irrevocable Backloading STM Transactions and
Client NPV Payment Requirement.
    The term ``FCM Client Margin Requirement'' will be amended to
delete any reference to the term Variation Margin.
    The term ``FCM House Margin Account'' will be amended to update the
cross references to Irrevocable Backloading STM Transactions and House
NPV Payment Requirement.
    The term ``FCM House Margin Requirement'' will be amended to delete
any reference to the term Variation Margin.
    The term ``Open Position'' will be amended to mirror the language
contained within what was formerly Article <IP_ADDRESS>. As a result, the
cross reference to Article <IP_ADDRESS>, as well as the Article itself, will
be removed from the Rule Book. The cross references to Article <IP_ADDRESS>
and Article <IP_ADDRESS>, as well as the Articles themselves, will also be
removed from the Rule Book.
    The term ``Payment Failure'' will be amended to replace the term
Cash Payment by Variation Margin, to add the newly defined term Price
Alignment Amount as a category of amounts which may trigger a Payment
Failure, and to add a new sub-section (v) in reference to NPV Amount to
satisfy a Clearing Member's NPV Payment Requirement.
    The term ``Variation Margin'' will be amended to remove the
reference to Price Alignment Interest.
    Beyond definitional changes, LCH SA proposes to amend the Rule Book
at Title I, Chapter 2, Section 1.2.7, Article <IP_ADDRESS> to include the
term ``Variation Margin Collateral Transfer'' regarding the currency in
which the Clearing Members are required to make payments and/or
transfers.
    LCH SA proposes to amend Section 1.2.9, Article <IP_ADDRESS> to include
the payment of NPV Amounts to the Clearing Member as new item (iii) and
the payment of the Price Alignment Amount to the Clearing Member as new
item (iv), where applicable. In addition, item (i) is modified to
clarify that the payment of Variation Margin to the relevant Clearing
Member is by way of Variation Margin Collateral Transfer.
    LCH SA proposes to amend the Rule Book at Title I, Chapter 3,
Section 1.3.1, Article <IP_ADDRESS> to include clarifying language that the
cumulative value of all NPV Amount(s) paid by the Clearing Member or
LCH SA in respect of NPV Payment Requirements for the corresponding
House Margin Account or Client Margin Account should be included in the
computation of the value of each Cleared Transaction. Article <IP_ADDRESS>
will be amended to include the concept of NPV Amount, as applicable,
whereas currently it references Variation Margin only. Article <IP_ADDRESS>
will be amended to include the concept of redelivery of Variation
Margin whereas currently the section only refers to repayment.
    LCH SA proposes to amend the Rule Book at Title II, Chapter 2,
Section 2.2.1, Article <IP_ADDRESS>. in order to include the reference to
Variation Margin Collateral Transfer obligations whereas currently the
Article only refers to Cash Payment obligations.
    Rule Book at Title II, Chapter 2, Section 2.2.7, Article <IP_ADDRESS>
will be modified to include the reference to Variation Margin
Collateral Transfer obligations, whereas the Article only refers to
Cash Payment obligations. The same modifications will be brought to
Article <IP_ADDRESS>.
    LCH SA proposes to amend the Rule Book at Title II, Chapter 4,
Section 2.4.2, Article <IP_ADDRESS> to add the reference to NPV Payment
Requirements whereas the Article only refers to Variation Margin
Requirement.
    Rule Book at Title III, Chapter 1, Section 3.1.8, Article <IP_ADDRESS>
will be modified to remove the concept of Variation Margin Requirement
from the existing paragraph and to create a stand-alone paragraph that
specifically addresses the method for calculating the Variation Margin
Requirement and/or NPV Payment Requirement by cross-referencing Title
IV, Chapter 2 of the Rule Book; Section 2 of the Procedures; and Title
III, Chapter 1, Section 3.1.7 of the Rule Book.
    Rule Book at Title III, Chapter 1, Section 3.1.9, Articles <IP_ADDRESS>
and <IP_ADDRESS> will be modified to add the reference to NPV Payment
Requirement(s) whereas currently these Articles only refer to Variation
Margin Requirement(s).
    LCH SA proposes to make updates to the provisions of the Rule Book
that discuss the registration of cleared transactions. New Rule Book
Title III, Chapter 1, Section 3.1.10, Article <IP_ADDRESS> through <IP_ADDRESS>
will be added to the Rule Book. Current Article <IP_ADDRESS> will become
Article <IP_ADDRESS> and current Article <IP_ADDRESS> will become Article
<IP_ADDRESS>. New Article <IP_ADDRESS> will permit Clearing Members to elect
to classify each Trade Account as either a CTM Trade Account or an STM
Trade Account in accordance with Section 5 of the Procedures. Trade
Accounts will default to CTM Trade Accounts where a Clearing Member
does not make an election. Cleared Transactions registered within a
Trade Account will have the same classification as the Trade Account
itself. Trade Accounts may only comprise CTM Cleared Transactions or
STM Cleared Transactions, but not both simultaneously.
    New Article <IP_ADDRESS> will introduce the concept of a ``Converting
Clearing Member'' which is intended to capture a framework whereby a
Clearing Member submits a written request to LCH SA to convert all of
the CTM Cleared Transactions registered into a CTM Trade Account into
STM Cleared Transactions by converting the underlying account from a
CTM Trade Account into an STM Trade Account. This is a one-way
conversion from CTM to STM and, once complete, is irrevocable. This
caveat will be memorialized in Article <IP_ADDRESS>.
    Notwithstanding the provisions of Article <IP_ADDRESS> and Article
<IP_ADDRESS>, under new Article <IP_ADDRESS>, each Cleared Transaction
registered in the name of a Clearing Member that is an FCM or otherwise
established under the laws of any state of the United States or under
US federal law, will be registered as an STM Cleared Transaction. It
will neither be possible to register transactions for these entities as
CTM Cleared Transactions nor to convert from an STM Cleared Transaction
to a CTM Cleared Transaction.
    LCH SA proposes to update Article <IP_ADDRESS> of Section 4.1.1 under
Title IV, Chapter 1 in order to add a reference to House NPV Payment
Requirement and Client NPV Payment Requirement, whereas currently this
Article only refers to House Variation Margin Requirement and Client
Variation Margin Requirement.
    Updated Section 4.2.3 of the Chapter 2 under Title IV will now
capture the concept of Variation Margin Requirement and NPV Payment
Requirement whereas the current section only refers to ``Collateral
Calls''. In addition, the reference to NPV Payment Requirement will be
added to Title IV, Chapter 2 itself, whereas currently this Chapter is
only named ``Margin''. Article <IP_ADDRESS> will be amended to add the
reference to NPV Payment Requirement in addition to the reference to
Variation Margin Requirement and also to add the reference to NPV
Amount in addition to the reference to Variation Margin. Article
<IP_ADDRESS> will also be amended in order to replace the term ``Cash
Payment'' by NPV Payment as a payment to satisfy a NPV Payment
Requirement and Variation Margin

