Self-Regulatory Organizations; The Depository Trust Company; National Securities Clearing Corporation; Fixed Income Clearing Corporation; Notice of Filings of Proposed Rule Changes To Adopt the Clearing Agency Securities Valuation Framework, 45106-45109 [2017-20622]
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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
shall: (a) By order approve or
disapprove such proposed rule change,
or (b) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
BatsBZX–2017–54 on the subject line.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File No.
SR–BatsBZX–2017–54. This file number
should be included on the subject line
if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
18:59 Sep 26, 2017
Jkt 241001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–20625 Filed 9–26–17; 8:45 am]
BILLING CODE 8011–01–P
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
consistent with the Act. Comments may
be submitted by any of the following
methods:
VerDate Sep<11>2014
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–BatsBZX–
2017–54 and should be submitted on or
before October 18, 2017.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81667; File Nos. SR–DTC–
2017–016; SR–NSCC–2017–016; SR–FICC–
2017–020]
Self-Regulatory Organizations; The
Depository Trust Company; National
Securities Clearing Corporation; Fixed
Income Clearing Corporation; Notice of
Filings of Proposed Rule Changes To
Adopt the Clearing Agency Securities
Valuation Framework
September 21, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 8, 2017, The Depository
Trust Company (‘‘DTC’’), National
Securities Clearing Corporation
(‘‘NSCC’’), and Fixed Income Clearing
Corporation (‘‘FICC,’’ each a ‘‘Clearing
Agency,’’ and together with DTC and
NSCC, the ‘‘Clearing Agencies’’), filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule changes as described in
Items I, II and III below, which Items
have been prepared primarily by the
Clearing Agencies. The Commission is
publishing this notice to solicit
comments on the proposed rule changes
from interested persons.
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Clearing Agencies’ Statement of the
Terms of Substance of the Proposed
Rule Changes
The proposed rule changes would
adopt the Clearing Agency Securities
Valuation Framework (‘‘Framework’’) 3
of the Clearing Agencies, as described
below, including both of FICC’s
divisions: the Government Securities
Division (‘‘GSD’’) and the MortgageBacked Securities Division (‘‘MBSD’’).
The Framework would be maintained
by the Clearing Agencies to support
their compliance with Rule 17Ad–
22(e)(4)(i) 4 under the Act and, with
respect to NSCC and FICC as central
counterparties (the ‘‘CCPs’’), Rule
17Ad–22(e)(6)(iv) 5 under the Act, as
described below.
Although the Clearing Agencies
would consider the Framework to be a
rule, the proposed rule changes do not
require any changes to the Rules, Bylaws and Organization Certificate of
DTC (‘‘DTC Rules’’), the Rulebook of
GSD (‘‘GSD Rules’’), the Clearing Rules
of MBSD (‘‘MBSD Rules’’), or the Rules
& Procedures of NSCC (‘‘NSCC Rules’’),
as the Framework would be a
standalone document.6
II. Clearing Agencies’ Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Changes
In their filings with the Commission,
the Clearing Agencies included
statements concerning the purpose of
and basis for the proposed rule changes
and discussed any comments they
received on the proposed rule changes.
The text of these statements may be
examined at the places specified in Item
IV below. The Clearing Agencies have
prepared summaries, set forth in
sections A, B, and C below, of the most
significant aspects of such statements.
3 Pursuant to a telephone call with the Clearing
Agencies’ internal counsel on September 19, 2017,
staff in the Commission’s Office of Clearance and
Settlement corrected the title of the Framework
from ‘‘Clearing Agency Securities Framework’’ to
‘‘Clearing Agency Securities Valuation
Framework,’’ as it now reads.
4 17 CFR 240.17Ad–22(e)(4)(i).
5 17 CFR 240.17Ad–22(e)(6)(iv). Each of the
Clearing Agencies is a ‘‘covered clearing agency’’ as
defined in Rule 17Ad–22(a)(5), and must comply
with subsection (e) of Rule 17Ad–22. As Rule
17Ad–22(e)(6)(iv) only applies to covered clearing
agencies that are central counterparties, references
thereto and compliance therewith apply to the CCPs
only and do not apply to DTC.
6 Capitalized terms not defined herein are defined
in the DTC Rules, GSD Rules, MBSD Rules, or
NSCC Rules, as applicable, available at https://
dtcc.com/legal/rules-and-procedures.
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(A) Clearing Agencies’ Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Changes
Framework would also describe the
methodology for monitoring pricing
data with respect to the CUSIPs.
