Classification: Public

CORPORATE

 

 

LCH SA 

FCM/BD CDS Clearing Regulations 

03 August 2021[●]

 
FCM/BD CDS Clearing Regulations

LCH SA © 2021[●]                                                           ‐ 2 ‐                                      Published on [●]   30 July

2021

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CONTENTS 

FCM/BD CDS CLEARING REGULATIONS .................................................................................. 3

Regulation 1 ........... Governing Law and Jurisdiction ............................................................................ 6

Regulation 2 ........... Depository Accounts .............................................................................................. 7

Regulation 3 ........... Collateral ................................................................................................................ 9

Regulation 4 ........... Transfer ................................................................................................................ 10

Regulation 5 ........... Security Interest .................................................................................................... 11

Regulation 6 ........... Rules Relating to FCM/BD Cleared Swaps Client Segregated Accounts ............ 12

Regulation 7 ........... Portfolio Margining Program ............................................................................... 19
FCM/BD CDS Clearing Regulations

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FCM/BD CDS CLEARING REGULATIONS 

Scope

FCM/BD Clearing Members are bound by these FCM/BD CDS Clearing Regulations and the remainder

of the CDS Clearing Documentation applicable to FCM/BD Clearing Members, in connection with the

clearing of FCM/BD Cleared Transactions by FCM/BD Clearing Members through LCH SA.    These

FCM/BD CDS Clearing Regulations do not govern any other clearing services provided by LCH SA

(including, without limitation, the clearing of CCM Cleared Transactions in respect of the CDS Clearing

Service) which are governed by a separate set of rules.   

Any FCM/BD CDS Clearing Regulation or group of FCM/BD CDS Clearing Regulations expressly stated

not to apply to a category, or categories, of FCM/BD Cleared Transactions shall not apply to such

category, or categories, of FCM/BD Cleared Transactions.
FCM/BD CDS Clearing Regulations

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Definitions 

In these FCM/BD CDS Clearing Regulations, the CDS Clearing Rule Book (including the CDS Default

Management Process appended thereto), the Procedures and any related Clearing Notice, except

where the context otherwise requires, the following words and expressions shall have the following

meanings. All capitalised terms not otherwise defined herein have the meanings ascribed to them in

the CDS Clearing Rule Book.

Bank Means “Bank” as such term is defined in Section 3(a)(6) of the

Exchange Act.

CFTC Portfolio Margining Order Means “Treatment of Funds Held in Connection with Clearing

by LCH SA of Single‐Name Credit Default Swaps, Including Spun‐

Out Component Transactions” issued on November 1, 2021.

Code Means the U.S. Bankruptcy Code, as amended.

Bank

FCM/BD Cleared Swaps Client

Segregated Depository Account

‐  Means “Bank” as such term is defined in Section 3(a)(6) of the

Exchange Act.

Means an omnibus account (which will consist of one or more

accounts at one or more Permitted Depositories which are

commingled for purposes of the applicable provisions of the

CEA and CFTC Regulations) maintained by an FCM/BD Clearing

Member for its Cleared Swaps Customers with a Permitted

Depository, which issegregated in accordance with the CEA and

CFTC Regulations and contains Collateral deposited by such

Cleared Swaps Customers in connection with FCM/BD Cleared

Transactions that are Cleared Swaps (and, where relevant,

FCM/BD Portfolio Margining Transactions) cleared for such

Cleared Swaps Customers by such FCM/BD Clearing Member.  

FCM/BD Portfolio Margining

Transaction

Means an FCM/BD Cleared Transaction that is an SBS and which

is held in the FCM/BD Swaps Client Account Structure pursuant

to the Portfolio Margining Program.

FCM/BD SBS Client Segregated

Depository Account

Means an omnibus account (which will consist of one or more

accounts at one or more Permitted Depositories which are

commingled for purposes of the applicable provisions of the

Exchange Act and SEC Regulations) maintained by an FCM/BD

Clearing Member for its SBS Customers with a Bank, which is

segregated in accordance with the Exchange Act and SEC

Regulations and contains Collateral deposited by such SBS

Customers in connection with FCM/BD Cleared Transactions

that are SBS cleared for such SBS Customers by such FCM/BD

Clearing Member, excluding any FCM/BD Portfolio Margining

Transactions

Means an omnibus account (which will consist of one or more

accounts at one or more Banks which are commingled for

purposes of the applicable provisions of the Exchange Act and

SEC Regulations) maintained by an FCM/BD Clearing Member

for its SBS Customers with a Bank, which is segregated in

accordance with the Exchange Act and SEC Regulations and

contains Collateral deposited by such SBS Customers in

connection with FCM/BD Cleared Transactions that are SBS

cleared for such SBS Customers by such FCM/BD Clearing

Member, excluding any FCM/BD Portfolio Margining

Transactions
FCM/BD CDS Clearing Regulations

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LCH Cleared Swaps Client

Segregated Depository Account

‐  Means the omnibus account (which will consist of one or more

accounts at one or more Permitted Depositories which are

commingled for purposes of the applicable provisions of the

CEA and CFTC Regulations) maintained by LCH SA forthe benefit

of Cleared Swaps Customers of its FCM/BD Clearing Members

with a Permitted Depository, which is segregated in accordance

with the CEA and CFTC Regulations, is part of the cleared swaps

derivatives account class under Part 190 of the CFTC

Regulations and contains the Collateral deposited by such

FCM/BD Clearing Members on behalf of their Cleared Swaps

Customers (other than, for the avoidance of doubt, Collateral

provided to satisfy the Contribution Requirement of such

FCM/BD Clearing Members) in connection with FCM/BD

Cleared Transactions that are Cleared Swaps (and, where

relevant, FCM/BD Portfolio Margining Transactions) cleared for

such Cleared Swaps Customers by such FCM/BD Clearing

Members. (but does not, for the avoidance of doubt, include

any Collateral provided to satisfy the Contribution Requirement

of such FCM/BD Clearing Members).