Collateral Transfer as a transfer to satisfy a Variation Margin
Requirement; the word ``transfers'' will also be added in addition to
the word ``payments''.
    Section 4.2.5 will now capture the concept of NPV Amounts in
addition to Variation Margin to account for the new STM business
workflows and will be renamed to ``Variation Margin and NPV Amounts''.
Specifically, Article <IP_ADDRESS> is modified to account for the newly
defined terms described earlier in this rule proposal. The concept of
Cash Payments is replaced by an obligation to make either Variation
Margin Collateral Transfers or NPV Payments and to differentiate that
Variation Margin Collateral Transfers are applicable to CTM Cleared
Transactions or Irrevocable Backloading CTM Transactions; and that NPV
Payments are applicable to STM Cleared Transactions or Irrevocable
Backloading STM Transactions when such amounts are due.
    Updated Article <IP_ADDRESS> will be amended to capture the concept of
NPV Amounts within the requirement that such amounts are payable by a
Clearing Member or LCH SA at the same time as the Morning Call or as
otherwise provided by the Procedures. Variation Margin Collateral
Transfer or NPV Payments will be made in compliance with the times set
out in Section 3 of the Procedures. In addition, the Rule Book will
state that LCH SA and the Clearing Member agree that satisfaction of
the payment obligation arising under the NPV Payment Requirement will
discharge any such obligation required to settle outstanding exposure
under an STM Cleared Transaction or for an Irrevocable Backloading STM
Transaction which is not a Rejected Transaction. New Article <IP_ADDRESS> is
intended to clarify that, notwithstanding anything to the contrary in
the CDS Clearing Documentation, a Variation Margin Collateral Transfer
obligation does not arise for STM Cleared Transactions or for
Irrevocable Backloading STM Transactions. This Article is not intended
to prejudice any other rights to require Collateral to be transferred
under the CDS Clearing Documentation (e.g., a Collateral transfer
requirement in respect of a Clearing Member's Margin Requirement for
STM Cleared Transactions).
    In addition, LCH SA proposes to amend Title IV, Chapter 2, Section
4.2.7, Article <IP_ADDRESS> to clarify the fact that risk calculation
performed by LCH SA also includes the calculation of Variation Margin
Requirement and NPV Payment Requirement in addition to Margin
Requirements and Open Positions. Article <IP_ADDRESS>. will also be amended
in order to clarify the term ``clearing functions'' shall mean the
validation of Variation Margin Requirements and NPV Payment
Requirements, in addition to Margin Requirements.
    LCH SA proposes to amend Title IV, Chapter 3, Section 4.3.2,
Article <IP_ADDRESS> (viii) to clarify that, in case of default of a
Clearing Member, LCH SA will be authorized to convert the Variation
Margin Collateral Transfer obligations into cash payment obligations.
The purpose of such change is to ensure that in the case of default,
Variation Margin will be applied by LCH SA in the same way as an NPV
Payment (i.e., as a cash payment). Such treatment is consistent with
how LCH SA currently treats Variation Margin, but this amendment is
required because the new definition of Cash Payment will no longer
capture Variation Margin and Variation Margin is not captured within
the definition of Collateral.
    In addition to the specific proposed changes to the Rule Book
discussed above, certain conforming changes and clarifications to
incorporate the concepts of NPV Payment Requirement, NPV Amount, and
Price Alignment Amount with respect to STM were made throughout the
Rule Book. Corresponding changes and clarifications were made with
respect to CTM with conforming references to Variation Margin
Requirement, Variation Margin, and Price Alignment Interest. References
to Variation Margin and Variation Margin Requirements were removed in
respect of FCM Clearing Members. Such proposed changes are notably
inserted in Title V, Chapter 1, Section 5.1.1, Article <IP_ADDRESS> (xvii),
Title V, Chapter 2, Section 5.2.3, Article <IP_ADDRESS>, Title VI, Chapter
1, Section 6.1.1, Article <IP_ADDRESS> (xii), Title VI, Chapter 2, Section
6.2.3, Article <IP_ADDRESS> and Sections 1.1, 6.2, 7.1, 8.1.4, 8.2, 8.5 of
the CDS Default Management Process in Appendix 1.
ii. Procedures
(A) Section 2
    LCH SA Procedures Section 2 will be updated to reflect the
operational steps required to facilitate the NPV Payments and Price
Alignment required to operationalize the STM business model while still
maintaining the CTM business model for non-FCMs and non-US Clearing
Members. As a result, the Section itself will be renamed Margin, NPV
Payment and Price Alignment.
    The cross reference in Section 2.1 to Procedures Section 3 will be
updated to reference Variation Margin Collateral Transfers whereas
previously the reference was only to Cash Payments. Corresponding
updates (discussed below) will be made throughout Section 3.
    Section 2.2 will be amended to make certain clean-up and conforming
changes in order to ensure that the new defined terms relevant to
implementing STM are applied consistently to the existing procedure.
Specifically, Section 2.2(c) will now be called Variation Margin
Requirement and NPV Payment Requirement and will be broken into two
sub-sections, as applicable, to either: (i) Transfer Variation Margin
to or receive Variation Margin from LCH SA to satisfy the Client
Variation Margin Requirement and/or House Variation Margin Requirement;
and/or (ii) make NPV Payment to or receive NPV Payment from LCH SA to
satisfy the Client NPV Payment Requirement and/or House NPV Payment
Requirement. Section 2.2(d) will be updated to add the concept of NPV
Amount within the list of amounts that, when aggregated, represent the
amount that can be called from a Clearing Member that is a CDS Seller
in respect of a Cleared Transaction referencing a single Reference
Entity. Section 2.2(g) will be retitled ``Calculation of Margin and NPV
Amount(s) following a Payment Failure or the issuance of a Default
Notice in respect of a Clearing Member'' and will be updated to
incorporate the concept of NPV Amount(s) as an alternative to Margin
throughout the section.
    Section 2.4 will be renamed ``Collateral, Cash Payments, and
Variation Margin Collateral Transfers''. In parallel, Section 2.4(a)
will also be renamed to ``Types of Collateral and currencies for Cash
Payments and Variation Margin Collateral Transfers'' and Section 2.4(b)
will be renamed to ``Transferring Collateral and making Cash Payments
and Variation Margin Collateral Transfers''. Within Section 2.4(a) the
concept of Variation Margin Collateral Transfers, NPV Payment(s), and
Variation Margin will be added to the cross reference to Procedure
Section 3 which sets out the applicable types of Collateral and
currencies that may be used. Section 2.4(b) which also cross references
to Procedure Section 3 will be similarly updated.
    Section 2.5 will be renamed to ``Payment of the Margin Requirement,
Variation Margin Requirement, NPV Payment Requirement and Provision of
Excess Collateral and Client Collateral Buffer''. Section 2.5 (a) which
discusses the Morning Call is amended to include the concept of NPV
Payment Requirement in timing, notification, and payment requirement.
In addition, certain requirements of Clearing Members that previously
referenced

