Via CFTC Portal

9 September 2022

Mr Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street NW

Washington, DC 20581

Re: LCH SA CDSClear Switch CCP Programme

Dear Mr. Kirkpatrick,

Pursuant to CFTC regulation §40.6(a), LCH SA (“LCH SA”), a derivatives clearing organization (“DCO”) 

registered with the Commodity Futures Trading Commission (the “CFTC”), is submitting for selfcertification an incentive fee programme offered to existing and new potential clearing members and 

clients of its CDSClear service (the “Proposed Rule Change”).

This Proposed Rule Change is expected to be effective from 22 September 2022 however, in no event,

will either be implemented earlier than 10 business days after the proposed changes are filed with the 

CFTC.

The text of the Proposed Rule Change is attached hereto as Appendix1.

Part I: Explanation and Analysis

Following an announcement made at the end of June by an alternate credit CCP that it would cease 

clearing all classes of CDS contracts by the end of March 2023,2 but also in light of the upcoming 

extension of CDSClear products, LCH SA CDSClear expects a number of clients and clearing members of 

alternate credit CCPs to choose to move their CDS portfolios to LCH SA CDSClear.

In this context, the purpose of the Proposed Rule Change is for CDSClear to offer its Clearing Members

or clients acting through a Clearing Member, who have, directly or through a Clearing Member as 

1 Capitalised terms used but not defined herein (including in Annex to this document) shall have the 

meaning ascribed to them in the document entitled “CDS Clearing Rule Book” as published by LCH SA 

on its website and as amended from time to time.

2 Circular C22/076 "Cessation of clearing of CDS Contracts” published by ICE Clear Europe on 30 June 

2022 (C22076.pdf (theice.com)
2

applicable, signed up to the CCP Switch Programme3 as specified in Appendix, the opportunity to move 

their cleared index and single name credit default swap (“CDS”) or Index Swaption transactions from 

alternate credit CCPs to LCH SA at no cost (the “CCP Switch Programme”).

Part II: Description of Rule Changes

As detailed in the CDSClear Circular attached as Appendix and that will also be published on the LCH 

website, LCH SA CDSClear is proposing to implement the CCP Switch Programme that will be offered to 

all CDSClear Clearing Members and clients (the “Switch Programme Participants”) once effective.

The CCP Switch Programme will apply to all “Eligible Cleared Transactions” which include cleared 

transactions where there is no unlimited tariff available for the Switch Programme Participant or the 

cleared transaction would attract a non-zero clearing fee. This includes all CDS transactions for Select 

Members, but not Index Swaption transactions where an unlimited tariff is available. It includes all CDS 

transactions for clients of Clearing Members, but not Index Swaption transactions in 2022, where a full 

discount of client variable fees is being applied. It currently does not include any transactions for General 

Members. General Members have an unlimited tariff available for CDS apart from sovereign single 

names. Sovereign single names are subject to a full discount of clearing fees for General Members for 1 

year from the go-live date. An unlimited tariff is available to General Members for Index Swaptions, 

which excludes these from being an Eligible Cleared Transaction also.

To assist Switch Programme Participants in efficiently closing positions at alternate credit CCPs and 

reopening the same positions at the LCH SA CDSClear service, LCH SA is proposing to allow Switch 

Programme Participants to complete these transactions for zero CCP clearing fees.

In order to facilitate this, LCH SA CDSClear would charge no clearing fees to enter into the Eligible Cleared 

Transaction on CDSClear, known as the “the CDSClear Transaction Leg” and would give a Credit Note for 

the Assumed Cost of entering into the Alternate CCP Transaction Leg.

The Credit Note would be applied to all non-CCP Switch Eligible Cleared Transactions of a Switch 

Programme Participant for a period of six (6) months beginning at the “Programme Entry Date”, 

mentioned in the relevant Switch Programme registration form provided to LCH SA. This will effectively 

make the CCP Switch free of any clearing fees at either CCP. At the end of the six months period, any 

unused portion of the Credit Note would be forfeited.

Fees for both the CCP Switch and any transactions which will have the Credit Note applied would be 

charged as normal, then rebated at the end of each month.

