Document ID: SEC-2020-1274-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: LCH SA
Posted Date: 2020-08-10T04:00Z

[Federal Register Volume 85, Number 154 (Monday, August 10, 2020)]
[Notices]
[Pages 48295-48303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17346]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89465; File No. SR-LCH SA-2020-003]

Self-Regulatory Organizations; LCH SA; Notice of Filing of 
Proposed Rule Change, as Modified by Amendment No. 1, Relating to LCH 
SA's Governance Arrangements

August 4, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4,\2\ notice is hereby given that on July 
23, 2020, Banque Centrale de Compensation, which conducts business 
under the name LCH SA (``LCH SA''), filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change 
(``Proposed Rule Change''), as described in Items I, II and III below, 
which Items have been prepared by the clearing agency. On July 29, 
2020, LCH SA filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1 (the ``proposed 
rule change''), from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ LCH SA filed Amendment No. 1 to correct the Exhibit 5 to the 
original filing to reflect a change in Article 13 of the Terms of 
Reference of the Board of Directors of LCH SA, which is described 
below, and to correct an erroneous citation in Item II.A.2 below.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    LCH SA, a registered clearing agency and self-regulatory 
organization, is a majority-owned subsidiary of LCH Group Holdings 
Limited (``LCH Group'').\4\ LCH Group is indirectly majority-owned by 
London Stock Exchange Group PLC (``LSEG''). LCH SA is proposing to 
amend its governance documents (``Governance Documents'') including: 
(i) The Terms of Reference (``ToR'') of the Board of Directors 
(``Board''); and (ii) the TOR of the current committees of the Board. 
The Proposed Rule Change will also establish ToR of a Nominating 
Committee for LCH SA.
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    \4\ LCH Group owns 88.9 percent of LCH SA; Euronext N.V. owns 
11.1 percent of LCH SA. LCH Group is also the parent of LCH Limited, 
a central counterparty (``CCP'') authorized to offer services and 
activities in the European Union in accordance with the European 
Markets Infrastructure Regulation (``EMIR'') and registered with the 
Commodity Futures Trading Commission (``CFTC'') as a derivatives 
clearing organization (``DCO'').

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[[Page 48296]]

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, LCH SA included statements 
concerning the purpose of and basis for the Proposed Rule Change and 
discussed any comments it received on the Proposed Rule Change. The 
text of these statements may be examined at the places specified in 
Item IV below. LCH SA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Proposed Rule Change is being adopted in significant part to 
conform LCH SA's Governance Documents to actions taken by LCH Group to 
simplify its governing arrangements and to eliminate provisions in LCH 
Group's governance documents that they have determined are unnecessary 
and outdated. These changes will allow the LCH group as a whole to 
operate more efficiently and effectively. Although LCH SA's Governance 
Documents will be revised to reflect the changes to the LCH Group's 
governing arrangements described below, in practice, these revisions 
will not result in any substantive changes in LCH SA's current 
governance.
a. Background
    In connection with its purchase of approximately 58 percent of LCH 
Group \5\ in 2013, LSEG entered into a Relationship Agreement with LCH 
Group for the purpose of (i) assuring certain protections for minority 
LCH Group shareholders, (ii) providing for representation of 
stakeholders in the CCPs that comprise LCH Group, i.e., the clearing 
members of each CCP and the exchanges whose transactions were cleared 
through LCH SA or LCH Limited, and (iii) recognizing LSEG's 
requirements as majority shareholder for appropriate controls over LCH 
Group.\6\ To this end, among other provisions, the Relationship 
Agreement: (i) Set out certain Core Operating Principles to be applied 
in managing the business of LCH Group; (ii) provided that the Board of 
Directors of LCH Group and each CCP would be comprised of a prescribed 
mix of independent non-executive directors, executive directors, User 
Directors,\7\ exchanges (``Venues'') and LSEG representatives; (iii) 
provided that LCH Group would have a separate Audit Committee and 
Remuneration Committee independent of the parallel committees at each 
CCP; and (iv) provided for a Nomination Committee, which would be 
responsible for nominating independent non-executive directors, User 
Directors and Venue Directors of the Board of Directors and committee 
members at LCH Group and each CCP.
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    \5\ LCH Group was then known as LCH.Clearnet Group Limited.
    \6\ As appropriate, provisions of the Relationship Agreement 
were reflected in the LCH Group Articles of Association and the ToR 
of the LCH Group Board of Directors.
    \7\ User Directors are individuals that are associated with or 
connected to clearing members that are also shareholders of LCH 
Group.
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    The Relationship Agreement also provided for certain minority 
protection reserved matters, which would require the approval of 80 
percent of votes cast on a resolution, including: (i) Altering the 
constitutional documents of LCH Group; (ii) making material changes to 
the Core Operating Principles; (iii) proposals to wind-up LCH Group or 
any material LCG Group company; and (iv) material amendments to the 
Relationship Agreement.
    In addition, the Relationship Agreement contained customary consent 
rights for LSEG as a majority shareholder, including: (i) Approval of 
business and budget plans; (ii) matters representing changes from the 
Core Operating Principles; (iii) material changes to regulatory 
obligations and risk profile; (iv) material acquisitions/disposals; and 
(v) settlement of material litigation (collectively, ``Consent 
Matters''). The Relationship Agreement also reserved for LSEG the right 
to put certain matters to shareholder vote where LCH Group either 
failed to consider the matter or considered it and voted it down 
(``Push Matters'').\8\
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    \8\ LSEG never exercised this right.
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    As noted above, LCH Group has determined to simplify its governing 
arrangements and to eliminate provisions in LCH Group's governance 
documents that are unnecessary and outdated. In this regard, LCH Group 
and LSEG have decided to terminate the Relationship Agreement and to 
remove duplication in board decision-making between LCH Group and the 
CCP Boards by making the LCH Group Board an internal only board, i.e., 
comprised only of representatives of LSEG and LCH Group. The LCH Group 
Articles of Association similarly will be revised to eliminate those 
provisions arising from the Relationship Agreement.
    The Relationship Agreement is no longer necessary because certain 
contractual provisions are provided for in law of regulation and other 
provisions are historic and no longer relevant. Importantly, since 
2013, LSEG has added to its shareholdings in LCH Group and now owns 
approximately 83 percent of LCH Group. Therefore, the minority 
protection provisions noted above are no longer relevant as LSEG alone 
could approve such matters by voting its shares. As explained below, 
however, certain protections in the Relationship Agreement will be 
incorporated into the revised ToR of the Board of Directors.\9\
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    \9\ Such protections include but are not limited to certain 
consent rights and the right to have a representative on the Board 
of Directors of LCH SA and LCH Limited, as well as the several 
committees of LCH SA and LCH Limited
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b. Proposed Amendments to the ToR
    As noted earlier, the Proposed Rule Change is being adopted in 
significant part to conform LCH SA's Governance Documents to actions 
taken by LCH Group to simplify its governing arrangements. These 
changes will allow the LCH group as a whole to operate more efficiently 
and effectively. Importantly, there will be no change in the proportion 
of independent directors \10\ or the number of directors representing 
members and participants. Therefore, the Board and the committees of 
the Board will continue to assure fair representation of its members 
and participants in the selection of its directors and the 
administration of its affairs as provided in section 17A(b)(3)(C) of 
the Act.\11\
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    \10\ The ToR of the LCH SA Board defines an independent director 
as a director who satisfies applicable Regulatory Requirements, 
i.e., any regulation or requirement of applicable law or of any 
applicable regulatory body, regarding independent directors, and who 
is appointed in accordance with the Nomination Committee ToR.
    \11\ 15 U.S.C. 78q-1(b)(3)(C).
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Terms of Reference of the Board of Directors
    The ToR of the Board will be amended as necessary to remove those 
provisions that are no longer required as a result of the termination 
of the Relationship Agreement and the amendment of the LCH Group 
Articles of Association:
     Article 2, Definitions, will be amended to remove those 
definitions arising from the Relationship Agreement, including: (i) 
Core Operating Principles; (ii) Customer; (iii) Customer Director; (iv) 
Group Nomination Committee (which is being disbanded); (v) LSEG Audit 
Representative; (vi) LSEG Consent Matters; (vii) LSEG NomCom 
Representative; (viii) Material Interest; (ix) Minority Protection 
Reserved

