VIA CFTC PORTAL

16th June 2023

Mr. Christopher Kirkpatrick

Commodity Futures Trading Commission

1155 21st Street NW

Three Lafayette Centre

Washington, DC 20581

LCH Limited Self-Certification: Japanese License Restrictions

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 

self-certification changes to reflect certain restrictions in the LCH’s Japanese Clearing 

License.

Part I: Explanation and Analysis

LCH holds a license with the Japanese Financial Services Authority (“JFSA”) to operate its 

SwapClear and ForexClear services in the Japanese market. In order to ensure the LCH rules

align with the scope of LCH’s Japanese license requirements, LCH is amending its rulebook, 

where required, to provide for the following restrictions:

1. ForexClear clearing members incorporated in Japan may only clear ForexClear nondeliverable forward (NDF) transactions (and no other type of ForexClear transactions)

2. A ForexClear Clearing Member may only clear ForexClear NDF transactions (and no 

other type of ForexClear transaction) on behalf of clients incorporated in Japan (each, 

a Japanese Clearing Client); and 

3. A Japanese Clearing Client may only use a Clearing Member that is not incorporated 

in Japan to clear ForexClear and SwapClear transactions.

Part II: Description of Rule Changes

LCH will amend the following parts of the rulebook:

• Procedures Section 1 (Clearing Member, Non-Member Market Participant and Dealer 

Status)

• FCM Procedures 

The changes to the Procedures Section 1 are focused in Section 1.12 (Jurisdictional 

Requirements) and are across subsections 1.12.2 – 1.12.3. Point (c) has been added to 

1.12.2, and points (c) and (d) have been added to 1.12.3. Language to the effect of the 
aforementioned restrictions on Japanese Clearing Members and Clients is now included, 

along with changing references to SwapClear ‘Contracts’ to ‘Transactions’.

In the FCM procedures, section 1.9 (Other Conditions) has been the focus of these changes. 

Subsection 1.9.2 (Restrictions on Japanese FCM Clients) has seen the addition of point (c) 

which now notes that FCM Clearing Members may only clear ForexClear transactions that are

NDF transactions on behalf of Japanese Clearing Clients. Point (a) has been amended to 

include the terminology “Japanese FCM Clients”, and (b) now contains updated references to 

‘Transactions’ rather than Contracts along with ‘Japanese FCM Clients’ being included.

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

be effective not earlier than 3

rd July 2023.

Part III: Core Principle Compliance

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

finds it will continue to comply with all the requirements and standards set forth therein. 

Specifically, these rule changes have potential relevance to Core Principle C (Participant and 

Product Eligibility) and Core Principle L (Public Information).

The changes described in this filing ensure that LCH continues to meet the objectives of Core 

Principle C and CFTC Regulation §39.12, including that LCH has appropriate requirements 

and restrictions for determining the eligibility of agreements, contracts or transactions that are 

able to be sent for clearing. The changes described in this filing provide for clarification in the 

LCH rules of certain restrictions in the LCH’s licensing in the Japanese jurisdiction. These 

changes also serve to outline the specific products that are eligible for Japanese clients and 

Clearing Members to clear with LCH. 

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

and CFTC Regulation §39.21as LCH is to make available any information that is relevant to 

participation in the clearing and settlement activities of LCH. The changes provided for in this 

submission will be included in LCH’s publicly available Procedures Section 1 and FCM 

Procedures of the Clearing House, thereby providing clarity on certain LCH’s jurisdictional 

license conditions and product eligibility to market participants. 

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 james.woolley@lseg.com

Yours sincerely,

James Woolley

Regulatory Compliance Analyst

LCH Limited
Appendix I

Procedures Section 1

Clearing Member, Non-Member Market Participant and Dealer Status
CORPORATE

LCH LIMITED

PROCEDURES SECTION 1

CLEARING MEMBER, NON-MEMBER MARKET 

PARTICIPANT AND DEALER STATUS
Clearing House Procedures Clearing Member and Dealer Status 

LCH Limited © 20232 - 25 -

 April 20232

The Clearing House shall be entitled to charge Clearing Members fees, charges, levies 

and other dues as prescribed by the Clearing House from time to time, provided, that 

the Clearing House shall provide Clearing Members no fewer than fourteen (14) days’ 

prior notice of any increase to such fees, charges, levies or other dues. The Clearing 

House may provide the aforementioned notice by way of Clearing Member circular or 

notification, which may include notification via the Clearing House’s website.