Cash Payments, are now split to incorporate the concept of Variation
Margin Collateral Transfers and NPV Payments where applicable. In
reference to certain Excess Collateral and/or Cash Payments by FCM
Clearing Members, the concept of Variation Margin Requirement will be
replaced by NPV Payment Requirement. In addition, this section
previously provided that LCH SA is able to credit Euro denominated Cash
Collateral and/or make Cash payments to relevant Clearing Members in
accordance with the process outlined in Procedure Section 3. This
section will now also incorporate the concept of Variation Margin
Collateral Transfer(s) with respect to relevant Clearing Members.
Section 2.5(b) under the heading ``Second Intraday Call'' will be
updated for consistency such that the existing cross reference to
Procedure Section 3 will be applicable to Clearing Members that are
required to transfer Collateral to satisfy their Required Collateral
Amount, and now also to make Variation Margin Collateral Transfers in
respect of their Variation Margin Requirement. The existing reference
to Cash Payments will be revised for consistency to reference NPV
Payments and any applicable NPV Payment Requirement.
    LCH SA proposes to make amendments to Section 2.13 through the end
of Procedures Section 2. A new Section 2.14 covering ``NPV Amount'' and
a new Section 2.17 covering ``Price Alignment Amount'' will be added to
the Procedures. Contingency Variation Margin (formerly Section 2.14)
will be updated and re-numbered to Section 2.15 and Price Alignment
Interest (formerly Section 2.15) will be updated and re-numbered to
Section 2.16. Credit Quality Margin (formerly Section 2.16) will be re-
numbered to Section 2.18 and Extraordinary Margin (formerly Section
2.17) will be re-numbered to Section 2.19 although neither section is
subject to substantive updates.
    Section 2.13 will be amended to specify that Variation Margin is
applicable to CTM Cleared Transactions and Irrevocable Backloading CTM
Transactions which are not Rejected Transactions, rather than all
Cleared Transactions. Section 2.13 previously referred to ``net
position value'' but will be amended to refer to ``net present value''
throughout. The portion of Section 2.13(ii), which previously outlined
a netting procedure for payments from a Clearing Member to LCH SA and
from LCH SA to a Clearing Member, will be renumbered 2.13(b) and will
be amended to address the calculation of net present value for each CTM
Cleared Transaction or Irrevocable Backloading CTM Transaction and to
account for global changes to the defined terms in the Rule Book and
Procedures.
    New Section 2.14 NPV Amount will be added to the Procedures to
outline the specific operational steps required to facilitate the
accounting for an STM Cleared Transaction. An NPV Amount is an amount
paid on each Cash Payment Day between the Clearing Member and LCH SA to
account for the variation of the market value of the CDS, or as the
case may be, Index Swaption that is an STM Cleared Transaction of
Irrevocable Backloading STM Transaction. The updated Procedures
described the method by which LCH SA will go about calculating the NPV
Amount. The NPV Amount calculation will be based on the net present
value of each STM Cleared Transaction and Irrevocable Backloading STM
Transaction on each Cash Payment Day. The net present value for each
STM Cleared Transaction or Irrevocable Backloading STM Transaction is
based on the End of Day Contributed Prices provided to LCH SA as
proscribed in the Rule Book Article <IP_ADDRESS> and Procedures Section 5.
Unless otherwise agreed between the Clearing Member and LCH SA, the net
present value on the Trade Date is zero. Immediately upon determining
net present value, the net present value will be reset to zero (``NPV
Reset''), however, the NPV Reset will not be deemed to have occurred
where the STM Cleared Transaction or Irrevocable Backloading STM
Transaction is held in the Account Structure of an FCM and the NPV
Payment Requirement is not satisfied.
    Contemporaneous with the NPV Reset, if LCH SA determines that the
value of the STM Cleared Transaction or Irrevocable Backloading STM
Transaction has increased since the last NPV Reset, LCH SA will make a
cash payment (the NPV Amount) denominated in the same currency as the
STM Cleared Transaction or Irrevocable Backloading STM Transaction and
equal to the amount of the increase in the net present value to the
Clearing Member. If the net present value has decreased, then a
corresponding payment will be made by the Clearing Member to LCH SA. If
there is no change in net present value, then no payments are required.
New Section 2.14 contains provisions to ensure clarity with regard to
the meaning of an ``increase'' and ``decrease'' in net present value.
The proposed Procedure will state that, for the avoidance of doubt, an
``increase'' in the net present value means the value of an STM Cleared
Transaction or Irrevocable Backloading STM Transaction has moved in
favour of the Clearing Member since the immediately preceding NPV Reset
while a ``decrease'' means the opposite.
    Where amounts payable on each Cash Payment Day are in the same
currency and are related to the same Margin Account, proposed Section
2.14 provides for aggregation of amounts payable by the Clearing Member
to LCH SA and for aggregation of amounts payable by LCH SA to the
Clearing Member. In addition, the amounts will be offset against each
other as applicable. This procedure will result in a net payment amount
from either the Clearing Member to LCH SA or LCH SA to the Clearing
Member in accordance with Article <IP_ADDRESS> of the Rule Book and
Procedures Section 3. In addition, at the end of Section 2.14 a cross
reference will be added to Clause 7 of the CDS Default Management
process, regarding the details of the adjustment of the NPV Amount
which may occur.
    Conforming changes are proposed to Section 2.15 to replace
references to Cash payment with NPV Payment and Variation Margin
Collateral Transfer and to reflect related concepts throughout the
section.
    Section 2.16 will be amended to specify that it is applicable to
the receipt of Variation Margin Collateral Transfers and related to CTM
Cleared Transactions. Previously this section referred to Variation
Margin payments. A substantively new sentence will also be added to
Section 2.16 to describe how LCH SA will handle a negative interest
rate environment. Where the applicable Price Alignment Interest rate is
negative, ``LCH SA will either (i) pay Price Alignment Interest if a
Clearing Member has, on a cumulative net basis, received Variation
Margin from LCH SA, or (ii) charge Price Alignment Interest if a
Clearing member has, on a cumulative net basis, transferred Variation
Margin.''
    New Section 2.17 Price Alignment Amount will be added to the
Procedures to outline the specific operational steps required to
facilitate the accounting for an STM Cleared Transaction. The Price
Alignment Amount is identical to the Price Alignment Interest amount
and the two payments serve the same functional purpose although the
legal status of the two payments is different. Procedure Section 5
outlines the process by which a report is generated on each Cash
Payment Day indicating the applicable Price Alignment Amount to be paid
or received by each Clearing Member. Under proposed Section 2.17, if
LCH SA determines that the Cumulative Net Present Value is greater than
zero, the applicable Price Alignment Amount will immediately

become payable to LCH SA by the Clearing Member in the same currency as
the STM Cleared Transaction. If the Cumulative Net Present Value is
less than zero, the applicable Price Alignment Amount will immediately
become payable to the Clearing Member by LCH SA in the same currency as
the STM Cleared Transaction. Proposed Section 2.17 also outlines the
treatment of STM Cleared Transactions that are transferred to either
(i) a Backup Clearing Member pursuant to the CDS Default Management
Process; or (ii) a Receiving Clearing Member. In both instances, the
Trade Date of the STM Cleared Transaction for the purpose of
determining the Cumulative Net Present Value is the date of the
transfer. The same treatment will apply in an instance where a Clearing
Member elects to convert from a CTM Cleared Transaction to an STM
Cleared Transaction.
    Proposed Section 2.17 contains three definitions that are
applicable for the purposes of this section. ``Cumulative Net Present
Value'' is a hypothetical value computed by LCH SA on each Cash Payment
Day falling after a Trade Date, based on certain aggregate NPV Amounts
payable to LCH SA by a Clearing Member and by LCH SA to a Clearing
Member. ``Price Alignment Amount'' is computed on each Cash Payment Day
falling after a Trade Date. It means the product of (i) the absolute
value of the Cumulative Net Present Value on each Cash Payment Day;
(ii) the applicable Price Alignment Amount Rate on each Cash Payment
Day; and (iii) the day count fraction determined by LCH SA as being
applicable to the currency of the STM Cleared Transaction. ``Price
Alignment Amount Rate'' means the applicable prevailing interest rate
of the Cash Payment Date as mentioned in the files and reports to the
Clearing Member.
(B) Section 3
    Similar to Section 2, Section 3 itself will be renamed
``Collateral, Variation Margin and Cash Payment'' to reflect the new
business processes required to facilitate STM.
    LCH SA proposes to update Procedures Section 3.7(c) and (d) at
various sub-sections to make conforming changes to integrate the
concepts of Variation Margin Collateral Transfers and Client NPV
Payment Requirements where applicable.
    Section 3.11 will be renamed to ``LCH SA's rights in respect of
Collateral and Variation Margin transferred with full title''.
Conforming amendments will be made to various sub-sections to include
the concept of Variation Margin where applicable. Substantively, at
Section 3.11(b), the Procedures will be updated to reflect that LCH SA
may use Variation Margin transferred by Clearing Members for the
purposes of transferring corresponding Variation Margin or making
corresponding NPV Payment(s) to other Clearing Members in accordance
with the CDS Clearing Rules. Section 3.11(c) will include a reference
to the Variation Margin in addition to the reference to the term
Collateral.
    Section 3.18 will be renamed ``Cash Payments and Variation Margin
Collateral Transfers''. Conforming amendments will be made to the
various sub-sections to include the concept of Variation Margin
Collateral Transfer where applicable. The headings for the table at
Section 3.18(a) will be updated to (i) Cash Payment/Variation Margin
Type and (ii) Cash Payment/Cash transfer. A new row will be added to
the table indicating that Cash in CDS Contractual Currency is the
appropriate Cash Payment/Cash transfer when making an NPV Payment,
Price Alignment Amount.
(C) Section 5
    LCH SA proposes to make certain conforming changes throughout
Procedures Section 5. In Section 5.6(c) language that previously
referenced Variation Margin will be expanded to also reference rights
over aggregate NPV Amounts in respect to a transfer of Client Assets.
Similarly, in Section 5.6(d), row 9 of the timetable for transfers will
be updated to include reference to NPV Payment Requirement whereas
previously it only referred to Variation Margin Requirement.
    The section titled ``Registration of Cleared Transactions'' which
is found at Section 5.11 will be subject to updates to accommodate the
STM business processes. A new Section 5.11(a) titled STM or CTM
Classification of Trade Accounts will be added. As described earlier in
this rule proposal, non-FCMs and non-US Clearing Members will be given
the option to elect to designate a Trade Account as either an STM Trade
Account or a CTM Trade Account. Where no election is made, the account
will default to a CTM Trade Account. FCMs and US Clearing Members will
not be given such an option as their accounts will need to be
classified as STM Trade Accounts. Former Section 5.11(a) ``Notification
of registration'', will be re-numbered to 5.11(b). Former Section
5.11(b) will be re-numbered to Section 5.11(c) and is discussed within
the Account Structures section of this rule proposal.
    New Section 5.11(d), titled ``Conversion of STM Cleared
Transactions'' will be added to the Procedures to describe the specific
steps undertaken in connection with an STM Conversion Request which
will convert a CTM Trade Account into an STM Trade Account. As
proposed, upon receipt of an STM Conversion Request pursuant to Rule
Book Article <IP_ADDRESS>, LCH SA will have sole and absolute discretion to
nominate a Business Date for the conversion which will be called the
``STM Conversion Date.'' On the STM Conversion Date, subject to
conditions discussed below, the relevant CTM Trade Account will become
an STM Trade account and all Cleared Transactions registered in the
Trade Account will no longer be CTM Transactions, but rather will
immediately and automatically become STM Cleared Transactions. The
conversion will be affected through technological and operational
changes made by LCH SA, rather than by terminating the existing CTM
Cleared Transactions and entering into new STM Cleared Transactions.
    The occurrence of the STM Conversion Date is subject to a series of
conditions outlined in the new Section 5.11(d) including: (i) The
Converting Clearing Member is not a Defaulting Clearing Member; (ii)
the relevant Deemed Client Transactions may not be subject to an early
termination date; (iii) the STM Conversion Request may not violate
applicable laws or regulations; (iv) the Converting Clearing Member
must have satisfied all of its Cash Payment and Variation Margin and
Collateral Transfer obligations up to, but excluding, the STM
Conversion Date; (v) the Converting Clearing Member has paid to LCH SA,
or LCH SA has paid to the Converting Clearing Member (as applicable),
any cash settlement amount that LCH SA determines (in its sole and
absolute discretion) must be paid to ensure that the net present value
of each Cleared Transaction registered in the relevant Trade Account
shall be equal to zero on the STM Conversion Date. The Converting
Clearing Member and LCH SA agree that LCH SA may, in its sole and
absolute discretion, apply any Variation Margin transferred to and held
by LCH SA in respect of the Cleared Transaction registered in the
relevant Trade Account to satisfy (in whole or in part) the Converting
Clearing Member's obligation to pay the amount (if any) required in
relation to each such Cleared Transaction. The Converting Member and
LCH SA agree that any Variation Margin transferred to and held by the
Converting Clearing Member in