[[Page 48297]]

Matters; (x) Push Matters: (xi) Relationship Agreement; (xii) 
Significant Interest; (xiii) Venue; (xiv) Venue Director.
     Article 3, Composition of the Board, will be amended (i) 
to remove the requirement that the Chairman of LCH Group will be a non-
executive director of the Board, (ii) to confirm that LSEG is entitled 
to a representative on the Board unconditionally,\12\ (iii) to remove 
the requirement for a Venue Director,\13\ and (iv) to confirm that 
Euronext is entitled to propose the appointment of a representative to 
the Board as long as either the Cash Clearing Agreement or the 
Derivatives Clearing Agreement between Euronext and LCH SA remains in 
force.\14\ Article 3 will be further amended to provide that the Chief 
Risk Officer of LCH Group may, but is not required to, be one of the 
three executive Directors of the Board. Article 3 currently provides 
that the Chief Risk Officer of LCH Group, along with the CEO of LCH SA 
and the CEO of LCH Group will be the executive Directors of the Board. 
Finally, Article 3 references the new Nomination Committee, rather than 
the Group Nomination Committee.
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    \12\ Article 3 currently provides that LSEG is entitled to a 
representative on the Board ``for so long as LSEG is entitled to 
exercise or control the exercise of at least 5 percent of the votes 
able to be cast on all or substantially all matters at general 
meetings in LCH Group Holdings Limited''.
    \13\ With the exception of Euronext, there have been no Venue 
representatives on the LCH SA Board for some time. This is because a 
Venue must also be a shareholder of LCH Group in order to qualify 
for representation on the Board. Nasdaq was the last significant 
Venue on the LCH Group shareholder register but sold its stake in 
2018. Since then, there has only been one entity that is a 
combination of a User/Venue and that entity has shown no interest in 
being represented on any LCH board. Euronext was a shareholder of 
LCH Group, but moved its ownership stake to LCH SA in 2017. However, 
it is entitled to a Board representation through its contractual 
arrangements, i.e., the Cash Clearing Agreement and Derivatives 
Clearing Agreement.
    \14\ In accordance with the terms of the agreement pursuant to 
which Euronext N.V. purchased 11.1 percent of the shares of LCH SA, 
Euronext is already entitled to propose a representative to the 
Board.
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     Article 4, Rules applicable to Directors, will be amended 
to remove references to the Relationship Agreement (and Consent 
Matters, Minority Protection Reserved Matters and Push Matters therein) 
and refer only to rights of consent that LSEG may have under this ToR.
     Article 6, Quorum, will be amended to make a technical 
correction to the first sentence of the article. The sentence currently 
provides that the Board ``may validly deliberate only if half of the 
Directors are present.'' This sentence could be interpreted to mean 
that the Board could not deliberate if more than half of the Directors 
are present, which clearly is not intended. As proposed to be revised, 
this sentence will confirm that the Board ``may validly deliberate only 
if at least half of the Directors are present.''
     Article 12, Powers of the Board, will be amended to remove 
references to the Relationship Agreement, including the Core Operating 
Principles. However, the amendments to Article 12 will also confirm 
that the Board's authority with respect to certain matters remains 
subject to LSEG's consent. These matters, previously included in the 
Relationship Agreement, include: (i) Approval of LCH SA's annual 
operating and capital expenditure budget; (ii) approval of any material 
changes to LCH SA's budget; (iii) approval of the terms and conditions 
of any merger agreement between the LCH SA and a third party; and (iv) 
approval of a decision of LCH SA to issue new shares. LSEG's consent 
will also be required with regard to any matter that constitutes a 
material increase in the risk profile of LCH SA's investment policy or 
capital management policy that would result in a material decrease in 
LCH SA's available liquidity resources (subject to certain exceptions). 
In addition, LSEG's consent will be required with respect to (a) any 
recommended changes to the structure, size and composition of the Board 
that the Board, upon recommendations from the Nomination Committee, may 
recommend for approval by a general meeting of the shareholders, and 
(b) the ToR of any Board committees and any changes thereto, to the 
extent provided for in the ToR of the Board or the ToR of the affected 
committee.
    Article 12 will also be amended to reflect the existing group 
dividend policy including the factors to be taken into account when 
determining the dividend (as currently set out in the Relationship 
Agreement and the Euronext shareholders' agreement). Dividends are 
subject to the vote of the shareholders, having regard for: (i) 
Applicable regulatory and regulatory capital requirements; (ii) 
restrictions in any finance documents; (iii) investment to support 
capital expenditure contemplated by the business plan and budget from 
time to time, including technology, taking into account future expected 
cash flows; and (iv) applicable laws.
    Moreover, Article 12 will be amended to clarify that the Board will 
approve at least annually the LCH Group Risk Governance Framework and 
LCH SA's various policies, including LCH SA's: (i) Financial Resource 
Adequacy Policy; (ii) Default Management Policy; (iii) Collateral Risk 
Policy; (iv) Investment Risk Policy; (v) Liquidity Risk Policy; (vi) 
Settlement, Payment & Custody Risk Policy; (vii) Counterparty Credit 
Risk Policy; (viii) Contract and Market Acceptability Policy; (ix) 
Model Governance, Validation & Review Policy; (x) Operational Risk 
Policy; (xi) and Procyclicality Policy and any significant changes to 
those policies upon recommendations from the Risk Committee. Finally, 
Article 12 will be amended to confirm that, in appointing the Chairman 
of the Board and the LCH SA CEO, the Board will act in accordance with 
the ToR of the Nomination Committee.
     Article 13, Company management (Chairman--CEO), will be 
amended to provide that certain actions, which previously the CEO was 
authorized to take with the consent of the Board, may be undertaken 
only after consultation with the board of LCH Group. These activities 
include: (i) Any type of joint venture arrangement between LCH SA and 
any third party; (ii) any acquisition of a business with a valuation 
representing five percent or more of LCH SA's net revenue stated in the 
last audited accounts published by LCH SA; (iii) any disposal of all or 
any material part of LCH SA's business; (iv) any decision to cease to 
operate all or any material part of LCH SA's business; (v) any 
acquisition or disposal of shares or any interest in shares of LCH SA, 
any significant investment in any third party or the making of any 
takeover offer; and (vi) any material acquisitions and disposals, 
including in relation to intellectual property and LCH SA's various 
business segments and group undertakings.\15\ In addition, Article 13 
will be amended to authorize the CEO or the CEO's management team to 
provide to LSEG (subject to all laws and regulations (including 
antitrust laws and regulations)), (a) sufficient financial and other 
information that LSEG may reasonably require to meet any applicable 
reporting requirements or standards and LSEG's budgeting and 
forecasting processes; and (b) the audited accounts for each financial 
year and monthly management reports, consistent with LSEG's existing 
rights under the Relationship Agreement.
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    \15\ For the purposes of this paragraph, an acquisition or 
disposal will be material if the value of the consideration or the 
assets that are the subject of the transaction exceed an aggregate 
amount of [euro]10,000,000.
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    Article 13 will also be amended to provide that, in line with 
LSEG's consent rights in the Relationship Agreement, LSEG will have the 
right to consent with regard to the settlement of any litigation that 
could result in a