LCH Proprietary Depository

Account

‐  Means the account (which may consist of one or more

accounts) with a depository designated for such purpose by

LCH SA which contains Collateral deposited by an FCM/BD

Clearing Member for its own account and the account of its

Affiliates (but never accounts of its FCM/BD Clients).

LCH SBS Client Segregated

Depository Account

Permitted Depository

‐  Means an omnibus account (which will consist of one or more

accounts at one or more Banks which are commingled for

purposes of the applicable provisions of the Exchange Act and

SEC Regulations) maintained by an FCM/BD Clearing

MemberLCH SA for the benefit ofits SBS Customers of its

FCM/BD Clearing Members with a Bank, which is segregated in

accordance with the Exchange Act and SEC Regulations and

contains Collateral deposited by such FCM/BD Clearing

Members on behalf of their SBS Customers in connection with

FCM/BD Cleared Transactions that are SBS cleared for such SBS

Customers by such FCM/BD Clearing Members, excluding any

SBS (such as SBS held in the FCM/BD Swaps Client Account

Structure) that are permitted to be held in an account with

Cleared Swaps as defined in CFTC Regulation 22.1 under

Applicable LawFCM/BD Portfolio Margining Transactions.

Means “Permitted Depository” as such term is defined in CFTC

Regulations 22.1 and 22.4.

 

 
FCM/BD CDS Clearing Regulations

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Portfolio Margining Program Has the meaning ascribed to it in FCM/BD CDS Clearing

Regulation 7(a).

Proprietary Account ‐  Means, as the context requires, the House Trade Account of an

FCM/BD Clearing Member or an FCM/BD House Collateral

Account to which FCM/BD Cleared Transactions made by the

FCM/BD Clearing Member for its own account or accounts of its

Affiliates (but never accounts of its FCM/BD Clients) are

registered and to which monies in respect of such FCM/BD

Cleared Transactions are credited.

SEC Portfolio Margining Order Means Exchange Act Release 34‐93501 (Order Granting

Conditional Exemptions Under the Securities Exchange Act of

1934 in Connection With the Portfolio Margining of Cleared

Swaps and Security‐Based Swaps That Are Credit Default Swaps,

86 Fed. Reg. 61357 (November 5, 2021)).

SIPA Means the U.S. Securities Investor Protection Act of 1970, as

amended.
FCM/BD CDS Clearing Regulations

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Regulation 1 Governing Law and Jurisdiction 

(a) These FCM/BD CDS Clearing Regulations shall be governed by and construed in accordance

with the laws of the State of New York, without regard to any conflicts of laws principles,

and the laws of the United States of America, including the CEA, Exchange Act, and

applicable bankruptcy and insolvency laws.

(b) All Disputes arising under these FCM/BD CDS Clearing Regulations and the Proceduresshall

be referred to and resolved in accordance with the CDS Dispute Resolution Protocol.

(c) Notwithstanding any other provision of the CDS Clearing Rules, with respect to any

FCM/BD Cleared Transaction involving an FCM/BD Client cleared by an FCM/BD Clearing

Member, such FCM/BD Clearing Member shall act solely as agent of its FCM/BD Client in

connection with the clearing of such FCM/BD Cleared Transaction, provided that such

FCM/BD Clearing Membershall remain fully liable for all obligations owed to LCH SA arising

in connection with such FCM/BD Cleared Transaction.
FCM/BD CDS Clearing Regulations

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Regulation 2 Depository Accounts 

(a) Each FCM/BD Clearing Member shall establish and maintain (i) an FCM/BD Cleared Swaps

Client Segregated Depository Account on behalf of its Cleared Swaps Customers in

accordance with applicable provisions of the CEA and CFTC Regulations, including but not

limited to Part 1, Part 22 and Part 190 of the CFTC Regulations, and as further set forth in

FCM/BD CDS Clearing Regulation 6, and (ii) where required, an FCM/BD SBS Client

Segregated Depository Account on behalf of its SBS Customers in accordance with

applicable provisions of the Exchange Act and SEC regulations, including but not limited to

Section 3E and Section 15(c) of the Exchange Act and Rule 15c3‐3 of the SEC Regulation.   

The FCM/BD Cleared Swaps Client Segregated Depository Accountshall be maintained with

a Permitted Depository in accordance with the CEA and CFTC Regulations and the FCM/BD

Clearing Member may commingle assets of all of its Cleared Swaps Customers in such

Account in a single omnibus account established and maintained in accordance with CFTC

Regulations.    The FCM/BD Cleared Swaps Client Segregated Depository Account

maintained by each FCM/BD Clearing Member shall be designated as a “Cleared Swaps

Customer Account” (as that term is defined in CFTC Regulation 22.1) for purposes of Part

22 of the CFTC regulations and Section 4d(f) of the CEA.