respect of the Cleared Transaction registered in the relevant Trade
Account shall be applied to satisfy (in whole or in part) LCH SA's
obligation to pay the amount (if any) required in relation to each such
Cleared Transaction; and (vi) the Converting Clearing Member is in
satisfactory compliance with all other conditions stipulated by LCH SA.
    In connection with each STM Conversion Request made by a Clearing
Member, proposed Section 5.11(d) requires that the Clearing Member
agree that after the STM Conversion Date, it will neither be possible
to ``re-convert'' the Trade Account back into a CTM Trade Account nor
to convert individual transactions back into CTM Cleared Transactions.
Finally, LCH SA will be able to rely on an STM Conversion Request made
by the person, agent, officer, employee, or representative as made
under the full authority to do so and to bind the Converting Clearing
Member to the STM Conversion Request.
    The discussion of the Cleared Trades Report in Section
5.16(a)(i)(F) will be augmented to include an additional information
element on the report to indicate the classification of the Cleared
Transaction as either a CTM Cleared Transaction or an STM Cleared
Transaction. This distinction was not required previously because all
transactions were cleared on a CTM basis. The report discussed at
Section 5.16(c)(iii) will be renamed to ``Variation Margin and NPV
Amount Report'' and the description will be updated to reference NPV
Amount and NPV Payment Requirements, whereas previously it only
referenced Variation Margin and Variation Margin Requirement. In
addition, the concept of a ``transfer'' will be added where applicable
to account for the different method of money movement for CTM Cleared
Transactions as contrasted with STM Cleared Transactions which are
``paid'' to LCH SA.
    Section 5.18.4 related to the use of composite spreads/prices will
be updated to include references to NPV Payment Requirement whereas
previously the section only referenced the Variation Margin
Requirement.
iii. Clearing Supplement
    In support of the proposed STM business model, LCH SA will also add
new provisions to the Supplement in each of its three parts. Each of
these three new sections is substantially similar.
     For Index Cleared Transactions and Single Name
Transactions incorporating the 2003 ISDA Credit Derivatives
Definitions--Part A, Section 2.6 will be added to the Supplement;
     For Index Cleared Transactions and Single Name
Transactions incorporating the 2014 ISDA Credit Derivatives
Definitions--Part B, Section 2.6 will be added to the Supplement; and
     For Credit Index Swaptions--Part C, a Section 2.4 will be
added to the Supplement.
    The proposed new sections will establish the ``STM Cleared Terms''
for each of the three categories of transactions outlined above. If a
Cleared Transaction is designated as an STM Cleared Transaction in
accordance with Rule Book Article <IP_ADDRESS>, it will automatically be
governed by the STM Cleared Terms.
    In accordance with the STM Cleared Terms, net present value will be
computed at least once per Cash Payment Day in accordance with
Procedures Section 2. Immediately upon determining the net present
value, a cash amount may become due and payable by the Clearing Member
or LCH SA and the net present value of the STM Cleared Transaction will
be reset to zero. Any required payments will be made in accordance with
Section 2 of the Procedures. The STM Cleared Terms will also provide
that in any circumstance that prevents NPV Payments or Variation Margin
Collateral Transfers from being made in U.S. dollars, LCH SA will be
permitted to convert such amounts into Euro in accordance with Rule
Book Article <IP_ADDRESS>.
    Similarly, Price Alignment Amount will be determined at least once
per Cash Payment Day in accordance with Procedures Section 2.
Immediately upon determining the Price Alignment Amount, a cash amount
may become due and payable by the Clearing Member or LCH SA as
determined in accordance with Procedures Section 2.17. For the
avoidance of doubt, the new Supplement section will state that any
Price Alignment Amount shall immediately become due and payable by the
relevant party under the STM Cleared Terms applicable to the STM
Cleared Transaction and will be made in such time and manner as is
consistent with Procedures Section 2.
2. Amendments To Permit Multiple Account Structures
i. Rule Book
    LCH SA proposes to amend the Rule Book at Title V, Chapter 2,
Section 5.2.1, Article <IP_ADDRESS> to eliminate the existing language that
restricts a CCM Client from being allocated to more than one account
structure at the same time. Specifically, the current language states
that ``a single CCM Client is not permitted to be allocated, at the
same time, to (i) more than one CCM Client Account Structure of the
same CCM (except in connection with the provision of indirect clearing
services by such CCM Client to its CCM Indirect Clients) and (ii)
within a CCM Gross Omnibus Segregated Account Structure, more than one
CCM Gross Omnibus Sub-Account Structure.'' This language will be
removed from the Rule Book.
    The terms ``CCM Gross Omnibus Multi Sub-Account Structure'', ``CCM
Indirect Client Gross Segregated Account Structure'', ``CCM Indirect
Client Net Segregated Account Structure'' and ``CCM Net Omnibus
Segregated Account Structure'' will be amended to reference ``one or
more'' CCM Client Trade Accounts(s) where previously the definition
referred to ``a'' CCM Client Trade Account(s).
    Where relevant, the reference to a ``Sub-Account Client'' or to a
Client in the definitions or articles will now refer to a ``Sub-Account
Structure'' or to a ``Structure'' so that the wording will not imply
anymore that a Client can hold only one account structure.
    Title V, Chapter 2, Section 5.2.1, Article <IP_ADDRESS> will be modified
to permit CCM Net Omnibus Segregated Account Clients to configure
account allocations at the CCM Net Omnibus Segregated Account Structure
level and to configure multiple allocation accounts of each type. This
Article will also be modified to refer to ``one or more'' CCM Gross
Omnibus Sub-Account Structure(s) or ``CCM Individual Segregated Account
Structure(s)'' where previously it only referred to a structure.
    Title V, Chapter 2, Section 5.2.1, Article <IP_ADDRESS> will be modified
to permit LCH SA to open one or more CCM Client Trade Accounts(s) for
each CCM Omnibus Segregated Account Client; one CCM Client Trade
Account for each CCM Individual Segregated Account Structure; and one
or more CCM Client Trade Account(s) for each CCM Indirect Client
belonging to a CCM Indirect Client Segregated Account Structure.
    Title V, Chapter 2, Section 5.2.3, Article <IP_ADDRESS> will be modified
to substitute the concept of a client account structure in place of the
existing concept of a client, thereby permitting more than one account
structure for a single client.
    Title V, Chapter 2, Section 5.2.3, Article <IP_ADDRESS> will be modified
to substitute the concept of an account structure in place of the
existing concept of a client in Article <IP_ADDRESS>(i)

