VIA CFTC PORTAL

23 July 2015

Mr Christopher Kirkpatrick

Commodity Futures Trading Commission

1155 21st Street NW

Three Lafayette Centre

Washington DC 20581

Dear Mr Kirkpatrick

Pursuant to CFTC regulation §40.6(a), LCH.Clearnet Limited (“LCH.Clearnet”), a derivatives clearing 

organization registered with the Commodity Futures Trading Commission (the “CFTC”), is submitting for 

self-certification changes to its rules which allow LCH.Clearnet to facilitate its Clearing Members in 

accepting trades.

LCH.Clearnet intends to implement these rule changes on, or after August 14th, 2015.

Part I: Explanation and Analysis

Currently, and in exceptional circumstances, LCH.Clearnet will manually accept a SwapClear Transaction 

on behalf of a Clearing Member that is unable to do so itself. The changes to the Procedures Section 2C 

and FCM Procedures are being implemented to describe the acceptance process and to provide the 

Clearing House with comfort that an entity that is requesting a SwapClear Transaction be manually

accepted is appropriately authorised to do so.

Part II: Description of Rule Changes

Procedures Section 2C (SwapClear), Section 1.3.2 and FCM Procedures, Section 2.1.3 (b) have been 

inserted.

The changes to the Procedures Section 2C (SwapClear) are included at Appendix I and changes to FCM 

Procedures are included at Appendix II. 

Part III: Core Principle Compliance

LCH.Clearnet has concluded that compliance with the Core Principles will not be adversely affected by

this change. 

LCH.Clearnet Limited Aldgate House, 33 Aldgate High Street, London EC3N 1EA

Tel: +44 (0)20 7426 7000 Fax: +44 (0)20 7426 7001 www.lchclearnet.com

LCH.Clearnet Group Limited | LCH.Clearnet Limited | LCH.Clearnet SA | LCH.Clearnet LLC

Registered in England No. 25932 Registered Office: Aldgate House, 33 Aldgate High Street

Appendix I

Procedures Section 2C (SwapClear)
LCH.CLEARNET LIMITED

PROCEDURES SECTION 2C

SWAPCLEAR CLEARING SERVICE
Clearing House Procedures SwapClear Service 

LCH.Clearnet Limited © 2015 - 4 -

April July 2015

1.3.2 Clearing House Notification

In the case of a SwapClear Clearing Member which has been nominated to 

register a SwapClear Transaction on behalf of a third party Executing Party 

other than a SwapClear Dealer, the Clearing House will (only where such 

SwapClear Transaction is not a US Trading Venue Transaction) provide 

notification to such SwapClear Clearing Member of the relevant SwapClear 

Transaction and that it has been so nominated, via member reports, the 

ClearLink API or otherwise (the "Notification"). Where a SwapClear Clearing 

Member is nominated to clear both SwapClear Contracts arising from the 

registration of such a SwapClear Transaction (whether for itself or a third 

party Executing Party) in the capacities described in this paragraph, such 

SwapClear Clearing Member will receive two separate Notifications from the 

Clearing House in relation to such SwapClear Transaction. In all other cases, 

no Notification will be provided to any SwapClear Clearing Member.

In respect of a SwapClear Transaction that is not a US Trading Venue 

Transaction, following receipt of a Notification, a SwapClear Clearing 

Member may choose to grant or refuse consent to register the SwapClear 

Transaction. It is a condition for registration of such a SwapClear Transaction 

that a SwapClear Clearing Member grants a separate consent (each a 

"Necessary Consent") in respect of each Notification received by it in relation 

to the registration of such SwapClear Transaction. The Clearing House has an 

automated system which it operates on each business day (currently at or 

around 8 pm (London time)) for the purposes of rejecting SwapClear 

Transactions which have been presented for clearing but in respect of which 

any Necessary Consent has not been notified to the Clearing House prior to 

the LCH Cut-off Time. The "LCH Cut-off Time" in respect of a SwapClear 

Transaction will be the time on the business day following the day when the 

relevant SwapClear Transaction was presented for clearing at which the reject 

system is operated by the Clearing House and the relevant SwapClear 

Transaction is itself rejected by such system. If a SwapClear Clearing 

Member has not notified the Clearing House of a Necessary Consent by the 

LCH Cut-off Time, it will be deemed to have rejected the relevant SwapClear 

Transaction. Any Necessary Consent of a SwapClear Transaction notified by 

a SwapClear Clearing Member to the Clearing House prior to the LCH Cut-off 

Time is irrevocable. Any Necessary Consent notified by a SwapClear Clearing 

Member to the Clearing House after the LCH Cut-off Time shall be invalid.