Part III: Core Principle Compliance

LCH SA reviewed the introduction of the Proposed Rule Change against the requirements of Commission’s 

regulations and DCO Core Principles and has concluded that its compliance with all the requirements 

3 Clearing Members and clients will be able to enter into the CCP Switch Programme by completing a 

written form.
3

and standards therein and in particular with the following principle and Commission’s regulations 

including, but not limited to § 39.21 would not be adversely affected by this proposed fee change.

DCO Core Principle L – Public Information. LCH SA has determined that the Proposed Rule Changes are 

consistent with the DCOs requirements of CFTC Regulation 39.21 to make available publicly each clearing 

and other fee charged to Clearing Members. As usual, this proposed fee change will be publicly available 

on LCH website and the DCO will ensure that sufficient information is provided to market participants so 

that they can identify and evaluate accurately the fees associated with moving their positions and using

the relevant clearing services. The webpage on CDSClear fees will be updated with the proposed CCP 

Switch Programme set out in Appendix A once it becomes effective. As a result, LCH SA believes that this 

proposed change is consistent with the requirements of Core Principle L and Commission Rule 39.21(c).

Part IV: Public Information

LCH SA has posted a notice of pending certifications 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 SA by governing board or committee members, 

members of LCH SA that were not incorporated into the rule.

Certification

LCH SA hereby certifies to the CFTC, pursuant to the procedures set forth in the Commission regulation 

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

the regulations promulgated there under.

Should you have any questions please contact me.

Francois Faure

Chief Compliance Officer

+33 1 70 37 65 96

françois.faure@lseg.com
4

APPENDIX

LCH SA CDSClear Switch CCP Programme
APPENDIX

CCP Switch Programme1

This document describes the conditions of an incentive fee programme that CDSClear, a Eurozone-based 

clearing service provided by LCH SA,2 would like to offer to Switch Programme Participants3 wishing to move 

their cleared transactions from other credit central counterparties (“CCPs”) (the “LCH CDSClear CCP Switch 

Programme”).

Background

On 30 June 2022, a credit CCP published a circular notifying its clearing members that it had decided “to cease 

to act as a clearing house in relation to all classes of CDS Contracts currently cleared by [the credit CCP]”. 4 The 

clearing service in respect of credit default swaps (“CDS”) offered by this credit CCP is planned to end on 31 

March 2023. 

Within this context, CDSClear plans offer the LCH CDSClear CCP Switch Programme to facilitate this migration, 

available under the following conditions. 

LCH CDSClear CCP Switch Programme Description

To assist in reopening equivalent positions at LCH SA, within its CDSClear service, the LCH CDSClear CCP Switch 

Programme would allow Switch Programme Participants to do this CCP Switch for zero clearing fees. 

Specifically, LCH SA will charge no clearing fee to enter into the CDSClear Transaction Leg and would give a 

Credit Note for the Assumed Cost of entering into the Alternate CCP Transaction Leg.

The Credit Note will then be applied to all Cleared Transactions other than CDSClear Transaction Legs from 

and including the Programme Entry Date to and including the Credit Note Expiry Date, effectively making the 

CCP Switch free of any fees at the relevant Alternate CCP and LCH SA through the CDSClear service.

From a billing standpoint, fees that should have been due for Cleared Transactions entered into with LCH SA 

in relation to the CDSClear service: (i) which are part of the CCP Switch; or (ii) to which the Credit Note applies 

will be charged to the relevant Clearing Member by LCH SA and then rebated at the end of each month.

1 Subject to regulatory review and approval process

2 Referred to as the “CDS Clearing Service” within the meaning of the document entitled “CDS Clearing 

Rule Book” as published by LCH SA on its website and as amended from time to time. 

3 Capitalised terms used but not defined herein (including in Annex to this document) shall have the 

meaning ascribed to them in the document entitled “CDS Clearing Rule Book” as published by LCH SA 

on its website and as amended from time to time.

