LCH SA Gets Nod to Update CDS Rules for EU Compliance
Published Date: 5/8/2026
Notice
Summary
LCH SA, a big player in clearing credit default swaps, got the green light to update its rulebook to better match French and EU laws. This change mainly affects clearing members who outsource some tasks, making sure everyone plays by the same rules. The updates kick in soon and help keep the system smooth and secure without extra costs.
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Analyzed Economic Effects
5 provisions identified: 0 benefits, 4 costs, 1 mixed.
Resolution Authority Can Call Cash from Non‑Defaulting Members
Under the CCP Recovery and Resolution Regulation provisions added to the Rule Book, the Resolution Authority (identified as the ACPR) can require Non-Defaulting Clearing Members to contribute additional cash to LCH SA of up to twice the amount equivalent to their Contribution. If a member does not pay, the Resolution Authority may require LCH SA to declare an Event of Default and use that member's Initial Margin and Default Fund Contribution to cover deficits.
VM Haircut Tool, Payment Suspensions, and Resolution Powers
The Rule Book adds a VM Haircut Tool allowing reductions in amounts LCH SA would pay Non-Defaulting Clearing Members (e.g., for Variation Margin or net present value gains), requires clearing members to notify their clients if the tool is applied, and gives the Resolution Authority powers to suspend payments or delivery obligations, suspend termination rights, reduce or eliminate LCH SA debt, and authorize tools (like position or loss allocation and write-downs). Clearing Members agree to be bound by such tools without those actions constituting an LCH SA default if substantive obligations continue to be performed.
Stricter Outsourcing Rules for Clearing Members
If you are a clearing member, LCH SA now requires prior consent before you outsource any clearing activities and can withdraw that consent later. Outsourcing is limited to certain entities, requires written agreements using an LCH SA template that grant regulator access (including the AMF and the ACPR), and leaves the clearing member liable for outsourced activities.
Regulator Access & Outsourcer Requirements
Outsourcing providers that are not Clearing Members must meet capability, confidentiality, and notification requirements and must enter a written agreement requiring them to give AMF, ACPR, and other recognized foreign authorities access to information about the outsourced activities.
LCH SA Contribution Will Be Adjustable
LCH SA's own contribution (currently fixed at €20,000,000) will remain at least €20,000,000 but may be adjusted periodically to align with EMIR and the European Commission Delegated Regulation No 153/2013.
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