TheIf established, the FCM/BD SBS Client Segregated Depository Account shall be

maintained with a Bank in accordance with the Exchange Act and SEC Regulations and the

FCM/BD Clearing Member may commingle assets of all of its SBS Customers in such

Account in a single omnibus account established and maintained in accordance with SEC

Regulations.  The FCM/BD SBS Client Segregated Depository Account maintained by each

FCM/BD Clearing Member shall be designated as a “Special Reserve Bank Account for the

Exclusive Benefit of the Cleared Security‐Based Swap Customers” of the FCM/BD Clearing

Member  as provided in Exchange Act Rule 15c3‐3(p).

(b) LCH SA shall establish and maintain:  

(i) an LCH Cleared Swaps Client Segregated Depository Account on behalf of the

Cleared Swaps Customers of FCM/BD Clearing Members, in accordance with

applicable provisions of the CEA and CFTC Regulations, including but not limited

to Part 1, Part 22 and Part 190 of such CFTC Regulations;  

(ii) an LCH Proprietary Depository Account; and

(ii) upon request, an LCH SBS Client Segregated Depository Account on behalf of

the SBS Customers of FCM/BD Clearing Members, in accordance with

applicable provisions of the Exchange Act and SEC Regulations, including but

not limited to Section 3E and Section 15(c) of the Exchange Act and Rule 15c3‐

3 of the SEC Regulation; and

(iii) an LCH Proprietary Depository Account..   

(c) The LCH Cleared Swaps Client Segregated Depository Account shall be maintained with a

Permitted Depository in accordance with the CEA and CFTC Regulations and LCH SA may

commingle assets of all of the Cleared Swaps Customers in such Account in a single

omnibus account established and maintained in accordance with CFTC Regulations.  All

Collateral deposited by FCM/BD Clearing Members in connection with Cleared Swaps
FCM/BD CDS Clearing Regulations

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(including, for the avoidance of doubt, any FCM/BD Portfolio Margining Transactions)

cleared on behalf of Cleared Swaps Customers (other than, for the avoidance of doubt,

Collateral provided to satisfy the Contribution Requirement of such FCM/BD Clearing

Members) shall be held in such LCH Cleared Swaps Client Segregated Depository Account.  

The LCH Cleared Swaps Client Segregated Depository Account shall be maintained by LCH

SA separately from any and all assets of the FCM/BD Clearing Members, or any other assets

that LCH SA is holding for clients (other than Cleared Swaps Customers) and shall contain

no assets other than Collateral deposited by FCM/BD Clearing Membersin connection with

the clearing of Cleared Swaps (including, for the avoidance of doubt, any FCM/BD Portfolio

Margining Transactions) on behalf of their Cleared Swaps Customers.    The LCH Cleared

Swaps Client Segregated Depository Account maintained by LCH SA shall be designated as

a “Cleared Swaps Customer Account” for purposes of Part 22 of the CFTC regulations and

Section 4d(f) of the CEA.

TheIf established, the LCH SBS Client Segregated Depository Account shall be maintained

with a Bank in accordance with the Exchange Act and SEC Regulation and LCH SA may

commingle assets of all of the SBS Customers in such Account in a single omnibus account

established and maintained in accordance with SEC Regulations.  All Collateral deposited

by FCM/BD Clearing Members in connection with SBS held in the FCM/BD SBS Client

Account Structure cleared on behalf of SBS Customers (other than, for the avoidance of

doubt, Collateral provided to satisfy the Contribution Requirement of such FCM/BD

Clearing Members) shall be held in such LCH SBS Client Segregated Depository Account.  

The LCH SBS Client Segregated Depository Account shall be maintained by LCH SA

separately from any and all assets of the FCM/BD Clearing Members, or any other assets

that LCH SA is holding for clients (other than SBS Customers) and shall contain no assets

other than Collateral deposited by FCM/BD Clearing Members in connection with the

clearing of SBS held in the FCM/BD SBS Client Account Structure on behalf of their SBS

Customers.  The LCH SBS Client Segregated Depository Account maintained by LCH SA shall

be designated as a “Special Clearing Account for the Exclusive Benefit of the Cleared

Security‐Based Swaps Customers” of the FCM/BD Clearing Member for purposes of the

Exchange Act and SEC Regulations.
FCM/BD CDS Clearing Regulations

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Regulation 3 Collateral

(a) FCM/BD Clearing Members may deposit securities or cash with LCH SA as Collateral in

respect of FCM/BD Cleared Transactions cleared on behalf of FCM/BD Clients, in

accordance with Section 4.2.3 of the CDS Clearing Rule Book and Section 3 of the

Procedures.  Securities or cash deposited will be subject to a security interest in accordance

with Regulation 5 and held in an LCH Cleared Swaps Client Segregated Depository Account

or an LCH SBS Client Segregated Depository Account, as applicable.