1. Purpose
Selection of Pricing Vendors
Each Clearing Agency would value its
applicable CUSIP prices (both end-ofday and intraday) primarily via receipt
of files from third-party pricing vendors
(‘‘Pricing Vendors’’).10 For most CUSIPs,
Pricing Vendors would supply the
Clearing Agencies with intraday pricing
files for each business day on at least an
hourly basis.11 Pricing Vendors would
be selected by each Clearing Agency
based on a review of their service,
including, at a minimum, a review of
Pricing Vendors’ securities coverage and
a price quality check. Each Clearing
Agency would perform due diligence on
each Pricing Vendor prior to
engagement thereof, and at least
annually thereafter, to assess the
reliability of such Pricing Vendor.
Reliability of a Pricing Vendor would be
determined by each Clearing Agency
based on a range of factors, including,
without limitation, whether such
Pricing Vendor is able to provide
accurate and timely pricing data with
respect to each CUSIP.
The Framework would provide that
each CUSIP is assigned a primary source
Pricing Vendor (‘‘Primary Pricing
Vendor’’) and a secondary source
Pricing Vendor (‘‘Secondary Pricing
Vendor’’). In the event that the Primary
Pricing Vendor becomes unavailable,
unreliable, or otherwise unusable with
respect to a CUSIP, the Secondary
Pricing Vendor would be designated as
the replacement for the Primary Pricing
Vendor with respect to such CUSIP.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
The Clearing Agencies are proposing
to adopt the Framework, which would
set forth the securities valuation
practices adopted by the Clearing
Agencies for (i) securities eligible for
clearance and settlement processing by
the applicable Clearing Agency and (ii)
with respect to the CCPs, eligible
securities in their respective Clearing
Funds (each, a ‘‘CUSIP’’). The processes
and systems described in the
Framework, and any policies,
procedures, or other documents created
to support those processes, support the
Clearing Agencies’ compliance with the
requirements of Rule 17Ad–22(e)(4)(i) 7
and, with respect to the CCPs, Rule
17Ad–22(e)(6)(iv).8 The Framework
would be owned and managed by the
head of the DTCC Securities Valuation
team, on behalf of the Clearing
Agencies.9
The Framework would provide that (i)
any changes to the Framework must be
approved by the Boards or such
committee as may be delegated
authority by the Boards from time to
time pursuant to their charters, (ii) the
head of the Securities Valuation team,
or a delegate thereof, reviews the
Framework at least annually, and (iii)
any and all changes to the Framework
are subject to regulatory review and
approval.
To the extent the Clearing Agencies
create any policies, procedures or other
documents to support the execution of
the Framework, the Framework would
provide that such supplemental
documentation is subordinate to the
Framework, is reasonably and fairly
implied by the Framework, and
complies in all respects with the
provisions of the Framework.
As described in more detail below,
the Framework would describe the
manner in which the Clearing Agencies
identify, measure, monitor, and manage
the risks related to the pricing of the
CUSIPs. The Framework would set forth
the methodology of the Clearing
Agencies for using timely price data and
for pricing CUSIPs when pricing data
are not readily available or reliable. The
7 17
CFR 240.17Ad–22(e)(4)(i).
CFR 240.17Ad–22(e)(6)(iv).
9 The parent company of the Clearing Agencies is
The Depository Trust & Clearing Corporation
(‘‘DTCC’’). DTCC operates on a shared services
model with respect to the Clearing Agencies. Most
corporate functions are established and managed on
an enterprise-wide basis pursuant to intercompany
agreements under which it is generally DTCC that
provides a relevant service to a Clearing Agency.
8 17
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18:59 Sep 26, 2017
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Monitoring and Pricing
Each Clearing Agency would monitor
and review each applicable Pricing
Vendor’s pricing at least once each
business day to determine (i) whether
any CUSIP’s price has remained
unchanged for an extended period, (ii)
whether a CUSIP has been dropped
from the Pricing Vendor’s file, and (iii)
whether any other circumstances exist
that may call into question the
reliability of any CUSIP’s price.
Each CUSIP’s end-of-day price would
be date stamped and identified with its
Pricing Vendor source. In the event that
both Primary Pricing Vendor and
Secondary Pricing Vendor become
unavailable, unreliable, or otherwise
unusable with respect to a CUSIP for an
end-of-day price, the applicable
10 When pricing data is not available from Pricing
Vendors, the price would be procured from other
internal or external sources.
11 Certain CUSIPs may not be priced daily, and
others may only be priced once each business day.
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45107
Clearing Agency would assign such
CUSIP its last available price.