[[Page 48298]]

payment to or by LCH SA in excess of [euro]2,000,000 and with regard to 
any IT investments proposed to be made by LCH SA if they exceed an 
aggregate annual amount of [euro] 3,000,000.
     Article 14, Conflicts of Interest, will be amended to 
provide that, notwithstanding the general prohibition on a Director 
nominated by a shareholder of LCH Group from sharing information with 
the shareholder of LCH Group without the consent of the independent 
non-executive Directors of the Board, information may be shared with 
LSEG, in its capacity as an indirect shareholder of LCH SA, for legal, 
accounting, tax regulatory or disclosure purposes.
     Article 15, Committees of the Board, will be amended to 
note (i) the addition of a new committee, the Technology, Security and 
Resilience Committee, and (ii) that the Group Nomination Committee is 
now the Nomination Committee, i.e., a committee of LCH SA.
     Article 16, Audit Committee, will be amended to remove the 
requirement that the ToR of the Audit Committee must be substantially 
similar to the terms of reference of the Audit Committee of LCH Group 
(as this will no longer exist) and to recognize that changes in the ToR 
may be required by LCH SA's regulators (and not LCH Group's regulators) 
or any applicable law or regulation. The ToR must be reviewed annually 
by the Board, and (ii) are subject to the approval of the Board and to 
the consent of LSEG, in respect of the rights of LSEG under the ToR. 
Finally, the amended Article 16 will confirm that a Director 
representing LSEG and a Director representing Euronext will be a part 
of the Audit Committee.
     Article 17, Risk Committee, will confirm that a Director 
representing LSEG will be vice-chairman of the Risk Committee. The ToR 
must be reviewed annually by the Board, and (ii) are subject to the 
approval of the Board and to the consent of LSEG, in respect of the 
rights of LSEG under the ToR.
     Article 18, Nomination Committee, will be amended to 
remove any reference to the Group Nomination Committee and the 
requirement that, in the event LCH SA establishes its own Nomination 
Committee, its ToR must be substantially similar to the terms of 
reference of the LCH Group Nomination Committee. As amended, Article 18 
will provide that the ToR of the Nomination Committee (i) must be 
reviewed annually by the Board, and (ii) are subject to the approval of 
the Board and to the consent of LSEG.\16\ In addition, Article 18 
confirms that a Director representing LSEG will be a member of the 
Nomination Committee.
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    \16\ Note that, under Article 18, LSEG's consent is required for 
any amendment of the ToR of the Nomination Committee, not just 
amendments to LSEG's rights under the ToR. The reason for this 
slightly wider consent right (compared to other ToRs) is that the 
LCH Group Nomination Committee ToR required LSEG consent for any 
amendment, and the Relationship Agreement required any CCP 
Nomination Committee to have substantially similar terms to the LCH 
Group Nomination Committee ToR.
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     Article 19, Remuneration Committee, will be amended to 
remove the provision requiring the ToR to take into account the 
remuneration policies and principles of the LCH Group Remuneration 
Committee (which is being disbanded). However, the requirement to take 
into account the remuneration policies and principles applied by LSEG 
for its executive management remains. Any change in LSEG's rights under 
the ToR is subject to LSEG's consent. Finally, Article 19 confirms that 
a Director representing LSEG will be a member of LCH SA's Remuneration 
Committee.
     Article 20, Technology, Security and Resilience Committee, 
is a new article that recognizes the establishment of the Technology, 
Security and Resilience Committee, and provides that its organization 
and functions will be set out in a ToR, which are reviewed annually and 
subject to the approval of the Board.
     Article 25, Related party agreements between LCH SA and a 
manager, a Director or a shareholder, will be amended to provide that 
any contracts and agreements between LCH SA and LSEG or any member of 
the LSEG Group,\17\ will be subject to the prior approval of a 
committee of the Board consisting solely of the independent non-
executive directors of LCH SA. The article further provides that 
approval will be given provided that the contract or agreement is on 
bona fide arm's length terms. The committee's determination will be 
final.
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    \17\ LSEG Group means London Stock Exchange Group plc and its 
subsidiaries from time to time other than those entities comprising 
the LCH Group.
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     New Article 26, Group Compliance, will provide that, in 
light of LSEG's obligations under the Financial Conduct Authority's 
Listing Rules, the Board will notify LSEG of any proposed transaction 
in relation to LCH SA or of which the Board is otherwise aware that may 
constitute for LSEG either (i) a significant transaction under Listing 
Rule 10, or (ii) a related party transaction under Listing Rule 11. 
Further, if LSEG informs the Board that the proposed transaction 
constitutes a transaction (or other relevant matter) under Listing Rule 
10 or 11, the transaction will not take place without the prior 
approval of LSEG.
     New Article 27, Amendment, will provide that the Board ToR 
may be amended by the Board, provided that any changes to LSEG's rights 
or any changes which would otherwise have a detrimental effect on 
LSEG's rights pursuant to the ToR will be subject to LSEG's consent.
Terms of Reference of the Nomination Committee
    As noted earlier, as a part of the LCH Group governance changes, 
the committees of the Board of LCH Group will be disbanded. Therefore, 
LCH SA will establish its own Nomination Committee. Although this ToR 
is entirely new to LCH SA, it is based in substantial part on the 
provisions of the Group Nomination Committee applicable to LCH SA.
    The structure of the Board established under the Nomination 
Committee ToR will be essentially the same as it is today. 
Specifically, Article 2, Purpose, will provide that the Nomination 
Committee will recommend: (i) An independent Chairman; (ii) up to four 
independent directors; (iii) up to two User Directors; (iii) a director 
nominated by LSEG; and (iv) a director nominated by Euronext.\18\ In 
addition, the Board will have three Executive Directors: (a) The CEO of 
LCH SA; (b) the CEO of LCH Group; and (c) the chief risk officer of LCH 
Group, or ``such other officer as may be proposed by the Group CEO''.
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    \18\ Although both LSEG and Euronext are entitled to recommend 
the candidate to serve as a Director of the Board, the candidates 
are subject to consideration by the Nomination Committee and may be 
rejected if the Nomination Committee determines the candidate is not 
appropriate. In considering the candidates, the Nomination Committee 
will take into account (i) the seniority, experience, skill and 
expertise of each candidate, and (ii) the regulatory good standing 
of each candidate. ToR Articles 3 and 4.
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    As discussed above, under the Nomination Committee ToR, there will 
be no change in the proportion of independent directors or the number 
of directors representing members and participants. It should be noted, 
however, that the Group Nomination Committee ToR had provided for up to 
two representatives of Venues. As explained earlier, with the exception 
of Euronext, there have been no Venue representatives on the LCH SA 
Board for some time. Because Euronext is entitled to Board 
representation through its contractual arrangements, i.e., the Cash 
Clearing Agreement and Derivatives

