29146 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 

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

2 17 CFR 240.19b–4. 

3LCH SA, a wholly owned subsidiary of LCH 

Group, manages its liquidity risk pursuant to, 

among other policies and procedures, the Group 

Liquidity Risk Policy and the Group Liquidity Plan 

applicable to each entity within LCH Group. 

In addition to its CDSClear service, LCH SA 

provides clearing services in connection with cash 

equities and derivatives listed for trading on 

Euronext (EquityClear), commodity derivatives 

listed for trading on Euronext (CommodityClear), 

and tri-party Repo transactions (RepoClear). 

POSTAL REGULATORY COMMISSION 

[Docket Nos. CP2018–253; CP2018–254] 

New Postal Products 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice. 

SUMMARY: The Commission is noticing a 

recent Postal Service filing for the 

Commission’s consideration concerning 

negotiated service agreements. This 

notice informs the public of the filing, 

invites public comment, and takes other 

administrative steps. 

DATES: Comments are due: June 25, 

2018. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http://

www.prc.gov. Those who cannot submit 

comments electronically should contact 

the person identified in the FOR FURTHER

INFORMATION CONTACT section by 

telephone for advice on filing 

alternatives. 

FOR FURTHER INFORMATION CONTACT: 

David A. Trissell, General Counsel, at 

202–789–6820. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Docketed Proceeding(s) 

I. Introduction 

The Commission gives notice that the 

Postal Service has filed request(s) for the 

Commission to consider matters related 

to negotiated service agreement(s). The 

requests(s) may propose the addition or 

removal of a negotiated service 

agreement from the market dominant or 

the competitive product list, or the 

modification of an existing product 

currently appearing on the market 

dominant or the competitive product 

list. 

Section II identifies the docket 

number(s) associated with each Postal 

Service request, the title of each Postal 

Service request, the request’s acceptance 

date, and the authority cited by the 

Postal Service for each request. For each 

request, the Commission appoints an 

officer of the Commission to represent 

the interests of the general public in the 

proceeding, pursuant to 39 U.S.C. 505 

(Public Representative). Section II also 

establishes comment deadline(s) 

pertaining to each request. 

The public portions of the Postal 

Service’s request(s) can be accessed via 

the Commission’s website (http://

www.prc.gov). Non-public portions of 

the Postal Service’s request(s), if any, 

can be accessed through compliance 

with the requirements of 39 CFR 

3007.40. 

The Commission invites comments on 

whether the Postal Service’s request(s) 

in the captioned docket(s) are consistent 

with the policies of title 39. For 

request(s) that the Postal Service states 

concern market dominant product(s), 

applicable statutory and regulatory 

requirements include 39 U.S.C. 3622, 39 

U.S.C. 3642, 39 CFR part 3010, and 39 

CFR part 3020, subpart B. For request(s) 

that the Postal Service states concern 

competitive product(s), applicable 

statutory and regulatory requirements 

include 39 U.S.C. 3632, 39 U.S.C. 3633, 

39 U.S.C. 3642, 39 CFR part 3015, and 

39 CFR part 3020, subpart B. Comment 

deadline(s) for each request appear in 

section II. 

II. Docketed Proceeding(s) 

1. Docket No(s).: CP2018–253; Filing 

Title: Notice of United States Postal 

Service of Filing a Functionally 

Equivalent Global Expedited Package 

Services 9 Negotiated Service 

Agreement and Application for NonPublic Treatment of Materials Filed 

Under Seal; Filing Acceptance Date: 

June 15, 2018; Filing Authority: 39 CFR 

3015.5; Public Representative: Matthew 

R. Ashford; Comments Due: June 25, 

2018. 

2. Docket No(s).: CP2018–254; Filing 

Title: Notice of the United States Postal 

Service of Filing a Functionally 

Equivalent Global Plus 1D Negotiated 

Service Agreement and Application for 

Non-Public Treatment of Materials Filed 

Under Seal; Filing Acceptance Date: 

June 15, 2018; Filing Authority: 39 CFR 

3015.5; Public Representative: Matthew 

R. Ashford; Comments Due: June 25, 

2018. 