In circumstances where the registration of a SwapClear Transaction is 

conditional upon one or more Necessary Consent(s) being notified by the 

applicable SwapClear Clearing Member(s), the relevant SwapClear 

Transaction shall be deemed to have been "submitted" to the Clearing House 

by each such SwapClear Clearing Member at the time when it notifies the 

Clearing House of its Necessary Consent. In all other circumstances, a 

SwapClear Transaction shall be "submitted" to the Clearing House by the 

applicable SwapClear Clearing Member upon being presented to the Clearing 

House for clearing by or on behalf of such SwapClear Clearing Member (or its 

SCM Branch) or by or on behalf of a SwapClear Dealer (acting in such 
Clearing House Procedures SwapClear Service 

LCH.Clearnet Limited © 2015 - 5 -

April July 2015

capacity with respect to the relevant SwapClear Transaction) approved to clear 

SwapClear Transactions through the relevant SwapClear Clearing Member.

In accordance with Section 1.3.5 of these Procedures, it is a precondition for 

the registration of a SwapClear Contract that the applicable SwapClear 

Clearing Member has complied with all requirements to provide sufficient 

Collateral (taking into account MER, Client Buffer and/or SwapClear 

Tolerance, if any) to the Clearing House as of the time of "submission" or 

"deemed submission" of the SwapClear Transaction to which the SwapClear 

Contract relates, except that such Collateral shall be required to be provided 

prior to registration as a condition thereto only if such SwapClear Transaction 

is a Block IRS Trade. For the avoidance of doubt, in respect of the 

registration of a SwapClear Transaction that is a Block IRS Trade, both 

SwapClear Clearing Members or the relevant SwapClear Clearing Member 

and FCM Clearing Member must have complied with all requirements to 

provide sufficient Collateral (taking into account MER, Client Buffer and/or 

SwapClear Tolerance, if any) at the time when both SwapClear Contracts, or 

the SwapClear Contract and the FCM SwapClear Contract (as applicable), 

relating to the relevant SwapClear Transaction have been submitted or deemed 

to be submitted (as applicable).

In exceptional circumstances, where a Clearing Member experiences technical 

issues such that it is unable to accept or reject a Notification, it may contact 

the Clearing House via email to request that a SwapClear Transaction to which 

a Notification relates be accepted or rejected on its behalf. In such 

circumstances, and unless the Clearing House notifies the Clearing Member 

otherwise, the Clearing House will manually accept or reject the SwapClear 

Transaction on behalf of the requesting Clearing Member and will confirm 

registration or rejection of the SwapClear Transaction via email. In the event 

that a Clearing Member requests the manual acceptance or rejection of a 

SwapClear Transaction it shall ensure that such acceptance is requested by 

appropriately authorized personnel. The Clearing House shall have no liability 

in the event that a Clearing Member suffers a loss through the unauthorised 

manual acceptance or rejection of a SwapClear Transaction.

1.3.3 Trade Registration Facilitation: SwapClear Tolerance, Client Buffer and 

MER (Minimum Excess Requirement)

In order to facilitate the registration of SwapClear Contracts by SwapClear 

Clearing Members, the Clearing House may:

(a) require the transfer to the Clearing House of additional Collateral from 

those SwapClear Clearing Members participating in the MER 

Arrangements (as defined below) at the relevant time;

(b) where sufficient Collateral (including, but not limited to, any MER) is 

not available in relation to a Client Account, allocate Client Buffer (as 

further described below); and/ or 
Appendix II

FCM Procedures
FCM PROCEDURES OF

THE CLEARING HOUSE

LCH.CLEARNET LIMITED
FCM Procedures FCM SwapClear

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June July 2015

2.1.2 Operating Times And Calendars

(a) Opening Days

The Clearing House will publish a circular detailing the days on which 

the FCM SwapClear clearing system will be open.

(b) Opening Hours

Unless notified otherwise, the FCM SwapClear clearing system will be 

operational during the following hours:

05:00 London time to 19:00 hours New York time (a “Business Day”).