1.11 Other Conditions

The Clearing House may, at any time, impose additional conditions in relation to 

continued Clearing Member status, and at any time vary or withdraw any such 

conditions, provided that any such conditions which restrict, or may be considered to 

have the effect of restricting, access of a Clearing Member to the Clearing House shall 

be imposed only in circumstances where, and to the extent that, their object is to control 

the exposure of the Clearing House to risk. Clearing Members are referred to the 

Clearing House's website for further information about the relevant internal risk 

management policies and procedures of the Clearing House. 

The relevant additional conditions imposed on a Clearing Member may include, but are 

not limited to, a requirement to transfer additional cash or non-cash Collateral to the 

Clearing House, as determined by the Clearing House.

1.12 Jurisdictional Requirements

1.12.1 Singaporean Clients

Clearing Members are required to provide a copy of the ‘Notice to Singapore 

Clearing Clients’ to Clearing Clients incorporated in or operating through a 

branch in Singapore. The ‘Notice to Singapore Clearing Clients’ is available at: 

https://www.lch.com/system/files/media_root/singapore%20client%20disclosu

re.pdf. 

1.12.2 Restrictions on Clearing Members and SCM Branches incorporated in or 

domiciled in Japan (each, a “Japanese Clearing Member” andor “Japanese 

SCM Branch”, respectively)

(a) Japanese Clearing Members and Japanese SCM Branches are not

permitted to participate in the Portfolio Margining Service.

(b) Japanese Clearing Members and Japanese SCM Branches shall not clear

Yen-denominated SwapClear ContractsTransactions.

(c) Japanese Clearing Members shall not clear ForexClear Transactions,

except ForexClear NDF Transactions. 

1.12.3 Restrictions on Clearing Clients incorporated in or domiciled in Japan 

(“Japanese Clearing Clients”)

(a) Clearing Members may not participate in the Portfolio Margining

Service on behalf of Japanese Clearing Clients.
Clearing House Procedures Clearing Member and Dealer Status 

LCH Limited © 20232 - 26 -

 April 20232

(b) Clearing Members shall not clear Yen-denominated SwapClear

Contracts Transactions on behalf of Japanese Clearing Clients.

(c) Clearing Members shall not clear ForexClear Transactions, except

ForexClear NDF Transactions, on behalf of Japanese Clearing Clients.

(b)(d) Japanese Clearing Members shall not clear SwapClear Transactions or 

ForexClear Transactions on behalf of Japanese Clearing Clients. 

1.12.4 Restrictions on Clearing Clients organized under the laws of Canada, have their 

head office located in Canada or have their principal place of business in Canada 

(each, a “Canadian Clearing Client”)

(a) A Clearing Member may not open the following types of Client

Accounts on behalf of or with respect to a Canadian Clearing Client:

(i) Identified Client Omnibus Net Segregated Account;

(ii) Affiliated Client Omnibus Net Segregated Account;

(iii) Non-Identified Client Omnibus Net Segregated Account; or

(b) A Clearing Member may not permit a Canadian Clearing Client to be a

Combined Omnibus Gross Segregated Clearing Client.
Appendix II

FCM Procedures of the Clearing House
CORPORATE

FCM PROCEDURES OF THE CLEARING HOUSE

LCH LIMITED
FCM Procedures FCM SwapClear

LCH Limited © 20232 - 9 - DecemberApril 20232

CORPORATE

approval process involving the Risk Committee and Board of the Clearing

House.

1.7.2 Each FCM Clearing Member shall maintain current written risk management 

policies and procedures which address the risks that the relevant FCM 

Clearing Member may pose to the Clearing House, including any policies 

and procedures that the Clearing House may reasonably request to be 

incorporated therein. Upon the request of the Clearing House, an FCM 

Clearing Member shall promptly provide the Clearing House with a copy of 

its current policies and procedures for review by the Clearing House.