This notice will be published in the 

Federal Register. 

Stacy L. Ruble, 

Secretary. 

[FR Doc. 2018–13382 Filed 6–21–18; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83456; File No. SR–LCH 

SA–2018–003] 

Self-Regulatory Organizations; LCH 

SA; Notice of Filing of Proposed Rule 

Change Relating to Liquidity Risk 

Management 

June 18, 2018. 

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 June 4, 

2018, Banque Centrale de 

Compensation, which conducts 

business under the name LCH SA (‘‘LCH 

SA’’), filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change (the 

‘‘Proposed Rule Change’’) described in 

Items I, II and III below, which Items 

have been primarily prepared by LCH 

SA. The Commission is publishing this 

notice to solicit comments on the 

Proposed Rule Change from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

LCH SA is proposing to amend its 

Risk Management Procedures (the 

‘‘Procedures’’) to adopt a Liquidity Risk 

Modelling Framework (the 

‘‘Framework’’), which describes the 

Liquidity Stress Testing framework by 

which the Collateral and Liquidity Risk 

Management department (‘‘CaLRM’’) of 

LCH Group Holdings Limited (‘‘LCH 

Group’’) assures that LCH SA has 

enough cash available to meet any 

financial obligations, both expected and 

unexpected, that may arise over the 

liquidation period for each of the 

clearing services that LCH SA offers.3

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

LCH SA included statements concerning 

the purpose of and basis for the 

Proposed Rule Change and discussed 

any comments it received on the 

Proposed Rule Change. The text of these 

statements may be examined at the 

places specified in Item IV below. LCH 

SA has prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

LCH SA currently maintains a number 

of well-developed policies and 

procedures designed to manage its 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 29147 

4LCH SA has an interoperability agreement with 

Cassa di Compensazione e Garanzia (‘‘CC&G’’), an 

Italian CCP, pursuant to which LCH SA’s clearing 

members and CC&G’s clearing members are able to 

benefit from common clearing services without 

having to join the other CCP. Each CCP is a clearing 

member of the other one with a particular status 

when accessing the clearing system of the other 

counterparty. 

5Securities comprising non-cash collateral are 

comprised of the following components: (i) Margin 

collateral, i.e., non-cash collateral pledged by 

clearing members for margin cover; (ii) Collateral 

and Liquidity Management (‘‘CaLM’’) collateral, i.e., 

direct securities holdings that are part of the 

CaLM’s investment activities; and (iii) clearing 

settlement collateral, i.e., collateral resulting from 

the physical settlement of contracts on behalf of a 

defaulting clearing member. 

6Tier 2 assets are those securities that have a 

market and may be financed but are of lesser quality 

than Tier 1 assets. Tier 3 assets are deemed to have 

little or no liquidity value in the event of a default 

or major market stress or are deemed to be too 

illiquid to be converted in the timeframe that a CCP 

would require. 

7 15 U.S.C. 78q–1. 

8 15 U.S.C. 78q–1(b)(3)(F). 

9 17 CFR 240.17Ad–22(e)(7). 

10The proposed Framework is also consistent 

with LCH SA’s obligations under the European 

Markets Infrastructure Regulation (‘‘EMIR’’); 

Regulation (EU) No 648/2012 of the European 

Parliament and of the Council of 4 July 2012 on 

OTC derivatives, central counterparties and trade 

reporting. 

In particular, EMIR Article 44 provides, in part: 

Continued 

liquidity risk, i.e., the risk that LCH SA 

will not have enough cash available, in 

extreme but plausible circumstances, to 

settle margin payments or delivery 

obligations when they become due, in 

particular upon the default of a clearing 

member. Such policies and procedures 

include, among others: (i) The Group 

Liquidity Risk Policy; (ii) the Group 

Liquidity Plan; (iii) the Group Financial 

Resource Adequacy Plan; (iv) the Group 

Collateral Risk Policy; (v) the Group 

Investment Risk Policy; and (vi) the 

LCH SA Collateral Control Framework. 