[[Page 48299]]

Clearing Agreement, LCH SA has determined that there is no reason to 
provide for additional Venue directors in the LCH SA Nomination 
Committee ToR.
    Article 5, Executive Management Team, will provide that LCH SA's 
CEO, in consultation with the LCH Group CEO will be responsible for 
appointing the management team for LCH SA. This provision is intended 
to ensure independence at the CCP level.
    Article 6, Duties and Powers of the Committee, will set out the 
duties and powers of the Nomination Committee. Among other duties, the 
committee must: (i) Be satisfied that candidates understand the 
responsibilities of Board membership and be able to devote to necessary 
time to LCH SA matters; (ii) ensure that its recommended candidates are 
respected for their competence and are of good standing in their field 
of business; and (iii) keep itself informed of any changes in law or 
regulations applicable to the composition of the Board and other 
matters for which the committee is responsible.\19\
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    \19\ The Committee is also directed to consult periodically with 
the nomination committee of LCH Limited to ensure that there is a 
coordinated process for the appointment of suitable directors to the 
Board and the board of directors of LCH Limited.
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    Article 7, Procedures of the Committee, will set out the procedures 
of the Nomination Committee. As they relate to the appointment of the 
Chairman and the Independent Directors, Article 7 will provide that the 
committee will maintain a short list of potential candidates and 
consult with the CEO of LCH Group and the CEO and the Chairman of LSEG 
as to the suitability of the candidates. With regard to the appointment 
of a new Chairman, the committee will also consult with the Independent 
Directors.
    Article 7 further provides that, in determining whether a candidate 
is fit for appointment as Chairman or as an Independent Director, the 
committee will consider whether there are relationships or 
circumstances (including with LSEG or any member of LSEG Group) likely 
to affect such person's judgment and whether the candidate has a 
relationship that would disqualify such person as a ``public director'' 
within the meaning of CFTC rules in force from time to time or as an 
``independent director'' under any corporate governance standards 
applicable from time to time, or which the Board otherwise determines 
should be complied with in the interests of best practice corporate 
governance.\20\
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    \20\ If a recommended candidate appears to have any 
relationships that might call into question the candidate's 
independence, the committee must specify why it believes the 
candidate is nonetheless independent.
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    Finally, in making recommendations with regard to Independent 
Directors, the committee will take into account that there should be 
among the Independent Directors: (i) A breadth of industry expertise 
and experience and product knowledge; (ii) particular expertise and 
experience in each of risk management, audit, clearing services and 
financial services; and (iii) diversity, including gender, age, 
geographical provenance, and educational and professional background.
    The procedures for the appointment of User Directors are set out in 
Appendix to Article 7 (``Appendix''). Under these procedures, if a User 
Director retires from the Board, the committee may invite an ``Eligible 
User'', as defined,\21\ to nominate a candidate for appointment as a 
User Director on the Board (a ``Nominating User'').\22\ In selecting 
Nominating Users, the committee will consider those Eligible Users that 
the committee considers most likely to promote the success of LCH SA, 
having regard for: (i) The number of each Eligible User's contracts or 
trades (as the case may be) cleared by any member of LCH Group in the 
immediately preceding 12 months; (ii) any other contribution made to 
LCH Group's business by each Eligible User, including without 
limitation assistance provided to LCH Group in the development of new 
projects and the introduction to LCH Group of new clearing clients; 
(iii) the size of each Eligible User's shareholding in LCH Group; and 
(iv) how recently (if at all) the relevant Eligible User has been 
represented on any LCH Board, and the desirability of achieving a 
reasonably fair rotation of appointees among Eligible Users.
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    \21\ As defined in the Appendix, an ``Eligible User'' is a User 
Shareholder, i.e., a clearing member that is also a shareholder of 
LCH Group, that is not connected with an existing director (other 
than a director that is retiring or removed in accordance with the 
Appendix) and has not served notice terminating its clearing 
relationship with any member of LCH Group.
    \22\ In addition to retiring voluntarily from the Board, a User 
Director must retire if the User Director: (i) Retires or is removed 
as a result of the User Shareholder which nominated the User 
Director ceasing to be an Eligible User; (ii) retires or is removed 
as a result of their ceasing to be employed by, or for any other 
reason upon request by, the User Shareholder which nominated the 
User Director; (iii) retires or is removed following a change of 
role within the User Shareholder, if such role change would result 
in the User Director concerned no longer being able to maintain the 
relevant skill and expertise; or (iv) is disqualified or removed in 
accordance with the LCH SA's articles of association.
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    In deciding whether to approve a candidate for appointment to the 
Board (each, an ``Approved Candidate''), the committee will have regard 
for: (i) The seniority, experience, skill and expertise of each 
candidate; (ii) the regulatory good standing of each candidate; (iii) 
the desirability of having deep expertise on a wide range of products, 
including those which pose the greatest risk challenges for LCH SA from 
time to time; and (iv) the desirability of having significant 
experience and expertise in LCH SA's principal markets; and (v) the 
desirability of diversity on the Board, including gender, age, 
geographical provenance, and educational and professional background.
    From the Approved Candidates, the committee selects a number of 
``Proposed Directors'' that is equal to the number of User Directors 
that are retiring from the Board and presents the Proposed Directors to 
LSEG for approval. If LSEG does not approve a Proposed Director, the 
Nominating User may accept LSEG's decision, in which case, the 
committee may select another Proposed Director from among the Approved 
Candidates to be put to LSEG for approval, or the Nominating User may 
propose one or more alternative candidates to be considered and, if 
approved, be put to LSEG for approval.\23\ Upon approval of a Proposed 
Candidate by LSEG, the committee will recommend the Proposed Director's 
appointment to the Board.
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    \23\ The committee is not required to select the alternative 
candidate as a Proposed Candidate.
---------------------------------------------------------------------------

