VIA CFTC PORTAL

14 December 2023

Mr. Christopher Kirkpatrick

Commodity Futures Trading Commission

1155 21st Street NW

Three Lafayette Centre

Washington, DC 20581

LCH Limited Self-Certification: Changes to the LCH Limited rulebook regarding 

transferee confidentiality obligations in a default scenario

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 its rulebook regarding confidentiality, security and use obligations 

applicable to certain FCM Clearing Members and other Clearing Members in relation to 

portfolio transfers after the Default of another FCM Clearing Member or Clearing Member.1

 

Part I: Explanation and Analysis 

LCH will amend the following provisions of its rulebook: 

• FCM Regulation 33(c); and

• General Regulation 41.

Currently, FCM Regulation 33(c) provides that LCH may provide information regarding FCM 

Contracts and Collateral of a Defaulter, except information associated with its Proprietary 

Account (“Information”) to a non-defaulting FCM Clearing Member in connection with the 

transfer, or potential transfer, of one or more of the Defaulter’s FCM Contracts and associated 

Collateral to such non-defaulting FCM Clearing Member (the “Potential Transferee”). Where 

LCH provides Information to the Potential Transferee, it must:

• preserve the confidentiality of such Information;

• apply equivalent security measures to such Information as those which it applies to its

own confidential information; and

• if such Potential Transferee does not become the transferee FCM Clearing Member in

respect of one or more of the Defaulter’s FCM Contract(s) and associated Collateral,

delete the Information it has received in connection with such potential transfer.

1 Capitalized terms not defined herein shall, unless otherwise indicated, have the meanings ascribed 

to such terms in the LCH rulebook.
LCH proposes clarifying the above requirements by adding a provision that limits the use of 

the Information received by the Potential Transferee only for the purpose of assessing the

transfer of one or more of the Defaulter’s FCM Contract(s) and associated Collateral to it. 

In addition, the changes to Regulation 33(c) are to: 

• Ensure correct grammar and sense; and

• State that the Potential Transferee has an obligation to delete, and to confirm deletion

of, Information it receives, such that it only needs to do so where such information

relates to FCM Contracts and associated Collateral that were not transferred to such

Potential Transferee (which means, conversely, that a Potential Transferee is not

required to delete, and confirm deletion of, Information relating to FCM Contracts and

associated Collateral that was transferred to it).

Provisions to the same effect as the amended FCM Regulation 33(c) will also be inserted as 

a new General Regulation 41(d) and will apply to all Clearing Members (other than FCM 

Clearing Members) for consistency and alignment.

Part II: Description of Rule Changes

FCM Regulation 33(c) has been amended to ensure grammatical sense, and to alter three 

sub conditions within paragraph (c) mandating FCMs to do the following: 

i. Ensure that it preserves the confidentiality of such information;

ii. Apply equivalent security measures to such information as those which it applies to its

own confidential information; and

iii. Use such information only for the purpose of assessing the transfer of one or more of

the Defaulter’s FCM Contracts and associated Collateral to it.

Sub condition (iii) has been inserted as a new provision.

General Regulation 41(d) has been amended to ensure grammatical sense, and to insert 

provisions and structure to the same effect as RCM regulation 33(c). All clearing members 

under the LCH rulebook will therefore have the same obligations regarding information relating 

to contracts and collateral in transfer or potential transfer scenarios.

These rule changes are included as Appendices I and II (under the General Regulations 

and FCM Regulations) in black line form. The changes will be effective not earlier than 

29

th December 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, this rule change has potential relevance to Core Principles D (Risk Management) 

and G (Default Rules and Procedures). 
The changes described in this filing ensure that LCH continues to meet the objectives of Core 

Principle D. The changes do not impact LCH’s approach to risk management or the way that 

it manages risks associated with discharging its obligations as a Derivatives Clearing 

Organisation. Likewise, the rule changes do not affect the way that LCH manages the 

exposures from clearing member house or customer positions, nor LCH’s management of 

customer funds. As noted, LCH will ensure confidentiality of information provided to FCM 

clearing members for the purposes of transfers of contracts and will tighten the requirement 

of destruction of information if the transfer is not completed. This ensures that no sensitive 

information will be utilised for illegitimate purposes outside of default scenarios.

Further, in accordance with Core Principle G, the changes do not impact LCH’s obligations in 

default scenarios, nor do they make changes to the actions that can be taken by the LCH in 

the event of a default. By requiring all members to adhere to more suitable information 

management requirements with respect to portfolio transfer assessments, incidental knockon market effects are less likely to materialise, and data confidentiality will remain preserved.

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.

Definitions 

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

meaning specified in the general regulations of the LCH rulebook, which rulebook is located 

at www.lch.com. 

Should you have any questions please contact me at james.woolley@lseg.com

Yours sincerely,

James Woolley

Regulatory Compliance Analyst

LCH Limited
Appendix I

General Regulations
Clearing House: General Regulations

- iApril November 20232

GENERAL REGULATIONS OF

LCH LIMITED
Clearing House: General Regulations

- 146-

April November 20232

CHAPTER X – DISCLOSURE, FEES, RECORDS AND 

AMENDMENTS

REGULATION 41 DISCLOSURE AND REPORTING

(a) The Clearing House shall have authority to supply any information whatsoever

concerning a Member and its trading to: (ia) an Exchange or an exchange with whom

the Clearing House has entered into an agreement pursuant to which the parties have

agreed to exchange information as required or contemplated by its Exchange Rules;,

(iib) any Regulatory Body which is entitled to receive or request any such details or

information;, (iiic) a Co-operating Clearing House pursuant to an agreement entered

into with the Co-operating Clearing House;, (ivd) any Approved EquityClear

Settlement Provider pursuant to an agreement entered into with that Approved

EquityClear Settlement Provider;, (ve) a member of the LCH Group;, (vif) any other

person or body to which the Clearing House is, in its reasonable opinion, legally

required to disclose the same;, (viig) any other person or body to which the Clearing

House has agreed to provide such information (including, without limitation, pursuant

to Section 5 (Disciplinary Proceedings) of the Procedures);, (viiih) a trade or data

repository or similar body on an ongoing basis in the ordinary course of business;, or

(ixi) any securities depository or securities settlement system on an ongoing basis in

the ordinary course of business.

