Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices 62115 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

14 17 CFR 200.30–3(a)(12), (59). 1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

The Exchange believes that the 

proposed rule change would not impose 

a burden on competing options 

exchanges. The Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues. When 

an exchange offers enhanced 

functionality (like the proposed Strategy 

Limit per Symbol) that distinguishes it 

from the competition and participants 

find it useful, it has been the Exchange’s 

experience that competing exchanges 

will move to adopt similar functionality. 

Thus, the Exchange believes that this 

type of competition amongst exchanges 

is beneficial to the entire marketplace as 

it can result in enhanced processes, 

functionality, and technologies. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 12 and Rule 19b– 

4(f)(6) thereunder.13 At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

change should be approved or 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSEARCA–2023–56 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–NYSEARCA–2023–56. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NYSEARCA–2023–56 and should be 

submitted on or before September 29, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–19356 Filed 9–7–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98279; File No. SR– 

NYSEARCA–2023–57] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify Rule 6.62P– 

O(g)(1) 

September 1, 2023. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on August 

18, 2023, NYSE Arca, Inc. (‘‘NYSE 

Arca’’ or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify 

Rule 6.62P–O(g)(1) regarding Complex 

Qualified Contingent Cross Orders. The 

proposed rule change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 


lotter on DSK11XQN23PROD with NOTICES1
62116 Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices 

4See, e.g., Rule 6.62P–O(h)(6)(B) (regarding 

Stock/Complex Orders, which are a subset of 

Complex Orders (per Rule 6.62P–O(f)), that are only 

available for trading in Open Outcry and are not 

subject to the standard ratio requirement). 

5 In June 2022, Cboe Exchange, Inc. (‘‘Cboe’’) 

began supporting the electronic processing of 

certain stock-option orders in non-standard ratios, 

including Complex QCC Orders. See Cboe Exchange 

Alert, ‘‘Schedule Update—Cboe Options Introduces 

New Net, Leg Price Increments and Enhanced 

Electronic, Open Outcry Handling for Complex 

Orders with Non-Conforming Ratios, Reference ID: 

C2022060301 available online at https://

cdn.cboe.com/resources/release_notes/2022/ 

Schedule-Update-Cboe-Options-Introduces-NewNet-Leg-Price-Increments-and-Enhanced-ElectronicOpen-Outcry-Handling-for-Complex-Orders-withNon-Conforming-Ratios.pdf (providing, in relevant 

part, that beginning June 12, 2022, ‘‘automated 

handling via COA, COB, AIM, and QCC will be 

available for applicable non-conforming orders, 

except in SPX/SPXW). See also Securities Exchange 

Act Release Nos. 94204 (February 9, 2022), 87 FR 

8625 (February 15, 2022) (SR–CBOE–2021–046) 

(order approving Cboe’s proposal, as amended, to 

permit complex orders with ratios less than one-tothree and greater than three-to-one to be eligible for 

electronic processing and to trade in penny 

increments); 95006 (May 31, 2022), 87 FR 34334 

(June 6, 2022) (SR–CBOE–2022–024) (allowing Cboe 

to retain discretion to determine on class-by-class 

basis eligibility for electronic processing of complex 

orders with ratios less than one-to-three and greater 

than three-to-one (i.e., ratios other than the standard 

ratio requirement). The current proposal is limited 

to allowing Complex QCC Orders regardless of ratio 

to be traded electronically. If the Exchange opts to 

allow other (non-QCC) Complex Orders in any ratio 

to be traded electronically, the Exchange will 

submit a separate rule filing. 

6See proposed Rule 6.62P–O(g)(1)(G) (‘‘Complex 

QCC Orders are eligible for electronic processing 

regardless of the ratio in the component legs.’’). The 

Exchange notes that other options exchanges offer 

Complex QCC Orders, however, the rules of these 

options exchanges are silent as to whether they 

permit Complex QCC Orders in non-standard ratios 

to be processed electronically. See, e.g., Nasdaq ISE, 

LLC (‘‘ISE’’) Options 3, Section 12(d) (describing 

Complex Qualified Cross Orders). 

7See Rule 6.62P–O(g)(1)(B) for the definition of 

a Qualified Contingent Trade. 

