Self-Regulatory Organizations; LCH SA; Order Approving Proposed Rule Change Relating to Revisions to Terms of Reference of the Nomination Committee and Board of Directors

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104375; File No. SR-LCH SA-2025-008]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; LCH SA; Order Approving Proposed Rule Change Relating to Revisions to Terms of Reference of the Nomination Committee and Board of Directors</SUBJECT> <DATE>December 12, 2025.</DATE> <HD SOURCE="HD1">I. Introduction</HD> On September 2, 2025, Banque Centrale de Compensation, which conducts business under the name LCH SA (“LCH SA”), filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> a proposed rule change to amend the Terms of Reference of the Board of Directors of LCH SA (“Board ToR”) and the Terms of Reference of the Nomination Committee of the Board of Directors (“Nomination Committee ToR”) (together, the “Proposed Rule Change”). The Proposed Rule Change was published for comment in the <E T="04">Federal Register</E> on September 19, 2025. <SU>3</SU> <FTREF/> On November 3, 2025, the Commission designated a longer period within which to approve, disapprove, or institute proceedings to determine whether to approve or disapprove the Proposed Rule Change. <SU>4</SU> <FTREF/> The Commission did not receive comments regarding the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <FTNT> <SU>3</SU>  Securities Exchange Act Release No. 103975 (Sept. 16, 2025), 90 FR 45288 (Sep. 19, 2025) (File No. SR-LCH SA-2025-008) (“Notice”). </FTNT> <FTNT> <SU>4</SU>  Securities Exchange Act Release No. 104173 (Nov. 3, 2025), 90 FR 51424 (Nov. 17, 2025) (File No. SR-LCH SA-2025-008). </FTNT> <HD SOURCE="HD1">II. Description of the Proposed Rule Change</HD> LCH SA is a clearing agency registered with the Commission for the purpose of clearing security-based swaps. LCH SA is managed by a board of directors (the “Board”). The Proposed Rule Change would modify the composition of the Board, as reflected in the Board ToR and Nomination Committee ToR. Specifically, the Proposed Rule Change would amend the provisions of both documents as they relate to directors that are nominated by (i) Euronext; (ii) Users of LCH SA; and (iii) the London Stock Exchange Group (“LSEG”). <SU>5</SU> <FTREF/> The Proposed Rule Change also would make unrelated, minor updates to the Board ToR as it relates to the description of certain LCH SA personnel. <FTNT> <SU>5</SU>  LCH SA is a subsidiary of LCH Group Holdings Limited (“LCH Group”) and an indirect subsidiary of LSEG. Notice, 90 FR at 45288, n.3. </FTNT> <HD SOURCE="HD2">A. Euronext Director</HD> LCH SA had a business relationship with Euronext pursuant to which LCH SA provided clearing services for certain trading facilities and markets operated by Euronext. LCH SA had agreements in place to document this relationship, and Euronext had an ownership stake in LCH SA. Recently, Euronext sold its ownership stake in LCH SA, and Euronext and LCH SA ended their clearing relationship. <SU>6</SU> <FTREF/> Thus, LCH SA no longer offers clearing services to Euronext, and Euronext no longer has an ownership stake in LCH SA. <FTNT> <SU>6</SU>   <E T="03">See</E> Euronext announces the sale of its 11.1% stake in LCH SA to LCH Group Holdings Limited, <E T="03">available at https://www.euronext.com/en/about/media/euronext-press-releases/euronext-announces-sale-its-111-stake-lch-sa-lch-group-holdings</E> and Successful expansion of Euronext Clearing to all Euronext financial derivatives markets, <E T="03">available at https://www.euronext.com/en/about/media/euronext-press-releases/successful-expansion-euronext-clearing-all-euronext-financial.</E> </FTNT> Currently, Article 3 of the Board ToR gives Euronext the right to nominate one director while certain agreements between LCH SA and Euronext are in effect. Due to the end of the business relationship between LCH SA and Euronext, these agreements are no longer in place. Accordingly, the Proposed Rule Change would delete this provision from Article 3 and otherwise remove references to a director nominated by Euronext from the Board ToR, thus eliminating the Euronext director. <SU>7</SU> <FTREF/> <FTNT> <SU>7</SU>  For example, the Proposed Rule Change would delete from Article 16 a provision that makes the Euronext director a part of the Audit Committee of the Board. </FTNT> The Proposed Rule Change would make similar updates to the Nomination Committee ToR. The Proposed Rule Change would delete Article 2.1.5, which requires the Nomination Committee recommend to the Board for appointment a director nominated by Euronext. The Proposed Rule Change also would delete in its entirety Article 4, which describes how Euronext may nominate a person to be a director and the criteria that a nominee must satisfy. <HD SOURCE="HD2">B. User