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LCH Group Holdings Limited | LCH Limited | Banque Centrale de Compensation | LCH.Clearnet LLC

LCH Limited. Registered in England No. 25932 Registered Office: 10 Paternoster Square, London, EC4M 7LS

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VIA CFTC PORTAL

January 12, 2024

Mr. Christopher Kirkpatrick

Commodity Futures Trading Commission

1155 21st Street NW

Three Lafayette Centre

Washington, DC 20581

LCH Limited self-certification: New Brazilian national holiday

Dear Mr. Kirkpatrick,

Pursuant to Commodity Futures Trading Commission (“CFTC”) Regulation §40.6(a), LCH Limited 

(“LCH”), a derivatives clearing organization registered with the CFTC, is submitting for selfcertification amendments to its rules (“LCH Rules”) in response to a new national holiday created in 

Brazil, which has affected the value of certain SwapClear Contracts and FCM SwapClear Contracts.

Part I: Explanation and analysis

On December 22, 2023, a new holiday was created in Brazil for the celebration of the National Day 

of Zumbi and Black Consciousness and occurring on November 20 of each year. This affected the 

value of non-deliverable interest rate swap SwapClear Contracts and FCM SwapClear Contracts that 

(i) reference the BRL-CDI index, (ii) were registered on or before December 22, 2023, and (iii) have 

a termination date beyond November 20, 2024 (each, an “Affected Contract”). This is because, unlike 

other types of SwapClear contracts, payments under an Affected Contract accrue each business (not 

calendar) day during the term of the contract.

The consensus amongst market participants is that it is preferable to amend the terms of Affected 

Contracts to restore the value to that which they would have in the absence of the new holiday.

To facilitate this, LCH is amending Procedure 2C and the FCM Procedures of the LCH Rules in order 

to grant LCH the ability to amend the terms of SwapClear Contracts and FCM SwapClear Contracts

and/or require the SwapClear Clearing Member or FCM SwapClear Clearing Member that is party to 

such SwapClear Contract or FCM SwapClear Contract, respectively, to comply with any directions 

issued by the Clearing House regarding such SwapClear Contract or FCM SwapClear Contract. 

Part II: Description of the rule changes

LCH will include a new section 1.8.13 of Procedure 2C to provide that, if the government of any nation, 

state or territory, or any institution or agency of such government, has created or announced a new 

holiday, which has affected, or is likely to affect, the value of a SwapClear Contract, then the Clearing 

House may amend the terms of such SwapClear Contract and/or require the SCM that is party to 

such SwapClear Contract to comply with any directions issued by the Clearing House regarding such 

SwapClear Contract, in each case, in order to seek to ensure such SwapClear Contract will have the 
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same or similar value to that which it would have in the absence of such new holiday. LCH will also 

include a parallel new section 2.1.8(o) within the FCM Procedures, for FCM SwapClear Contracts. 

The changes to the LCH Rules are included as Appendices I-II in black line form. The changes will 

be effective not earlier than January 29, 2024.

Part III: Core Principle Compliance

LCH has reviewed the proposed rule changes against the requirements of the Core Principles and 

finds it will continue to comply with all requirements and standards set forth therein. Specifically, this 

rule change has potential relevance to Core Principles C (Participant and Product Eligibility) and L 

(Public Information).

The changes described in this filing meet the objectives of Core Principle C, including that LCH has

appropriate requirements for determining the eligibility of submitted transactions, taking into account 

LCH’s ability to manage the associated risks. In determining whether to accept swaps, LCH 

considered factors that included trading volume, liquidity, availability of pricing data and the ability for 

LCH to manage any associated risks within LCH’s existing operational, risk management and default 

management tools. LCH carefully considered these factors and determined that this clarification

meets LCH’s qualifications and the requirements of Core Principle C. 

The changes described in this filing also ensure that LCH meets the objectives of Core Principle L, 

including that, in addition to the specified requirements of CFTC Regulation §39.21, LCH makes

available any information that is relevant to participation in the clearing and settlement activities of 

LCH, including the terms and conditions of each contract. LCH considered its public information 

requirements and believes amending Procedures 2C within LCH Rules to include this clarification

meets the requirements of Core Principle L. 

As such, LCH believes these changes are consistent with the requirements of Core Principle C on 

Participant and Product Eligibility under CFTC Regulation §39.12 and Core Principle L on Public 

Information under CFTC Regulation §39.21.

Part IV: Public Information

LCH has posted a notice of pending certification with the CFTC and a copy of the submission on 

LCH’s website at: https://www.lch.com/resources/rulebooks/proposed-rule-changes.

Part V: Opposing Views

There were no opposing views expressed to LCH by governing board or committee members, 

members of LCH or market participants that were not incorporated into this proposal.

Certification

LCH hereby certifies to the CFTC, pursuant to the procedures set forth in CFTC Regulation §40.6, 

that the attached submission complies with the Commodity Exchange Act, as amended, and the 

regulations promulgated thereunder.

Definitions

Words which begin with a capital letter, but are not defined, in this document shall have the meaning 

specified in the General Regulations of the LCH Rules, which rulebook is located at www.lch.com.