8See Rule 6.62P–O(g)(1) (defining Complex QCC 

Orders). See also Rule 6.62P–O(g)(1)(D) regarding 

pricing requirements for Complex QCCs. This 

proposal does not alter the pricing requirements for 

Complex QCC Orders and such requirements apply 

regardless of whether a Complex QCC Order has a 

standard (or non-standard) ratio. 

9See Rule 6.62P–O(g)(1)(B)(i). See generally Rule 

6.62P–O(g)(1)(B) (setting forth criteria for a 

Qualified Contingent Trade). 

10See Rule 6.62P–O(g)(1)(B)(vi) (providing that 

the QCT transaction must be ‘‘fully hedged (without 

regard to any prior existing position) as a result of 

other components of the contingent trade.’’). 

11See Rule 6.62P–O(g)(1)(D) (providing that ‘‘no 

option leg [of a Complex QCC Order] will trade at 

a price worse than the Exchange BBO’’). 

12See Rule 6.62P–O(g)(1)(D)(i). See also Rule 

6.62P–O(g)(1)(C) (Execution of QCC Orders) (‘‘A 

QCC Order with one option leg will be rejected if 

received when the NBBO is crossed or if it will 

trade at a price that (i) is at the same price as a 

displayed Customer order on the Consolidated Book 

and (ii) is not at or between the NBB’’ and requiring 

that ‘‘[a] QCC Order with one option leg will never 

trade at a price worse than the Exchange BBO.’’). 

13See Rule 6.62P–O(g)(1)(D)(ii). The Exchange 

proposes to amend current Rule 6.62P–O(g)(1)(D)(ii) 

to clarify that the Complex QCC Order must price 

improve any displayed Customer interest by ‘‘at 

least’’ one penny ($0.01), which would make the 

Rule more accurate. See proposed Rule 6.62P– 

O(g)(1)(D)(ii). 

14See Rule 6.62P–O(g)(1)(D)(iii). The Exchange 

proposes to amend current Rule 6.62P– 

O(g)(1)(D)(iii) to clarify that this provision refers to 

the price of the ‘‘Complex’’ QCC Order, which 

would make the Rule more accurate. See proposed 

Rule 6.62P–O(g)(1)(D)(iii). The Exchange would 

continue to reject Complex QCC Orders (regardless 

of ratio) if ‘‘the prices of the best-priced Complex 

Orders in the Consolidated Book are crossed’’; or 

‘‘for any option leg there is no NBO.’’ See Rule 

6.62P–O(g)(1)(D)(iii), (iv), respectively. 

15 15 U.S.C. 78f(b). 

16 15 U.S.C. 78f(b)(5). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to modify 

Rule 6.62P–O(g)(1) regarding Complex 

Qualified Contingent Cross (‘‘QCC’’) 

Orders to allow Complex QCC Orders in 

non-standard ratios (as defined below) 

to be processed electronically. 

Rule 6.62P–O(f) provides that a 

Complex Order is any order involving 

the simultaneous purchase and/or sale 

of two or more option series in the same 

underlying security (the ‘‘legs’’ or 

‘‘components’’ of the Complex Order), 

for the same account, in a ratio that is 

equal to or greater than one-to-three 

(.333) and less than or equal to three-toone (3.00) (referred to herein as the 

‘‘standard ratio’’ or ‘‘standard ratio 

requirement’’).The Exchange currently 

permits certain Complex Orders with 

ratios greater than three-to-one or less 

than one-to-three (‘‘non-standard 

ratios’’) for execution on the Exchange’s 

trading floor.4 This proposed change is 

competitive as at least one other options 

exchange permits Complex QCC Orders 

in non-standard ratios to be processed 

electronically.5 As such, the Exchange 

proposes to add new Rule 6.62P– 

O(g)(1)(G) to specify that Complex QCC 

Orders may be processed electronically 

in non-standard ratios.6

Rule 6.62P–O(g)(1) provides that a 

QCC Order must be comprised of an 

originating order to buy or sell at least 

1,000 contracts that is identified as 

being part of a qualified contingent 

trade coupled with a contra-side order 

or orders totaling an equal number of 

contracts.7 A Complex QCC Order is a 

QCC Order that has more than one 

option leg and each option leg must 

have at least 1,000 contracts.8 Like QCC 

Orders, each Complex QCC Order must 

be a part of a ‘‘qualified contingent 

trade’’ (‘‘QCT’’), which is a transaction 

consisting of two or more component 

orders, one of which must be a stock 

leg.9 The Exchange notes that there may 

be instances when an order sender must 

submit a Complex QCC in a nonstandard ratio to meet the QCT criteria 

(e.g., to be fully hedged).10

The proposed rule change would have 

no impact on the pricing of Complex 

QCCs because the same (existing) 

