Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change to the Required Fund Deposit Calculation in the Government Securities Division Rulebook, 12229-12234 [2018-05565]
Download as PDF
<![CDATA[
Federal Register / Vol. 83, No. 54 / Tuesday, March 20, 2018 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82871; File No. SR–
NASDAQ–2017–088]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change,
as Modified by Amendment No. 1, To
Allow Participants To Designate When
an Order With a RTFY or SCAN
Routing Order Attribute Will be
Activated During Pre-Market Hours
March 14, 2018.
On August 30, 2017, The Nasdaq
Stock Market LLC (‘‘Exchange’’ or
‘‘Nasdaq’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend Nasdaq
Rule 4703(a) to allow participants to
designate when an order with a RTFY
or SCAN routing order attribute will be
activated during Pre-Market Hours. The
proposed rule change was published for
comment in the Federal Register on
September 18, 2017.3 On October 31,
2017, pursuant to Section 19(b)(2) of the
Act,4 the Commission designated a
longer period within which to approve
the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule change.5 On December 13, 2017,
the Exchange filed Amendment No. 1 to
the proposed rule change.6 On
December 15, 2017, the Commission
published notice of Amendment No. 1
and instituted proceedings under
Section 19(b)(2)(B) of the Act 7 to
determine whether to approve or
disapprove the proposed rule change, as
modified by Amendment No. 1.8 The
Commission has received no comments
on the proposed rule change.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81579
(September 12, 2017), 82 FR 43584.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 81986,
82 FR 51453 (November 6, 2017). The Commission
designated December 17, 2017 as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
approve or disapprove, the proposed rule change.
6 Amendment No. 1 is available at https://
www.sec.gov/comments/sr-nasdaq-2017-088/
nasdaq2017088-2798107-161689.pdf.
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No. 82335,
82 FR 60637 (December 21, 2017).
daltland on DSKBBV9HB2PROD with NOTICES
2 17
VerDate Sep<11>2014
19:08 Mar 19, 2018
Jkt 244001
Section 19(b)(2) of the Act 9 provides
that, after initiating disapproval
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of filing of the proposed rule
change. The Commission may extend
the period for issuing an order
approving or disapproving the proposed
rule change, however, by not more than
60 days if the Commission determines
that a longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for notice and
comment in the Federal Register on
September 18, 2017. March 17, 2018 is
180 days from that date, and May 16,
2018 is 240 days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change, as modified
by Amendment No. 1. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,10 designates May 16,
2018 as the date by which the
Commission shall either approve or
disapprove the proposed rule change
(File No. SR–NASDAQ–2017–088), as
modified by Amendment No. 1.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05561 Filed 3–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82876; File No. SR–FICC–
2018–001]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change to the Required
Fund Deposit Calculation in the
Government Securities Division
Rulebook
March 14, 2018.
I. Introduction
On January 12, 2018, Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–FICC–2018–001
9 15
U.S.C. 78s(b)(2).
10 Id.
11 17
PO 00000
CFR 200.30–3(a)(57).
Frm 00083
Fmt 4703
Sfmt 4703
12229
(‘‘Proposed Rule Change’’) pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 to make
changes to the method by which the
Government Securities Division
(‘‘GSD’’) of FICC calculates the margin
requirement of its members.3 The
Proposed Rule Change was published
for comment in the Federal Register on
February 1, 2018.4 As of March 14,
2018, the Commission has received two
comment letters to the Proposed Rule
Change.5 This order institutes
proceedings under Section 19(b)(2)(B) of
the Act 6 to determine whether to
approve or disapprove the Proposed
Rule Change.
II. Description of the Proposed Rule
Change
FICC proposes to amend the FICC
GSD Rulebook (‘‘GSD Rules’’) 7 to make
changes to GSD’s method of calculating
GSD members’ (‘‘Members’’) margin.8
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On January 12, 2018, FICC also filed the
proposal contained in the Proposed Rule Change as
advance notice SR–FICC–2018–801 (‘‘Advance
Notice’’) with the Commission pursuant to Section
806(e)(1) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act entitled the Payment,
Clearing, and Settlement Supervision Act of 2010
(‘‘Clearing Supervision Act’’), 12 U.S.C. 5465(e)(1),
and Rule 19b–4(n)(1)(i) of the Act, 17 CFR 240.19b–
4(n)(1)(i). Notice of filing of the Advance Notice
was published for comment in the Federal Register
on March 2, 2018. Securities Exchange Act Release
No. 82779 (February 26, 2018), 83 FR 9055 (March
2, 2018) (SR–FICC–2018–801). On March 7, 2018,
the Commission extended its review period of the
Advance Notice for an additional 60 days pursuant
to Section 806(e)(1)(H) of the Clearing Supervision
Act. Securities Exchange Act Release No. 82820
(March 7, 2018), 83 FR 10761 (March 12, 2018) (SR–
FICC–2018–801). The proposal contained in the
Proposed Rule Change and the Advance Notice
shall not take effect until all regulatory actions
required with respect to the proposal are
completed.
4 Securities Exchange Act Release No. 82588
(January 26, 2018), 83 FR 4687 (February 1, 2018)
(SR–FICC–2018–001) (‘‘Notice’’).
5 Letter from Robert E. Pooler, Chief Financial
Officer, Ronin Capital LLC, dated February 22,
2018, to Robert W. Errett, Deputy Secretary,
Commission, available at https://www.sec.gov/
comments/sr-ficc-2018-001/ficc2018001-3133039161947.pdf (‘‘Ronin Letter’’); letter from Michael
Santangelo, Chief Financial Officer, Amherst
Pierpont Securities LLC, dated February 22, 2018,
to Brent J. Fields, Secretary, Commission, available
at https://www.sec.gov/comments/sr-ficc-2018-001/
ficc2018001-3130095-161938.pdf (‘‘Amherst
Pierpont Letter’’). Because the proposal contained
in the Proposed Rule Change was also filed as an
Advance Notice, supra note 3, the Commission is
considering all public comments received on the
proposal regardless of whether the comments were
submitted to the Advance Notice or the Proposed
Rule Change.
6 15 U.S.C. 78s(b)(2)(B).
7 Available at https://www.dtcc.com/legal/rulesand-procedures.
8 See Notice, supra note 4, at 4687.
2 17
E:\FR\FM\20MRN1.SGM
20MRN1
12230
Federal Register / Vol. 83, No. 54 / Tuesday, March 20, 2018 / Notices
Specifically, FICC proposes to (1)
change GSD’s method of calculating the
Value-at-Risk (‘‘VaR’’) Charge
component; (2) add a new component
referred to as the ‘‘Blackout Period
Exposure Adjustment;’’ (3) eliminate the
Blackout Period Exposure Charge and
the Coverage Charge components; (4)
amend the Backtesting Charge
component to (i) include the backtesting
deficiencies of certain GCF
Counterparties during the Blackout
Period, and (ii) give GSD the ability to
assess the Backtesting Charge on an
intraday basis for all Netting Members;
and (5) amend the calculation for
determining the Excess Capital
Premium for Broker Members, InterDealer Broker Members, and Dealer
Members.9 In addition, FICC proposes
to provide transparency with respect to
GSD’s existing authority to calculate
and assess Intraday Supplemental Fund
Deposit amounts.10 The proposed QRM
Methodology document would reflect
the proposed VaR Charge calculation
and the proposed Blackout Period
Exposure Adjustment calculation.11
A. Changes to GSD’s VaR Charge
Component
FICC states that the changes proposed
in the Proposed Rule Change are
designed to improve GSD’s current VaR
Charge so that it responds more
effectively to market volatility.12
Specifically, FICC proposes to (1)
replace GSD’s current full revaluation
approach with a sensitivity approach; 13
(2) employ the Margin Proxy as an
alternative (i.e., a back-up) VaR Charge
calculation; (3) eliminate GSD’s current
augmented volatility adjustment
multiplier; (4) utilize a haircut method
for securities cleared by GSD that lack
9 See
Notice, supra note 4, at 4687–88.