Directors</HD> The Board ToR currently defines a User Director as a director who is nominated by a shareholder of LCH Group which is a User or who is otherwise connected to such User shareholder by virtue of employment or directorship. A User is defined as an Eligible Institution other than an Exchange, and Eligible Institution means, among things, inter-dealer brokers, clearing members, and indirect users. <SU>8</SU> <FTREF/> Thus, as currently written, a User must be a shareholder of LCH Group to nominate directors to the Board. <FTNT> <SU>8</SU>  The term “Eligible Institution” is defined in the Articles of Association of LCH Group. <E T="03">See</E> Notice, 90 FR at 45289, n.10. </FTNT> The Proposed Rule Change would amend the Board ToR to allow all Users, not just those who are shareholders of LCH Group, to nominate directors to the Board. Thus, the Proposed Rule Change would amend the definition of User Director in the Board ToR to mean a director who is nominated by a User or who is otherwise connected to such User by virtue of their employment or directorship, regardless of whether the User is a shareholder of LCH Group. In the Nomination Committee ToR, the Proposed Rule Change would make a similar amendment and increase the number of User Directors. Article 2.1.3 currently requires the Nomination Committee recommend to the Board for appointment up to two directors associated with or connected to “User Shareholders,” meaning Users that are shareholders of LCH Group. The Proposed Rule Change would amend Article 2.1.3 to increase the number to three from two, include any director associated with a User, and delete the term User Shareholder. Thus, under Article 2.1.3 as amended, the Nomination Committee would recommend to the Board for appointment up to three directors associated with a User. The Proposed Rule Change would make other changes to the Nomination Committee ToR to reflect that a User no longer needs to be a shareholder of LCH Group to nominate a director. The Appendix to the Nomination Committee ToR outlines the process for appointing and removing User Directors to the Board. In the Appendix, the Proposed Rule Change would delete references to User Shareholders and any other references to a User being a shareholder of LCH Group. <SU>9</SU> <FTREF/> <FTNT> <SU>9</SU>  For example, under current Section 3(a)(iii) of the Appendix, the Nomination Committee must consider the size of a User's holding in LCH Group when determining whether to recommend the person nominated by that User. The Proposed Rule Change would delete this provision. </FTNT> The Proposed Rule Change also would update the Appendix as it relates to the criteria applicable to a User Director. Specifically, Section 2(b) of the Appendix currently requires the Nomination Committee to recommend a replacement for any User Director who is removed due to the User who nominated them ceasing to be an Eligible User. <SU>10</SU> <FTREF/> The Proposed Rule Change would simplify this requirement. Under the Proposed Rule Change, the Nomination Committee would recommend a replacement for any User Director who is removed due to the User who nominated them ceasing to be an Eligible Institution. <SU>11</SU> <FTREF/> <FTNT> <SU>10</SU>  Eligible User is defined in the Appendix as a User who is not connected with an existing director and who has not served notice termination its clearing relationship with LCH SA or LCH Ltd. </FTNT> <FTNT> <SU>11</SU>  As noted above, the term Eligible Institution is defined in the Articles of Association of LCH Group and means, among things, inter-dealer brokers, clearing members, and indirect users. <E T="03">See</E> Notice, 90 FR at 45289, n.10. </FTNT> LCH SA is making this change to reflect the current number of Users that are shareholders of LCH Group. Due to an increase in London Stock Exchange Group's ownership interest in LCH Group, only eleven financial firms remain as shareholders of LCH Group. <SU>12</SU> <FTREF/> Of these remaining shareholders, five have not previously indicated a desire to nominate a User Director. <SU>13</SU> <FTREF/> Thus, the pool of firms which are both shareholders of LCH Group and Users have decreased. To help ensure that a sufficient number of firms that are Users are interested in nominating directors to the Board, LCH SA is removing the requirement that a User Director be nominated by a User who is also a shareholder of LCH Group. <FTNT> <SU>12</SU>  Notice, 90 FR at 45289. </FTNT> <FTNT> <SU>13</SU>   <E T="03">Id.</E> </FTNT> Finally, LCH SA is increasing the number of User Directors by one to maintain its current number of directors following the removal of the director previously nominated by Euronext. <HD SOURCE="HD2">C. LSEG Director</HD ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 20k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━