    Article 8, Tenure of Directors, will provide that each director 
(other than the Executive Directors and User Directors) will have, in 
principle, a maximum tenure on the Board of three three-year terms. 
However, the Committee may nominate an Independent Director for such 
longer period as is necessary to ensure that not all such Independent 
Directors' appointments terminate at the same time. All User Directors 
will have a tenure on the Board of one three-year term, unless 
otherwise agreed by the Board to ensure that not all such User 
Directors' appointments terminate at the same time. Article 8 further 
provides that the terms of appointment of each User Director will 
provide that the User Director must retire from the Board if any of the 
circumstances set out in sub-paragraphs 2(a) through 2(e) of the 
Appendix occurs.\24\
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    \24\ Paragraphs 2(a) through 2(e) of the Appendix provide that a 
User Director must retire if the User Director: (a) Retires of the 
User Director's own volition; (b) retires or is removed as a result 
of the User Shareholder that nominated the User Director ceasing to 
be an Eligible User; (c) retires or is removed as a result of the 
User Director ceasing to be employed by, or for any other reason 
upon request by, the User Shareholder that nominated the User 
Director; (d) retires or is removed following a change of role 
within the User Shareholder, if such role change would result in the 
User Director concerned no longer being able to maintain the 
relevant skill and expertise; or (e) is disqualified or removed in 
accordance with LCH SA's Articles of Association.

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[[Page 48300]]

    Article 9, Membership of the Nomination Committee, will provide 
that the members of the Nomination Committee will be appointed by the 
Board and be comprised of four to six directors, including the 
Chairman, at least two Independent Directors, one User Director and the 
LSEG Director. The Chairman of the Board, or such other Independent 
Director as the Independent Directors and LSEG may agree, will be the 
Chairman of the committee.
    Articles 10 and 12 through 16 will establish the Committee's 
policies with regard to the conduct of meetings. In this regard, these 
articles provide that: (i) LCH SA's secretary will be the secretary of 
the Committee (Article 10); (ii) notice of meetings will be provided by 
the secretary or Committee Chairman in a timely manner, along with an 
agenda and supporting documents (Article 12); (iii) the Committee will 
meet at least twice each year and as necessary to fulfill its duties 
(Article 13); (iv) Committee meetings may be held in person, by 
telephone, by video conference or any combination thereof, and 
decisions may be made by email circulation, provided approval is 
unanimous (Article 14); (v) one Independent Director, one User 
Director, and the LSEG Director must be in attendance to constitute a 
quorum of the Committee, authorized to exercise all authorities of the 
Committee (Article 15); and the secretary will prepare minutes of all 
Committee meetings, which will be presented to the Committee for 
approval at its next meeting.
    Article 11, Tenure of Nomination Committee Members, will provide 
that, in the event a member of the Committee ceases to be a director or 
LCH SA, the member will automatically cease to be a member of the 
Committee.
    Article 17, Reporting and Reviews, will provide that the Committee 
will furnish to the Board for approval each year a summary of (i) its 
activities, (ii) the process used to make nominations, (iii) a 
description of its policy on diversity (including gender), any 
measurable objectives it has set for implementing the policy and 
progress on achieving such objectives, and (iv) will either explain if 
external advice or search consultants have not been used or, if they 
have been used, identify them and state whether they have a connection 
with LCH SA.\25\ Article 17 will further require the Committee 
Chairman, or the Chairman's designee, to make available to LCH SA's 
Chief Compliance Officer (the ``Chief Compliance Officer'') such 
information relating to the Committee's work as is necessary for the 
Chief Compliance Officer to draft and submit the annual compliance 
reports required by the CFTC Rules and other applicable regulations in 
force from time to time.
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    \25\ Following approval of the Committee's summary, it will be 
included as a section in LCH SA's annual report.
---------------------------------------------------------------------------