Notice, supra note 4, at 4688. Pursuant to
the GSD Rules, FICC has the existing authority and
discretion to calculate an additional amount on an
intraday basis in the form of an Intraday
Supplemental Clearing Fund Deposit. See GSD
Rules 1 and 4, supra note 7.
11 See Notice, supra note 4, at 4688.
12 See Notice, supra note 4, at 4690. FICC
proposes to amend its calculation of GSD’s VaR
Charge because during the fourth quarter of 2016,
FICC’s current methodology for calculating the VaR
Charge did not respond effectively to the market
volatility that existed at that time. As a result, the
VaR Charge did not achieve backtesting coverage at
a 99 percent confidence level and, therefore,
yielded backtesting deficiencies beyond FICC’s risk
tolerance.
13 Id. GSD’s proposed sensitivity approach is
similar to the sensitivity approach that FICC’s
Mortgage-Backed Securities Division (‘‘MBSD’’)
uses to calculate the VaR Charge for MBSD clearing
members. See Securities Exchange Act Release No.
79868 (January 24, 2017), 82 FR 8780 (January 30,
2017) (SR–FICC–2016–007) and Securities
Exchange Act Release No. 79643 (December 21,
2016), 81 FR 95669 (December 28, 2016) (SR–FICC–
2016–801).
daltland on DSKBBV9HB2PROD with NOTICES
10 See
VerDate Sep<11>2014
19:08 Mar 19, 2018
Jkt 244001
sufficient historical data; and (5)
establish a VaR Floor calculation that
would serve as a minimum VaR Charge
for Members, as discussed below.14
For the proposed sensitivity approach
to the VaR Charge, FICC would source
sensitivity data and relevant historical
risk factor time series data generated by
an external vendor based on its
econometric, risk and pricing models.15
FICC would conduct independent data
checks to verify the accuracy and
consistency of the data feed received
from the vendor.16 In the event that the
external vendor is unable to provide the
sourced data in a timely manner, FICC
would employ its existing Margin Proxy
as a back-up VaR Charge calculation.17
14 Id.
15 See Notice, supra note 4, at 4690. The
following risk factors would be incorporated into
GSD’s proposed sensitivity approach: Key rate,
convexity, implied inflation rate, agency spread,
mortgage-backed securities spread, volatility,
mortgage basis, and time risk factor. These risk
factors are defined as follows:
• Key rate measures the sensitivity of a price
change to changes in interest rates;
• convexity measures the degree of curvature in
the price/yield relationship of key interest rates;
• implied inflation rate measures the difference
between the yield on an ordinary bond and the
yield on an inflation-indexed bond with the same
maturity;
• agency spread is yield spread that is added to
a benchmark yield curve to discount an Agency
bond’s cash flows to match its market price;
• mortgage-backed securities spread is the yield
spread that is added to a benchmark yield curve to
discount a to-be-announced (‘‘TBA’’) security’s cash
flows to match its market price;
• volatility reflects the implied volatility
observed from the swaption market to estimate
fluctuations in interest rates;
• mortgage basis captures the basis risk between
the prevailing mortgage rate and a blended Treasury
rate; and
• time risk factor accounts for the time value
change (or carry adjustment) over the assumed
liquidation period. Id.
The above-referenced risk factors are similar to
the risk factors currently utilized in MBSD’s
sensitivity approach; however, GSD has included
other risk factors that are specific to the U.S.
Treasury securities, Agency securities and
mortgage-backed securities cleared through GSD. Id.
Concerning U.S. Treasury securities and Agency
securities, FICC would select the following risk
factors: Key rates, convexity, agency spread,
implied inflation rates, volatility, and time. Id. For
mortgage-backed securities, each security would be
mapped to a corresponding TBA forward contract
and FICC would use the risk exposure analytics for
the TBA as an estimate for the mortgage-backed
security’s risk exposure analytics. Id. FICC would
use the following risk factors to model a TBA
security: Key rates, convexity, mortgage-backed
securities spread, volatility, mortgage basis, and
time. Id. To account for differences between
mortgage-backed securities and their corresponding
TBA, FICC would apply an additional basis risk
adjustment.
16 Id.
17 See Notice, supra note 4, at 4692. In the event
that the data used for the sensitivity approach is
unavailable for a period of more than five days,
FICC proposes to revert back to the Margin Proxy
as an alternative VaR Charge calculation. Id.
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
Additionally, FICC proposes to look at
the historical changes of specific risk
factors during the look-back period in
order to generate risk scenarios to arrive
at the market value changes for a given
portfolio.18 A statistical probability
distribution would be formed from the
portfolio’s market value changes, which
would then be calibrated to cover the
projected liquidation losses at a 99
percent confidence level.19 The
portfolio risk sensitivities and the
historical risk factor time series data
would then be used by FICC’s risk
model to calculate the VaR Charge for
each Member.20
FICC also proposes to eliminate the
augmented volatility adjustment
multiplier. FICC states that the
multiplier would not be necessary
because the proposed sensitivity
approach would have a longer look-back
period and the ability to include an
additional stressed market condition to
account for periods of market
volatility.21
According to FICC, in the event that
a portfolio contains classes of securities
that do not have sufficient volume and
price information available, a historical
simulation approach would not generate
VaR Charge amounts that reflect the risk
profile of such securities.22 Therefore,
FICC proposes to calculate the VaR
Charge for these securities by utilizing
a haircut approach based on a market
benchmark with a similar risk profile as
the related security.23 The proposed
haircut approach would be calculated
separately for U.S. Treasury/Agency
securities and mortgage-backed
securities.24
Finally, FICC proposes to amend the
existing calculation of the VaR Charge to
include a VaR Floor, which would be
the amount used as the VaR Charge
when the sum of the amounts calculated
by the proposed sensitivity approach
and haircut method is less than the
proposed VaR Floor.25 The VaR Floor
would be calculated as the sum of (1) a
U.S. Treasury/Agency bond
18 See
Notice, supra note 4, at 4690.
19 Id.
20 Id.
21 See
Notice, supra note 4, at 4692.
22 Id.
23 See
24 See
Notice, supra note 4, at 4692–93.
Notice, supra note 4, at 4693.
25 Id.
E:\FR\FM\20MRN1.SGM
20MRN1
Federal Register / Vol. 83, No. 54 / Tuesday, March 20, 2018 / Notices
marginfloor 26 and (2) a mortgagebacked securities margin floor.27
B. Addition of the Blackout Period
Exposure Adjustment Component
FICC proposes to add a new
component to GSD’s margin
calculation—the Blackout Period
Exposure Adjustment.28 FICC states that
the Blackout Period Exposure
Adjustment would be calculated to
address risks that could result from
overstated values of mortgage-backed
securities that are pledged as collateral
for GCF Repo Transactions 29 during a
Blackout Period.30 A Blackout Period is
the period between the last business day
of the prior month and the date during
the current month upon which a
government-sponsored entity that issues
mortgage-backed securities publishes its
updated Pool Factors.31 The proposed
Blackout Period Exposure Adjustment
would result in a charge that either
increases a Member’s VaR Charge or a
credit that decreases the VaR Charge.32
daltland on DSKBBV9HB2PROD with NOTICES
C. Elimination of the Blackout Period
Exposure Charge and Coverage Charge
Components
FICC proposes to eliminate the
existing Blackout Period Exposure
Charge component from GSD’s margin
calculation.33 The Blackout Period
Exposure Charge only applies to
Members with GCF Repo Transactions
26 Id. The U.S. Treasury/Agency bond margin
floor would be calculated by mapping each U.S.
Treasury/Agency security to a tenor bucket, then
multiplying the gross positions of each tenor bucket
by its bond floor rate, and summing the results. Id.
The bond floor rate of each tenor bucket would be
a fraction (initially set at 10 percent) of an indexbased haircut rate for such tenor bucket. Id.
27 Id. The mortgage-backed securities margin floor
would be calculated by multiplying the gross
market value of the total value of mortgage-backed
securities in a Member’s portfolio by a designated
amount, referred to as the pool floor rate, (initially
set at 0.05 percent). Id.