pricing requirements apply to all 

Complex QCC Orders that are 

electronically processed by the 

Exchange. Specifically, no option leg of 

a Complex QCC Order will trade at a 

price worse than the Exchange BBO 11

and a Complex QCC Order will be 

rejected based on its price if: 

• ‘‘any option leg cannot execute in 

compliance with paragraph (g)(1)(C) of 

this Rule’’, i.e., cannot meet the pricing 

requirements for single-leg QCC 

Orders’’; 12

• ‘‘the best-priced Complex Order(s) 

on the Exchange contain(s) displayed 

Customer interest and the Complex QCC 

Order price does not improve such 

displayed Customer interest by 0.01;’’ 13

or 

• ‘‘the price of the QCC Order is 

worse than the best-priced Complex 

Orders in the Consolidated Book.’’ 14

Thus, under this proposal, the 

Exchange would ensure that every 

component leg of a Complex QCC Order 

(regardless of ratio) would trade at a 

price that is equal to or better than the 

Exchange BBO and better than 

displayed Customer interest on the 

Exchange in the same manner as it does 

today. In other words, the proposed rule 

change continues to protect interest in 

the leg markets as well as displayed 

Customer interest on the Exchange. 

Implementation 

The Exchange will announce by 

Trader Update the implementation date 

of the proposed rule change, which 

implementation will be no later than 90 

days after the effectiveness of this rule 

change. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Securities Exchange Act of 1934 

(the ‘‘Act’’),15 in general, and furthers 

the objectives of Section 6(b)(5) of the 

Act,16 in particular, in that it is designed 

to prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices 62117 

17See supra note 5. 

18See supra notes 13–14. 

19 15 U.S.C. 78s(b)(3)(A). 

20 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

system and, in general, to protect 

investors and the public interest. 

In particular, the proposed rule 

change will remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because it will enable the 

Exchange to compete on equal footing 

with other exchanges that permit 

trading of Complex QCCs with nonstandard ratios.17 The proposed rule 

change would continue to protect 

investors and the public interest 

because the (approved) pricing 

requirements for Complex QCC Orders 

would continue to apply to Complex 

QCC Orders with non-standard ratios. 

As such, the proposal would ensure that 

the Complex QCC Order is priced equal 

to or better than the best-priced 

Complex Order(s) and, if there is 

displayed Customer interest on such 

order(s), that the execution price of the 

Complex QCC Order improves the price 

of the displayed Customer interest and 

improves the price of displayed 

Customer interest on each component 

leg of the Complex QCC Order. 

In addition, the proposed change 

would promote just and equitable 

principles of trade, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest because it would provide 

another venue for electronically 

executing Complex QCC Orders with 

non-standard ratios. The proposed 

change would also increase 

opportunities for execution of Complex 

QCC Orders with non-standard ratios, 

which benefits all investors. The 

Exchange also believes that the 

proposed rule change would not permit 

unfair discrimination among market 

participants, as all market participants 

may opt to trade Complex QCC Orders 

with non-standard ratios. 

The Exchange believes that the 

proposed clarifying changes would 

ensure accuracy of the proposed rule, 

which benefits all investors.18

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe that its 

proposed rule change will impose any 

burden on intra-market competition as it 

would apply equally to all market 

participants that opt to submit Complex 

QCC Orders with non-standard ratios for 

electronic processing, which orders the 

Exchange will process in a uniform 

manner. 

