2024-25533. Self-Regulatory Organizations; LCH SA; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Cash Spreads and Fees on Securities Collateral

Currency	Unsecured overnight index	Cash collateral fee/spread (bps)
		All markets	CDSClear clients	Default funds
EUR	€STR	21.5	6.5	11.5
GBP	SONIA	35	20
USD	FEDFUND	30	15

LCH SA is proposing to decrease the cash collateral spread for EUR, GBP and USD by 2bps. Accordingly, LCH SA will apply a revised spread of 19.5bps, 33bps and 28bps for EUR, GBP and USD cash collateral balances, respectively, posted for initial margin. In addition, LCH SA is proposing to add a column reflecting the current Default Fund spread for purposes of transparency, however LCH SA is not proposing any changes to this spread. LCH SA is also not proposing any changes to the cash collateral spread for CDSClear clients. LCH SA is proposing these changes primarily to encourage members to post more cash collateral, as non-cash collateral deposited has become a larger proportion of all margin collateral on deposit. An increase in the proportion of cash collateral on deposit will enhance LCH SA's Liquidity Coverage Ratio, provide LCH SA with the required operational liquidity to inject into the settlement and payment networks and to ensure there is no disruption in clearing services, should LCH SA liquidate the portfolio of a defaulted clearing member.

LCH SA is proposing to reduce the spreads for eligible cash collateral balances to encourage CDSClear clearing members to post more cash as initial margin for clearing and to better diversify the mix of collateral posted as initial margin from clearing members, as non-cash collateral has become a greater portion of all margin collateral on deposit. LCH SA believes this will enhance its liquidity risk management processes by ensuring it maintains sufficient liquid resources ( i.e., cash) to facilitate the timely settlement of its payment obligations with a high degree of confidence under a wide range of foreseeable stress scenarios. In addition, an increase in cash collateral will support LCH SA's ability to manage the ongoing operational liquidity needs for the purposes of injecting liquidity into the various settlement and payment networks and will further support LCH SA's default management process ( e.g., during the liquidation of a member portfolio). LCH SA does not believe any changes are necessary to the cash collateral spreads for CDSClear Clients or with respect to cash posted to satisfy Default Fund requirements. CDSClear Clients will continue to benefit from a larger spread than CDSClear House accounts and the Default Fund cash collateral spread will remain unchanged, as clearing members must continue to meet their Default Fund obligations in cash collateral.

ii. Changes to Securities Collateral Fees

LCH SA is also proposing to amend the fees it charges clearing members for securities collateral posted as initial margin. Eligible securities collateral currently includes government securities from select countries, select European supranational debt, government agency debt issued by Rentenbank (Germany), Kreditanstalt für Wiederaufbau (Germany) and CADES (France) and select equities listed on the EURO STOXX 50 index. The fees charged on each securities collateral type varies based on the mechanism of how the clearing member posts the collateral. For example, securities collateral may be deposited via Full Title Transfer (FTT) to an account opened by LCH SA at various central securities depositories (CSDs). Clearing members may also pledge securities collateral directly to LCH SA, whereby it will deposit securities via a Single Pledgor Pledged Account (SPPA) opened by LCH SA at Euroclear Bank. LCH SA also offers a Tri-Party solution whereby LCH SA and a Clearing member may appoint Euroclear Bank and/or Euroclear France as a triparty agent and authorize such triparty agent to enter settlement instructions on their behalf into the securities settlement system to affect movements of securities between a giver account and a taker account opened with the relevant triparty agent on a full title transfer basis for the purposes of transferring Collateral to LCH SA or releasing such collateral. LCH SA currently applies the following fees for securities collateral for CDSClear house and client accounts:

	Securities	House			Client
		Full title transfer	Pledge	Triparty	CDSClear clients
Government Securities	Australia	13	NA	NA	10
	Austria	11	15	9.5	10
( print page 87658)
	Belgium	11	15	9.5	10
	Canada	13	NA	NA	10
	Denmark	13	NA	NA	10
	Finland	11	15	9.5	10
	France	11	15	9.5	10
	Germany	11	15	9.5	10
	Italy	11	15	9.5	10
	Japan	13	NA	NA	10
	Netherlands	11	15	9.5	10
	Norway	13	NA	NA	10
	Portugal	11	NA	9.5	10
	Spain	11	15	9.5	10
	Sweden	13	NA	NA	10
	Switzerland	13	NA	NA	10
	UK	11	15	NA	10
	USA	11	15	NA	10
Supranationals	European Financial Stability Facility	13	15	11.5	10
	European Stability Mechanism	13	15	11.5	10
	European Investment Bank	13	15	11.5	10
	European Union	13	15	11.5	10
	Investment Bank for Reconstruction and Development	13	15	11.5	10
Agencies	Rentenbank	13	15	11.5	10
	Kreditanstalt für Wiederaufbau	13	15	11.5	10
	CADES	13	15	NA	10
Equities	All (as listed in Haircut Schedule)	13	NA	NA	NA