28 See Notice, supra note 4, at 4694. The proposed
Blackout Period Exposure Adjustment would be
calculated by (1) projecting an average pay-down
rate of mortgage loan pools (based on historical pay
down rates) for the government sponsored
enterprises (Fannie Mae and Freddie Mac) and the
Government National Mortgage Association (Ginnie
Mae), respectively, then (2) multiplying the
projected pay-down rate by the net positions of
mortgage-backed securities in the related program,
and (3) summing the results from each program.
29 GCF Repo Transactions refer to transactions
made on FICC’s GCF Repo Service that enables
dealers to trade general collateral repos, based on
rate, term, and underlying product, throughout the
day, without requiring intra-day, trade-for-trade
settlement on a Delivery-versus-Payment basis.
30 See Notice, supra note 4, at 4694.
31 Id. Pool Factors are the percentage of the initial
principal that remains outstanding on the mortgage
loan pool underlying a mortgage-backed security, as
published by the government-sponsored entity that
is the issuer of such security.
32 Id.
33 Id.
VerDate Sep<11>2014
19:08 Mar 19, 2018
Jkt 244001
that have two or more backtesting
deficiencies during the Blackout Period
and whose overall 12-month trailing
backtesting coverage falls below the 99
percent coverage target.34 FICC would
eliminate this charge because the
proposed Blackout Period Exposure
Adjustment would apply to all Members
with GCF Repo Transactions
collateralized with mortgage-backed
securities during the Blackout Period.35
FICC also proposes to eliminate the
existing Coverage Charge component
from GSD’s margin calculation.36 FICC
states that the Coverage Charge is based
on historical portfolio activity, which
may not be indicative of a Member’s
current risk profile.37 FICC would
eliminate the Coverage Charge because,
as FICC states, the proposed sensitivity
approach would provide overall better
margin coverage, rendering the Coverage
Charge unnecessary.38
D. Amendment of the Backtesting
Charge Component
FICC proposes to amend GSD’s
existing Backtesting Charge component
of its margin calculation to (1) include
the backtesting deficiencies of certain
Members during the Blackout Period
and (2) give GSD the ability to assess the
Backtesting Charge on an intraday
basis.39
Currently, the Backtesting Charge
does not apply to Members with
mortgage-backed securities during the
Blackout Period because such Members
would be subject to a Blackout Period
Exposure Charge.40 In response to
FICC’s proposal to eliminate the
Blackout Period Exposure Charge, FICC
proposes to amend the applicability of
the Backtesting Charge.41 Specifically,
FICC proposes to apply the Backtesting
Charge to Members that experience
backtesting deficiencies that are
attributed to the Member’s GCF Repo
Transactions collateralized with
mortgage-backed securities during the
Blackout Period.42
FICC also proposes to amend the
Backtesting Charge to apply to Members
that experience backtesting deficiencies
during the trading day because of such
12231
Member’s intraday trading activities.43
The Intraday Backtesting Charge would
be assessed on Members with portfolios
that experience at least three intraday
backtesting deficiencies over the prior
12-month period and would generally
equal a Member’s third largest historical
intraday backtesting deficiency.44
E. Amendment of the Excess Capital
Premium Charge
FICC proposes to amend GSD’s
calculation for determining the Excess
Capital Premium. Currently, GSD
assesses the Excess Capital Premium
when a Member’s VaR Charge exceeds
the Member’s Excess Capital.45 Only
Members that are brokers or dealers are
required to report Excess Net Capital
figures to FICC while other Members
report net capital or equity capital,
based on the type of regulation to which
the Member is subject.46 If a Member is
not a broker or dealer, FICC uses the net
capital or equity capital in order to
calculate each Member’s Excess Capital
Premium.47 FICC proposes to move to a
net capital measure for broker Members,
inter-dealer broker Members, and dealer
Members.48 FICC states that such a
change would make the Excess Capital
Premium for those Members more
consistent with the equity capital
measure that is used for other Members
in the Excess Capital Premium
calculation.49
F. Additional Transparency
Surrounding the Intraday Supplemental
Fund Deposit
Separate from the above changes to
GSD’s margin calculation, FICC
proposes to provide transparency in the
GSD Rules with respect to GSD’s
existing calculation of the Intraday
Supplemental Fund Deposit.50 FICC
proposes to provide more detail in the
GSD rules surrounding both GSD’s
calculation of the Intraday
Supplemental Fund Deposit charge and
its determination of whether to assess
the charge.51
FICC calculates the Intraday
Supplemental Fund Deposit by tracking
three criteria for each Member.52 The
34 Id.
35 Id.
43 See
36 Id.
44 Id.
37 Id. FICC states that it previously determined
the Coverage Charge to be appropriate to address
potential shortfalls in margin charges under the
current, full revaluation approach.
38 Id.
39 See Notice, supra note 4, at 4695.
40 Id.
41 Id.
42 Id. Additionally, during the Blackout Period,
the Blackout Period Exposure Adjustment Charge,
as described in Section I.C, will be applied to all
applicable Members.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
Notice, supra note 4, at 4695.
45 See Notice, supra note 4, at 4696. The term
‘‘Excess Capital’’ means Excess Net Capital, net
assets, or equity capital as applicable, to a Member
based on its type of regulation. GSD Rules, Rule 1,
supra note 7.
46 See Notice, supra note 4, at 4696.
47 Id.
48 Id.
49 Id.
50 Id.
51 Id.
52 Id.
E:\FR\FM\20MRN1.SGM
20MRN1
12232
Federal Register / Vol. 83, No. 54 / Tuesday, March 20, 2018 / Notices
first criteria, the ‘‘Dollar Threshold,’’
evaluates whether a Member’s Intraday
VaR Charge equals or exceeds a set
dollar amount when compared to the
VaR Charge that was included in the
most recent margin collection.53 The
second criteria, the ‘‘Percentage
Threshold,’’ evaluates whether the
Intraday VaR Charge equals or exceeds
a percentage increase of the VaR Charge
that was included in the most recent
margin collection.54 The third criteria,
the ‘‘Coverage Target,’’ evaluates
whether a Member is experiencing
backtesting results below a 99 percent
confidence level.55 In the event that a
Member’s additional risk exposure
breaches all three criteria, FICC assess
an Intraday Supplemental Fund
Deposit.56 FICC also assess an Intraday
Supplemental Fund Deposit if, under
certain market conditions, a Member’s
Intraday VaR Charge breaches both the
Dollar Threshold and the Percentage
Threshold.57
G. Description of the QRM Methodology
The QRM Methodology document
provides the methodology by which
FICC would calculate the VaR Charge,
with the proposed sensitivity approach,
as well as other components of the
Required Fund Deposit calculation.58
The QRM Methodology document
specifies (i) the model inputs,
parameters, assumptions and qualitative
adjustments; (ii) the calculation used to
generate margin amounts; (iii)
additional calculations used for
benchmarking and monitoring purposes;
(iv) theoretical analysis; (v) the process
by which the VaR methodology was
developed as well as its application and
limitations; (vi) internal business
requirements associated with the
implementation and ongoing monitoring
of the VaR methodology; (vii) the model
change management process and
governance framework (which includes
the escalation process for adding a
stressed period to the VaR calculation);
(viii) the haircut methodology; (ix) the
Blackout Period Exposure Adjustment
calculations; (x) intraday margin
calculation; and (xi) the Margin Proxy
calculation.59
daltland on DSKBBV9HB2PROD with NOTICES
III. Summary of Comments Received
The Commission received two
comment letters in response to the
Proposed Rule Change.60 One comment
53 Id.
54 See
Notice, supra note 4, at 4697.
55 Id.
56 Id.
57 Id.
58 See
Notice, supra note 4, at 4697.
59 Id.
60 See
supra, note 5.
VerDate Sep<11>2014
19:08 Mar 19, 2018
Jkt 244001
letter, the Amherst Pierpont Letter,
requested additional time to provide
comments on the proposal.61 A second
comment letter, the Ronin Letter, objects
to the Proposed Rule Change.