1.7.3 Pursuant to, and in accordance with, FCM Regulation 14 (Margin and 

Collateral), where an FCM Clearing Member provides clearing services to an 

FCM Client which the FCM Clearing Member considers to have a heightened 

risk profile, then that FCM Clearing Member shall collect from that FCM 

Client additional FCM Client Funds with a value that is 10 percent above the 

amount that the Clearing House would normally require for such FCM Client.

FCM Clearing Members are not required to furnish the Clearing House with 

the additional margin described in this section. However, for the avoidance of 

doubt, FCM Clearing Members are required to furnish the Clearing House with 

the Required Margin for every FCM Client.

1.8 Other Conditions

The Clearing House may, at any time, impose additional conditions in relation to 

continued FCM Clearing Member status, and at any time vary or withdraw any such 

conditions, provided that any conditions which restrict, or may be considered to have 

the effect of restricting, access of an FCM Clearing Member to the Clearing House 

shall be imposed only in circumstances where, and to the extent that, their object is to 

control the exposure of the Clearing House to risk. FCM Clearing Members are 

referred to the Clearing House's website for further information about the relevant 

internal risk management policies and procedures of the Clearing House. 

The relevant additional conditions imposed on an FCM Clearing Member may 

include, but are not limited to, a requirement to furnish additional cash or non-cash 

Collateral to the Clearing House, as determined by the Clearing House.

1.9 Other Conditions

1.9.1 Singaporean Clients

FCM Clearing Members are required to provide a copy of the ‘Notice to 

Singapore Clearing Clients’ to FCM Clients incorporated in or operating 

through a branch in Singapore. The ‘Notice to Singapore Clearing Clients’ is 

available here: http://www.lch.com/members-clients/members/fees-ltd/annualaccount-structure-fees. 

1.9.2 Restrictions on Japanese FCM Clients
FCM Procedures FCM SwapClear

LCH Limited © 20232 - 10 - December April 20232

CORPORATE

(a) FCM Clearing Members shall not permit FCM Clients incorporated

in or domiciled in Japan (“Japanese FCM Clients”) to participate

in the Portfolio Margining Service.

(b) FCM Clearing Members shall not clear Yen-denominated FCM

SwapClear Contracts Transactions on behalf of Japanese FCM

Clients incorporated in or domiciled in Japan.

(b)(c) FCM Clearing Members shall not clear FCM ForexClear 

Transactions, except FCM ForexClear NDF Transactions, on behalf 

of Japanese Clearing Clients.

1.10 Prescribed Terms

Pursuant to FCM Regulation 7 the Clearing House may prescribe certain provisions

that an FCM Clearing Member must include in its agreement with an FCM Client.

Where an FCM Clearing Member provides FCM Clearing Services to an FCM Client

that is a registered investment company, as defined in the Investment Company Act of

1940, it shall include provisions in its agreement with that FCM Client to the

following effect:

(a) the FCM Clearing Member shall comply with Applicable Law relating to the

segregation of FCM Client Funds, including Part 22 of the CFTC Regulations;

(b) FCM Client Funds delivered by the FCM Client shall be held in accordance

with the CEA and the CFTC Regulations, and the FCM Clearing Member

shall obtain an acknowledgement, to the extent required by Parts 1.20 and 22

of the CFTC Regulations, that those FCM Client Funds are being held in

accordance with the CEA and the CFTC Regulations;

(c) the FCM Clearing Member will promptly furnish copies of or extracts from its

records or such other information pertaining to the FCM Client’s assets as the

Securities Exchange Commission, through its employees or agents, may

request;

(d) any gains on FCM Contracts held on behalf of an FCM Client (other than de

minimus amounts) may be maintained by the FCM Clearing Member only

until the next Business Day following receipt; and

(e) the FCM Client has the ability to withdraw its assets from the FCM Clearing

Member as soon as reasonably practicable if the FCM Clearing Member’s or

the Clearing House’s custody of FCM Client Funds no longer meets the

requirements of Rule 17f-6 under the Investment Company Act of 1940.