Each CUSIP’s intraday price would be
time and date stamped and identified
with its Pricing Vendor source. In the
event that both Primary Pricing Vendor
and Secondary Pricing Vendor become
unavailable, unreliable, or otherwise
unusable with respect to a CUSIP for a
specific intraday interval, the applicable
Clearing Agency would assign such
CUSIP its last available price.
If pricing data for a CUSIP is not
available from Pricing Vendors or if the
last available price is deemed to be
unreliable or unusable with respect to a
CUSIP, the applicable Clearing Agency
would establish a price for the CUSIP
based on valuation models, where
applicable, and in accordance with the
policies and procedures that support the
Framework.
2. Statutory Basis
The Clearing Agencies believe that the
proposed rule changes are consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a registered clearing
agency. In particular, the Clearing
Agencies believe that the Framework is
consistent with Section 17A(b)(3)(F) of
the Act 12 as well as Rule 17Ad–
22(e)(4) (i)13 and, with respect to the
CCPs, Rule 17Ad–22(e)(6)(iv) 14
promulgated under the Act, for the
reasons described below.
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of a
registered clearing agency be designed
to promote the prompt and accurate
clearance and settlement of securities
transactions, and to assure the
safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible.15 As described above, the
Framework would set forth the manner
in which the Clearing Agencies identify,
measure, monitor, and manage the risks
related to the pricing of securities
processed or otherwise held by the
Clearing Agencies. The processes,
systems, and controls used by the
Clearing Agencies to identify, measure,
monitor, and manage such risks, as
described in the Framework, and the
policies and procedures that support
these activities, would help assure that
each Clearing Agency is using reliable
sources of timely price data as well as
procedures and sound valuation models
when pricing data are not readily
available or reliable. Using reliable
12 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(4)(i).
14 17 CFR 240.17Ad–22(e)(6)(iv).
15 15 U.S.C. 78q–1(b)(3)(F).
13 17
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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices
sources of timely price data as well as
procedures and sound valuation models
when pricing data are not readily
available or reliable (i) with respect to
the CCPs, would improve their margin
system accuracy and (ii) with respect to
DTC, is essential for the daily settlement
of securities transactions in a fully
collateralized system. Since margin and
collateral play key roles in the
applicable Clearing Agency’s risk
management process, having accurate
margin system and collateral valuation
would assist the Clearing Agencies to
continue the prompt and accurate
clearance and settlement of securities
transactions and continue to assure the
safeguarding of securities and funds
which are in their custody or control or
for which they are responsible.