Ronin states that the Proposed Rule
Change would ‘‘unduly burden
competition’’ and be ‘‘unnecessary and
unfair’’ because the VaR model redesign
would necessitate higher margin
requirements than are necessary for
Members, specifically Members with a
higher cost of capital.62 Ronin states that
FICC is tasked with determining that
each Member’s margin is adequate to
satisfy losses that may arise from the
liquidation of that Member’s portfolio
under a default scenario, but Ronin
emphasizes that FICC must also ensure
that ‘‘backtesting practices are
appropriate for determining the
adequacy of [FICC’s] margin
resources.’’ 63 Ronin states that certain
‘‘flaws’’ in FICC’s current backtesting
methodology should be carefully
examined before using backtesting
deficiencies as justification for the
proposed sensitivity VaR model.64
Ronin also states that FICC’s
assumption that it would take three
days to liquidate or hedge the portfolio
of a defaulted Member is incorrect.65
Specifically, Ronin states that FICC
incorrectly assumes that liquidity needs
following a default will be identical for
all Members.66 Ronin states that the
three-day liquidation period creates an
‘‘arbitrary and extremely high hurdle’’
for historical backtesting by
overestimating the closeout-period risk
posed to FICC by many of its Members
by ‘‘triple-counting’’ a single event.67
Ronin also states that FICC lacks
visibility into its Members’ ‘‘true risk’’
because FICC only has access to a subset
of a Members’ portfolio and,
consequently, FICC does not have a VaR
model issue, but, instead, a ‘‘data
sharing problem.’’ 68 Ronin states that
due to a lack of information regarding
Members’ entire portfolios, FICC is
‘‘improperly’’ applying its VaR model to
only a subset of a Member’s portfolio,
resulting in incomplete margin
calculations, which FICC should rectify
through ‘‘cross-margin integration’’ with
61 The Commission is extending the period for
review and public comment for the Proposed Rule
Change associated with this proposal through this
Order and has also extended the period for review
and public comment on the Advanced Notice
associated with this proposal, supra note 3.
62 Ronin Letter at 1–9.
63 Ronin Letter at 2.
64 Id.
65 Id.
66 Id.
67 Ronin Letter at 3.
68 Id.
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
the Chicago Mercantile Exchange and
FICC’s Mortgage-Backed Securities
Division.69
Finally, Ronin states that the VaR
model input is ‘‘biased’’ because it
continuously retains a ‘‘stressed period’’
in the proposed 10-year look-back
period.70 This results in higher than
necessary margin withholdings because
it ‘‘treats every day for risk-related
purposes as if the market is
continuously in the midst of a financial
crisis.’’ 71
IV. Proceedings To Determine Whether
to Approve or Disapprove the Proposed
Rule Change and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 72 to determine
whether the Proposed Rule Change
should be approved or disapproved.
Institution of proceedings is appropriate
at this time in view of the legal and
policy issues raised by the Proposed
Rule Change. Institution of proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
Rather, the Commission seeks and
encourages interested persons to
comment on the Proposed Rule Change,
and provide the Commission with
arguments to support the Commission’s
analysis as to whether to approve or
disapprove the Proposed Rule Change.
Pursuant to Section 19(b)(2)(B) of the
Act,73 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of, and input from
commenters with respect to, the
Proposed Rule Change’s consistency
with Section 17A of the Act,74 and the
rules thereunder, including the
following provisions:
• Section 17A(b)(3)(F) of the Act,75
which requires, among other things, that
the rules of a clearing agency must be
designed to assure the safeguarding of
securities and funds which are in the
custody or control of the clearing agency
and, in general, protect investors and
the public interest;
• Section 17A(b)(3)(I) of the Act,76
which requires that the rules of a
clearing agency do not impose any
burden on competition not necessary or
69 Ronin
70 Ronin
Letter at 3–4.
Letter at 4.
71 Id.
72 15
U.S.C. 78s(b)(2)(B).
73 Id.
74 15
U.S.C. 78q–1.
U.S.C. 78q–1(b)(3)(F).
76 15 U.S.C. 78q–1(b)(3)(I).
75 15
E:\FR\FM\20MRN1.SGM
20MRN1
daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 54 / Tuesday, March 20, 2018 / Notices
appropriate in furtherance of the
purpose of the Act;
• Rule 17Ad–22(e)(4)(i) under the
Act,77 which requires a clearing agency
to 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 exposures arising from its
payment, clearing, and settlement
processes by maintaining sufficient
financial resources to cover its credit
exposure to each participant fully with
a high degree of confidence;
• Rule 17Ad–22(e)(6)(i) under the
Act,78 which requires a clearing agency
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover, if the
covered clearing agency provides
central counterparty services, its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market;
• Rule 17Ad–22(e)(6)(ii) under the
Act,79 which requires a clearing agency
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover, if the
covered clearing agency provides
central counterparty services, its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, marks participant
positions to market and collects margin,
including variation margin or equivalent
charges if relevant, at least daily and
includes the authority and operational
capacity to make intraday margin calls
in defined circumstances;
• Rule 17Ad–22(e)(6)(iii) under the
Act,80 which requires a clearing agency
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover, if the
covered clearing agency provides
central counterparty services, its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, calculates margin
sufficient to cover its potential future
exposure to participants in the interval
between the last margin collection and
the close out of positions following a
participant default;
• Rule 17Ad–22(e)(6)(iv) under the
Act,81 which requires a clearing agency
to establish, implement, maintain and
77 17
CFR 240.17Ad–22(e)(4)(i).
CFR 240.17Ad–22(e)(6)(i).
79 17 CFR 240.17Ad–22(e)(6)(ii).
80 17 CFR 240.17Ad–22(e)(6)(iii).
81 17 CFR 240.17Ad–22(e)(6)(iv).
78 17
VerDate Sep<11>2014
19:08 Mar 19, 2018
Jkt 244001
enforce written policies and procedures
reasonably designed to cover, if the
covered clearing agency provides
central counterparty services, 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
procedures and sound valuation models
for addressing circumstances in which
pricing data are not readily available or
reliable; and
• Rule 17Ad–22(e)(6)(v) under the
Act,82 which requires a clearing agency
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover, if the
covered clearing agency provides
central counterparty services, its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, uses an appropriate
method for measuring credit exposure
that accounts for relevant product risk
factors and portfolio effects across
products.
V. Request for Written Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
Proposed Rule Change. In particular, the
Commission invites the written views of
interested persons concerning whether
the Proposed Rule Change is consistent
with Sections 17A(b)(3)(F) and (I) of the
Act, Rules 17Ad–22(e)(4)(i) and (6)(i)–
(v) under the Act, cited above, or any
other provision of the Act, or the rules
and regulations thereunder. Although
there do not appear to be any issues
relevant to approval or disapproval that
would be facilitated by an oral
presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4(g)
under the Act,83 any request for an
opportunity to make an oral
presentation.84
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
Proposed Rule Change should be
approved or disapproved by April 4,
2018. Any person who wishes to file a
rebuttal to any other person’s
82 17
CFR 240.17Ad–22(e)(6)(v).
CFR 240.19b–4(g).
84 Section 19(b)(2) of the Act grants to the
Commission flexibility to determine what type of
proceeding—either oral or notice and opportunity
for written comments—is appropriate for
consideration of a particular proposal by a selfregulatory organization. See Securities Act
Amendments of 1975, Senate Comm. on Banking,
Housing & Urban Affairs, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
83 17
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
12233
submission must file that rebuttal by
April 16, 2018. 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–
FICC–2018–001 on the subject line.
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
Number SR–FICC–2018–001. 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 website (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
available for website 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 such
filings also will be available for
inspection and copying at the principal
office of FICC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FICC–
2018–001 and should be submitted on
or before April 4, 2018. Rebuttal
comments should be submitted by April
16, 2018.
85 17
E:\FR\FM\20MRN1.SGM
CFR 200.30–3(a)(57).
20MRN1
12234
Federal Register / Vol. 83, No. 54 / Tuesday, March 20, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.85
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05565 Filed 3–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82875; File No. SR–CBOE–
2018–022]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rule 6.56,
Compression Forums
March 14, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 8,
2018, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 6.56. The text of the proposed rule
change is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Cboe Exchange, Inc. Rules
daltland on DSKBBV9HB2PROD with NOTICES
*
*
*
*
*
Rule 6.56. Compression Forums
(a) Procedure.
