Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Clearing Agency Policy on Capital Requirements and the Clearing Agency Capital Replenishment Plan, 53138-53141 [2018-22779]
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53138
Federal Register / Vol. 83, No. 203 / Friday, October 19, 2018 / Notices
stress testing and liquidity stress testing
practices and enhance ICC’s approach to
identifying potential weaknesses in the
risk methodology as well as the
methodology for testing the sufficiency
of ICC’s liquidity resources, thereby
ensuring that ICC maintains sufficient
financial resources to withstand, at a
minimum, a default by the two CP
families to which it has the largest
exposures in extreme but plausible
market conditions, consistent with the
requirements of Rule 17Ad–22(b)(3).11
Rule 17Ad–22(d)(8) 12 requires ICC to
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to have governance
arrangements that are clear and
transparent to fulfill the public interest
requirements in Section 17A of the
Act.13 By updating the Stress Testing
Framework and the Liquidity Risk
Management Framework so that the
documents more clearly reflect the
assignment of responsibilities to the ICC
Risk Department in terms of reporting
and stress testing obligations, the
proposed changes will ensure that ICC’s
governance of the Stress Testing
Framework and the Liquidity Risk
Management Framework is clear,
transparent, and documented
accurately, consistent with the
requirements of Rule 17Ad–22(d)(8).14
(B) Clearing Agency’s Statement on
Burden on Competition
ICC does not believe the proposed
rule changes would have any impact, or
impose any burden, on competition.
The proposed changes to ICC’s Stress
Testing Framework and ICC’s Liquidity
Risk Management Framework will apply
uniformly across all market participants.
Therefore, ICC does not believe the
proposed rule changes impose any
burden on competition that is
inappropriate in furtherance of the
purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
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Written comments relating to the
proposed rule change have not been
solicited or received. ICC will notify the
Commission of any written comments
received by ICC.
III. Date of Effectiveness of the
Proposed Rule Change
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
11 Id.
12 17
CFR 240.17Ad–22(d)(8).
U.S.C. 78q–1.
14 17 CFR 240.17Ad–22(d)(8).
13 15
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of the Act and paragraph (f) of Rule
19b–4 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is 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–
ICC–2018–010 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–ICC–2018–010. 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 will also be available for
inspection and copying at the principal
office of ICE Clear Credit and on ICE
Clear Credit’s website at https://
www.theice.com/clear-credit/regulation.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
PO 00000
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information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–ICC–2018–010 and
should be submitted on or before
November 9, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–22776 Filed 10–18–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84426; File No. SR–DTC–
2018–008]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Clearing Agency Policy on Capital
Requirements and the Clearing Agency
Capital Replenishment Plan
October 15, 2018.
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 October
4, 2018, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by the clearing
agency. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(4)
thereunder.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
amendments to (i) the Clearing Agency
Policy on Capital Requirements
(‘‘Capital Policy’’ or ‘‘Policy’’) of DTC
and its affiliates, National Securities
Clearing Corporation (‘‘NSCC’’) and
Fixed Income Clearing Corporation
(‘‘FICC,’’ and together with DTC and
NSCC, the ‘‘Clearing Agencies’’); and (ii)
the Clearing Agency Capital
Replenishment Plan (‘‘Capital
Replenishment Plan’’ or ‘‘Plan’’) of the
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4).
1 15
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Federal Register / Vol. 83, No. 203 / Friday, October 19, 2018 / Notices
Clearing Agencies. In particular, the
proposed revisions to the Capital Policy
and Capital Replenishment Plan would
(1) correct typographical errors and
make other technical revisions to correct
and simplify statements in the Policy
and Plan; (2) replace references in the
Policy and Plan to the ‘‘Credit Risk
Capital Requirement’’ with the
‘‘Corporate Contribution;’’ and (3)
update references in the Policy to the
Recovery & Wind-down Plans of each of
the Clearing Agencies, which were
recently adopted by the Clearing
Agencies, as described in greater detail
below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
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1. Purpose
The Clearing Agencies are proposing
to revise the Capital Policy and Capital
Replenishment Plan, which were
adopted by the Clearing Agencies in
July 2017 5 and are maintained by the
Clearing Agencies in compliance with
Rule 17Ad–22(e)(15) under the Act.6
Overview of the Capital Policy and
Capital Replenishment Plan
The Capital Policy sets forth the
manner in which each Clearing Agency
identifies, monitors, and manages its
general business risk with respect to the
requirement to hold sufficient liquid net
assets (‘‘LNA’’) funded by equity to
cover potential general business losses
so the Clearing Agency can continue
operations and services as a going
concern if such losses materialize.7 The
amount of LNA funded by equity to be
held by each of the Clearing Agencies
for this purpose is defined in the Policy
as the General Business Risk Capital
Requirement. The Policy provides that
5 See Securities Exchange Act Release No. 81105
(July 7, 2017), 82 FR 32399 (July 13, 2017) (SR–
DTC–2017–003, SR–FICC–2017–007, SR–NSCC–
2017–004).
6 17 CFR 240.17Ad–22(e)(15).
7 Id.
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the General Business Risk Requirement
is calculated for each Clearing Agency
as the greatest of three separate
calculations—(1) an amount based on
that Clearing Agency’s general business
risk profile (‘‘Risk-Based Capital
Requirement’’), (2) an amount based on
the time estimated to execute a recovery
or orderly wind-down of the critical
operations of that Clearing Agency
(‘‘Recovery/Wind-down Capital
Requirement’’), and (3) an amount based
on an analysis of that Clearing Agency’s
estimated operating expenses for a six
month period (‘‘Operating Expense
Capital Requirement’’). On an annual
basis, each of these three capital
requirements are measured, and the
General Business Risk Capital
Requirement for each Clearing Agency
are determined as the greatest of these
calculations.