4 Circular C22/076 "Cessation of clearing of CDS Contracts” published by ICE Clear Europe on 30 June 

2022 (C22076.pdf (theice.com)).
2

Example 1 – CCP Switch Into Identical Position

Alternate CCP CDSClear

Buy/Sell 

Protection Product Notional

Buy/Sell 

Protection Product Notional

Starting Client Position

Buy iTraxx Europe S37 5Y EUR 1bn

Sell iTraxx Europe Crossover 

S37 5Y

EUR 250m

Offsetting Client Positions Entered on Same Trade Date

Sell iTraxx Europe S37 5Y EUR 1bn Buy iTraxx Europe S37 5Y EUR 1bn

Buy iTraxx Europe Crossover 

S37 5Y

EUR 250m Sell iTraxx Europe Crossover 

S37 5Y

EUR 250m

Switch Credit: 

EUR 5 * (EUR 1bn + EUR 250m)/EUR 1m = EUR 6,250

Clearing Fees if not part of CCP Switch: 

EUR 4 * (EUR 1bn + EUR 250m)/EUR 1m = EUR 5,000

Clearing Fees charged: EUR 0

Ending Client Position

Buy iTraxx Europe S37 5Y EUR 1bn

Sell iTraxx Europe Crossover 

S37 5Y

EUR 250m

End client position at CDSClear is identical to the starting client position at the Alternate CCP

Example 2 - CCP Switch via a Roll 

Alternate CCP CDSClear

Buy/Sell 

Protection Product Notional

Buy/Sell 

Protection Product Notional

Starting Client Position

Buy iTraxx Europe S36 5Y EUR 1bn

Sell iTraxx Europe Crossover 

S36 5Y

EUR 250m

Offsetting Client Positions Entered on Same Trade Date

Sell iTraxx Europe S36 5Y EUR 1bn Buy iTraxx Europe S37 5Y EUR 1bn

Buy iTraxx Europe Crossover 

S36 5Y

EUR 250m Sell iTraxx Europe Crossover 

S37 5Y

EUR 250m

Switch Credit: 

EUR 5 * (EUR 1bn + EUR 250m)/EUR 1m = EUR 6,250

Clearing Fees if not part of CCP Switch: 

EUR 4 * (EUR 1bn + EUR 250m)/EUR 1m = EUR 5,000

Clearing Fees charged: EUR 0

Ending Client Position

Buy iTraxx Europe S37 5Y EUR 1bn

Sell iTraxx Europe Crossover 

S37 5Y

EUR 250m

End client position at CDSClear rolls the starting client position at the Alternate CCP to a new series
3

Annex: Definitions 

Alternate CCP means either ICE Clear Europe, or ICE Clear Credit as appropriate.

Alternate CCP Transaction Leg means any trade leg cleared at an Alternate CCP that has the same:

(a) (i) CDS Type, except for the index series and version and maturity date that could differ, in respect of 

a CDS index; (ii) CDS Type, except for the maturity date that could differ, in respect of a CDS single 

name; or (iii) the same Swaption Type in respect of an Index Swaption;

(b) notional amount; and 

(c) trade date 

as an offsetting CDSClear Transaction Leg and is entered into as part of a CCP Switch.

Assumed Cost means the fees that the Switch Programme Participant, or the relevant clearing member acting 

on behalf of such Switch Programme Participant as applicable, would be charged by the Alternate CCP for 

entering into the Alternate CCP Transaction Leg as calculated by LCH SA using information published on the 

Alternate CCP’s website.

CCP Switch describes the process of entering into: (i) an Eligible Cleared Transaction at LCH SA through the 

CDS Clearing Service; and (ii) an offsetting position at an Alternate CCP.

CDSClear Transaction Leg means any trade leg of a Cleared Transaction entered into with LCH SA as part of a 

CCP Switch.

Credit Note means an offset in the fees charged by LCH SA, through its CDSClear service, for Cleared 

Transactions other than CDSClear Transaction Legs by the amount of Switch Credit.

Credit Note Expiry Date means the last calendar day of a six-month period starting on the Programme Entry 

Date.

Eligible Cleared Transaction means a Cleared Transaction where there is no unlimited tariff available for the 

Switch Programme Participant and the Cleared Transaction would attract non-zero clearing fee.5

Programme Entry Date means the calendar day on which the Switch Programme Participant enters into the 

LCH CDSClear CCP Switch Programme, being the first calendar day of the month as mentioned in the 

registration form duly completed, executed by the Clearing Member and returned to LCH SA.

Switch Credit means the sum of all Assumed Costs across all CCP Switches performed by the Switch 

Programme Participant between the Programme Entry Date and the Credit Note Expiry Date.

Switch Programme Participant means a Clearing Member or client, acting through a Clearing Member, who 

have, directly or through a Clearing Member as applicable, signed up to the LCH CDSClear CCP Switch 

Programme.

5 Fees published at https://www.lch.com/services/cdsclear/fees