    Article 18, Amendment, will provide that the ToR may be amended 
with approval of the Board, subject to LSEG's consent.
    Article 19, Confidentiality and Conflicts of Interest, will set out 
the requirements with respect to confidentiality and conflicts of 
interest and provides that all confidential matters considered by the 
committee and any confidential information disclosed to members of the 
committee in connection with their position as a member of the 
committee must remain confidential, notwithstanding the company to 
which that information relates, nor whether the member is a director of 
that company or not, except as required to be disclosed by law or 
regulation. Conflicts of interest relating to committee members will be 
governed by the relevant articles in LCH SA's Articles of Association.
    Article 20, Other, will provide that (i) the Committee will have 
sufficient resources to carry out its duties, (ii) every member of the 
Committee will receive a copy of the ToR, and (iii) every member of the 
Committee will receive appropriate and timely training, including 
access to external consultancy support, when required.
Terms of Reference of the Risk Committee
    No substantive changes are proposed to be made to the ToR of the 
Risk Committee. The ToR will be amended primarily to reflect the 
changes in the LCH Group governing arrangements. For example, (i) 
Article 1, Composition, will be revised to reference the criteria for 
independence set out in LCH SA's Nomination Committee ToR rather than 
in LCH Group's Nomination Committee ToR, and (ii) Article 16, 
Confidentiality and Conflicts of Interest, will be revised to remove 
reference to any rights LSEG may have in the Relationship Agreement and 
refer, instead, to rights LSEG or its representatives have under this 
ToR.
    Article 1 will also been amended to remove as unnecessary the 
provision that authorized LSEG to appoint the Vice Chairman of the 
committee only for so long as LSEG is entitled to exercise or control 
the exercise of at least 40 percent of the votes able to be cast on all 
or substantially all matters at general meetings of LCH SA. Provided 
such person has the skills and experience commensurate with such a 
role, LSEG will be entitled to appoint the Vice Chairman of the 
committee without restriction.\26\
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    \26\ Article 17 of the ToR, Harmonization with LCH Limited, will 
be amended to remove references to LCH LLC. LCH LLC is registered 
with the CFTC as a DCO, although its registration is currently 
dormant.
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    Article 20, Other, will be amended to provide that LSEG must 
consent to any amendments to: (i) Paragraph 1.2.6, recognizing the 
authority of LSEG's Head of Financial Risk (or delegate) to attend 
meeting of the Risk Committee; (ii) paragraph 1.4, authorizing LSEG to 
appoint the Vice Chairman of the committee; (iii) paragraph 16.1, 
relating to confidentiality and conflicts of interest; and (iv) 
paragraph 20.6, recognizing the provisions of the ToR requiring LSEG's 
consent. Further, no provisions of ToR may be amended without the 
approval of the Board.
Terms of Reference of the Audit Committee
    No substantive changes are proposed to be made to the ToR of the 
Audit Committee. However, Article 2, Structure and Membership, will be 
revised to reference the criteria for independence set out in LCH SA's 
Nomination Committee ToR rather than in LCH Group's Nomination 
Committee ToR and, further, will be amended to provide that one member 
of the Audit Committee will be a director recommended or approved by 
LSEG.\27\
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    \27\ Article 2 will also be amended to remove as unnecessary 
references to the Relationship Agreement and the paragraph providing 
that LSEG will have the authority to appoint a member of the 
committee only for so long as LSEG is entitled to exercise or 
control the exercise of at least 20 percent of the votes able to be 
cast on all or substantially all matters at general meetings of LCH 
Group.
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    Article 3, Authority and Responsibilities, will be amended to 
remove the requirement that LCH SA's Audit Committee coordinate with 
the Audit Committee of LCH Group. However, Article will be amended to 
require the committee to coordinate with the Technology, Security and 
Resilience Committee.\28\ In addition,

[[Page 48301]]

Article 3 will be amended to recognize that LCH SA has more than one 
External Auditor, and provide that, in making recommendations to the 
Board concerning the appointment, evaluation and termination of the 
engagement of the External Auditors for LCH SA, the Committee will take 
into account the auditor appointed by LSEG in respect of the wider LSEG 
Group. Article 3 will also be amended to provide that the Committee 
will review the annual audit plan prepared by LCH SA's Internal Audit 
department after approval by the LCH SA's CEO and ahead of any 
submission of the plan to LCH SA's regulator, if requested by the 
regulator. Finally, Article 3 will be amended to remove the requirement 
that the Committee respond to any requests from the LCH Group Audit 
Committee (which is being disbanded) to vary LCH SA's internal audit 
program of work.
---------------------------------------------------------------------------

    \28\ The Committee's obligation to coordinate with the LCH SA 
Risk Committee is unchanged.
---------------------------------------------------------------------------

    Article 5, Reporting, will be amended to confirm that Committee 
secretary will present all minutes of the proceedings and resolutions 
of all Committee meetings to the Committee for approval at the next 
following meeting.
    Current Article 8, Annual Evaluation and Terms of Reference Review, 
which provides that the Committee will arrange for periodic reviews of 
its own performance and, at least annually, arrange for independent 
internal review of its constitution and these Terms of Reference, will 
be removed. This review is conducted, instead, by the Board and 
executive management.
    Article 8, Amendments, will be added, which will specify those 
provisions of the ToR that may be approved solely by the Board and 
those provisions that will also require LSEG's consent.
Terms of Reference of the Remuneration Committee
    The ToR of the Remuneration Committee will be amended to reflect 
some minor changes in the remuneration process. For example, Article 1, 
Duties and Powers of the Committee will be revised to provide that the 
remuneration policies will apply to ``Specified Executives'' rather 
than ``Executive Management''. This is a technical change to confirm 
that the remuneration policies will apply only to those executives 
identified in the ToR or otherwise specified by the Board and will not 
apply to other LCH SA executives who otherwise might be deemed to fall 
within the category of ``Executive Management'' for other purposes. As 
defined, ``Specified Executives'' means, with respect to LCH SA, the 
Executive Directors, the CEO, the Chief Risk Officer, the Chief 
Compliance Officer, and any other personnel designated by the Board 
from time to time.\29\ Further, the process by which the remuneration 
of the CEO or any Specified Executive may be submitted for approval by 
the Board and, subsequently, the LSEG remuneration committee will be 
simplified by removing the requirement that the Committee consult with 
the Chief Executive Officer of LSEG when making any change in the 
remuneration (including salary, bonus and long term incentives) of the 
CEO or any Specified Executive. It was determined that requiring the 
Committee to consult with the Chief Executive Officer of LSEG at the 
start of the process with regard to any changes in the remuneration of 
the LCH SA CEO or any Specified Executive is unnecessary, since the 
approval of the LSEG Remuneration Committee is required as a final 
step.\30\ Article 1 will also be amended to require the Committee to 
review annually the ongoing appropriateness of any individual 
remuneration and to review for approval by the Board the design of all 
incentive plans and performance related pay schemes, including 
performance targets to be used, that are designed by and received from 
the LSEG remuneration committee.
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    \29\ ``Specified Executives'' also include any personnel with an 
annual remuneration package of more than [euro]1,000,000 or 
equivalent, and the Chairman of the Board.
    \30\ With regard to the remuneration of directors, Article I 
will be amended to provide that the committee will consult from time 
to time with the remuneration committee of LSEG and the remuneration 
committee of LCH Limited to ensure that there is a coordinated 
approach to the remuneration of directors on the Board and the board 
of directors of LCH Limited.
---------------------------------------------------------------------------