Therefore, the Clearing Agencies believe
the Framework is consistent with the
requirements of Section 17A(b)(3)(F) of
the Act.16
Rule 17Ad–22(e)(4)(i) under the Act
requires that each covered clearing
agency establish, implement, maintain
and enforce written policies and
procedures reasonably designed to
effectively identify, measure, monitor,
and manage its credit exposures to
participants and those arising from its
payment, clearing, and settlement
processes by maintaining sufficient
financial resources to cover its credit
exposure to each participant with a high
degree of confidence.17 The Framework
would describe how the Clearing
Agencies identify, measure, monitor,
and manage the risks related to the
pricing of securities processed or
otherwise held by the Clearing
Agencies. The processes, systems, and
controls used by the Clearing Agencies
to identify, measure, monitor, and
manage such risks, as described in the
Framework, and the policies and
procedures that support these activities,
would help assure that each Clearing
Agency is using (i) reliable sources of
timely price data when pricing
securities processed or otherwise held
by the applicable Clearing Agency and
(ii) procedures and sound valuation
models when pricing data are not
readily available or reliable. When
pricing securities, using reliable sources
of timely price data as well as
procedures and sound valuation models
when pricing data are not readily
available or reliable is essential to each
Clearing Agency’s ability to effectively
identify, measure, monitor and manage
its credit exposure to participants and
those arising from its payment, clearing,
and settlement processes by maintaining
sufficient financial resources to cover its
credit exposure to each participant with
a high degree of confidence. Therefore,
the Clearing Agencies believe the
Framework is consistent with the
requirements of Rule 17Ad–22(e)(4)(i).18
Rule 17Ad–22(e)(6)(iv) under the Act
requires that each covered clearing
agency that is a central counterparty
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, uses reliable
sources of timely price data and uses
procedures and sound valuation models
for addressing circumstances in which
pricing data are not readily available or
reliable.19 The Framework would
describe how the CCPs identify,
measure, monitor, and manage the risks
related to the pricing of securities
processed or otherwise held by the
CCPs. The processes, systems, and
controls used by the CCPs to identify,
measure, monitor, and manage such
risks, as described in the Framework,
and the policies and procedures that
support these activities, would help
assure that each CCP is using reliable
sources of timely price data as well as
procedures and sound valuation models
when pricing data are not readily
available or reliable. Specifically, the
Framework would set forth the
methodology for pricing securities
processed or otherwise held by each
CCP, including monitoring pricing data
with respect to the securities eligible for
clearance and settlement processing by
the CCP and for eligible securities held
in its Clearing Fund. In addition, the
Framework would describe how each
CCP would price securities when
pricing data are not readily available or
reliable. By setting forth how the CCPs
would use timely price data when
pricing securities and how each CCP
would price securities when pricing
data are not readily available or reliable,
the CCPs believe the Framework is
consistent with the requirements of Rule
17Ad–22(e)(6)(iv).20
(B) Clearing Agencies’ Statement on
Burden on Competition
None of the Clearing Agencies believe
that the Framework would have any
impact, or impose any burden, on
competition because the proposed rule
changes reflect some of the existing
securities valuation practices that the
Clearing Agencies employ, which have
been designed to assist the Clearing
18 Id.
16 Id.
17 17
19 17
CFR 240.17Ad–22(e)(4)(i).
VerDate Sep<11>2014
18:59 Sep 26, 2017
CFR 240.17Ad–22(e)(6)(iv).
20 Id.
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Agencies in using reliable sources of
timely price data as well as procedures
and sound valuation models for
addressing circumstances in which
pricing data are not readily available or
reliable. The proposed rule changes
would not effectuate any changes to the
Clearing Agencies’ processes described
therein as they currently apply to their
respective members or participants.
(C) Clearing Agencies’ Statement on
Comments on the Proposed Rule
Changes Received From Members,
Participants, or Others
The Clearing Agencies have not
solicited or received any written
comments relating to this proposal. The
Clearing Agencies will notify the
Commission of any written comments
received by the Clearing Agencies.
III. Date of Effectiveness of the
Proposed Rule Changes, and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the clearing agency consents, the
Commission will:
(A) By order approve or disapprove
such proposed rule changes, or
(B) institute proceedings to determine
whether the proposed rule changes
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
changes are consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2017–016, SR–NSCC–2017–016, or
SR–FICC–2017–020 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File
Number SR–DTC–2017–016, SR–NSCC–
2017–016, or SR–FICC–2017–020. One
of these file numbers should be
included on the subject line if email is
used. To help the Commission process
E:\FR\FM\27SEN1.SGM
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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices
and review your comments more
efficiently, please use only one method.
The Commission will post all comments
on the Commission’s Internet Web site
(https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent
amendments, all written statements
with respect to the proposed rule
changes that are filed with the
Commission, and all written
communications relating to the
proposed rule changes between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Clearing Agencies and on
DTCC’s Web site (https://dtcc.com/legal/
sec-rule-filings.aspx). All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–DTC–
2017–016, SR–NSCC–2017–016, or SR–
FICC–2017–020, and should be
submitted on or before October 18,
2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–20622 Filed 9–26–17; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15308 and #15309;
ILLINOIS Disaster Number IL–00050]
Administrative Declaration of a
Disaster for the State of ILLINOIS
Physical Loan Application Deadline
Date: 11/14/2017.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/15/2018.
SMALL BUSINESS ADMINISTRATION
Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
Administrative Declaration of a
Disaster for the State of Wisconsin
ADDRESSES:
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416, (202) 205–6734.
FOR FURTHER INFORMATION CONTACT:
This is a notice of an
Administrative declaration of a disaster
for the State of ILLINOIS dated
09/15/2017.
Incident: Severe Storms and Flooding.
Incident Period: 07/19/2017 through
07/31/2017.
DATES: Issued on 09/15/2017.
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The number assigned to this disaster
for physical damage is 15308 6 and for
economic injury is 15309 0.
The States which received an EIDL
Declaration # are Illinois, Wisconsin.
(Catalog of Federal Domestic Assistance
Number 59008)
Dated: September 15, 2017.
Linda E. McMahon,
Administrator.
[FR Doc. 2017–20703 Filed 9–26–17; 8:45 am]
21 17
CFR 200.30–3(a)(12).
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BILLING CODE 8025–01–P
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U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
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SUMMARY:
Percent
2.500
AGENCY:
SUMMARY:
[Disaster Declaration #15310 and #15311;
WISCONSIN Disaster Number WI–00061]
This is a notice of an
Administrative declaration of a disaster
for the State of Wisconsin dated 09/18/
2017.
Incident: Heavy Rains and Flash
SUPPLEMENTARY INFORMATION: Notice is
Flooding.
hereby given that as a result of the
Incident Period: 07/19/2017 through
Administrator’s disaster declaration,
07/23/2017.
applications for disaster loans may be
DATES: Issued on 09/18/2017.
filed at the address listed above or other
Physical Loan Application Deadline
locally announced locations.