The Exchange does not believe that its 

proposed rule change will impose any 

burden on inter-market competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act, 

rather the Exchange believes that its 

proposal will promote inter-market 

competition. As noted here, the 

proposed change is competitive as 

another options exchange currently 

permits Complex QCC Orders with nonstandard ratios to be traded 

electronically. The Exchange’s proposal 

will enhance inter-market competition 

by providing an additional venue where 

investors may electronically execute 

Complex QCC Orders with non-standard 

ratios, giving investors greater flexibility 

and a choice of where to send their 

orders. Market participants may find it 

more convenient to access one exchange 

over another or may choose to 

concentrate volume at a particular 

exchange to maximize the impact of 

volume-based incentive programs or 

may prefer the trade execution services 

of one exchange over another. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 19 and Rule 19b– 

4(f)(6) thereunder.20 At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

change should be approved or 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSEARCA–2023–57 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–NYSEARCA–2023–57. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 


lotter on DSK11XQN23PROD with NOTICES1
62118 Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices 

21 17 CFR 200.30–3(a)(12), (59). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 97888 (July 

13, 2023), 88 FR 46221 (July 19, 2023) (File No. SR– 

LCH–2023–005) (‘‘Notice’’). 

4Capitalized terms used but not defined herein 

have the meanings specified in the LCH SA Rule 

Book (‘‘Rule Book’’), CDS Clearing Supplement 

(‘‘Supplement’’), CDS Clearing Procedures 

(‘‘Procedures’’), and FCM/BD CDS Clearing 

Regulations (‘‘Regulations’’), as applicable. 

5See Order Approving Proposed Rule Change to 

Adopt ICC’s Enhanced Margin Methodology, 

Exchange Act Release No. 66001 (Dec. 16, 2011). 

6Exchange Act Release 34–93501 Order Granting 

Conditional Exemptions Under the Securities 

Exchange Act of 1934 in Connection With the 

Portfolio Margining of Cleared Swaps and SecurityBased Swaps That Are Credit Default Swaps’’, 86 

FR 61357 (November 5, 2021) (‘‘Portfolio Margining 

Order’’). The Portfolio Margining Order replaced a 

similar Commission order issued in 2012. See Order 

Granting Conditional Exemptions under the 

Securities Exchange Act of 1934 in Connection with 

Portfolio Margining of Swaps and Security-based 

Swaps, Exchange Act Release No. 68433 (Dec. 12, 

2012) 77 FR 75211 (Dec. 19, 2012). 

7See Treatment of Funds Held in Connection 

with Clearing by LCH SA of Single-Name Credit 

Default Swaps, Including Spun-Out Component 

Transactions (Nov. 1, 2021), available at https://

www.cftc.gov/media/6711/lchsa4dorder11022021/ 

download. 

8The Proposed Rule Change would define the 

term ‘‘FCM/BD Portfolio Margining Transaction’’ to 

mean an FCM/BD Cleared Transaction that is an 

SBS and which is held in the FCM/BD Swaps Client 

Account Structure pursuant to the Portfolio 

Margining Program. The Proposed Rule Change 

would add references to this new defined term, 

where relevant, in the Regulations, the Procedures, 

and the Rule Book. 

9The Definitions section of the Regulations will 

be amended to define the ‘‘Portfolio Margining 

Program’’ by making a direct reference to 

Regulation 7(a) in the Regulations. 

10A ‘‘Clearing Member’’ is defined as a general 

member or a select member, as the context requires. 

SR–NYSEARCA–2023–57 and should be 

submitted on or before September 29, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–19357 Filed 9–7–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98276; File No. SR–LCH 

SA–2023–005] 

Self-Regulatory Organizations; LCH 

SA; Order Approving Proposed Rule 

Change Relating to Portfolio Margining 

September 1, 2023. 

I. Introduction 

On May 30, 2023, Banque Centrale de 

Compensation, which conducts 

business under the name LCH SA (‘‘LCH 

SA’’), 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 (‘‘Proposed Rule 

Change’’) to revise its portfolio 

margining program (‘‘Program’’) and 

make other unrelated changes. The 

Proposed Rule Change was published 

for comment in the Federal Register on 

July 19, 2023.3 The Commission has not 

received any comments on the Proposed 

Rule Change. For the reasons discussed 

below, the Commission is approving the 

Proposed Rule Change. 