and (iv). In addition, changes to this article make clarifying
amendments to the sentence structure.
ii. Procedures
    Procedures at Section 5.3(f) will be modified to refer to the
ability for CCMs to have several account structures and trade accounts
by adding the word ``relevant'' to the last paragraph of the section in
reference to Client Trade Accounts and Client Margin Accounts. The same
modification will be brought to Section 5.5. In addition, Procedures at
Section 5.6(b)(i) and (iv) will be modified to refer to ``a'' rather
than ``the'' CCM Client Trade Account and ``a'' rather than ``the'' CCM
Gross Omnibus Single Sub-Account structure.
3. Amendments To Permit Select Members Clearing for Affiliated Firms
i. Rule Book
    In order to permit Select Members to provide client clearing
services to certain affiliates, ``Affiliated Firm'' will now be
included as a defined term in the Rule Book and will be added into the
definition of ``Select Member'' as a category of persons to whom Select
Members are permitted to provide client clearing services. The
definition of Affiliated Firm will also be augmented into other defined
terms as appropriate. Certain conforming changes are also proposed to
Title II, Chapter 2; Title IV, Chapter 2; Title V, Chapter 1; and Title
VI, Chapter 1 of the Rule Book and to the Procedures at Section
5.11(c).
    With respect to a Clearing Member, an Affiliated Firm is any
Affiliate or any entity that is otherwise member to the same
institutional protection scheme (as defined in the CRR \14\) as the
Clearing Member. The Rule Book currently defines Affiliate with respect
to a Clearing Member, as any entity that controls, directly or
indirectly, the Clearing Member, any entity controlled, directly or
indirectly, by the Clearing Member or any entity directly or indirectly
under common control with such Clearing Member.
---------------------------------------------------------------------------

    \14\ CRR refers to Regulation (EU) No. 575/2013 of the European
Parliament and of the Council of 26 June 2016 on prudential
requirements for credit institutions and investment firms and
amending Regulation (EU) No. 648/2012 and all delegated regulatory
and implementing technical standards adopted pursuant to Regulation
(EU) No. 575/2013 and published in the Official Journal of the
European Union from time-to-time.
---------------------------------------------------------------------------

    The term ``Select Member'' will be amended to permit a Select
Member to provide clearing services to their Affiliated Firms whereas
currently Select Members are not permitted to provide clearing services
to any third-party.
    The term ``CCM'' will be amended to permit Clearing Members to
provide CDS CCM Client Clearing Services to their Affiliated Firms
without qualifying as General Members.
    The term ``FCM Clearing Member'' will also be amended to permit
Clearing Members to provide CDS FCM Client Clearing Services to
Affiliated Firms without qualifying as General Members.
    The terms ``CCM Indirect Gross Segregated Account Client'', ``CCM
Indirect Net Segregated Account Client'', and ``CCM Individual
Segregated Account Client'' will be amended to expand the definitions
to capture the new defined term Affiliated Firm.
    The term ``FCM Client'' will be amended to include a specific
reference to the new defined term Affiliated Firm as an additional
category of persons who are deemed to be FCM Clients.
    Rule Book Article <IP_ADDRESS> will be modified to ensure that Select
Members account for Product Families held by both the Select Members
and any Affiliated Firms to which the Select Member provides CDS Client
Clearing Services. The Membership Requirements in Article <IP_ADDRESS>,
Continuing Obligations in Article <IP_ADDRESS>, Markit LCH Settlement Price
and LCH Settlement Price authorization in <IP_ADDRESS> are broadened to
apply to Select Members who intend to provide CDS Client Clearing
Services to Affiliated Firms. Article <IP_ADDRESS> and Article <IP_ADDRESS> are
modified to permit Select Members to provide CDS Client Clearing
Services to Affiliated Firms. Article <IP_ADDRESS> is modified to permit FCM
Clearing Members to provide CDS Client Clearing services to Affiliated
Firms.
ii. Procedures
    Finally, Procedures at Section 5.11(c) will be modified to ensure
that the change to Rule Book Article <IP_ADDRESS> regarding Product Families
is incorporated into the procedures for updating the Product Family
Form and thus operationalized by Select Members and LCH SA's personnel
when updating Product Family Forms.
4. Onboarding Procedures Clarifications
    LCH SA is also proposing to make updates to Procedures Section 1 to
account for normal course of business changes to its current onboarding
process. These modifications will ensure that Section 1 of the
Procedures accurately reflects the current processes for onboarding
applicants (``Applicants'') to CDSClear. Section 1.1(b) and (c) will be
updated to consolidate certain steps that were previously characterized
as a stand-alone ``initial review'' into the overall ``application
process.'' Whereas previously, the CDSClear Admission Form was only
completed after an initial review, it will now be submitted prior to
the initial review. Section 1.1 is further amended to adjust the
operational timing of the review steps undertaken during the 30 days of
the application process. Section 1.1(d) (formerly Section 1.1(e)) is
updated to permit more flexibility for LCH SA to use its discretion to
determine if a site visit is appropriate when evaluating applications.
Language setting a target to review applications within 30 Business
Days, or 40 Business Days where a legal opinion is required, is removed
from the Procedure as the overall timeline to either (i) reject or (ii)
accept an application is described in Section 1.1(b) (formerly 1.1(c)).
    Section 1.1(f) previously described LCH SA's ability to impose
conditions or limitations on the exercise of certain rights under the
CDS Clearing Documentation. This section will be clarified to eliminate
the concept of ``conditions'' but the Procedure will continue to permit
LCH SA to impose limitations following approval. A recently approved
Applicant, before the submission of its first Original Transaction,
shall make its initial Contribution into the CDS Default Fund and shall
also post sufficient Collateral before the submission of its first
Intraday Transaction, which LCH SA believes is consistent with its
regulatory obligations to manage risk.
    Finally, Section 1.1(g) will now reference a Clearing Member's
possible obligation to put in place a Power of Attorney in respect of
Bank of New York Mellon for the purposes of posting Collateral,
transferring Variation Margin, and making Cash Payments when submitting
its first Client Clearing Form.
5. Technical Amendments
    The amendments to the Procedures, Rule Book, and Supplement also
contain typographical corrections, clean-up changes, and similar
technical corrections as well as various conforming references to the
new or revised defined terms. Specifically, the reference to CFTC
Regulation 1.3(y) was amended to CFTC Regulation 1.3 based on comments
from the CFTC. The description of the Clearing Member Restructuring
Pair File in the Procedures Section 5.16(a)(i)(H) will be revised to
reference an M(M)R Restructuring rather than a Restructuring Credit
Event. Later, the Procedures Section 5.17 which

describes Regulatory Reporting obligations are updated to remove the
reference to the name of a specific trade repository. Finally,
corresponding changes to provision numbering throughout each document
have been made as necessary and in compliance the US law and regulatory
guidance.
(b) Statutory Basis
    As more fully discussed below, LCH SA believes that the proposed
rule changes in connection with (1) implementing settled-to-market as a
method to mitigate counterparty credit risk related to changes in the
market value of transactions; (2) permitting Clearing Members to create
multiple account structures for a single Client and multiple trade
accounts per Client within a single omnibus account structure; (3)
permitting Select Members to provide client clearing services to their
Affiliated Firms; and (4) making clarifications and enhancements to the
existing onboarding procedures to better reflect current business
practices, are consistent with the requirements of Section 17A of the
Securities Exchange Act of 1934 \15\ (the ``Exchange Act'') and the
regulations thereunder, including the standards under Exchange Act Rule
17Ad-22.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78q-1.
    \16\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------