Date: 11/17/2017.
The following areas have been
Economic Injury (EIDL) Loan
determined to be adversely affected by
Application Deadline Date: 06/18/2018.
the disaster:
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Primary Counties: Stephenson.
Administration, Processing and
Contiguous Counties:
Disbursement Center, 14925 Kingsport
Illinois: Carroll, Jo Daviess, Ogle,
Road, Fort Worth, TX 76155.
Winnebago.
FOR FURTHER INFORMATION CONTACT:
Wisconsin: Green, Lafayette.
A. Escobar, Office of Disaster
Assistance, U.S. Small Business
The Interest Rates are:
Administration, 409 3rd Street SW.,
Percent
Suite 6050, Washington, DC 20416,
(202) 205–6734.
For Physical Damage:
SUPPLEMENTARY INFORMATION: Notice is
Homeowners with Credit Available Elsewhere ......................
3.500 hereby given that as a result of the
Administrator’s disaster declaration,
Homeowners without Credit
Available Elsewhere ..............
1.750 applications for disaster loans may be
Businesses with Credit Availfiled at the address listed above or other
able Elsewhere ......................
6.610 locally announced locations.
Businesses
without
Credit
The following areas have been
Available Elsewhere ..............
3.305 determined to be adversely affected by
Non-Profit Organizations with
the disaster:
Credit Available Elsewhere ...
2.500
Primary Counties: La Crosse,
Non-Profit Organizations withTrempealeau
out Credit Available Elsewhere .....................................
2.500 Contiguous Counties:
For Economic Injury:
................
Wisconsin: Buffalo, Eau Claire,
Businesses & Small Agricultural
Jackson, Monroe, Vernon
Cooperatives without Credit
Minnesota: Houston, Winona
Available Elsewhere ..............
3.305
The Interest Rates are:
Non-Profit Organizations without Credit Available Elsewhere .....................................
U.S. Small Business
Administration.
ACTION: Notice.
45109
For Physical Damage:
Homeowners with Credit Available Elsewhere ......................
Homeowners without Credit
Available Elsewhere ..............
Businesses with Credit Available Elsewhere ......................
Businesses
without
Credit
Available Elsewhere ..............
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
E:\FR\FM\27SEN1.SGM
27SEN1
3.500
1.750
6.610
3.305
2.500
2.500
]]>Agencies
[Federal Register Volume 82, Number 186 (Wednesday, September 27, 2017)]
[Notices]
[Pages 45106-45109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20622]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81667; File Nos. SR-DTC-2017-016; SR-NSCC-2017-016; SR-
FICC-2017-020]
Self-Regulatory Organizations; The Depository Trust Company;
National Securities Clearing Corporation; Fixed Income Clearing
Corporation; Notice of Filings of Proposed Rule Changes To Adopt the
Clearing Agency Securities Valuation Framework
September 21, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 8, 2017, The Depository Trust Company (``DTC''), National
Securities Clearing Corporation (``NSCC''), and Fixed Income Clearing
Corporation (``FICC,'' each a ``Clearing Agency,'' and together with
DTC and NSCC, the ``Clearing Agencies''), filed with the Securities and
Exchange Commission (``Commission'') the proposed rule changes as
described in Items I, II and III below, which Items have been prepared
primarily by the Clearing Agencies. The Commission is publishing this
notice to solicit comments on the proposed rule changes from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agencies' Statement of the Terms of Substance of the
Proposed Rule Changes
The proposed rule changes would adopt the Clearing Agency
Securities Valuation Framework (``Framework'') \3\ of the Clearing
Agencies, as described below, including both of FICC's divisions: the
Government Securities Division (``GSD'') and the Mortgage-Backed
Securities Division (``MBSD''). The Framework would be maintained by
the Clearing Agencies to support their compliance with Rule 17Ad-
22(e)(4)(i) \4\ under the Act and, with respect to NSCC and FICC as
central counterparties (the ``CCPs''), Rule 17Ad-22(e)(6)(iv) \5\ under
the Act, as described below.
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\3\ Pursuant to a telephone call with the Clearing Agencies'
internal counsel on September 19, 2017, staff in the Commission's
Office of Clearance and Settlement corrected the title of the
Framework from ``Clearing Agency Securities Framework'' to
``Clearing Agency Securities Valuation Framework,'' as it now reads.
\4\ 17 CFR 240.17Ad-22(e)(4)(i).