(1) Prior to 4:30 p.m. Chicago time on
the second to last business day of each
calendar week; the second, third, and
fourth to last business day of each
calendar month; and the second, third,
fourth, fifth, and sixth to last business
day of each calendar quarter, in a
manner and format determined by the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
VerDate Sep<11>2014
19:08 Mar 19, 2018
Jkt 244001
Exchange, a Trading Permit Holder may
provide the Exchange with a list of open
SPX options positions that it would like
to close through the compression forum
for that calendar month (‘‘compressionlist positions’’). Trading Permit Holders
may also permit their Clearing Trading
Permit Holders or the Clearing
Corporation to submit a list of these
positions to the Exchange on their
behalf.
(2) Prior to the open of Regular
Trading Hours on the last business day
of each calendar week; each of the last
three business days of each calendar
month; and each of the last five
business days of each calendar quarter,
[second to last business day, and third
to last business day of each calendar
month,] the Exchange will make
available to all Trading Permit Holders
a list including the size of the offsetting
compression-list positions (including all
possible combinations of offsetting
multi-leg positions) in each series (and
multi-leg position) for which both long
and short compression-list positions
have been submitted to the Exchange
(‘‘compression-list positions file’’).
(3)–(5) No change.
(6) The Exchange will make available
an open outcry ‘‘compression forum’’ in
which all Trading Permit Holders may
participate on the last business day of
each calendar week, each of the last
three business days of every calendar
month, and each of the last five
business days of every calendar quarter,
at a location on the trading floor
determined by the Exchange. The
compression forum will be held for four
(4) hours during Regular Trading Hours
on the last business day of each
calendar week, each of the last three
business days of every calendar month,
and each of the last five business days
of every calendar quarter, unless [or
three (3) hours if] any of those days is
an abbreviated trading day, as[t times]
determined by the Exchange, in which
case the compression forum will be held
for three (3) hours.
(b)–(c) (No change).
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend rule
6.56 (Compression Forums) to increase
the number of compression forums that
are held on the Exchange.
Currently, compression forums are
held on each of the last three business
days of every calendar month.5 In
addition to holding compression forums
on each of the last three business days
of every calendar month, the Exchange
seeks to hold compression forums on
the last business day of every calendar
week and each of the last five business
days of every calendar quarter. In order
to increase the frequency of
compression forums the Exchange also
proposes to increase the frequency with
which TPHs submit compression-list
positions to the Exchange and the
frequency with which the Exchange
generates the compression-list positions
file. The Exchange notes that it is not
proposing any modification to the type
of information TPHs submit to the
Exchange pursuant to Rule 6.56 nor
modifying the manner by which the
Exchange generates files and
information pursuant to Rule 6.56.
Rather, the Exchange is simply
increasing the frequency with which
TPHs may submit compression-list
positions, the frequency with which the
Exchange generates the compression-list
positions file, and the number of
compression forums that will be held on
the Exchange. The Exchange believes
that more frequent compression forums
will further encourage the closing of
positions, which, once closed, may
serve to alleviate the capital
requirement constraints on TPHs and
improve overall market liquidity by
freeing capital currently tied up in
certain SPX positions.
The Exchange proposes to implement
this rule change on March 22, 2018, in
order to allow a compression forum to
be held on March 23rd and each of the
last five business days of March.
5 See
E:\FR\FM\20MRN1.SGM
Rule 6.56(a)(6).
20MRN1
]]>Agencies
[Federal Register Volume 83, Number 54 (Tuesday, March 20, 2018)]
[Notices]
[Pages 12229-12234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05565]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82876; File No. SR-FICC-2018-001]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change to the Required Fund Deposit
Calculation in the Government Securities Division Rulebook
March 14, 2018.
I. Introduction
On January 12, 2018, Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-FICC-2018-001 (``Proposed Rule Change'')
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ to make changes to the
method by which the Government Securities Division (``GSD'') of FICC
calculates the margin requirement of its members.\3\ The Proposed Rule
Change was published for comment in the Federal Register on February 1,
2018.\4\ As of March 14, 2018, the Commission has received two comment
letters to the Proposed Rule Change.\5\ This order institutes
proceedings under Section 19(b)(2)(B) of the Act \6\ to determine
whether to approve or disapprove the Proposed Rule Change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On January 12, 2018, FICC also filed the proposal contained
in the Proposed Rule Change as advance notice SR-FICC-2018-801
(``Advance Notice'') with the Commission pursuant to Section
806(e)(1) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act entitled the Payment, Clearing, and Settlement
Supervision Act of 2010 (``Clearing Supervision Act''), 12 U.S.C.
5465(e)(1), and Rule 19b-4(n)(1)(i) of the Act, 17 CFR 240.19b-
4(n)(1)(i). Notice of filing of the Advance Notice was published for
comment in the Federal Register on March 2, 2018. Securities
Exchange Act Release No. 82779 (February 26, 2018), 83 FR 9055
(March 2, 2018) (SR-FICC-2018-801). On March 7, 2018, the Commission
extended its review period of the Advance Notice for an additional
60 days pursuant to Section 806(e)(1)(H) of the Clearing Supervision
Act. Securities Exchange Act Release No. 82820 (March 7, 2018), 83
FR 10761 (March 12, 2018) (SR-FICC-2018-801). The proposal contained
in the Proposed Rule Change and the Advance Notice shall not take
effect until all regulatory actions required with respect to the
proposal are completed.
\4\ Securities Exchange Act Release No. 82588 (January 26,
2018), 83 FR 4687 (February 1, 2018) (SR-FICC-2018-001)
(``Notice'').
\5\ Letter from Robert E. Pooler, Chief Financial Officer, Ronin
Capital LLC, dated February 22, 2018, to Robert W. Errett, Deputy
Secretary, Commission, available at https://www.sec.gov/comments/sr-ficc-2018-001/ficc2018001-3133039-161947.pdf (``Ronin Letter'');
letter from Michael Santangelo, Chief Financial Officer, Amherst
Pierpont Securities LLC, dated February 22, 2018, to Brent J.
Fields, Secretary, Commission, available at https://www.sec.gov/comments/sr-ficc-2018-001/ficc2018001-3130095-161938.pdf (``Amherst
Pierpont Letter''). Because the proposal contained in the Proposed
Rule Change was also filed as an Advance Notice, supra note 3, the
Commission is considering all public comments received on the
proposal regardless of whether the comments were submitted to the
Advance Notice or the Proposed Rule Change.
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
FICC proposes to amend the FICC GSD Rulebook (``GSD Rules'') \7\ to
make changes to GSD's method of calculating GSD members' (``Members'')
margin.\8\
[[Page 12230]]
Specifically, FICC proposes to (1) change GSD's method of calculating
the Value-at-Risk (``VaR'') Charge component; (2) add a new component
referred to as the ``Blackout Period Exposure Adjustment;'' (3)
eliminate the Blackout Period Exposure Charge and the Coverage Charge
components; (4) amend the Backtesting Charge component to (i) include
the backtesting deficiencies of certain GCF Counterparties during the
Blackout Period, and (ii) give GSD the ability to assess the
Backtesting Charge on an intraday basis for all Netting Members; and
(5) amend the calculation for determining the Excess Capital Premium
for Broker Members, Inter-Dealer Broker Members, and Dealer Members.\9\
In addition, FICC proposes to provide transparency with respect to
GSD's existing authority to calculate and assess Intraday Supplemental
Fund Deposit amounts.\10\ The proposed QRM Methodology document would
reflect the proposed VaR Charge calculation and the proposed Blackout
Period Exposure Adjustment calculation.\11\
---------------------------------------------------------------------------
\7\ Available at https://www.dtcc.com/legal/rules-and-procedures.
\8\ See Notice, supra note 4, at 4687.
\9\ See Notice, supra note 4, at 4687-88.
\10\ See Notice, supra note 4, at 4688. Pursuant to the GSD
Rules, FICC has the existing authority and discretion to calculate
an additional amount on an intraday basis in the form of an Intraday
Supplemental Clearing Fund Deposit. See GSD Rules 1 and 4, supra
note 7.
\11\ See Notice, supra note 4, at 4688.