II. Description of the Proposed Rule 

Change 

LCH SA is a clearing agency that 

offers clearing of, among other things, 

credit-default swaps (‘‘CDS’’).4 LCH SA 

is registered with the Commission for 

clearing CDS that are security-based 

swaps (‘‘SBS’’) and with the Commodity 

Futures Trading Commission (‘‘CFTC’’) 

for clearing CDS that are swaps. As part 

of its CDS clearing business, LCH offers 

clearing of CDS submitted by Clearing 

Members on behalf of their U.S. clients. 

As part of this U.S. client clearing, LCH 

previously proposed, and the 

Commission approved, certain changes 

to its rules and procedures to allow for 

portfolio margining.5

Portfolio margining is the practice by 

which transactions in SBS are cleared 

and held on a commingled basis with 

transactions in swaps. Under such a 

portfolio margining arrangement, 

Clearing Members are able to maintain 

reduced levels of margin that are 

commensurate with the risks of the 

portfolio based on correlations in a 

Clearing Member’s cleared CDS 

positions consisting of both swaps and 

SBS. LCH is required to conduct its 

portfolio margining program pursuant to 

the terms and conditions of an 

exemptive order issued by the 

Commission,6 as well as an exemptive 

order issued by the Commodity Futures 

Trading Commission (‘‘CFTC’’).7 Under 

these orders, LCH SA’s Clearing 

Members that are registered future 

commission merchants (‘‘FCM’’) and 

broker-dealers (‘‘BD’’) are authorized to 

clear and hold SBS transactions a 

commingled basis with cleared swaps 

on behalf of their clients (‘‘FCM/BD 

Clients’’). 

The purpose of the Proposed Rule 

Change is to revise and update LCH 

SA’s portfolio margining program (the 

‘‘Program’’). The Proposed Rule Change 

would amend certain provisions of the 

Rule Book and Procedures regarding 

collateral, the client collateral buffer, 

and the release of collateral to a Clearing 

Member. The Proposed Rule Change 

would update LCH SA’s Liquidity Risk 

Modelling Framework (‘‘LRMF’’) with 

respect to the liquidity resources and 

requirements applicable to FCM/BD 

Clearing Members. Finally, The 

Proposed Rule Change will also make 

other miscellaneous amendments to 

LCH SA’s Rule Book and Procedures. 

These miscellaneous amendments cover 

Time References, Real Time Session, 

and Personnel Requirements. 

A. Portfolio Margining Program 

As discussed above, LCH first 

established the Program in 2021. 

Currently, the basis for the Program is 

primarily Article 6.2.1.1 of the Rule 

Book and Section 3 of the Procedures. 

As discussed further below, the 

Proposed Rule Change would delete 

Article 6.2.1.1 from the Rule Book, 

replace it with a new Regulation 7, and 

revise Section 3 of the Procedures. 

Article 6.2.1.1(iii) of the Rule Book and 

Regulation 7 

Article 6.2.1.1(iii) currently provides 

that an FCM/BD Clearing Member that 

is both an FCM and a BD may elect to 

clear and hold FCM/BD Cleared 

Transactions that are SBS for FCM/BD 

Clients in the FCM/BD Swaps Client 

Account Structure on a commingled 

basis with Cleared Swaps and margin 

such combined positions on a portfolio 

basis in compliance with Applicable 

Laws, provided that each FCM/BD 

Client is an eligible contract participant 

as defined in Section 1a(18) of the 

Commodity Exchange Act. As 

mentioned, the Proposed Rule Change 

would delete this provision and replace 

with a new Regulation 7, as part of the 

FCM/BD CDS Clearing Regulations. 

New Regulation 7 would maintain the 

requirements currently found in Article 

6.2.1.1(iii) while also clarifying 

operation of the program. 

Paragraph (a) of Regulation 7, In 

General, would define Program as the 

ability of FCM/BD Clearing Members, 

on behalf of their FCM/BD clients, to 

portfolio margin FCM/BD Cleared 

Transactions 8 that are SBS with FCM/ 

BD Cleared Transactions that are 

Cleared Swaps.9

Paragraph (b) of Regulation 7, 

Participation, would state that FCM/BD 

Clearing Members may participate in 

the Program by providing LCH SA 

materials that LCH SA may require from 

time to time.10 This section would also 

provide that, in providing these 

materials to LCH SA, the FCM/BD 

Clearing Member shall be deemed to 

represent that: (i) it is both an FCM and 

a BD and neither such status has been 


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