    Article 2, Composition of the Committee, will be revised to remove 
as unnecessary the provision that LSEG is entitled to appoint a 
representative to the committee only for so long LSEG is entitled to 
exercise or control the exercise of at least five percent of the votes 
able to be cast on all or substantially all matters at general meetings 
in Group.\31\ LSEG will be entitled to appoint a representative to the 
committee at all times. Article 2 will also authorize the LCH Group CEO 
to attend committee meetings as an observer.
---------------------------------------------------------------------------

    \31\ Article 14, Other, will also be amended to remove the 
general provision that the rights of LSEG set out in the ToR will 
cease automatically if LSEG ceases to be entitled to exercise or 
control the exercise of at least five percent of the votes able to 
be cast on all or substantially all matters at general meetings of 
LCH Group.
---------------------------------------------------------------------------

    Article 10. Amendment, will be amended to confirm those paragraphs 
of the ToR that may only be amended with the approval of the Board and 
the consent of LSEG.
    Article 12, Confidentiality and Conflicts of Interest, will be 
revised to remove reference to any rights LSEG may have in the 
Relationship Agreement and refer, instead, to rights LSEG or its 
representatives have under this ToR.
Terms of Reference of the Technology, Security and Resilience Committee
    Unrelated to the changes in its governance arrangements described 
above, LCH SA has also established ToR for a Technology, Security and 
Resilience Committee of the Board.
    Article 1, Purpose, will provide that the purpose of the Committee 
is to ``represent the interests of the Board in the sound management of 
technology, security and operational resilience, including cyber 
security, to ensure that technology security and operational resilience 
strategies, investments and outcomes support the mission, values, and 
strategic goals'' of LCH SA, and determine whether management has put 
in place adequate strategies that provide reasonable assurance that LCH 
SA ``operates within its risk appetite and complies with regulatory 
requirements.''
    To this end, the Committee will assist the Board in fulfilling its 
responsibilities relating to, inter alia: (i) Review of LCH SA's 
Operations and Technology Strategy; (ii) review of significant 
investments in support of this strategy including application and 
infrastructure architecture; (iii) review of the frameworks, policies 
and strategies that set the internal control environment in relation to 
technology, security and operational resilience; (iv) review of the 
Operational Risk Management Framework; (v) review of LCH SA's Strategy 
for Cyber Security and Information Security and for delivery of 
supporting programs; (vi) review of the integration of Digital and 
Physical Security and their alignment with Business Continuity Plans; 
and (vii) providing regulatory attestations or declarations as may be 
required from time to time in relation to technology, security and 
operational resilience.
    Article 2, Structure and Membership, will provide that the 
Committee will be comprised of at least four directors of the Board. At 
least two members of the Committee will be Independent Directors, one 
of whom will be appointed by the Chairman of the Committee. Both 
Independent Directors must satisfy the criteria for independence set 
out in the ToR of the Nomination Committee. One member of the Committee 
must also be a member

[[Page 48302]]

of the Audit Committee.\32\ All Committee members will be appointed by 
the Board in consultation with the Committee Chairman.
---------------------------------------------------------------------------

    \32\ The Committee as a whole should have a breadth of 
experience to enable alignment with financial risk management, 
regulatory requirements and audit. Ideally, members of the Committee 
will also have significant, recent and relevant experience of the 
operations of LCH SA and its dependence on technology.
---------------------------------------------------------------------------

    Article 2 will further provide that he Committee will meet as 
frequently as it determines necessary but must meet no less frequently 
than three times a year. Two members of the committee will constitute a 
quorum, provided at least one member is an independent director. 
Remuneration of the Committee members will be determined by the Board, 
and no member of the Committee may receive any consulting, performance, 
advisory or other compensatory fee from LCH SA other than fees paid in 
member's capacity as a member of the Board or as a member of a 
Committee of the Board.
    Article 3, Reports to the Committee, will provide that the 
Committee will receive and review periodic management information for 
relevant operations and technology metrics and will align its meeting 
schedule with the requirements of the Board.
    Article 4, Authority and Responsibilities, will describe the 
specific functions of the Committee, including: (i) Reviewing LCH SA's 
operations and technology strategy and policies including application 
and infrastructure architecture; (ii) reviewing and, as appropriate, 
making recommendations to the Board regarding significant technology 
investments in support of LCH SA's technology strategy; (iii) reviewing 
and, as appropriate, making recommendations to the Board regarding the 
resources and delivery of LCH SA's technology programs; (iv) reviewing 
any information technology resilience, cyber and information security 
programs, tracking progress in relation to such programs and providing 
reports to the Board as appropriate; (vi) reviewing any significant 
operations and technology risk exposures of LCH SA, including any 
detailed operational risk assessments with significant information 
technology elements and information security and cyber security risks, 
together with the steps management has taken to monitor and control 
such exposures; (vii) reviewing LCH SA's integrated security and 
resilience, including review of any new or novel approaches to 
information technology including security and resilience; (viii) 
reviewing reports from management regarding LCH SA's Business 
Continuity Management planning; (ix) receiving reports, as appropriate, 
from the Audit Committee regarding the results of reviews and 
assessments of LCH SA's operations and technology functions; and (x) 
reviewing reports, as appropriate, on operations and agreed metrics in 
conjunction with the Audit Committee.
    Article 5, Provisions for Access, will confirm that the Committee 
(i) will have full and unrestricted access to management and employees 
of LCH SA and other members of the LCH Group, (ii) may obtain 
independent professional advice and the assistance of relevant experts 
outside of LCH SA, and (iii) will have full and unrestricted access to 
any systems, records, facilities or other data from LCH SA or other 
member of LCH Group that it requires to carry out its functions.
    Article 6, Reporting, will provide that the Committee Chairman will 
report the Committee's discussions, decisions and recommendations to 
the Board, which will decide on an appropriate policy response.\33\ 
Further, the Committee Chairman, or the Chairman's designee, will make 
available to LCH SA's Chief Compliance Officer such information 
relating to the Committee's work as is necessary for the Chief 
Compliance Officer to draft and submit the annual compliance reports 
required by applicable regulations in force from time to time.
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    \33\ The Committee will have no executive powers with respect to 
its findings and recommendations.
---------------------------------------------------------------------------

