SEC Notice: LCH SA Proposed Rule Change to CDS Clearing Rules on Outsourcing, EMIR Own Funds Contribution, and CCP Recovery and Resolution
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LCH SA is amending its CDS Clearing Rule Book to align with French AMF outsourcing rules, EMIR requirements, and the EU CCP Recovery and Resolution Regulation. The changes expand the conditions under which Clearing Members may outsource clearing operations to third parties, subject to LCH SA prior approval, risk assessments, written agreements, and regulatory access. The definition of LCH SA Contribution is revised by removing the fixed €20 million cap and linking it directly to the EMIR-mandated amount of dedicated own resources (minimum €20 million). A new Recovery and Resolution chapter introduces tools allowing the French Resolution Authority (ACPR) to require non-defaulting members to contribute up to twice their prior contribution for both default and non-default losses, apply variation margin haircuts, and temporarily suspend payment obligations.
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Key Changes
- Outsourcing of clearing operations now requires prior LCH SA authorization; denied if it threatens regulatory compliance
- New outsourcing conditions for non-Clearing Member providers: risk assessment, written agreement, control policy, outsourcing register, and signed letter of undertakings granting AMF/ACPR access
- LCH SA Contribution definition changed from fixed €20 million to EMIR-calculated amount (floor remains €20 million)
+ 3 more changes with Pro
Obligations
What this law requires
Clearing Members must obtain prior authorization from LCH SA before outsourcing clearing operations to third parties
Clearing Members must conduct risk assessments for outsourcing arrangements with non-Clearing Member service providers
Clearing Members must execute written agreements with outsourcing providers that include specific terms and conditions
Clearing Members must establish and maintain a formalized policy for control over third-party outsourcing providers and maintain an outsourcing register
Clearing Members and outsourcing providers must sign a letter of undertakings using LCH SA's template, granting AMF and equivalent foreign authorities on-site access to information regarding outsourced activities