(b) Security Arrangements.  FCM/BD Clearing Members wishing to deposit securities or cash

with LCH SA as Collateral in respect of FCM/BD Cleared Transactions cleared on behalf of

FCM/BD Clients must do so under the security arrangements set out in these FCM/BD CDS

Clearing Regulations.  

(c) Collateral deposited in an FCM/BD Clearing Member’s LCH Proprietary Depository Account

may be applied by LCH SA towardsthe payment of any sum whatsoever due by the FCM/BD

Clearing Member to LCH SA.  No Collateral deposited in an FCM/BD Clearing Member’s LCH

Cleared Swaps Client Segregated Depository Account or LCH SBS Client Segregated

Depository Account shall be applied on or in respect of payment or satisfaction of any of

the FCM/BD Clearing Member’s liabilities to LCH SA as recorded in any of the FCM/BD

Clearing Member’s Proprietary Accounts.

   
FCM/BD CDS Clearing Regulations

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Regulation 4 Transfer 

(a) If an FCM/BD Clearing Member is a Defaulting Clearing Member, any action taken by LCH

SA pursuant to the CDS Clearing Rule Book (including the CDS Default Management Process

appended thereto), including but not limited to the disposal by LCH SA of FCM/BD Cleared

Transactions held on behalf of FCM/BD Clients of the Defaulting Clearing Member, shall be

taken in compliance with the CEA and CFTC Regulations or the Exchange Act and SEC

Regulation, as applicable, and applicable bankruptcy laws regarding the liquidation or

transfer of Cleared Swaps carried by an FCM on behalf of its Cleared Swaps Customers or

SBS carried by a BD on behalf of its SBS Customers.  LCH SA shall have no responsibility or

liability whatsoever for any action taken or not taken with respect to the accounts and

FCM/BD Cleared Transactions of FCM/BD Clients of the Defaulting Clearing Member in

accordance with such laws or regulations or the directions of any Regulatory Body or

bankruptcy trustee.   

(b) If and to the extent any transfer by an FCM/BD Clearing Member of open contracts

between its Proprietary Account and accounts of its FCM/BD Clients, and vice versa, upon

an FCM/BD Client default, is permitted pursuant to the CDS Clearing Rule Book (including

the CDS Default Management Process appended thereto) and the Procedures, such

transfer shall be made subject to applicable provisions of the CEA and CFTC Regulations or

the Exchange Act and SEC Regulations, as applicable, regarding segregation of assets.
Portfolio Margining Draft (6 January 2023)

FCM/BD CDS Clearing Regulations

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Regulation 5 Security Interest 

Each FCM/BD Clearing Member hereby grants LCH SA a first security interest in and a first priority and

unencumbered first lien upon any and all cash, securities, receivables, rights and intangibles and any

other Collateral or assets deposited with or transferred to LCH SA, or otherwise held by LCH SA

(including without limitation all property deposited in an LCH Proprietary Depository Account and in

an LCH Cleared Swaps Client Segregated Depository Account and an LCH SBS Client Segregated

Depository Account, or any amounts owing to an FCM/BD Clearing Member as recorded in a

Proprietary Account), including all substitutions for and proceeds of, any such property, in connection

with any FCM/BD Cleared Transaction cleared for such FCM/BD Clearing Member or on behalf of its

FCM/BD Clients or Affiliates, as security for unconditional payment and satisfaction of the obligations

and liabilities of the FCM/BD Clearing Member to LCH SA.  The FCM/BD Clearing Member agrees to

take any and all actions, including but not limited to the execution of any and all documents, requested

by LCH SA in order to perfect, maintain or enforce the security interest granted to LCH SA hereunder.  

LCH SA may exercise any and all rights available to it with respect to the security interest granted

hereunder, in accordance with the FCM/BD CDS Clearing Regulations and applicable laws.  

Notwithstanding the foregoing, in no event shall LCH SA’s security interest in the Collateral in an LCH

Cleared Swaps Client Segregated Depository Account or an LCH SBS Client Segregated Depository

Account held on behalf of the FCM/BD Clearing Member’s Clients be exercised to satisfy any

obligations or liabilities of such FCM/BD Clearing Member other than in connection with obligations

or liabilities relating to Cleared Swaps cleared by such FCM/BD Clearing Member on behalf of its

Cleared Swaps Customers or relating to SBS cleared by such FCM/BD Clearing Member on behalf of its

SBS Customers.
FCM/BD CDS Clearing Regulations

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Regulation 6 Rules Relating to FCM/BD Cleared Swaps Client Segregated Accounts 

(a) Notice of Deficiency in FCM/BD Cleared Swaps Client Segregated Depository Account.  

Whenever an FCM/BD Clearing Member knows or should know that the aggregate amount

of funds on deposit in its FCM/BD Cleared Swaps Client Segregated Depository Account is

less than the total amount of such funds required by the CEA, CFTC Regulations and/or the

CDS Clearing Rule Book to be on deposit, the FCM/BD Clearing Member must report such

deficiency immediately by telephone notice, confirmed immediately in writing by e‐mail

notice, to the LCH SA file notice with the CFTC in accordance with CFTC Regulation 1.12,

and, if the FCM/BD Clearing Member is a BD, to the Securities and Exchange Commission,

in accordance with 17 C.F.R. § 240.17a‐11.

(b) Segregation of Funds.