---------------------------------------------------------------------------
A. Changes to GSD's VaR Charge Component
FICC states that the changes proposed in the Proposed Rule Change
are designed to improve GSD's current VaR Charge so that it responds
more effectively to market volatility.\12\ Specifically, FICC proposes
to (1) replace GSD's current full revaluation approach with a
sensitivity approach; \13\ (2) employ the Margin Proxy as an
alternative (i.e., a back-up) VaR Charge calculation; (3) eliminate
GSD's current augmented volatility adjustment multiplier; (4) utilize a
haircut method for securities cleared by GSD that lack sufficient
historical data; and (5) establish a VaR Floor calculation that would
serve as a minimum VaR Charge for Members, as discussed below.\14\
---------------------------------------------------------------------------
\12\ See Notice, supra note 4, at 4690. FICC proposes to amend
its calculation of GSD's VaR Charge because during the fourth
quarter of 2016, FICC's current methodology for calculating the VaR
Charge did not respond effectively to the market volatility that
existed at that time. As a result, the VaR Charge did not achieve
backtesting coverage at a 99 percent confidence level and,
therefore, yielded backtesting deficiencies beyond FICC's risk
tolerance.
\13\ Id. GSD's proposed sensitivity approach is similar to the
sensitivity approach that FICC's Mortgage-Backed Securities Division
(``MBSD'') uses to calculate the VaR Charge for MBSD clearing
members. See Securities Exchange Act Release No. 79868 (January 24,
2017), 82 FR 8780 (January 30, 2017) (SR-FICC-2016-007) and
Securities Exchange Act Release No. 79643 (December 21, 2016), 81 FR
95669 (December 28, 2016) (SR-FICC-2016-801).
\14\ Id.
---------------------------------------------------------------------------
For the proposed sensitivity approach to the VaR Charge, FICC would
source sensitivity data and relevant historical risk factor time series
data generated by an external vendor based on its econometric, risk and
pricing models.\15\ FICC would conduct independent data checks to
verify the accuracy and consistency of the data feed received from the
vendor.\16\ In the event that the external vendor is unable to provide
the sourced data in a timely manner, FICC would employ its existing
Margin Proxy as a back-up VaR Charge calculation.\17\
---------------------------------------------------------------------------
\15\ See Notice, supra note 4, at 4690. The following risk
factors would be incorporated into GSD's proposed sensitivity
approach: Key rate, convexity, implied inflation rate, agency
spread, mortgage-backed securities spread, volatility, mortgage
basis, and time risk factor. These risk factors are defined as
follows:
Key rate measures the sensitivity of a price change to
changes in interest rates;
convexity measures the degree of curvature in the
price/yield relationship of key interest rates;
implied inflation rate measures the difference between
the yield on an ordinary bond and the yield on an inflation-indexed
bond with the same maturity;
agency spread is yield spread that is added to a
benchmark yield curve to discount an Agency bond's cash flows to
match its market price;
mortgage-backed securities spread is the yield spread
that is added to a benchmark yield curve to discount a to-be-
announced (``TBA'') security's cash flows to match its market price;
volatility reflects the implied volatility observed
from the swaption market to estimate fluctuations in interest rates;
mortgage basis captures the basis risk between the
prevailing mortgage rate and a blended Treasury rate; and
time risk factor accounts for the time value change (or
carry adjustment) over the assumed liquidation period. Id.
The above-referenced risk factors are similar to the risk
factors currently utilized in MBSD's sensitivity approach; however,
GSD has included other risk factors that are specific to the U.S.
Treasury securities, Agency securities and mortgage-backed
securities cleared through GSD. Id. Concerning U.S. Treasury
securities and Agency securities, FICC would select the following
risk factors: Key rates, convexity, agency spread, implied inflation
rates, volatility, and time. Id. For mortgage-backed securities,
each security would be mapped to a corresponding TBA forward
contract and FICC would use the risk exposure analytics for the TBA
as an estimate for the mortgage-backed security's risk exposure
analytics. Id. FICC would use the following risk factors to model a
TBA security: Key rates, convexity, mortgage-backed securities
spread, volatility, mortgage basis, and time. Id. To account for
differences between mortgage-backed securities and their
corresponding TBA, FICC would apply an additional basis risk
adjustment.
\16\ Id.
\17\ See Notice, supra note 4, at 4692. In the event that the
data used for the sensitivity approach is unavailable for a period
of more than five days, FICC proposes to revert back to the Margin
Proxy as an alternative VaR Charge calculation. Id.
---------------------------------------------------------------------------
Additionally, FICC proposes to look at the historical changes of
specific risk factors during the look-back period in order to generate
risk scenarios to arrive at the market value changes for a given
portfolio.\18\ A statistical probability distribution would be formed
from the portfolio's market value changes, which would then be
calibrated to cover the projected liquidation losses at a 99 percent
confidence level.\19\ The portfolio risk sensitivities and the
historical risk factor time series data would then be used by FICC's
risk model to calculate the VaR Charge for each Member.\20\
---------------------------------------------------------------------------
\18\ See Notice, supra note 4, at 4690.
\19\ Id.
\20\ Id.
---------------------------------------------------------------------------
FICC also proposes to eliminate the augmented volatility adjustment
multiplier. FICC states that the multiplier would not be necessary
because the proposed sensitivity approach would have a longer look-back
period and the ability to include an additional stressed market
condition to account for periods of market volatility.\21\
---------------------------------------------------------------------------
\21\ See Notice, supra note 4, at 4692.
---------------------------------------------------------------------------
According to FICC, in the event that a portfolio contains classes
of securities that do not have sufficient volume and price information
available, a historical simulation approach would not generate VaR
Charge amounts that reflect the risk profile of such securities.\22\
Therefore, FICC proposes to calculate the VaR Charge for these
securities by utilizing a haircut approach based on a market benchmark
with a similar risk profile as the related security.\23\ The proposed
haircut approach would be calculated separately for U.S. Treasury/
Agency securities and mortgage-backed securities.\24\
---------------------------------------------------------------------------
\22\ Id.
\23\ See Notice, supra note 4, at 4692-93.
\24\ See Notice, supra note 4, at 4693.
---------------------------------------------------------------------------
Finally, FICC proposes to amend the existing calculation of the VaR
Charge to include a VaR Floor, which would be the amount used as the
VaR Charge when the sum of the amounts calculated by the proposed
sensitivity approach and haircut method is less than the proposed VaR
Floor.\25\ The VaR Floor would be calculated as the sum of (1) a U.S.
Treasury/Agency bond
[[Page 12231]]
marginfloor \26\ and (2) a mortgage-backed securities margin floor.\27\
---------------------------------------------------------------------------
\25\ Id.
\26\ Id. The U.S. Treasury/Agency bond margin floor would be
calculated by mapping each U.S. Treasury/Agency security to a tenor
bucket, then multiplying the gross positions of each tenor bucket by
its bond floor rate, and summing the results. Id. The bond floor
rate of each tenor bucket would be a fraction (initially set at 10
percent) of an index-based haircut rate for such tenor bucket. Id.
\27\ Id. The mortgage-backed securities margin floor would be
calculated by multiplying the gross market value of the total value
of mortgage-backed securities in a Member's portfolio by a
designated amount, referred to as the pool floor rate, (initially
set at 0.05 percent). Id.
---------------------------------------------------------------------------
B. Addition of the Blackout Period Exposure Adjustment Component
FICC proposes to add a new component to GSD's margin calculation--
the Blackout Period Exposure Adjustment.\28\ FICC states that the
Blackout Period Exposure Adjustment would be calculated to address
risks that could result from overstated values of mortgage-backed
securities that are pledged as collateral for GCF Repo Transactions
\29\ during a Blackout Period.\30\ A Blackout Period is the period
between the last business day of the prior month and the date during
the current month upon which a government-sponsored entity that issues
mortgage-backed securities publishes its updated Pool Factors.\31\ The
proposed Blackout Period Exposure Adjustment would result in a charge
that either increases a Member's VaR Charge or a credit that decreases
the VaR Charge.\32\
---------------------------------------------------------------------------
\28\ See Notice, supra note 4, at 4694. The proposed Blackout
Period Exposure Adjustment would be calculated by (1) projecting an
average pay-down rate of mortgage loan pools (based on historical
pay down rates) for the government sponsored enterprises (Fannie Mae
and Freddie Mac) and the Government National Mortgage Association
(Ginnie Mae), respectively, then (2) multiplying the projected pay-
down rate by the net positions of mortgage-backed securities in the
related program, and (3) summing the results from each program.