As described below, the proposed 

Framework would complement these 

existing policies and procedures and 

develop further the Group Liquidity 

Risk Policy. 

In brief, the Framework: (i) Identifies 

LCH SA’s sources of liquidity and 

corresponding liquidity risks; (ii) 

identifies LCH SA’s liquidity 

requirements with respect to its 

members and its interoperable central 

counterparty (‘‘CCP’’); 4 (iii) describes 

the metrics and limits that LCH SA 

monitors; and (iv) describes the 

scenarios under which these metrics are 

computed. 

The proposed Framework first 

identifies the main sources of liquidity 

available to LCH SA, cash and non-cash 

collateral, and assigns non-cash 

collateral to one of three tiers.5 Tier 1 

assets are limited to those securities that 

are deemed to be of sufficient quality 

and demand to generate liquidity at 

little or no loss in the event of a default 

of a clearing member or a major market 

stress. LCH SA is able to pledge these 

securities to the Banque de France to 

generate cash on the same day. Only 

Tier 1 assets are included as liquidity 

resources in liquidity stress testing.6

The proposed Framework then 

highlights the three principal events 

under which LCH SA would require 

liquidity: (i) The default of one or more 

clearing members; (ii) the default of 

CC&G; and (iii) operational liquidity 

needs (each defined below). 

The proposed Framework also 

examines liquidity needs arising from 

members’ defaults, liquidity needs 

arising from an interoperating central 

counterparty’s default (currently CC&G), 

and the manner in which operational 

liquidity requirements are determined. 

Liquidity needs arising from members’ 

defaults are those needs arising from 

fulfilment of the settlement of the 

securities of the defaulted clearing 

member; posting of variation margin to 

non-defaulting members on the 

positions held by the defaulted clearing 

member(s); the value of bonds pledged 

at the Banque de France; haircuts by the 

European Central Bank on securities 

posted by the defaulting Clearing 

Member; and investment losses. 

Liquidity needs arising from 

interoperating CCPs’ defaults are those 

needs arising from the service closure of 

the Italian Clearing activity (e.g. 

reimbursement of the margins and 

default funds related to the Italian 

clearing activity, cash settlement of the 

Italian repo positions). Operational 

liquidity is defined as the amount of 

liquidity that LCH SA is required to 

hold to satisfy liquidity needs related to 

the operational management of LCH SA 

in a stressed environment that does not 

lead to a member’s default. Such 

liquidity requirements arise from a 

number of factors, including the need to 

repay excess cash posted by members, 

the need to repay margin when margin 

requirements are reduced, and the 

substitution of cash collateral and 

European Central Bank eligible 

securities. 

The proposed Framework next 

describes the metrics used to determine 

LCH SA’s liquidity needs that are 

calculated each day over a five-day 

period. Such metrics include: (i) The 

liquidity coverage ratio; (ii) a monthly 

rolling average liquidity buffer; (iii) a 

daily minimum liquidity buffer; and (iv) 

required cash collateral. 

With respect to the liquidity coverage 

ratio, the proposed Framework explains 

how the liquidity coverage ratio is 

determined for each of the clearing 

services that LCH SA offers in a Cover 

2 scenario, i.e., the liquidity risk arising 

from the default of at least two clearing 

group members to which LCH SA has 

the largest exposures during the 5 days 

following default. The Cover 2 amount 

is computed by aggregating the liquidity 

risks related to clearing members within 

the same group across all of LCH SA’s 

services. The two largest group members 

are chosen according to the liquidity 

needs related to these members. The 

liquidity requirements are generated by 

three risk drivers: The settlement risk, 

market risk and the ECB haircut. For the 

CDSClear service, LCH SA determines 

the liquidity risk by considering 

variation margin modelled at member 

level by applying the most punitive CDS 

spread widening stress scenario for both 

ITraxx Main and CrossOver (currently 

the historical scenario considering the 

2007 crisis). The Framework focuses on 

the principal risks for which LCH SA 

must assure that it has sufficient 

liquidity. 