1. Amendments To Permit Settled-To-Market Treatment for Cleared
Transactions
    LCH SA believes that the proposed amendments to the CDS Clearing
Rules to permit STM Variation Margin treatment for Cleared Transactions
are consistent with the requirements of Section 17A of the Exchange
Act.\17\ Section 17A(b)(3)(F) of the Exchange Act \18\ requires, among
other things, that the rules of a clearing agency be designed to
promote the prompt and accurate clearance and settlement of securities
transactions and, to the extent applicable, derivative agreements,
contracts, and transactions.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q-1.
    \18\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    LCH SA's proposed amendments and resulting operating model is
similar to other clearing agencies servicing US counterparties who have
implemented STM variation margin treatment. For example, ICE Clear
Credit LLC (``ICC'') adopted changes to its clearing rules to clearly
characterize margin payments as STM. ICC acknowledged that, prior to
the ICC's August 2018 changes, its clearing rules were not entirely
clear about some aspects of its operational procedures which were
already treating transactions as STM.\19\ In its order approving ICC's
rule changes, the SEC confirmed that the operational practice of
treating payments made under an STM model as settlement payments is
consistent with an overall clearing program designed to ``assure the
safeguarding of securities and funds which are in the control of the
ICC or for which it is responsible . . . the [f]ramework would, in
general, protect investors and the public interest.'' \20\
---------------------------------------------------------------------------

    \19\ Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating To Amending the ICC Clearing
Rules Regarding Mark-to-Market Margin, Securities Exchange Act
Release No. 34-83832; File No. SR-ICC-2018-006 (June 29, 2018), 83
FR 41118 (Aug. 13, 2018) (available at https://www.govinfo.gov/content/pkg/FR-2018-08-17/pdf/2018-17741.pdf).
    \20\ Id. at 41120.
---------------------------------------------------------------------------

    LCH SA's proposed rule changes will align with the requirements of
Exchange Act Rule 17Ad-22(e)(8) which requires each covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ``define the point at which
settlement is final to be no later than the end of the day on which the
payment or obligation is due and, where necessary or appropriate,
intraday or in real time.'' \21\ In adopting Exchange Act Rule 17Ad-
22(e)(8), the SEC recognized that there may be a number of ways to
address compliance, highlighting three factors: (i) Whether a clearing
agency's policies and procedures clearly define the point at which
settlement is final; (ii) whether a clearing agency completes final
settlement no later than the end of the value date, and preferably
intraday or in real time; and (iii) whether a clearing agency clearly
defines the point after which unsettled payments, transfer
instructions, or other obligations may not be revoked by a
participant.\22\
---------------------------------------------------------------------------

    \21\ 17 CFR 240.17Ad-22(e)(8).
    \22\ Securities and Exchange Commission; Standards for Covered
Clearing Agencies, Exchange Act Release No. 3478961; File No. S7-03-
14 (Sept. 28, 2016), 81 FR 70786 (Oct. 13, 2016) (available at:
https://www.sec.gov/rules/final/2016/34-78961.pdf).
---------------------------------------------------------------------------

    The proposed rule changes with respect to the STM model
transparently outline a specific process by which STM transactions will
be facilitated, including the operational steps that LCH SA will follow
once STM is implemented to ensure finality is achieved. The CDS
Clearing Rules will clearly describe the daily mandatory STM processes
for FCMs and US Clearing Members, as well as the optional processes for
non-FCMs and non-US Clearing Members to convert to and maintain STM
accounts. Under the proposed STM model, the daily transfer of NPV
Payments and PAA constitutes a final settlement of the outstanding
exposure between the counterparties. All Clearing Members using the STM
model will make applicable payments each day, thereby achieving a final
settlement for that day. Each subsequent day, the outstanding exposure
will change, and new payments will be needed to settle the exposure.
The STM model is in contrast to the CTM model where transfers of
collateral are made between the counterparties, with associated rights
to reclaim such collateral. Under the CTM model, exposure between the
counterparties carries forward through the life of the contract.
Implementation of the STM model aligns LCH SA's operations with the
requirements of Exchange Act Rule 17Ad-22(e)(8) by clearly defining a
daily settlement cycle and settling each amount on the day that it is
due.
    Thus, the proposed rule changes to implement STM variation margin
treatment, which includes daily settlement under the STM model and
achieves finality with respect to STM positions each day, will promote
the prompt and accurate settlement of securities transactions and
derivative agreements, contracts, and transactions and assuring the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible and,
therefore, will be consistent with Section 17A of the Exchange Act and
the rules promulgated thereunder.
2. Amendments To Permit Multiple Account Structures; Amendments To
Permit Select Member's Clearing for Affiliated Firms; and Onboarding
Procedures Clarifications
    In the SEC's Order as of December 29, 2016 Granting Application for
Registration as a Clearing Agency and Request for Exemptive Relief \23\
(``2016 Order''), the SEC evaluated LCH SA's membership standards
against the requirements of Section 17A(b)(3)(B) of the Exchange Act
which provides that the rules of a clearing agency must permit certain
categories of persons to be eligible for membership including:
Registered brokers or dealers, registered clearing agencies, registered
investment companies, banks, and insurance companies.\24\ The 2016
Order went on

to explain that a clearing agency is permitted to deny, or condition
participation of, any member or any category of members listed in
Section 17A(b)(3)(B) if such persons do not meet the financial
responsibility, operational capability, experience, and competence
standards set forth set by the clearing agency.\25\ In addition,
Exchange Act Rules 17Ad-22(b)(5)-(6) require a clearing agency to
establish, implement, maintain, and enforce written policies and
procedures that do not limit membership to dealers and do not impose
any specific portfolio size or transaction volume minimums.\26\
Exchange Act Rule 17Ad-22(b)(7) requires that a clearing agency
establish, implement, maintain, and enforce written policies and
procedures that ``provide[s] a person that maintains net capital equal
to greater than $50 million with the ability to obtain membership at
the clearing agency, provided that such persons are able to comply with
other reasonable membership standards, with any net capital
requirements being scalable so that they are proportional to the risks
posed by the participants activities . . .'' \27\ among other
requirements. Finally, the 2016 Order considered Exchange Act Rule
17Ad-22(d)(2) which requires a registered clearing agency to establish,
implement, maintain, and enforce written policies and procedures that
require participants to have sufficient financial resources and robust
operational capacity to meet the obligations arising from participating
in the clearing agency; have procedures in place to monitor that
participation requirements are met on an ongoing basis; and have
participation requirements that are objective and publicly disclosed,
and permit fair and open access.\28\
---------------------------------------------------------------------------

    \23\ Self-Regulatory Organizations; LCH SA; Order Granting
Application for Registration as a Clearing Agency and Request for
Exemptive Relief, Order, Securities Exchange Act Release No. 34-
79707; File No. 600-36 (Dec. 29, 2016), 82 FR 1398 (Jan. 5, 2017)
(available at https://www.govinfo.gov/contente/pkg/FR-2017-01-05/pdf/2016-31940.pdf).
    \24\ 15 U.S.C. 78q-1(b)(3)(B).
    \25\ 2016 Order at 82 FR 1402; 15 U.S.C. 78q-1(b)(4)(B).
    \26\ 17 CFR 240.17Ad-22(b)(5)-(6).
    \27\ 17 CFR 240.17Ad-22(b)(7).
    \28\ 2016 Order at 82 FR 1402; 17 CFR 240.17Ad-22(d)(2).
---------------------------------------------------------------------------