\29\ GCF Repo Transactions refer to transactions made on FICC's
GCF Repo Service that enables dealers to trade general collateral
repos, based on rate, term, and underlying product, throughout the
day, without requiring intra-day, trade-for-trade settlement on a
Delivery-versus-Payment basis.
\30\ See Notice, supra note 4, at 4694.
\31\ Id. Pool Factors are the percentage of the initial
principal that remains outstanding on the mortgage loan pool
underlying a mortgage-backed security, as published by the
government-sponsored entity that is the issuer of such security.
\32\ Id.
---------------------------------------------------------------------------
C. Elimination of the Blackout Period Exposure Charge and Coverage
Charge Components
FICC proposes to eliminate the existing Blackout Period Exposure
Charge component from GSD's margin calculation.\33\ The Blackout Period
Exposure Charge only applies to Members with GCF Repo Transactions that
have two or more backtesting deficiencies during the Blackout Period
and whose overall 12-month trailing backtesting coverage falls below
the 99 percent coverage target.\34\ FICC would eliminate this charge
because the proposed Blackout Period Exposure Adjustment would apply to
all Members with GCF Repo Transactions collateralized with mortgage-
backed securities during the Blackout Period.\35\
---------------------------------------------------------------------------
\33\ Id.
\34\ Id.
\35\ Id.
---------------------------------------------------------------------------
FICC also proposes to eliminate the existing Coverage Charge
component from GSD's margin calculation.\36\ FICC states that the
Coverage Charge is based on historical portfolio activity, which may
not be indicative of a Member's current risk profile.\37\ FICC would
eliminate the Coverage Charge because, as FICC states, the proposed
sensitivity approach would provide overall better margin coverage,
rendering the Coverage Charge unnecessary.\38\
---------------------------------------------------------------------------
\36\ Id.
\37\ Id. FICC states that it previously determined the Coverage
Charge to be appropriate to address potential shortfalls in margin
charges under the current, full revaluation approach.
\38\ Id.
---------------------------------------------------------------------------
D. Amendment of the Backtesting Charge Component
FICC proposes to amend GSD's existing Backtesting Charge component
of its margin calculation to (1) include the backtesting deficiencies
of certain Members during the Blackout Period and (2) give GSD the
ability to assess the Backtesting Charge on an intraday basis.\39\
---------------------------------------------------------------------------
\39\ See Notice, supra note 4, at 4695.
---------------------------------------------------------------------------
Currently, the Backtesting Charge does not apply to Members with
mortgage-backed securities during the Blackout Period because such
Members would be subject to a Blackout Period Exposure Charge.\40\ In
response to FICC's proposal to eliminate the Blackout Period Exposure
Charge, FICC proposes to amend the applicability of the Backtesting
Charge.\41\ Specifically, FICC proposes to apply the Backtesting Charge
to Members that experience backtesting deficiencies that are attributed
to the Member's GCF Repo Transactions collateralized with mortgage-
backed securities during the Blackout Period.\42\
---------------------------------------------------------------------------
\40\ Id.
\41\ Id.
\42\ Id. Additionally, during the Blackout Period, the Blackout
Period Exposure Adjustment Charge, as described in Section I.C, will
be applied to all applicable Members.
---------------------------------------------------------------------------
FICC also proposes to amend the Backtesting Charge to apply to
Members that experience backtesting deficiencies during the trading day
because of such Member's intraday trading activities.\43\ The Intraday
Backtesting Charge would be assessed on Members with portfolios that
experience at least three intraday backtesting deficiencies over the
prior 12-month period and would generally equal a Member's third
largest historical intraday backtesting deficiency.\44\
---------------------------------------------------------------------------
\43\ See Notice, supra note 4, at 4695.
\44\ Id.
---------------------------------------------------------------------------
E. Amendment of the Excess Capital Premium Charge
FICC proposes to amend GSD's calculation for determining the Excess
Capital Premium. Currently, GSD assesses the Excess Capital Premium
when a Member's VaR Charge exceeds the Member's Excess Capital.\45\
Only Members that are brokers or dealers are required to report Excess
Net Capital figures to FICC while other Members report net capital or
equity capital, based on the type of regulation to which the Member is
subject.\46\ If a Member is not a broker or dealer, FICC uses the net
capital or equity capital in order to calculate each Member's Excess
Capital Premium.\47\ FICC proposes to move to a net capital measure for
broker Members, inter-dealer broker Members, and dealer Members.\48\
FICC states that such a change would make the Excess Capital Premium
for those Members more consistent with the equity capital measure that
is used for other Members in the Excess Capital Premium
calculation.\49\
---------------------------------------------------------------------------
\45\ See Notice, supra note 4, at 4696. The term ``Excess
Capital'' means Excess Net Capital, net assets, or equity capital as
applicable, to a Member based on its type of regulation. GSD Rules,
Rule 1, supra note 7.
\46\ See Notice, supra note 4, at 4696.
\47\ Id.
\48\ Id.
\49\ Id.
---------------------------------------------------------------------------
F. Additional Transparency Surrounding the Intraday Supplemental Fund
Deposit
Separate from the above changes to GSD's margin calculation, FICC
proposes to provide transparency in the GSD Rules with respect to GSD's
existing calculation of the Intraday Supplemental Fund Deposit.\50\
FICC proposes to provide more detail in the GSD rules surrounding both
GSD's calculation of the Intraday Supplemental Fund Deposit charge and
its determination of whether to assess the charge.\51\
---------------------------------------------------------------------------
\50\ Id.
\51\ Id.
---------------------------------------------------------------------------
FICC calculates the Intraday Supplemental Fund Deposit by tracking
three criteria for each Member.\52\ The
[[Page 12232]]
first criteria, the ``Dollar Threshold,'' evaluates whether a Member's
Intraday VaR Charge equals or exceeds a set dollar amount when compared
to the VaR Charge that was included in the most recent margin
collection.\53\ The second criteria, the ``Percentage Threshold,''
evaluates whether the Intraday VaR Charge equals or exceeds a
percentage increase of the VaR Charge that was included in the most
recent margin collection.\54\ The third criteria, the ``Coverage
Target,'' evaluates whether a Member is experiencing backtesting
results below a 99 percent confidence level.\55\ In the event that a
Member's additional risk exposure breaches all three criteria, FICC
assess an Intraday Supplemental Fund Deposit.\56\ FICC also assess an
Intraday Supplemental Fund Deposit if, under certain market conditions,
a Member's Intraday VaR Charge breaches both the Dollar Threshold and
the Percentage Threshold.\57\
---------------------------------------------------------------------------
\52\ Id.
\53\ Id.
\54\ See Notice, supra note 4, at 4697.
\55\ Id.
\56\ Id.
\57\ Id.
---------------------------------------------------------------------------
G. Description of the QRM Methodology
The QRM Methodology document provides the methodology by which FICC
would calculate the VaR Charge, with the proposed sensitivity approach,
as well as other components of the Required Fund Deposit
calculation.\58\ The QRM Methodology document specifies (i) the model
inputs, parameters, assumptions and qualitative adjustments; (ii) the
calculation used to generate margin amounts; (iii) additional
calculations used for benchmarking and monitoring purposes; (iv)
theoretical analysis; (v) the process by which the VaR methodology was
developed as well as its application and limitations; (vi) internal
business requirements associated with the implementation and ongoing
monitoring of the VaR methodology; (vii) the model change management
process and governance framework (which includes the escalation process
for adding a stressed period to the VaR calculation); (viii) the
haircut methodology; (ix) the Blackout Period Exposure Adjustment
calculations; (x) intraday margin calculation; and (xi) the Margin
Proxy calculation.\59\
---------------------------------------------------------------------------
\58\ See Notice, supra note 4, at 4697.