(i) With respect to FCM/BD Client funds deposited in connection with Cleared

Swaps:

(A)   all such funds shall be separately accounted for and segregated as

belonging to Cleared Swaps Customers by the FCM/BD Clearing

Member and, in the event of an FCM/BD Clearing Member’s

bankruptcy administered under the US bankruptcy laws, are intended

to be part of a separate account class, treated as a Cleared Swaps

Account Class;

(B)   allsuch funds must be held by the applicable FCM/BD Clearing Member

or deposited with a Permitted Depository, and such funds shall be

deposited under an account name which complies with the

requirements of CFTC Regulation 22.6 and shows that they are

segregated as required by the CDS Clearing Rule Book and Part 22 of

the CFTC Regulations; and

(C)   each FCM/BD Clearing Member shall obtain and retain in its files for

the period provided in CFTC Regulation 1.31 a written

acknowledgment, in accordance with CFTC Regulations 22.5, 1.20

and/or 1.26 (as applicable) from such Permitted Depository that it was

informed that such funds deposited in the FCM/BD Cleared Swaps

Client Segregated Depository Account maintained by such Permitted

Depository for the FCM/BD Clearing Member are those of Cleared

Swaps Customers and are being held in accordance with the provisions

of the CEA, CFTC Regulations and the CDS Clearing Rule Book.

For the avoidance of doubt, the FCM/BD Cleared Swaps Client Segregated

Depository Account maintained by an FCM/BD Clearing Member shall be treated

as segregated accounts and shall be subject to the requirements of the CEA and

CFTC Regulations applicable to segregated accounts and to this FCM/BD

Regulation 6, regardless of the location of any such account.  Without limitation

of the foregoing, under no circumstances shall any portion of Cleared Swaps

Customers funds held in FCM/BD Cleared Swaps Client Segregated Depository

Accounts be obligated to LCH SA, an FCM/BD Clearing Member, any Permitted

Depository, or any other person except to purchase, margin, guarantee, secure,
FCM/BD CDS Clearing Regulations

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transfer, adjust or settle trades, contracts or transactions of Cleared Swaps

Customers.  No person, including LCH SA or any Permitted Depository, that has

received Cleared Swaps Customersfundsfor deposit in an FCM/BD Cleared Swaps

Client Segregated Depository Account, as provided in this rule, may hold, dispose

of, or use any such funds as belonging to any person other than the Cleared Swaps

Customers of the FCM/BD Clearing Member which deposited such funds.  

(ii) All Cleared Swaps Customer funds received by LCH SA from an FCM/BD Clearing

Member to purchase, margin guarantee,secure orsettle Cleared Swaps cleared

on behalf of Cleared Swaps Customers and all money accruing to such Cleared

Swaps Customers as the result of trades, contracts or transactions so carried

shall be separately accounted for and segregated as belonging to such Cleared

Swaps Customers, and LCH SA shall not hold, use or dispose of such Cleared

Swaps Customer funds except as belonging to such Cleared Swaps Customers.  

Such Cleared Swaps Customer funds, when deposited in a Permitted

Depository,shall be deposited under an account name which complies with the

requirements of CFTC Regulation 22.6 and shows that they are segregated as

required by the CEA and the CFTC Regulations.  LCH SA shall obtain and retain

in itsfilesfor the period provided by CFTC Regulation 1.31, an acknowledgment

from such Permitted Depository that it was informed that the funds deposited

in any LCH Cleared Swaps Client Segregated Depository Accounts maintained

by LCH SA are those of Cleared Swaps Customers of FCM/BD Clearing Members

and are being held in accordance with the provisions of the CEA, CFTC

Regulations and the CDS Clearing Rule Book.

(iii) Each FCM/BD Clearing Member shall treat and deal with Cleared Swaps

Customer funds as belonging to such Cleared Swaps Customers.  All Cleared

Swaps Customer funds shall be separately accounted for, and shall not be

commingled with the money, securities or property of an FCM/BD Clearing

Member or of any other person, or be used to secure or guarantee the trades,

contracts or transactions, or to secure or extend the credit, of any person other

than the one for whom the same are held; provided, however, that Cleared

Swaps Customer funds of an FCM/BD Clearing Member may for convenience

be physically commingled (although separately accounted for in accordance

with the CDS Clearing Rule Book and these FCM/BD CDS Clearing Regulations),

subject to and in accordance with the CEA, the CFTC Regulations and the CDS

Clearing Rule Book; provided, further, that Cleared Swaps Customer funds may

be invested in accordance with FCM/BD CDS Clearing Regulation 6(g).