    Similarly, Exchange Act Section 17A(b)(3)(A) requires a clearing
agency to have the capacity to facilitate the prompt and accurate
clearance and settlement and the safeguarding of securities and
funds.\29\ Exchange Act Rule 17Ad-22(e)(17) requires a covered clearing
agency to establish, implement, maintain, and enforce written policies
and procedures reasonably designed to identify the plausible sources of
operational risk, both internal and external and mitigate their impact
through the use of appropriate systems, policies, procedures and
controls; ensure that the system have a high degree of security,
resiliency, operational reliability, and adequate, scalable capacity;
and establish and maintain business continuity plans that address
events posing a significant risk of disrupting operations.\30\
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78q-1(b)(3)(A).
    \30\ 17 CFR 240.17Ad-22(e)(17).
---------------------------------------------------------------------------

    The modifications proposed to the Procedures Section 1 enhance and
clarify LCH SA's existing onboarding procedure. The proposed changes
will consolidate certain steps that were previously characterized as a
stand-alone ``initial review'' into the overall ``application
process''; refine certain timing for review and approvals; and refine
how LCH SA goes about imposing limitations on Clearing Members under
certain circumstances, among other refinements. These enhancements
reflect LCH SA's commitment to ensuring the effectiveness of its
overall Clearing Members onboarding program and take into account
learning by LCH SA on these subjects since the 2016 Order.
    LCH SA has considered its proposal to permit Select Members to
provide clearing services to Affiliated Firms and the proposal to
modify its operational Account Structure model against the requirements
to minimize operational risk and maintain reliable, resilient, and
secure systems. Permitting Clearing Members to create multiple account
structures and multiple trade accounts per Client within a single
omnibus account structure will promote flexibility, would permit
Clearing Members to manage and mitigate risks in a manner that is more
closely tailored to their needs and the needs of their customers.
Similarly, permitting Select Members to provide clearing services to
Affiliated Firms will decrease barriers to entry for accessing cleared
markets and thus result in a larger number of cleared transactions
which are carried out in a clear and transparent manner. Based on LCH
SA's significant experience operating a clearing agency, and its
associated systems and controls, it believes that these new client-
focused features are appropriate and will enhance, not reduce, the
level of customer protection under the current CDS Clearing Rules for
Clearing Members and their Clients. As such, LCH SA believes that the
modifications to the account structures and onboarding procedures, and
addition of Client clearing for Select Members for their Affiliated
Firms are consistent with the requirements of Section 17A of the
Exchange Act and Exchange Act Rule 17Ad-22 described above.

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.\31\ LCH SA does
not believe that the proposed rule change would impose burdens on
competition that are not necessary or appropriate in furtherance of the
purposes of the Act. Specifically, the proposed changes to the Rule
Book, Supplement, and Procedures would apply equally to all Clearing
Members and their Clients. For FCMs and U.S. persons, the STM business
model will apply to all Clearing Members and their customers. Non-FCMs
and non-US Clearing Members will be given the option to elect to
operate under the STM business model.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    The proposed rule change and implementation of STM will require
FCMs and US Clearing Members to utilize the STM business model when
making use of LCH SA's clearing services which may impose burdens on
those Clearing Members and their Clients, but such burdens are
necessary and appropriate to comply with recent CFTC guidance which is
applicable to LCH SA and its FCMs and US Clearing Members.\32\
Therefore, LCH SA does not believe that the proposed rule change would
impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \32\ CFTC Staff Letter No. 17-51 at 2.
---------------------------------------------------------------------------

    Further, as described above, LCH SA's proposed rule change to
permit Select Members to provide clearing services to Affiliated Firms
will generally improve the ability of such market participants to
engage in cleared transactions or to access clearing services.

C. Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been
solicited or received. LCH SA will notify the Commission of any written
comments received by LCH SA.

D. Extension of Time Period for Commission Action

    LCH SA does not consent to the extension of the time period listed
in Section 19(b)(2) of the Securities Exchange Act of 1934 for
Commission action.

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:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please
include File Number SR-LCH SA-2019-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-LCH SA-2019-003. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of LCH SA and on LCH SA's website
at: https://www.lch.com/resources/rules-and-regulations/proposed-rule-changes-0.
    All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-LCH SA-2019-003 and should
be submitted on or before June 21, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11319 Filed 5-30-19; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 142 (Tuesday, July 24, 2012)]
[Notices]
[Pages 43277-43278]
[FR Doc No: 2012-17922]

=======================================================================
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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. CP12-482-000]

Tennessee Gas Pipeline Company, L.L.C.; Notice of Application

    Take notice that on July 6, Tennessee Gas Pipeline Company, L.L.C.
(Tennessee), 1001 Louisiana Street, Houston, Texas 77002, filed in the
above referenced docket an application pursuant to section 7(b) of the
Natural Gas Act (NGA) and Part 157 of the Commission's regulations,
requesting authorization to abandon in place the northern portion of
its Line No. 523M-100, and one associated inactive offshore supply
pipeline, Line No. 523M-6300 and associated appurtenances located from
the Ship Shoal Area in federal waters extending northerly to onshore in
Terrebonne Parish, Louisiana. The facilities to be abandoned include
approximately 32 miles of 26-inch pipeline, and 5.19 miles of 6-inch
pipeline, as well as associated appurtenances, all as more fully set
forth in the application which is on file with the Commission and open
to public inspection. This filing is available for review at the
Commission in the Public Reference Room or may be viewed on the
Commission's Web site web at http://www.ferc.gov using the ``eLibrary''
link. Enter the docket number excluding the last three digits in the
docket number field to access the document. For assistance, contact
FERC at<EMAIL_ADDRESS>or call toll-free,<PHONE_NUMBER> or
TYY,<PHONE_NUMBER>.
    Any questions concerning this application may be directed to Thomas
G. Joyce, Manager, Certificates, Tennessee Gas Pipeline Company, L.L.C.
1001 Louisiana Street, Houston, Texas 77002, or telephone (713) 420-
3299, or facsimile<PHONE_NUMBER>, or by email at<EMAIL_ADDRESS>Susan T. Halbach, Assistant General Counsel,
Tennessee Gas Pipeline Company, L.L.C. 1001 Louisiana Street, Houston,
Texas 77002, or telephone<PHONE_NUMBER>, or by email

<EMAIL_ADDRESS>or Debbie Kalisek, Regulatory Analyst,
Tennessee Gas Pipeline Company, L.L.C. 1001 Louisiana Street, Houston,
Texas 77002, or telephone at<PHONE_NUMBER>, or facsimile at (713) 420-
1605, or by email<EMAIL_ADDRESS>    Pursuant to section 157.9 of the Commission's rules, 18 CFR157.9,
within 90 days of this Notice the Commission staff will either:
complete its environmental assessment (EA) and place it into the
Commission's public record (eLibrary) for this proceeding; or issue a
Notice of Schedule for Environmental Review. If a Notice of Schedule
for Environmental Review is issued, it will indicate, among other
milestones, the anticipated date for the Commission staff's issuance of
the final environmental impact statement (FEIS) or EA for this
proposal. The filing of the EA in the Commission's public record for
this proceeding or the issuance of a Notice of Schedule for
Environmental Review will serve to notify federal and state agencies of
the timing for the completion of all necessary reviews, and the
subsequent need to complete all federal authorizations within 90 days
of the date of issuance of the Commission staff's FEIS or EA.
    There are two ways to become involved in the Commission's review of
this project. First, any person wishing to obtain legal status by
becoming a party to the proceedings for this project should, on or
before the comment date stated below file with the Federal Energy
Regulatory Commission, 888 First Street NE., Washington, DC 20426, a
motion to intervene in accordance with the requirements of the
Commission's Rules of Practice and Procedure (18 CFR 385.214 or
385.211) and the Regulations under the NGA (18 CFR 157.10). A person
obtaining party status will be placed on the service list maintained by
the Secretary of the Commission and will receive copies of all
documents filed by the applicant and by all other parties. A party must
submit seven copies of filings made in the proceeding with the
Commission and must mail a copy to the applicant and to every other
party. Only parties to the proceeding can ask for court review of
Commission orders in the proceeding.
    However, a person does not have to intervene in order to have
comments considered. The second way to participate is by filing with
the Secretary of the Commission, as soon as possible, an original and
two copies of comments in support of or in opposition to this project.
The Commission will consider these comments in determining the
appropriate action to be taken, but the filing of a comment alone will
not serve to make the filer a party to the proceeding. The Commission's
rules require that persons filing comments in opposition to the project
provide copies of their protests only to the party or parties directly
involved in the protest.
    Persons who wish to comment only on the environmental review of
this project should submit an original and two copies of their comments
to the Secretary of the Commission. Environmental commentors will be
placed on the Commission's environmental mailing list, will receive
copies of the environmental documents, and will be notified of meetings
associated with the Commission's environmental review process.
Environmental commentors will not be required to serve copies of filed
documents on all other parties. However, the non-party commentors will
not receive copies of all documents filed by other parties or issued by
the Commission (except for the mailing of environmental documents
issued by the Commission) and will not have the right to seek court
review of the Commission's final order.
    The Commission strongly encourages electronic filings of comments,
protests and interventions in lieu of paper using the ``eFiling'' link
at http://www.ferc.gov. Persons unable to file electronically should
submit an original and seven copies of the protest or intervention to
the Federal Energy regulatory Commission, 888 First Street NE.,
Washington, DC 20426.
    Comment Date: August 7, 2012.