\59\ Id.
---------------------------------------------------------------------------
III. Summary of Comments Received
The Commission received two comment letters in response to the
Proposed Rule Change.\60\ One comment letter, the Amherst Pierpont
Letter, requested additional time to provide comments on the
proposal.\61\ A second comment letter, the Ronin Letter, objects to the
Proposed Rule Change.
---------------------------------------------------------------------------
\60\ See supra, note 5.
\61\ The Commission is extending the period for review and
public comment for the Proposed Rule Change associated with this
proposal through this Order and has also extended the period for
review and public comment on the Advanced Notice associated with
this proposal, supra note 3.
---------------------------------------------------------------------------
Ronin states that the Proposed Rule Change would ``unduly burden
competition'' and be ``unnecessary and unfair'' because the VaR model
redesign would necessitate higher margin requirements than are
necessary for Members, specifically Members with a higher cost of
capital.\62\ Ronin states that FICC is tasked with determining that
each Member's margin is adequate to satisfy losses that may arise from
the liquidation of that Member's portfolio under a default scenario,
but Ronin emphasizes that FICC must also ensure that ``backtesting
practices are appropriate for determining the adequacy of [FICC's]
margin resources.'' \63\ Ronin states that certain ``flaws'' in FICC's
current backtesting methodology should be carefully examined before
using backtesting deficiencies as justification for the proposed
sensitivity VaR model.\64\
---------------------------------------------------------------------------
\62\ Ronin Letter at 1-9.
\63\ Ronin Letter at 2.
\64\ Id.
---------------------------------------------------------------------------
Ronin also states that FICC's assumption that it would take three
days to liquidate or hedge the portfolio of a defaulted Member is
incorrect.\65\ Specifically, Ronin states that FICC incorrectly assumes
that liquidity needs following a default will be identical for all
Members.\66\ Ronin states that the three-day liquidation period creates
an ``arbitrary and extremely high hurdle'' for historical backtesting
by overestimating the closeout-period risk posed to FICC by many of its
Members by ``triple-counting'' a single event.\67\
---------------------------------------------------------------------------
\65\ Id.
\66\ Id.
\67\ Ronin Letter at 3.
---------------------------------------------------------------------------
Ronin also states that FICC lacks visibility into its Members'
``true risk'' because FICC only has access to a subset of a Members'
portfolio and, consequently, FICC does not have a VaR model issue, but,
instead, a ``data sharing problem.'' \68\ Ronin states that due to a
lack of information regarding Members' entire portfolios, FICC is
``improperly'' applying its VaR model to only a subset of a Member's
portfolio, resulting in incomplete margin calculations, which FICC
should rectify through ``cross-margin integration'' with the Chicago
Mercantile Exchange and FICC's Mortgage-Backed Securities Division.\69\
---------------------------------------------------------------------------
\68\ Id.
\69\ Ronin Letter at 3-4.
---------------------------------------------------------------------------
Finally, Ronin states that the VaR model input is ``biased''
because it continuously retains a ``stressed period'' in the proposed
10-year look-back period.\70\ This results in higher than necessary
margin withholdings because it ``treats every day for risk-related
purposes as if the market is continuously in the midst of a financial
crisis.'' \71\
---------------------------------------------------------------------------
\70\ Ronin Letter at 4.
\71\ Id.
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether to Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \72\ to determine whether the Proposed Rule
Change should be approved or disapproved. Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the Proposed Rule Change. Institution of proceedings does not
indicate that the Commission has reached any conclusions with respect
to any of the issues involved. Rather, the Commission seeks and
encourages interested persons to comment on the Proposed Rule Change,
and provide the Commission with arguments to support the Commission's
analysis as to whether to approve or disapprove the Proposed Rule
Change.
---------------------------------------------------------------------------
\72\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\73\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and input from commenters with respect to, the Proposed
Rule Change's consistency with Section 17A of the Act,\74\ and the
rules thereunder, including the following provisions:
---------------------------------------------------------------------------
\73\ Id.
\74\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act,\75\ which requires, among
other things, that the rules of a clearing agency must be designed to
assure the safeguarding of securities and funds which are in the
custody or control of the clearing agency and, in general, protect
investors and the public interest;
---------------------------------------------------------------------------
\75\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Section 17A(b)(3)(I) of the Act,\76\ which requires that
the rules of a clearing agency do not impose any burden on competition
not necessary or
[[Page 12233]]
appropriate in furtherance of the purpose of the Act;
---------------------------------------------------------------------------
\76\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(4)(i) under the Act,\77\ which requires a
clearing agency to 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 exposures arising from its payment, clearing, and settlement
processes by maintaining sufficient financial resources to cover its
credit exposure to each participant fully with a high degree of
confidence;
---------------------------------------------------------------------------
\77\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(i) under the Act,\78\ which requires a
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover, if the covered
clearing agency provides central counterparty services, its credit
exposures to its participants by establishing a risk-based margin
system that, at a minimum, considers, and produces margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market;
---------------------------------------------------------------------------
\78\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(ii) under the Act,\79\ which requires a
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover, if the covered
clearing agency provides central counterparty services, its credit
exposures to its participants by establishing a risk-based margin
system that, at a minimum, marks participant positions to market and
collects margin, including variation margin or equivalent charges if
relevant, at least daily and includes the authority and operational
capacity to make intraday margin calls in defined circumstances;
---------------------------------------------------------------------------
\79\ 17 CFR 240.17Ad-22(e)(6)(ii).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(iii) under the Act,\80\ which requires
a clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover, if the covered
clearing agency provides central counterparty services, its credit
exposures to its participants by establishing a risk-based margin
system that, at a minimum, calculates margin sufficient to cover its
potential future exposure to participants in the interval between the
last margin collection and the close out of positions following a
participant default;
---------------------------------------------------------------------------
\80\ 17 CFR 240.17Ad-22(e)(6)(iii).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(iv) under the Act,\81\ which requires a
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover, if the covered
clearing agency provides central counterparty services, 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 procedures and sound valuation models for addressing circumstances
in which pricing data are not readily available or reliable; and
---------------------------------------------------------------------------
\81\ 17 CFR 240.17Ad-22(e)(6)(iv).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(v) under the Act,\82\ which requires a
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover, if the covered
clearing agency provides central counterparty services, its credit
exposures to its participants by establishing a risk-based margin
system that, at a minimum, uses an appropriate method for measuring
credit exposure that accounts for relevant product risk factors and
portfolio effects across products.
---------------------------------------------------------------------------
\82\ 17 CFR 240.17Ad-22(e)(6)(v).
---------------------------------------------------------------------------
V. Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the Proposed Rule Change. In particular, the Commission invites
the written views of interested persons concerning whether the Proposed
Rule Change is consistent with Sections 17A(b)(3)(F) and (I) of the
Act, Rules 17Ad-22(e)(4)(i) and (6)(i)-(v) under the Act, cited above,
or any other provision of the Act, or the rules and regulations
thereunder. Although there do not appear to be any issues relevant to
approval or disapproval that would be facilitated by an oral
presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4(g) under the Act,\83\ any request for
an opportunity to make an oral presentation.\84\
---------------------------------------------------------------------------
\83\ 17 CFR 240.19b-4(g).
\84\ Section 19(b)(2) of the Act grants to the Commission
flexibility to determine what type of proceeding--either oral or
notice and opportunity for written comments--is appropriate for
consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change should be approved
or disapproved by April 4, 2018. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
April 16, 2018. 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 [email protected]. Please include
File Number SR-FICC-2018-001 on the subject line.
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 Number SR-FICC-2018-001. 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 website (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 available for website 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 such filings also will be available for inspection
and copying at the principal office of FICC and on DTCC's website
(https://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FICC-2018-001 and should be submitted on
or before April 4, 2018. Rebuttal comments should be submitted by April
16, 2018.
---------------------------------------------------------------------------
\85\ 17 CFR 200.30-3(a)(57).
[[Page 12234]]
---------------------------------------------------------------------------
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\85\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05565 Filed 3-19-18; 8:45 am]
BILLING CODE 8011-01-P