    Article 7, Confidentiality and Conflicts of Interest, will set out 
the requirements with respect to confidentiality and conflicts of 
interest and provides that all confidential matters considered by the 
Committee and any confidential information disclosed to members of the 
Committee in connection with their position as a member of the 
Committee must remain confidential, notwithstanding the company to 
which that information relates, nor whether the member is a director of 
that company or not, except as required to Committee members will be 
governed by the relevant articles in LCH SA's Articles of Association.
2. Statutory Basis
    LCH SA has determined that Proposed Rule Change is consistent with 
the requirements of Section 17A of the Act \34\ and regulations 
thereunder applicable to it. In particular, Section 17A(b)(3)(C) of the 
Act provides that the rules of a clearing agency must assure fair 
representation of its members and participants in the selection of its 
directors and the administration of its affairs.
---------------------------------------------------------------------------

    \34\ Id.
---------------------------------------------------------------------------

    As noted above, the Proposed Rule Change will not lead to any 
change in the proportion of independent directors or the number of 
directors representing members and participants. Therefore, the Board 
and the committees of the Board will continue to assure fair 
representation of its members and participants in the selection of its 
directors and the administration of its affairs as provided in section 
17A(b)(3)(C) of the Act.\35\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78q-1(b)(3)(C).
---------------------------------------------------------------------------

    Further, Section 17A(b)(3)(F) of the Act \36\ provides that the 
rules of a clearing agency must be designed to assure the safeguarding 
of securities and funds which are in the custody or control of the 
clearing agency. In this regard, the Proposed Rule Change will make no 
substantive changes to the risk management policies of LCH SA or, 
except as explained immediately below, to the obligations of the Board 
with respect to risk management.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Proposed Rule Change will amend Article 12 of the Board of 
Directors ToR to clarify that the Board must approve at least annually 
the LCH Group Risk Governance Framework and LCH SA's various policies, 
including LCH SA's: (i) Financial Resource Adequacy Policy; (ii) 
Default Management Policy; (iii) Collateral Risk Policy; (iv) 
Investment Risk Policy; (v) Liquidity Risk Policy; (vi) Settlement, 
Payment & Custody Risk Policy; (vii) Counterparty Credit Risk Policy; 
(viii) Contract and Market Acceptability Policy; (ix) Model Governance, 
Validation & Review Policy; (x) Operational Risk Policy; (xi) and 
Procyclicality Policy and any significant changes to those policies 
upon recommendations from the Risk Committee.
    By making no substantive changes to the risk management policies of 
LCH SA or to the obligations of the Board with respect to risk 
management and by clarifying the obligation of LCH SA's Board to 
approve the above policies annually, which policies collectively assure 
the safeguarding of securities and funds which are in the custody or 
control of LCH SA, the Proposed Rule Change is consistent with the 
requirements of Section 17A(b)(3)(F) of the Act.
    Commission Rule 17Ad-22(e)(2) requires each registered clearing 
agency to ``establish, implement, maintain and enforce written policies 
and procedures reasonably designed to provide for

[[Page 48303]]

governance arrangements that: (i) Are clear and transparent; (ii) 
support the public interest requirements in Section 17A of the Act 
applicable to clearing agencies, and the objectives of owners and 
participants; (iii) specify clear and direct lines of responsibility; 
and (vi) consider the interests of participants' customers . . . and 
other relevant stakeholders of the covered clearing agency.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

    As discussed above, the Proposed Rule Change is being adopted in 
significant part to conform LCH SA's Governance Documents to actions 
taken by LCH Group to simplify its governing arrangements and to 
eliminate provisions in LCH Group's governance documents that are 
unnecessary and outdated. Importantly, LCH Group and LSEG have decided 
to terminate the Relationship Agreement between them and remove 
duplication in board decision-making between LCH Group and the CCP 
Boards by making the LCH Group Board an internal only board and 
disbanding all LCH Group committees.
    By simplifying its governance arrangements and eliminating 
provisions in LCH Group's governance documents that are unnecessary and 
outdated; by vesting in LCH SA's CEO responsibility for appointing LCH 
SA's management team; and by confirming that the Proposed Rule Change 
will not lead to any change in the proportion of independent directors 
or the number of directors representing members and participants, the 
Proposed Rule Change enhances LCH SA's governance arrangements and 
assures that they (i) remain clear and transparent (ii) continue to 
fulfill the public interest requirements in Section 17A of the Act 
applicable to clearing agencies by assuring fair representation of its 
members and participants in the selection of its directors and the 
administration of its affairs, (iii) support the objectives of members 
and participants, (iv) specify clear and direct lines of 
responsibility; and (v) consider the interests of participants' 
customers . . . and other relevant stakeholders of the covered clearing 
agency, within the meaning of SEC Rule 17Ad-22(e)(2).\38\
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    \38\ 17 CFR 240.17Ad-22(e)(2).
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B. Clearing Agency's Statement on Burden on Competition

    LCH SA does not believe the Proposed Rule Change would have any 
impact, or impose any burden, on competition. The Proposed Rule Change 
does not address any competitive issue or have any impact on the 
competition among central counterparties. LCH SA operates an open 
access model, and the Proposed Rule Change will have no effect on this 
model.

C. Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the Proposed Rule Change have not been 
solicited or received. LCH SA will notify the Commission of any written 
comments received by LCH SA.

III. Date of Effectiveness of the Proposed Rule Change

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will: 
(A) By order approve or disapprove such proposed rule change, or (B) 
institute proceedings to determine whether the proposed rule change 
should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, security-based swap submission, or advance notice is consistent 
with the Act. Comments may be submitted by any of the following 
methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number LCH SA-2020-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-LCH SA-2020-003. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change, security-based 
swap submission, or advance notice that are filed with the Commission, 
and all written communications relating to the proposed rule change, 
security-based swap submission, or advance notice between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of LCH SA and on LCH SA's website at: https://www.lch.com/resources/rules-and-regulations/proposed-rule-changes-0. 
All comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-LCH SA-2020-003 and should 
be submitted on or before August 31, 2020.
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    \39\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-17346 Filed 8-7-20; 8:45 am]
BILLING CODE 8011-01-P