\5\ 17 CFR 240.17Ad-22(e)(6)(iv). Each of the Clearing Agencies
is a ``covered clearing agency'' as defined in Rule 17Ad-22(a)(5),
and must comply with subsection (e) of Rule 17Ad-22. As Rule 17Ad-
22(e)(6)(iv) only applies to covered clearing agencies that are
central counterparties, references thereto and compliance therewith
apply to the CCPs only and do not apply to DTC.
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Although the Clearing Agencies would consider the Framework to be a
rule, the proposed rule changes do not require any changes to the
Rules, By-laws and Organization Certificate of DTC (``DTC Rules''), the
Rulebook of GSD (``GSD Rules''), the Clearing Rules of MBSD (``MBSD
Rules''), or the Rules & Procedures of NSCC (``NSCC Rules''), as the
Framework would be a standalone document.\6\
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\6\ Capitalized terms not defined herein are defined in the DTC
Rules, GSD Rules, MBSD Rules, or NSCC Rules, as applicable,
available at https://dtcc.com/legal/rules-and-procedures.
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II. Clearing Agencies' Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Changes
In their filings with the Commission, the Clearing Agencies
included statements concerning the purpose of and basis for the
proposed rule changes and discussed any comments they received on the
proposed rule changes. The text of these statements may be examined at
the places specified in Item IV below. The Clearing Agencies have
prepared summaries, set forth in sections A, B, and C below, of the
most significant aspects of such statements.
[[Page 45107]]
(A) Clearing Agencies' Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Changes
1. Purpose
The Clearing Agencies are proposing to adopt the Framework, which
would set forth the securities valuation practices adopted by the
Clearing Agencies for (i) securities eligible for clearance and
settlement processing by the applicable Clearing Agency and (ii) with
respect to the CCPs, eligible securities in their respective Clearing
Funds (each, a ``CUSIP''). The processes and systems described in the
Framework, and any policies, procedures, or other documents created to
support those processes, support the Clearing Agencies' compliance with
the requirements of Rule 17Ad-22(e)(4)(i) \7\ and, with respect to the
CCPs, Rule 17Ad-22(e)(6)(iv).\8\ The Framework would be owned and
managed by the head of the DTCC Securities Valuation team, on behalf of
the Clearing Agencies.\9\
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\7\ 17 CFR 240.17Ad-22(e)(4)(i).
\8\ 17 CFR 240.17Ad-22(e)(6)(iv).
\9\ The parent company of the Clearing Agencies is The
Depository Trust & Clearing Corporation (``DTCC''). DTCC operates on
a shared services model with respect to the Clearing Agencies. Most
corporate functions are established and managed on an enterprise-
wide basis pursuant to intercompany agreements under which it is
generally DTCC that provides a relevant service to a Clearing
Agency.
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The Framework would provide that (i) any changes to the Framework
must be approved by the Boards or such committee as may be delegated
authority by the Boards from time to time pursuant to their charters,
(ii) the head of the Securities Valuation team, or a delegate thereof,
reviews the Framework at least annually, and (iii) any and all changes
to the Framework are subject to regulatory review and approval.
To the extent the Clearing Agencies create any policies, procedures
or other documents to support the execution of the Framework, the
Framework would provide that such supplemental documentation is
subordinate to the Framework, is reasonably and fairly implied by the
Framework, and complies in all respects with the provisions of the
Framework.
As described in more detail below, the Framework would describe the
manner in which the Clearing Agencies identify, measure, monitor, and
manage the risks related to the pricing of the CUSIPs. The Framework
would set forth the methodology of the Clearing Agencies for using
timely price data and for pricing CUSIPs when pricing data are not
readily available or reliable. The Framework would also describe the
methodology for monitoring pricing data with respect to the CUSIPs.
Selection of Pricing Vendors
Each Clearing Agency would value its applicable CUSIP prices (both
end-of-day and intraday) primarily via receipt of files from third-
party pricing vendors (``Pricing Vendors'').\10\ For most CUSIPs,
Pricing Vendors would supply the Clearing Agencies with intraday
pricing files for each business day on at least an hourly basis.\11\
Pricing Vendors would be selected by each Clearing Agency based on a
review of their service, including, at a minimum, a review of Pricing
Vendors' securities coverage and a price quality check. Each Clearing
Agency would perform due diligence on each Pricing Vendor prior to
engagement thereof, and at least annually thereafter, to assess the
reliability of such Pricing Vendor. Reliability of a Pricing Vendor
would be determined by each Clearing Agency based on a range of
factors, including, without limitation, whether such Pricing Vendor is
able to provide accurate and timely pricing data with respect to each
CUSIP.