Finally, the Framework describes the 

reverse stress test that LCH SA runs at 

least quarterly. The reverse stress test is 

designed to help determine the limits of 

the models and of the liquidity risk 

management framework by modelling 

extreme market conditions that go 

beyond what are considered plausible 

market conditions over a 5-day time 

horizon. LCH SA stresses seven risk 

factors independently, and also 

considers these risk factors together in 

two combined reverse stress test 

scenarios, the Behavioural and Macroeconomic. 

2. Statutory Basis 

LCH SA has determined that the 

Proposed Rule Change is consistent 

with the requirements of Section 17A of 

the Act 7 and regulations thereunder 

applicable to it. The Framework 

implements the provisions of Section 

17A(b)(3)(F) of the Act,8 which require, 

inter alia, that the rules of a clearing 

agency ‘‘assure the safeguarding of 

securities and funds that are in its 

custody or control or for which it is 

responsible.’’ Further, Regulation 17dA– 

22(e) requires a clearing agency to 

maintain and enforce written policies 

and procedures reasonably designed to 

‘‘measure, monitor, and manage the 

liquidity risk that arises in or is borne 

by the covered clearing agency.’’ 9

Consistent with these provisions, the 

Framework assures that the clearing 

agency maintains sufficient liquid 

resources to effect the settlement of 

payment obligations with a high degree 

of confidence under a wide range of 

foreseeable stress scenarios.10


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29148 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 

‘‘A CCP shall at all times have access to adequate 

liquidity to perform its services and activities. . . . 

A CCP shall measure, on a daily basis, its potential 

liquidity needs [taking] into account the liquidity 

risk generated by the default of at least the two 

clearing members to which it has the largest 

exposures.’’ 11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

B. Clearing Agency’s Statement on 

Burden on Competition 

LCH SA does not believe the 

Proposed Rule Change would have any 

impact, or impose any burden, on 

competition. The Proposed Rule Change 

does not address any competitive issue 

or have any impact on the competition 

among central counterparties. LCH SA 

operates an open access model, and the 

Proposed Rule Change will have no 

effect on this model. 

C. Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments relating to the 

Proposed Rule Change have not been 

solicited or received. LCH SA will 

notify the Commission of any written 

comments received by LCH SA. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml) or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

LCH SA–2018–003 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–2018–003. 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 such 

filings will also be available for 

inspection and copying at the principal 

office of LCH SA and on LCH SA’s 

website at http://www.lch.com/assetclasses/cdsclear. 

All comments received will be posted 

without change. Persons submitting 

comments are cautioned that we do not 

redact or edit personal identifying 

information from comment submissions. 

You should submit only information 

that you wish to make available 

publicly. All submissions should refer 

to File Number SR–LCH SA–2018–003 

and should be submitted on or before 

July 12, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13378 Filed 6–21–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83458; File No. SR–Phlx– 

2018–47] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Exchange 

Rule 1101A, Terms of Option Contracts 

June 18, 2018. 

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 June 11, 

2018, Nasdaq PHLX LLC (‘‘Phlx’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. 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 amend 

Exchange Rule 1101A, Terms of Option 

Contracts. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaqphlx.cchwallstreet.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 

Exchange 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. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to adopt new Commentary .06 

to Exchange Rules 1101A, to codify that 

the Exchange will defer to The Options 

Clearing Corporation (‘‘OCC’’) in 

determining settlement prices for index 

options when OCC elects to do so in 

accordance with its own rules and 

bylaws. Such OCC-determined 

settlement prices may be determined in 

a manner that differs from the 

settlement price procedures under the 

Exchange’s own rules. 

Exchange Rule 1101A(d) currently 

states that the Rules of the Options 

Clearing Corporation specify that, 

unless the Rules of the Exchange 

provide otherwise, the current index 


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