    Dated: July 17, 2012.
Kimberly D. Bose,
Secretary.
[FR Doc. 2012-17922 Filed 7-23-12; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register: July 7, 2009 (Volume 74, Number 128)]
[Notices]
[Page 32210-32211]
[DOCID:fr07jy09-106]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60185; File No. SR-CBOE-2009-028]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change Relating
to Rebating Member Dues for Certain Members

June 29, 2009.

I. Introduction

    On May 6, 2009, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend its Fee Schedule to
rebate member dues for certain members. The proposed rule change was
published for comment in the Federal Register on May 26, 2009.\3\ The
Commission received no comments on the proposal. This order approves
the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59935 (May 18,
2009), 74 FR 24888 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    CBOE assesses dues with respect to every membership (unless a
member is assessed the Hybrid Electronic Quoting Fee, in which case the
member does not pay member dues).\4\ Under CBOE Rule 3.17(c), the
membership lease agreement between a lessor member and a lessee member
designates who is responsible for Exchange dues, fees and other
charges. The Exchange represents that, typically, leases provide that
the lessee is responsible for dues and therefore lessors do not have to
pay dues.
---------------------------------------------------------------------------

    \4\ Member dues are $450 per month. See CBOE Fees Schedule,
Section 10.
---------------------------------------------------------------------------

    Under the lessor compensation component of the Interim Trading
Permit (``ITP'') program, the Exchange compensates a lessor for an
``open lease'' while the ITP program is active

and ITPs are outstanding.\5\ The goal of this component of the ITP
program is to put the lessor in a similar position as if the lessor's
membership was leased. The Exchange asserts that this goal would be
frustrated if the lessor is charged dues, because the lessor would be
subject to an obligation the lessor would otherwise not be subject to
if the lessor's membership was leased.
---------------------------------------------------------------------------

    \5\ The ITP program is a program pursuant to which the Exchange
has the authority to issue up to 50 ITPs. The ITP program is
governed by CBOE Rule 3.27. The lessor compensation component of the
ITP program is described in CBOE Rule 3.27(d). An ``open lease'' is
defined in Rule 3.27(d) as a transferable Exchange membership
available for lease.
---------------------------------------------------------------------------

    In a separate proposed rule change, the Exchange instituted a
waiver of member dues for any month that a lessor member receives a
payment from the Exchange for an open lease under the ITP program,
effective as of May 1, 2009.\6\ The Exchange now proposes to rebate
dues to any lessor member who received such a payment from the Exchange
during the period of August 1, 2008 through April 30, 2009.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 59892 (May 8, 2009),
74 FR 22790 (May 14, 2009) (SR-CBOE-2009-027).
---------------------------------------------------------------------------

III. Discussion

    The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\7\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(4) of the Act,\8\ which requires that the rules of a
national securities exchange provide for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using its facilities.
---------------------------------------------------------------------------

    \7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    As note above, CBOE recently adopted a waiver of member dues for
any month that a lessor member receives a payment from the Exchange for
an open lease under the ITP program, effective May 1, 2009.\9\ The
current proposal will effectively allow CBOE to apply this same waiver
retroactively by rebating to a lessor member its member dues for any
month in which the lessor member received a payment from the Exchange
for an open lease under the ITP program for the period August 1, 2008
through April 30, 2009.
---------------------------------------------------------------------------

    \9\ See supra, note 5.
---------------------------------------------------------------------------

    The Commission believes that the rebate will put lessor members who
received compensation from the Exchange for an open lease under the ITP
program but who paid member dues since August 1, 2008 in the same
position as those lessor members who are currently having their member
dues waived pursuant to the fee waiver adopted as of May 1, 2009.\10\
The Commission also believes that the proposed rebate will further the
goal of the Exchange's ITP program to put the lessor of an ``open
lease'' in the same position as if the lessor's membership had been
leased. The Commission notes that the Exchange represented that lease
agreements typically provide that the lessee member is responsible for
all dues and thus the lessor would generally not have to pay such dues.
Accordingly, the Commission finds that the proposed fee rebate is
consistent with the Act.
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-CBOE-2009-028), be, and
hereby is, approved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-15901 Filed 7-6-09; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)]
[Rules and Regulations]
[Pages 13415-13416]
[FR Doc No: 2018-06252]

=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 10

[Docket No. FDA-2018-N-1097]

Good Guidance Practices; Technical Amendment

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule; technical amendment.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA or Agency) is amending
its good guidance practices regulation to inform the public on how to
electronically submit a draft of a proposed guidance to the Agency.
This technical amendment is nonsubstantive.

DATES: This rule is effective March 29, 2018.

FOR FURTHER INFORMATION CONTACT: Megan Velez, Office of Policy, Food
and Drug Administration, 10903 New Hampshire Ave., Bldg. 32, Rm. 4254,
Silver Spring, MD 20993-0002,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: FDA is amending 21 CFR 10.115(f)(3), good
guidance regulations, by adding language on how the public can
electronically submit drafts of proposed guidance documents to
participate in the development and issuance of guidance documents. The
amendment provides an option for submitting the draft of a proposed
guidance to the Agency electronically through https://www.regulations.gov at Docket No. FDA-2013-S-0610.
    Publication of this document constitutes final action on the change
under the Administrative Procedure Act (5 U.S.C. 553). This technical
amendment is nonsubstantive. FDA therefore, for good cause, has
determined that notice and public comment are unnecessary under 5
U.S.C. 553(b)(3)(B). Further, this rule places no burden on affected
parties for which such parties would need a reasonable time to prepare
for the effective date of the rule. Accordingly, FDA, for good cause,
has determined

this technical amendment to be exempt under 5 U.S.C. 553(d)(3) and that
the rule can become effective upon publication.

List of Subjects in 21 CFR Part 10

    Administrative practice and procedure, News media.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, 21 CFR part
10 is amended as follows:

PART 10--ADMINISTRATIVE PRACTICES AND PROCEDURES

0
1. The authority citation for part 10 continues to read as follows:

    Authority:  5 U.S.C. 551-558, 701-706; 15 U.S.C. 1451-1461; 21
U.S.C. 141-149, 321-397, 467f, 679, 821, 1034; 28 U.S.C. 2112; 42
U.S.C. 201, 262, 263b, 264.

0
2. In Sec.  10.115, add two sentences to the end of paragraph (f)(3) to
read as follows:

Sec.  10.115   Good guidance practices.

* * * * *
    (f) * * *
    (3) * * * If you wish to submit the draft of a proposed guidance
document electronically, submit it through https://www.regulations.gov
at Docket No. FDA-2013-S-0610. It is only necessary to submit one copy.
* * * * *

    Dated: March 20, 2018.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2018-06252 Filed 3-28-18; 8:45 am]
 BILLING CODE 4164-01-P