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\10\ When pricing data is not available from Pricing Vendors,
the price would be procured from other internal or external sources.
\11\ Certain CUSIPs may not be priced daily, and others may only
be priced once each business day.
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The Framework would provide that each CUSIP is assigned a primary
source Pricing Vendor (``Primary Pricing Vendor'') and a secondary
source Pricing Vendor (``Secondary Pricing Vendor''). In the event that
the Primary Pricing Vendor becomes unavailable, unreliable, or
otherwise unusable with respect to a CUSIP, the Secondary Pricing
Vendor would be designated as the replacement for the Primary Pricing
Vendor with respect to such CUSIP.
Monitoring and Pricing
Each Clearing Agency would monitor and review each applicable
Pricing Vendor's pricing at least once each business day to determine
(i) whether any CUSIP's price has remained unchanged for an extended
period, (ii) whether a CUSIP has been dropped from the Pricing Vendor's
file, and (iii) whether any other circumstances exist that may call
into question the reliability of any CUSIP's price.
Each CUSIP's end-of-day price would be date stamped and identified
with its Pricing Vendor source. In the event that both Primary Pricing
Vendor and Secondary Pricing Vendor become unavailable, unreliable, or
otherwise unusable with respect to a CUSIP for an end-of-day price, the
applicable Clearing Agency would assign such CUSIP its last available
price.
Each CUSIP's intraday price would be time and date stamped and
identified with its Pricing Vendor source. In the event that both
Primary Pricing Vendor and Secondary Pricing Vendor become unavailable,
unreliable, or otherwise unusable with respect to a CUSIP for a
specific intraday interval, the applicable Clearing Agency would assign
such CUSIP its last available price.
If pricing data for a CUSIP is not available from Pricing Vendors
or if the last available price is deemed to be unreliable or unusable
with respect to a CUSIP, the applicable Clearing Agency would establish
a price for the CUSIP based on valuation models, where applicable, and
in accordance with the policies and procedures that support the
Framework.
2. Statutory Basis
The Clearing Agencies believe that the proposed rule changes are
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a registered clearing agency. In
particular, the Clearing Agencies believe that the Framework is
consistent with Section 17A(b)(3)(F) of the Act \12\ as well as Rule
17Ad-22(e)(4) (i)\13\ and, with respect to the CCPs, Rule 17Ad-
22(e)(6)(iv) \14\ promulgated under the Act, for the reasons described
below.
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 240.17Ad-22(e)(4)(i).
\14\ 17 CFR 240.17Ad-22(e)(6)(iv).
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Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a registered clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions, and to
assure the safeguarding of securities and funds which are in the
custody or control of the clearing agency or for which it is
responsible.\15\ As described above, the Framework would set forth the
manner in which the Clearing Agencies identify, measure, monitor, and
manage the risks related to the pricing of securities processed or
otherwise held by the Clearing Agencies. The processes, systems, and
controls used by the Clearing Agencies to identify, measure, monitor,
and manage such risks, as described in the Framework, and the policies
and procedures that support these activities, would help assure that
each Clearing Agency is using reliable sources of timely price data as
well as procedures and sound valuation models when pricing data are not
readily available or reliable. Using reliable
[[Page 45108]]
sources of timely price data as well as procedures and sound valuation
models when pricing data are not readily available or reliable (i) with
respect to the CCPs, would improve their margin system accuracy and
(ii) with respect to DTC, is essential for the daily settlement of
securities transactions in a fully collateralized system. Since margin
and collateral play key roles in the applicable Clearing Agency's risk
management process, having accurate margin system and collateral
valuation would assist the Clearing Agencies to continue the prompt and
accurate clearance and settlement of securities transactions and
continue to assure the safeguarding of securities and funds which are
in their custody or control or for which they are responsible.
Therefore, the Clearing Agencies believe the Framework is consistent
with the requirements of Section 17A(b)(3)(F) of the Act.\16\
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
\16\ Id.