(iv) In accordance with CFTC Regulation 22.15 (and subject to CFTC Regulation

22.3(d)), LCH SA shall treat the value of all Collateral received on behalf of each

Cleared Swaps Customer in connection with Cleared Swaps as belonging to

each such individual Cleared Swaps Customer, and such amount shall be

credited to such Cleared Swaps Customer’s applicable FCM/BD Swaps Client

Financial Account as provided in the CDS Clearing Rule Book and Procedures,

and shall not be used to margin, guarantee, or secure the FCM/BD Cleared

Transactions or other obligations of the applicable FCM/BD Clearing Member,

other Cleared Swaps Customers or any other person, except as permitted

under the CDS Clearing Rule Book (and not prohibited by the CEA or CFTC

Regulations) or as permitted under Part 22 of the CFTC Regulations.  
FCM/BD CDS Clearing Regulations

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(c) Care of Money and Securities Accruing to Cleared Swaps Customers.  All money received

directly or indirectly by, and all money and securities accruing to, an FCM/BD Clearing

Member from LCH SA or from any FCM/BD Clearing Member or from any other person

incident to or resulting from any Cleared Swaps made by or through such FCM/BD Clearing

Member on behalf of any Cleared Swaps Customer shall be considered as accruing to such

Cleared Swaps Customer within the meaning of the CDS Clearing Rule Book.  Such money

and securitiesshall be treated and dealt with as belonging to such Cleared Swaps Customer

in accordance with the provisions of the CEA, CFTC Regulations and the CDS Clearing Rule

Book.    The value of money and securities accruing in connection with Cleared Swaps

cleared on behalf of Cleared Swaps Customers shall be separately recorded in the relevant

FCM/BD Swaps Client Financial Account of each Cleared Swaps Customer.   

(d) Use of Cleared Swaps Customer Funds Restricted.  No FCM/BD Clearing Member shall use,

or permit the use of, Cleared Swaps Customer funds to purchase, margin or settle the

trades, contracts or transactions of, or to secure or extend the credit of, any person other

than its Cleared Swaps Customers.  Cleared Swaps Customer funds shall not be used to

carry trades or positions of the same Cleared Swaps Customer other than in connection

with Cleared Swaps cleared through the facilities of a derivatives clearing organization that

has established rules or bylaws which require Cleared Swaps, along with the money,

securities and/or other property margining, guaranteeing or securing such derivatives, to

be held in a separate account.

(e) Interest of FCM/BD Clearing Members in Cleared Swaps Customer Funds; Additions and

Withdrawals.  FCM/BD CDS Clearing Regulation 6(b), which prohibits the commingling of

Cleared Swaps Customer funds with the funds of an FCM/BD Clearing Member, shall not

be construed to prevent an FCM/BD Clearing Member from having a residual financial

interest in Cleared Swaps Customer funds, segregated as required by the CEA, CFTC

Regulations and the CDS Clearing Rule Book and set apart for the benefit of Cleared Swaps

Customers; norshallsuch provisions be construed to prevent an FCM/BD Clearing Member

from adding to the segregated Cleared Swaps Customer funds such amount or amounts of

money, from its own funds or unencumbered securitiesfrom its own inventory, of the type

permitted under FCM/BD CDS Clearing Regulation 6(g), asit may deem necessary to ensure

that its FCM/BD Cleared Swaps Client Segregated Depository Account holds at all times, at

a minimum, an aggregate amount equal to the amount required by the CEA, CFTC

Regulations and the CDS Clearing Rule Book.  The books and records of an FCM/BD Clearing

Member shall at all times accurately reflect its interest in the segregated Cleared Swaps

Customer funds.    An FCM/BD Clearing Member may draw upon such Cleared Swaps

Customer funds to its own order, to the extent of its actual interest therein, including the

withdrawal of securities held FCM/BD Cleared Swaps Client Segregated Depository

Accounts held by LCH SA or a Permitted Depository, provided that any such withdrawals

do not result in any such account holding lessin segregated Cleared Swaps Customer assets

than such account is required to contain at such time.  Such withdrawal shall not result in

Cleared Swaps Customer funds being used to purchase, margin or carry the trades,

contracts or transactions, or extend the credit of any other Cleared Swaps Customer or

other person. For the purposes of this last sentence, references to “Cleared Swaps

Customer” shall include all Cleared Swaps Customersfor the same beneficial owner,  unless

the FCM/BD Clearing Member has written internal controls and procedures that require it

to, and it in fact does, comply with all of the conditions set out in CFTC Letter No. 19‐17 of

July 10, 2019.
FCM/BD CDS Clearing Regulations

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(f) Assets Not Permitted to be Held in FCM/BD Cleared Swaps Client Segregated Depository

Accounts.  Money held in FCM/BD Cleared Swaps Client Segregated Depository Accounts

by an FCM/BD Clearing Membershall not include (i) money invested in obligations orstocks

of any clearing organization or in memberships in or obligations of any contract market or

(ii) money held by any clearing organization which it may use for any purpose other than

to purchase, margin, guarantee, secure, transfer, adjust, or settle the Cleared Swaps of the

Cleared Swaps Customers of such FCM/BD Clearing Member.  

(g) Investments of Cleared Swaps Customer Funds.  An FCM/BD Clearing Member or LCH SA

may invest Cleared Swaps Customer funds subject to the terms and conditions set forth in

CFTC Regulation 1.25, which regulation shall apply to such funds in accordance with the

provisions of the CEA and CFTC Regulation 22.2(e)(1) thereunder relating to transactions

in Cleared Swaps.  

(h) Deposit of Instruments Purchased with Cleared Swaps Customer Funds.