However, FCM Clearing Members should note that FCM Acceptances 

of an FCM Notification submitted during a Business Day shall be 

accepted by the Clearing House until 19:01 New York time on the 

following day. The Clearing House will notify FCM Clearing 

Members in the event that the FCM SwapClear clearing system is 

scheduled for closure for operational or other reasons (including 

compression runs).

(c) FCM SwapClear Clearing System Calendars

The FCM SwapClear clearing system uses the SwapsMonitor Financial 

Calendar for its processing. This will require all FCM Clearing 

Members to be licensees of the SwapsMonitor Financial Calendar. 

The calendars, as applicable to the FCM SwapClear clearing system, 

will be available online for inspection and for file download from FCM 

Clearing Member Reporting (see Section 2.1.1(c)).

2.1.3 Registration

(a) Submission for Registration

The Clearing House receives details of a new eligible FCM SwapClear 

Transaction using agreed format messages via an FCM Approved 

Trade Source System. The FCM Approved Trade Source System will 

send these trades to the Clearing House once they have been bilaterally agreed by two Executing Parties, or otherwise executed by or 

on behalf of two Executing Parties on an FCM US Trading Venue or 

other similar venue or facility, and will confirm which FCM Clearing 

Member(s) has been elected to register the FCM SwapClear 

Transaction.

(b) Conditions to Registration

Non-FCM US Trading Venue Transactions

In respect of an FCM SwapClear Transaction that is not an FCM US 

Trading Venue Transaction, following receipt of information from the 

FCM Approved Trade Source System the Clearing House will notify 
FCM Procedures FCM SwapClear

- 15 -

June July 2015

In accordance with Section 2.1.3(e) of these FCM Procedures, it is a 

precondition for registration of an FCM SwapClear Contract resulting 

from an FCM US Trading Venue Transaction that, no later than the 

Clearing House’s receipt of the relevant details of the FCM SwapClear 

Transaction pursuant to Section 2.1.3(a), both the FCM Clearing 

Members have complied with all requirements to furnish sufficient 

Margin (taking into account available SwapClear Tolerance, if any) in 

respect of such FCM SwapClear Contract, except that such Margin 

shall be required to be furnished prior to registration as a condition 

thereto only if such FCM SwapClear Contract results from an FCM 

SwapClear Transaction that is a Block IRS Trade.

In exceptional circumstances, where a FCM Clearing Member 

experiences technical issues such that it is unable to accept or reject a 

Notification, it may contact the Clearing House via email to request 

that an FCM SwapClear Transaction to which an FCM Notification 

relates be accepted or rejected on its behalf. In such circumstances, and 

unless the Clearing House notifies the FCM Clearing Member 

otherwise, the Clearing House will manually accept or reject the FCM

SwapClear Transaction on behalf of the requesting FCM Clearing 

Member and will confirm registration or rejection of the FCM 

SwapClear Transaction via email. In the event that an FCM Clearing 

Member requests the manual acceptance or rejection of an FCM

SwapClear Transaction it shall ensure that such acceptance is 

requested by appropriately authorized personnel. The Clearing House 

shall have no liability in the event that an FCM Clearing Member 

suffers a loss through the unauthorised manual acceptance or rejection 

of an FCM SwapClear Transaction.

(c) Trade Registration Facilitation: SwapClear Tolerance and Minimum 

Excess Requirement (“MER”)

In order to facilitate the registration of new FCM SwapClear 

Transactions by FCM Clearing Members, the Clearing House may 

require the furnishing of additional Margin from those FCM Clearing 

Members participating in the MER Arrangements (as defined below) at 

the relevant time and may offer SwapClear Tolerance on a daily basis, 

as further described below.

The Clearing House will set MER requirements (where applicable) and 

SwapClear Tolerance Limits (as defined below) based on a number of 

factors, including an FCM Clearing Member's credit rating and risk

profile, an analysis of the incremental risk registered by an FCM 

Clearing Member during an historic look-back period and, in the case 

of the overall value of the SwapClear Tolerance which may be made 

available to an FCM Clearing Member, whether the FCM Clearing 

Member is a participant in the MER Arrangements at the relevant time. 

However, the Clearing House sets MER requirements and SwapClear 

Tolerance Limits in its sole discretion, and may modify its 

methodologies at any time or may vary it across different FCM 

Clearing Members.