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Rule 17Ad-22(e)(4)(i) under the Act requires that each covered
clearing agency establish, implement, maintain and enforce written
policies and procedures reasonably designed to effectively identify,
measure, monitor, and manage its credit exposures to participants and
those arising from its payment, clearing, and settlement processes by
maintaining sufficient financial resources to cover its credit exposure
to each participant with a high degree of confidence.\17\ The Framework
would describe how the Clearing Agencies identify, measure, monitor,
and manage the risks related to the pricing of securities processed or
otherwise held by the Clearing Agencies. The processes, systems, and
controls used by the Clearing Agencies to identify, measure, monitor,
and manage such risks, as described in the Framework, and the policies
and procedures that support these activities, would help assure that
each Clearing Agency is using (i) reliable sources of timely price data
when pricing securities processed or otherwise held by the applicable
Clearing Agency and (ii) procedures and sound valuation models when
pricing data are not readily available or reliable. When pricing
securities, using reliable sources of timely price data as well as
procedures and sound valuation models when pricing data are not readily
available or reliable is essential to each Clearing Agency's ability to
effectively identify, measure, monitor and manage its credit exposure
to participants and those arising from its payment, clearing, and
settlement processes by maintaining sufficient financial resources to
cover its credit exposure to each participant with a high degree of
confidence. Therefore, the Clearing Agencies believe the Framework is
consistent with the requirements of Rule 17Ad-22(e)(4)(i).\18\
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\17\ 17 CFR 240.17Ad-22(e)(4)(i).
\18\ Id.
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Rule 17Ad-22(e)(6)(iv) under the Act requires that each covered
clearing agency that is a central counterparty establish, implement,
maintain and enforce written policies and procedures reasonably
designed to cover its credit exposures to its participants by
establishing a risk-based margin system that, at a minimum, uses
reliable sources of timely price data and uses procedures and sound
valuation models for addressing circumstances in which pricing data are
not readily available or reliable.\19\ The Framework would describe how
the CCPs identify, measure, monitor, and manage the risks related to
the pricing of securities processed or otherwise held by the CCPs. The
processes, systems, and controls used by the CCPs to identify, measure,
monitor, and manage such risks, as described in the Framework, and the
policies and procedures that support these activities, would help
assure that each CCP is using reliable sources of timely price data as
well as procedures and sound valuation models when pricing data are not
readily available or reliable. Specifically, the Framework would set
forth the methodology for pricing securities processed or otherwise
held by each CCP, including monitoring pricing data with respect to the
securities eligible for clearance and settlement processing by the CCP
and for eligible securities held in its Clearing Fund. In addition, the
Framework would describe how each CCP would price securities when
pricing data are not readily available or reliable. By setting forth
how the CCPs would use timely price data when pricing securities and
how each CCP would price securities when pricing data are not readily
available or reliable, the CCPs believe the Framework is consistent
with the requirements of Rule 17Ad-22(e)(6)(iv).\20\
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\19\ 17 CFR 240.17Ad-22(e)(6)(iv).
\20\ Id.
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(B) Clearing Agencies' Statement on Burden on Competition
None of the Clearing Agencies believe that the Framework would have
any impact, or impose any burden, on competition because the proposed
rule changes reflect some of the existing securities valuation
practices that the Clearing Agencies employ, which have been designed
to assist the Clearing Agencies in using reliable sources of timely
price data as well as procedures and sound valuation models for
addressing circumstances in which pricing data are not readily
available or reliable. The proposed rule changes would not effectuate
any changes to the Clearing Agencies' processes described therein as
they currently apply to their respective members or participants.
(C) Clearing Agencies' Statement on Comments on the Proposed Rule
Changes Received From Members, Participants, or Others
The Clearing Agencies have not solicited or received any written
comments relating to this proposal. The Clearing Agencies will notify
the Commission of any written comments received by the Clearing
Agencies.
III. Date of Effectiveness of the Proposed Rule Changes, and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the clearing agency consents, the Commission will:
(A) By order approve or disapprove such proposed rule changes, or
(B) institute proceedings to determine whether the proposed rule
changes should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
changes are consistent with the Act. Comments may be submitted by any
of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-DTC-2017-016, SR-NSCC-2017-016, or SR-FICC-2017-020 on
the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-DTC-2017-016, SR-NSCC-
2017-016, or SR-FICC-2017-020. One of these file numbers should be
included on the subject line if email is used. To help the Commission
process
[[Page 45109]]
and review your comments more efficiently, please use only one method.
The Commission will post all comments on the Commission's Internet Web
site (https://www.sec.gov/rules/sro.shtml). Copies of the submission,
all subsequent amendments, all written statements with respect to the
proposed rule changes that are filed with the Commission, and all
written communications relating to the proposed rule changes between
the Commission and any person, other than those that may be withheld
from the public in accordance with the provisions of 5 U.S.C. 552, will
be available for Web site viewing and printing in the Commission's
Public Reference Room, 100 F Street NE., Washington, DC 20549 on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
Copies of the filing also will be available for inspection and copying
at the principal office of the Clearing Agencies and on DTCC's Web site
(https://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-DTC-2017-016, SR-NSCC-2017-016, or SR-
FICC-2017-020, and should be submitted on or before October 18, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20622 Filed 9-26-17; 8:45 am]
BILLING CODE 8011-01-P