(i) Each FCM/BD Clearing Member that invests Cleared Swaps Customer funds in

instruments permitted under FCM/BD CDS Clearing Regulation 6(g) shall

separately account for such instruments and segregate such instruments as

belonging to such Cleared Swaps Customers to the extent required under the

CEA and CFTC Regulations.  Such instruments, when deposited with LCH SA or

a Permitted Depository, shall be deposited under an account name which

clearly showsthat they belong to Cleared Swaps Customers and are segregated

asrequired by the CEA, CFTC Regulations and the CDS Clearing Rule Book.  Upon

opening any such account, an FCM/BD Clearing Membershall obtain and retain

in its files an acknowledgment from such Permitted Depository that it was

informed that the instruments belong to Cleared Swaps Customers and are

being held in accordance with the CEA and CFTC Regulations.    Such

acknowledgment shall be retained in accordance with CFTC Regulation 1.31.  

Such Permitted Depository shall allow inspection of the records of such assets

at any reasonable time by representatives of LCH SA.

(ii) When it invests money belonging or accruing to Cleared Swaps Customers of its

FCM/BD Clearing Members in instruments permitted under FCM/BD CDS

Clearing Regulation 6(g), LCH SA shall separately account for such instruments

and segregate such instruments as belonging to such Cleared Swaps Customers

(provided that any such instruments may be held in commingled accounts, on

behalf of all Cleared Swaps Customers of all FCM/BD Clearing Members, at one

or more Permitted Depositories).  Such instruments, when deposited with a

Permitted Depository, shall be deposited under an account name which will

clearly show that they belong to Cleared Swaps Customers and are segregated

asrequired by the CEA, CFTC Regulations and the CDS Clearing Rule Book.  Upon

opening any such account, LCH SA shall obtain and retain in its files a written

acknowledgment from such bank or trust company that it was informed that

the instruments belong to Cleared Swaps Customers of FCM/BD Clearing

Members and are being held in accordance with the provisions of the CEA and

CFTC Regulations.  Such acknowledgment shall be retained in accordance with

CFTC Regulation 1.31.  Such Permitted Depository shall allow inspection ofsuch

instruments at any reasonable time by representatives of LCH SA.
FCM/BD CDS Clearing Regulations

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(i) Record of Investments.

(i) Each FCM/BD Clearing Member that invests Cleared Swaps Customer funds

shall keep a record showing the following:

(A)   The date on which such investments were made;

(B)   The name of the person through whom such investments were made;

(C)   The amount of money or current market value ofsecuritiesso invested;

(D)   A description of the instruments in which such investments were made,

including the CUSIP or ISIN numbers;

(E)   The identity of the depositories or other places where such instruments

are held;

(F)   The date on which such investments were liquidated or otherwise

disposed of and the amount of money or current market value of

securities received of such disposition, if any;

(G)   The name of the person to or through whom such investments were

disposed of; and

(H)   Daily valuation for each instrument and readily available

documentation supporting the daily valuation for each instrument.

Such supporting documentation must be sufficient to enable auditors

to verify the valuations and the accuracy of any information from

external sources used in those valuations.

(ii) When LCH SA receives documents from its FCM/BD Clearing Members

representing or evidencing investment of Cleared Swaps Customer funds, LCH

SA shall keep a record showing separately for each FCM/BD Clearing Member

the following:

(A)   The date on which such documents were received from the FCM/BD

Clearing Member;

(B)   A description of such documents, including the CUSIP or ISIN numbers;

and

C)   The date on which such documents were returned to the FCM/BD

Clearing Member or the details of disposition by other means.

(iii) Such records shall be retained in accordance with CFTC Regulation 1.31.  No

such investments shall be made except in instruments permitted under

FCM/BD CDS Clearing Regulation 6(g).

(j) Valuation of Instruments Purchased with Cleared Swaps Customer Funds.    FCM/BD

Clearing Members that invest Cleared Swaps Customer funds in instruments permitted

under FCM/BD CDS Clearing Regulation 6(g)shall include such instrumentsin their FCM/BD
FCM/BD CDS Clearing Regulations

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Cleared Swaps Client Segregated Depository Account records and reports at values which

at no time exceed theirthen current market value, determined as of the close of the market

on the date for which such computation is made.  

(k) Increment or Interest Resulting from Investment of Cleared Swaps Customer Funds.  The

investment of Cleared Swaps Customer fundsin instruments permitted under FCM/BD CDS

Clearing Regulation 6(g) shall not prevent the FCM/BD Clearing Member or LCH SA so

investing such funds from receiving and retaining as its own any increment or interest

resulting therefrom.  

(l) FCM/BD Cleared Swaps Client Segregated Depository Accounts; Daily Computation and

Record.

(i) Each FCM/BD Clearing Member must compute as of the close of the previous

Business Day:

(A)   the aggregate amount of Cleared Swaps Customer funds on deposit in

its FCM/BD Cleared Swaps Client Segregated Depository Account on

behalf of Cleared Swaps Customers;

(B)   the amount ofsuch Cleared Swaps Customer fundsrequired by the CEA,

CFTC Regulations and the CDS Clearing Rule Book to be on deposit in its

FCM/BD Cleared Swaps Client Segregated Depository Account on behalf

of such Cleared Swaps Customers, including the amount attributable to

each individual Cleared Swaps Customer; and

(C)   the amount of the FCM/BD Clearing Member’s residual interest in such

Cleared Swaps Customer funds.

