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LCH | 10 Paternoster Square | London EC4M 7LS | T: +44 (0)20 7426 7000 | F: +44 (0)20 7426 7001 | lch.com

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

VIA CFTC PORTAL

November 25, 2022

Mr. Christopher Kirkpatrick

Commodity Futures Trading Commission

1155 21st Street NW

Three Lafayette Centre

Washington, DC 20581

LCH Limited Self-Certification: SwapClear Service Product Expansions & Operational 

Enhancement

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 revisions to its rules to expand its eligible SwapClear transactions as well as make an 

operational enhancement related to basis swap splitting. The product expansions include: (a) 

fixed vs DKK-DESTR-OIS Compound interest rate swap, denominated in DKK, with a term of up 

to 11 years; (b) fixed vs SEK-SWESTR-OIS Compound interest rate swap, denominated in SEK, 

with a term of up to 11 years; (c) swap where each floating leg is the USD-SOFR-OIS Compound 

index, with a maximum tenor of 51 years; and (d) swap where one floating leg is the USD-SOFROIS Compound index and the other is the USD-Federal Funds index, with a maximum tenor of 51 

years (“Relevant Swaps”). Additionally, LCH is also making available an operational 

enhancement for the purposes of permitting members and clients to split SOFR-SOFR basis 

swaps in preparation for USD LIBOR conversion in April 2023 (“Basis Swap Splitting”).

Part I: Explanation and Analysis

LCH is revising its rules in order to provide eligibility for the Relevant Swaps. In order to facilitate 

these changes, LCH plans to revise its rules, specifically the Product Specific Contract Terms and 

Eligibility Criteria Manual and FCM Product Specific Contract Terms and Eligibility Criteria Manual 

(jointly, the “Product Terms”).

LCH is also revising its rules to provide for the Basis Swap Splitting process. In order to facilitate 

these changes, LCH plans to revise its General Regulations, FCM Regulations, Procedures 

Section 2C (SwapClear Service) and FCM Procedures. 

Part II: Description of Rule Changes

Product Expansion

LCH will amend Section 1.2(a) of Part B of the Product Specific Contract Terms and Eligibility 

Criteria Manual (Product Eligibility Criteria for Registration of a SwapClear Contract) and Section 

1.1(a) of the FCM Product Specific Contract Terms and Eligibility Criteria Manual (FCM Product

Eligibility Criteria for Registration of a SwapClear Contract) to include the following products:
Instrument Currency Leg 1 Leg 2 Variable 

Notional

Maximum 

Tenor

Notional Amount

OIS DKK Fixed DKK-DESTROIS CompoundYes 4,050 

days

0.01-

99,999,999,999.99

OIS SEK Fixed SEK-SWESTROIS CompoundYes 4,050 

days

0.01-

99,999,999,999.99

Basis Swap USD USD-SOFROIS 

Compound

USD-SOFROIS CompoundNo 18,675 

days

0.01-

99,999,999,999.99

Basis Swap USD USD-Federal 

Funds

USD-SOFROIS CompoundNo 18,675 

days

0.01-

99,999,999,999.99

Basis Swap Splitting

SwapClear is planning to offer a unilateral, optional service to allow members and clients to split 

basis swaps into two fixed versus float swaps. Each of the two resulting swaps with be set to 

have a fixed leg of 0% so the cashflows and risk profile of the outcome is identical to that of the 

input basis swap, and the margin calculation will also be identical for all measures and add-ons. 

The conventions on the fixed leg are irrelevant from a financial perspective, but will be set to 

maximize compression opportunities.

Based on feedback from members and clients, LCH plans to offer basis swap splitting as an

option for members and clients, rather than as a mandatory split as was deployed prior to the 

2021 LIBOR conversions. Providing an election rather than a mandatory split is designed to 

reduce the number of open contracts and associated notional resulting from basis swap splitting

prior to conversion. 

The initial implementation will permit the splitting of US Dollar LIBOR basis swaps only, but may 

be expanded to any other currency eligible in the service at a later date.

The changes to the rules are included as Appendices I - VI in black line form. The changes will 

be effective not earlier than December 12, 2022. 

Part III: Core Principle Compliance

LCH 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), 

D (Risk Management), and L (Public Information). 

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

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

account LCH’s ability to manage the associated risks. In determining whether to offer the 

Relevant Swaps for clearing, LCH considered factors including: 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 feels that the Relevant Swaps meet LCH’s qualifications and the requirements 

of Core Principle C. 

LCH believes the changes described in this filing will not impact LCH’s ongoing compliance with 

the objectives of Core Principle D. The Relevant Swaps and Basis Swap Splitting will not require 

changes to LCH’s risk management framework, margin methodology, or margin requirements.

LCH will clear the Relevant Swaps and offer Basis Swap Splitting consistent with its current 

operational, risk management, and default management tools. LCH considered its risk 

management requirements and believes clearing the Relevant Swaps will not impact LCH’s 

ongoing compliance with Core Principle D. 

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 §39.21, LCH make available any 
information that is relevant to participation in the clearing and settlement activities of LCH. LCH 

considered its public information requirements and believes including the Relevant Swaps and 

Basis Swap Splitting in its rules maintains compliance with Core Principle L. 

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

Participant and Product Eligibility under CFTC regulation §39.12, Core Principle D on Risk 

Management under CFTC regulation §39.13, 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.

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.

Should you have any questions please contact me at michelle.weiler@lseg.com.

Yours sincerely,

Michelle Weiler

US Compliance Officer

LCH Limited
Appendix I

Product Specific Contract Terms and Eligibility Criteria Manual 

Changed Pages
Appendix II

FCM Product Specific Contract Terms and Eligibility Criteria Manual

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Appendix III

General Regulations

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Appendix IV

FCM Regulations

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Appendix V

Procedures Section 2C (SwapClear Service)

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Appendix VI

FCM Procedures

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