SEC approves LCH SA liquidity plan rule change
The order binds LCH SA and its clearing members, effective August 18, 2026
On August 18, 2026 the Securities and Exchange Commission issued an Order approving the proposed rule change filed by Banque Centrale de Compensation, doing business as LCH SA, to submit its Liquidity Plan for Commission approval (Release No. 34-106155; File No. SR-LCH SA-2026-004). The Commission received no comments after the notice was published in the Federal Register on July 9, 2026.
The Liquidity Plan sets out LCH SA's objectives, governance structure, and procedures for managing liquidity risk as a clearing agency for security-based swaps, including credit default swaps and options on CDS. It details the sources and uses of liquidity, emphasizing cash posted by members for margin, cash contributions to Default Funds, and LCH SA's own capital as primary resources.
Roles and responsibilities are delineated in Section 2 of the plan. The Head of CaLM (or delegate) maintains the plan and oversees the overall liquidity position; CaLM Front Office handles day-to-day investment and intraday liquidity; Second Line CaLM Risk sets and enforces liquidity limits and escalates breaches; Collateral Operations monitors intraday flows; CaLM Middle Office performs mark-to-market and reporting; and the Chief Risk Officer decides actions during a liquidity event.
The plan identifies secondary liquidity sources such as maturing reverse-repo and overnight unsecured investments, sales of highly liquid assets, repo of securities, borrowing facilities, foreign-exchange funding transactions, and access to central-bank liquidity. Mitigation measures include longer notice periods for collateral substitution, caps on pledge amounts, minimum cash collateral requirements, and extraordinary margin calls if the Liquidity Coverage Ratio falls below specified thresholds.
Stress-testing requirements encompass daily Cover 2 default tests by currency, intraday Cover 2 tests when scheduled payments are due, a five-day forward Cover 2 test, and reverse-stress scenarios that model cash-margin reductions, rating downgrades, multiple member defaults, and other macro-economic shocks. Second Line CaLM Risk monitors liquidity limits and reports daily to CaLM, ensuring ongoing oversight of both operational and default-related liquidity needs.