(ii) In computing the aggregate amount of funds required to be in its FCM/BD

Cleared Swaps Client Segregated Depository Account, an FCM/BD Clearing

Member may offset any net deficit in a particular Cleared Swaps Customer’s

account against the then current market value of readily marketable securities,

less applicable percentage deductions (i.e., “securities haircuts”) as set forth in

Rule 15c3–1(c)(2)(vi) of the Securities and Exchange Commission (17 CFR

§ 241.15c3–1(c)(2)(vi)), held for the same customer’s account.  The FCM/BD

Clearing Member must maintain a security interest in the securities, including

a written authorization to liquidate the securities at the FCM/BD Clearing

Member’s discretion, and must segregate the securities in a safekeeping

account with LCH SA or a Permitted Depository.  For purposes of this FCM/BD

CDS Clearing Regulation 6(l), a security will be considered readily marketable if

it is traded on a “ready market” as defined in Rule 15c3–1(c)(11)(i) of the

Securities and Exchange Commission (17 CFR § 240.15c3–1(c)(11)(i)).

(iii) The daily computations required by this FCM/BD CDS Clearing Regulation 6(l)

must be completed by the FCM/BD Clearing Member prior to noon on the next

Business Day and must be kept, together with all supporting data, in

accordance with the requirements of CFTC Regulation 1.31.
FCM/BD CDS Clearing Regulations

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(m) Classification of Positions.  Each FCM/BD Clearing Member shall maintain, as provided in

CFTC Regulation 1.31, a record of all securities and property received from Cleared Swaps

Customers in lieu of money to purchase, margin, guarantee or settle the Cleared Swaps

cleared on behalf of such Cleared Swaps Customers.  Such record shall show separately for

each Cleared Swaps Customer: a description of the securities or property received; the

name and address of such Cleared Swaps Customer; the dates when the securities or

property were received; the identity of the Permitted Depositories or other places where

such securities or property are segregated; the dates of deposits and withdrawals from

such Permitted Depositories; and the dates of return of such securities or property to such

Cleared Swaps Customer, or other disposition thereof, together with the facts and

circumstances of such other disposition.

(n) Change in Law or Regulations.  LCH SA shall enforce the rules set forth in this FCM/BD CDS

Clearing Regulation 6 (and set forth in these FCM/BD CDS Clearing Regulations generally)

at all times in accordance with and subject to the CEA and CFTC Regulations.  In the event

that a change in law or in CFTC Regulations occurs but has not yet been reflected

appropriately in the CDS Clearing Rule Book, the CFTC Regulations (to the extent

compliance therewith has become mandatory) and Applicable Law will prevail, the

provisions of the CDS Clearing Rule Book shall be deemed to be modified accordingly and

LCH SA will enforce these FCM/BD CDS Clearing Regulations in accordance with CFTC

Regulations and applicable law.  
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Regulation 7 Portfolio Margining Program 

(a) In General.  LCH SA is authorized, pursuant to the SEC Portfolio Margining Order and the

CFTC Portfolio Margining Order, to offer FCM/BD Clearing Members, on behalf of their

FCM/BD Clients, the ability to portfolio margin FCM/BD Cleared Transactions that are SBS

with FCM/BD Cleared Transactions that are Cleared Swaps, as more fully set out in this

FCM/BD CDS Clearing Regulation 7 (“Portfolio Margining Program”).   

(b) Participation.

(i) An FCM/BD Clearing Member may participate in the Portfolio Margining

Program on behalf of its FCM/BD Client(s), by providing such materials

reasonably required by LCH SA for such purpose from time to time, including

information in respect of its FCM/BD Client(s).

(ii) In providing the materials referred to in (i), an FCM/BD Clearing Member shall

be deemed to represent to LCH SA:

(A)   it is both an FCM and a BD and neither such status has been revoked;

(B)   it is in compliance with the applicable requirements of the SEC Portfolio

Margining Order and the CFTC Portfolio Margining Order; and

(C)   each relevant FCM/BD Client is an “eligible contract participant” as

defined in Section 1a(18) of the CEA.

(iii) Where LCH SA has determined that an FCM/BD Clearing Member may

participate in the Portfolio Margining Program on behalf of its FCM Client(s), it

shall also communicate the date on which such participation shall begin (the

“Portfolio Margining Start Date”).  

(c) Operation.  Following the relevant Portfolio Margining Start Date:

(i) all FCM/BD Cleared Transactions that are SBS for the relevant FCM/BD Client

shall be treated as FCM/BD Portfolio Margining Transactions and shall be held

(along with any associated Collateral) in the FCM/BD Swaps Client Account

Structure on a commingled basis with FCM/BD Cleared Transactions that are

Cleared Swaps for such FCM/BD Client;  

(ii) such FCM/BD Portfolio Margining Transactions shall constitute “Cleared

Swaps” for purposes of the CDS Clearing Rules and the resulting combined

positions shall be margined on a portfolio basis in respect of the relevant

FCM/BD Client; and

(iii) the relevant FCM/BD Client shall be deemed to acknowledge and agree that

any property used to margin, guarantee or secure the FCM/BD Portfolio

Margining Transactions shall not receive customer protection treatment under

the Exchange Act or SIPA and will instead receive customer protection
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treatment under the commodity broker liquidation provisions of the Code and

the rules and regulations promulgated thereunder.