RegAlert2013-09-27
Added · Updated
SEC Division of Trading and Markets no-action letter: LCH.Clearnet SA
The Division of Trading and Markets will not recommend enforcement action against LCH.Clearnet SA or its U.S. Clearing Members for providing clearance and settlement services for Spun-Out Component Transactions without registering as a clearing agency under Section 17A(b)(1) of the Securities Exchange Act of 1934. This relief applies specifically to single-name credit default swaps spun out from broad-based index credit default swaps following a Credit Event, such as bankruptcy, failure to pay, or restructuring. LCH.Clearnet SA must restrict these services to U.S. Clearing Members for proprietary accounts only, prohibiting the clearing of security-based swaps other than these specific transactions or on behalf of U.S. customers. The Division's position is conditional on representations that LCH.Clearnet SA will not permit changes to position sizes outside the Credit Event Management Process and will maintain required records and provide information to the Commission.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON , DC 20549
DIVISION OF
TRADING AN D MARKETS
September 27, 2013
Mr. Christophe Hernon
Chi ef Executive Officer
LCH.Clearnet SA
18 rue du Quatre Septembre
Paris, France 750002
Re: No-Action Relief for LCH.Clearnet SA and its Members to Provide Clearing Services for Certain Spun-Out Component Transactions of Broad-Based Index Credit Default Swaps Dear Mr. Hernon:
In yo ur letter dated September 27, 2013 , you request advice that, based on the statement offacts set out in your letter, the Division ofTrading and Markets (" Division") will not recommend enforcement action to the Securities and Exchange Commission ("Commission") against:
(1) Banque Ce ntrale de Compensation, doing business as LCH. Clearnet SA ("LCH.C SA"), for failure to comply with the registration requirements of Section 17A(b )(1) of the Securities Exchange Act of 1934 ("Exchange Act") in connection with the provision ofclearance and settlement services to clearing members that are U.S. persons ("U.S. Clearing Members") for component transactions that are spun-out of certain broad-based index credit default swaps (" CDS") as a result of a Credit Event ("Spun-Out Component Transactions"); and (2) LCH.C SA's U.S. Clearing Members by reason of clearing security-based swaps through an umegistered clearing agency if LCH.C SA provides clearance and settlement services to U.S . Clearing Members in respect of Spun-Out Component Transactions as described in your letter. Based on yo ur letter, we understand the facts to be as follows:
LCH.C SA is a French subsidiary ofLCH.Clearnet Group Limited, a holding company incorporated in the United Kingdom, and operates as a clearinghouse subj ect to French law with its principal office in Paris. LCH.C SA is regulated in France as a clearinghouse by the Financial Markets A uthority (Autorite des Marches Financiers) (" AMF") and as a credit institution by the Prudential Control Authority (Autorite de Con/role Prudentiel) ("ACP"). In addition, the clearing system managed and operated by LCH.C SA has been approved by the AMF and the
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