Should you have any questions, please contact me at lavannyan.mahalingam@lseg.com.
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Yours sincerely,

Lavannyan Mahalingam

Regulatory Advisor

LCH Limited
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Appendix I

Procedures 2C

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 LCH LIMITED

PROCEDURES SECTION 2C

SWAPCLEAR CLEARING SERVICE
Clearing House Procedures SwapClear 

Service 

LCH Limited © 20243 - 31 - November January 20243

The Index level used for calculating the Floating Rate for an Inflation 

SwapClear Contract is determined according to the 2008 ISDA Inflation 

Definitions in respect of the Index applicable to such Inflation SwapClear 

Contract.

In the event an Index is not available to calculate the Index Final, the Clearing 

House will, in its sole discretion, determine a value for the Index Final.

1.8.12 Non-deliverable Interest Rate Swaps

The Clearing House will calculate all coupon payments for SwapClear 

Contracts that are non-deliverable interest rate swaps, including the Fixed 

Amount or Floating Amount payable under any such SwapClear Contract, in 

USD, and all amounts due or payable under such SwapClear Contracts must be 

paid in USD.

1.8.13 New holiday affecting the value of SwapClear Contracts

If the government of any nation, state or territory, or any institution or agency 

of such government, has created or announced a new holiday (“New Holiday”), 

which has affected, or is likely to affect, the value of a SwapClear Contract, then 

the Clearing House may amend the terms of such SwapClear Contract and/or 

require the SCM that is party to such SwapClear Contract to comply with any 

directions issued by the Clearing House regarding such SwapClear Contract, in 

each case, in order to seek to ensure such SwapClear Contract will have the 

same or similar value to that which it would have in the absence of such New 

Holiday. 

1.9 Initial Margin

The Clearing House will require SCMs to transfer Collateral in respect of their initial 

margin obligations, which are not discharged. This amount will be determined by the 

prevailing market conditions and the expected time to close out the portfolio. The 

Portfolio Approach to Interest Rate Scenarios (PAIRS) will be used to calculate initial 

margin requirements for SwapClear Contracts.

Separate initial margin calculations are performed for an SCM's Proprietary Accounts 

and for each Individual Segregated Account, Custodial Segregated Account, Omnibus 

Segregated Account (other than an Omnibus Gross Segregated Account), and Indirect 

Gross Sub-Account within an Indirect Gross Account. In respect of each Omnibus 

Gross Segregated Clearing Client (other than a Combined Omnibus Gross Segregated 

Clearing Client) separate initial margin calculations are performed in respect of the 

SwapClear Contracts entered into by the relevant SCM on behalf of each such Omnibus 

Gross Segregated Clearing Client. In respect of a group of Combined Omnibus Gross 

Segregated Clearing Clients a single initial margin calculation is performed in respect 

of SwapClear Contracts entered into by the relevant SCM on behalf of each such group 

of Combined Omnibus Gross Segregated Clearing Clients.

No offset between the "C" and the "H" accounts is allowed (except (i) pursuant to Rule 

8(d) of the Default Rules or any Insufficient Resources Determination Rule, or (ii) in 

relation to the transfer of House Excess or Client Buffer in accordance with the 
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Appendix II

FCM Procedures

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FCM PROCEDURES OF THE CLEARING HOUSE

LCH LIMITED
FCM Procedures FCM SwapClear

LCH Limited © 20243 - 37 - November January 20243

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Inflation Definitions in respect of the Index applicable to such Inflation 

FCM SwapClear Contract. 

In the event an Index is no available to calculate the Index Final, the 

Clearing House will, in its sole discretion, determine a value for the 

Index Final.

(n) Non-deliverable Interest Rate Swaps

The Clearing House will calculate all coupon payments for FCM

SwapClear Contracts that are non-deliverable interest rate swaps,

including the Fixed Amount or Floating Amount payable under any

such FCM SwapClear Contract, in USD, and all amounts due or

payable under such FCM SwapClear Contracts must be paid in USD.

(o) New holiday affecting the value of FCM SwapClear Contracts

If the government of any nation, state or territory, or any institution or 

agency of such government, has created or announced a new holiday 

(“New Holiday”), which has affected, or is likely to affect, the value 

of an FCM SwapClear Contract, then the Clearing House may amend 

the terms of such FCM SwapClear Contract and/or require the FCM 

Clearing Member that is party to such FCM SwapClear Contract to 

comply with any directions issued by the Clearing House regarding 

such FCM SwapClear Contract, in each case, in order to seek to ensure 

such FCM SwapClear Contract will have the same or similar value to 

that which it would have in the absence of such New Holiday.

2.1.9 Initial Margin

The Clearing House will require FCM Clearing Members to furnish it with 

Initial Margin. This amount will be determined by the prevailing market 

conditions and the expected time to close out the portfolio. The Portfolio 

Approach to Interest Rate Scenarios (PAIRS) will be used to calculate Initial 

Margin requirements for FCM SwapClear Contracts.

Separate Initial Margin calculations are performed for an FCM Clearing 

Member's house “H” and client “C” accounts and, within a “C” account, 

separately in respect of each FCM Client Sub-Account therein. No offset 

between the “C” and “H” accounts is permitted.

The Clearing House reserves the right to require additional amounts of Margin

from a specific FCM Clearing Member or from all FCM Clearing Members in 

accordance with FCM Regulation 14 (Margin and Collateral).

(a) Liquidity Risk Margin 

The Clearing House may require an FCM Clearing Member to transfer 

Collateral to the Clearing House to meet the liquidity risk margin 

requirement applicable to such FCM Clearing Member. This 

requirement is based on the risk profile of the FCM Clearing Member