(b) The Clearing House shall also be entitled to supply any information whatsoever

concerning a Member to any person who has provided or may be contemplating

entering into arrangements to provide the Clearing House directly or indirectly with

stand-by or other finance, insurance cover, guarantee or other financial backing, which

the Clearing House has been requested or is legally required to disclose to assist such

person in relation to the provision of, or continued provision of, such finance, insurance

cover, guarantee or financial backing.

(c) The Clearing House shall have authority to: (ia) to obtain and make use of information

from securities depositories, warehouses and/or any other trade repositories relating to

a Member; and (iib) to disclose such information to any Regulatory Body or Exchange

which is entitled to receive or request any such information.

(d) Where a Member is a Defaulter, the Clearing House may supply any information

relating to Contracts and Collateral (other than where such information is associated 

with such Defaulter’s Proprietary Account) to a non-defaulting Member in connection 

with the transfer or potential transfer of the Defaulter’s Contracts or Collateral to that 

non-defaulting Member. Where a Member receives information pursuant to this 

paragraph (d), and other than in the event of regulatory or judicial intervention or where 

the information is made public (other than in violation of this paragraph (d)), it shall:

(i) ensure that it preserves the confidentiality of such information;

(ii) apply equivalent security measures to such information as those which it applies

to its own confidential information; and

(iii) use such information only for the purpose of assessing the transfer of one or

more of the Defaulter’s Contracts and associated Collateral to it.
Clearing House: General Regulations

- 147-

April November 20232

If the Member that receives such information does not act as the transferee Member in 

respect of one or more of the Defaulter’s Contract(s) and associated Collateral, it shall 

promptly delete the information it has received in connection with the potential transfer 

and immediately confirm such deletion to the Clearing House.
Appendix II

FCM Regulations
FCM REGULATIONS OF THE CLEARING HOUSE

LCH LIMITED
FCM Regulations

- 121 -

October November 20231

CHAPTER IX - DISCLOSURE, FEES, RECORDS AND AMENDMENTS

REGULATION 33 DISCLOSURE AND REPORTING

(a) The Clearing House shall have authority to, on an ongoing basis in the ordinary course

of business, supply any information whatsoever concerning an FCM Clearing Member

and its trading to:

(i) an Exchange or an exchange with whom the Clearing House has entered into an

agreement pursuant to which the parties have agreed to exchange information

as required or contemplated by Exchange Rules,

(ii) any Regulatory Body which is entitled to receive or request any such details or

information,

(iii) a member of the LCH Group,

(iv) any other person or body to which the Clearing House is, in its reasonable

opinion, legally required to disclose the same,

(v) any other person or body to which the Clearing House has agreed to provide

such information (including any clearing house, exchange or execution facility

or FCM Approved Trade Source System with which the Clearing House has an

agreement, and including pursuant to Section 8 (Disciplinary Procedures) of

the FCM Procedures),

(vi) a trade or data repository (including a swap data repository) on an ongoing basis

in the ordinary course of business, or

(vii) any securities depository or securities settlement system.

(b) The Clearing House shall also be entitled to supply any information whatsoever

concerning an FCM Clearing Member to any person (and the Clearing House will

solicit an undertaking from any such person that such person will keep such information

confidential) who has provided or may be contemplating entering into arrangements to

provide the Clearing House directly or indirectly with stand-by or other finance,

insurance cover, guarantee or other financial backing, which the Clearing House has

been requested or is legally required to disclose to assist such person in relation to the

provision of, or continued provision of, such finance, insurance cover, guarantee or

financial backing.

(c) Where an FCM Clearing Member is a Defaulter, the Clearing House may supply any

information relating to FCM Contracts and Collateral (other than where such

information is associated with such Defaulter’s Proprietary Account) to a nondefaulting FCM Clearing Member in connection with the transfer or potential transfer

of the Defaulter’s FCM Contracts or Collateral to that non-defaulting FCM Clearing

Member. Where an FCM Clearing Member receives information pursuant to this

paragraph (c), and other than in the event of regulatory or judicial intervention or where

the information is otherwise made public (other than in violation of this paragraph (c)),

it shall:

(i) ensure that it preserves the confidentiality of such information; and
FCM Regulations

- 122 -

October November 20231

(ii) shall apply equivalent security measures to the such information as those which

it applies to its own confidential information; and

(iii) use such information only for the purpose of assessing the transfer of one or

more of the Defaulter’s FCM Contracts and associated Collateral to it.

If . In the event that the FCM Clearing Member that receives the such information does 

not act as thea transferee FCM Clearing Member in respect of one or more of the 

Defaulter’s FCM Contract(s) and associated Collateral related to such information, it 

shall promptly delete the information it has received in connection with the such

proposed potential transfer and immediately confirm such deletion to the Clearing 

House.