Currently, the Capital Policy also
addresses how each Clearing Agency
maintains a portion of retained earnings
as LNA funded by equity as its Credit
Risk Capital Requirement, as a part of its
management of credit risk 8 and
pursuant to their respective rules.9
These resources are maintained to
address losses due to a participant
default, and are held in addition to the
LNA funded by equity held by each of
the Clearing Agencies as its General
Business Risk Capital Requirement. The
Capital Policy describes how each
Clearing Agency’s General Business
Risk Capital Requirement and Credit
Risk Capital Requirement fit within the
Clearing Agencies’ Capital Framework,
where the Total Capital Requirement of
each Clearing Agency is calculated as
the sum of its General Business Risk
Capital Requirement and Credit Risk
Capital Requirement.
The Policy also provides a plan for
the replenishment of capital through the
Capital Replenishment Plan. The
Capital Replenishment Plan was
adopted by the Clearing Agencies as a
plan for the replenishment of capital by
each Clearing Agency should its equity
fall close to or below the amount being
8 LNA funded by equity held as the Clearing
Agencies’ Credit Risk Capital Requirement is held
in addition to resources held by the Clearing
Agencies for credit risk in compliance with Rule
17Ad–22(e)(4) under the Act and in addition to
resources held by the Clearing Agencies for
liquidity risk in compliance with Rule 17Ad–
22(e)(7). 17 CFR 240.17Ad–22(e)(4), (7).
9 The Rules, By-laws and Organizational
Certificate of DTC (‘‘DTC Rules’’), the Rulebook of
the Government Securities Division of FICC (‘‘GSD
Rules’’), the Clearing Rules of the Mortgage-Backed
Securities Division of FICC (‘‘MBSD Rules’’), or the
Rules & Procedures of NSCC (‘‘NSCC Rules,’’
together with the DTC Rules, GSD Rules and MBSD
Rules, the ‘‘Clearing Agencies’ Rules’’ or ‘‘Rules’’),
available at https://dtcc.com/legal/rules-andprocedures.
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53139
held as its Total Capital Requirement
pursuant to the Capital Policy. The
Capital Replenishment Plan identifies
the circumstances that would trigger
implementation of the Plan; the roles,
responsibilities, and guiding principles
for implementation of the Plan; and an
overview and description of each of the
tools that may be used to replenish
capital.
Proposed Revisions to the Capital Policy
and Capital Replenishment Plan
As described in greater detail below,
the Clearing Agencies are proposing to
make certain revisions to the Capital
Policy and Capital Replenishment Plan.
First, the proposed revisions would
correct typographical errors and make
other technical revisions to correct and
simplify statements in the Capital Policy
and Capital Replenishment Plan.
Second, the proposed revisions would
replace references to the ‘‘Credit Risk
Capital Requirement’’ with ‘‘Corporate
Contribution.’’ This proposed change
would reflect the implementation of
recent revisions to the Clearing
Agencies’ Rules regarding allocation of
losses.10 Finally, the proposed revisions
would update the description of the
calculation of the Recovery/Wind-down
Capital Requirement in the Capital
Policy to clarify that the Recovery &
Wind-down Plans of each of the
Clearing Agencies have been adopted by
the Clearing Agencies.11
These proposed revisions are
designed to enhance the clarity of the
Policy and Plan and help ensure that
they continue to operate as intended.
1. Technical Revisions
DTC is proposing technical revisions
to the descriptions within the Capital
Policy and Capital Replenishment Plan
that would correct typographical errors,
including, for example, removing a
phrase that was incorrectly repeated in
the same sentence. These revisions
would also correct an error in Section 3
of the Policy, where the document was
incorrectly referred to as the Plan.
Such revisions would also update the
documents. For example, the proposed
changes would replace references in the
Capital Policy and Capital
Replenishment Plan to the Finance/
Capital Committee of the Boards, which
was disbanded September 2017, with
10 See Securities Exchange Act Release Nos.
83969 (August 28, 2018), 83 FR 44955 (September
4, 2018) (SR–DTC–2017–022); 83950 (August 27,
2018), 83 FR 44393 (August 30, 2018) (SR–DTC–
2017–804).
11 See Securities Exchange Act Release Nos.
83972 (August 28, 2018), 83 FR 44964 (September
4, 2018) (SR–DTC–2017–021); 83953 (August 27,
2018), 83 FR 44381 (August 30, 2018) (SR–DTC–
2017–803).
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the Boards, which has taken on the
responsibilities of this Committee set
forth in the Policy and Plan. These
revisions would also include updating
the Capital Replenishment Plan to
revise the name of the ‘‘Capital
Contributions to DTCC Subsidiaries and
Joint Ventures Policy’’ to the new name
of this document, the ‘‘Capital
Contributions Policy.’’ 12
Finally, the proposed revisions would
also simplify the descriptions in these
documents. For example, these
revisions would add a defined term for
the Clearing Agencies’ Rules to the
Policy in order to simplify references to
such rules and procedures in this
document.
2. Addition of Corporate Contribution
The proposed revisions would also
replace references in the Capital Policy
and Capital Replenishment Plan to the
‘‘Credit Risk Capital Requirement’’ with
the ‘‘Corporate Contribution.’’
Currently, the Capital Policy describes
how each Clearing Agency maintains a
portion of retained earnings as LNA
funded by equity as its Credit Risk
Capital Requirement, in accordance
with their respective Rules. Recently,
the Clearing Agencies implemented
revisions to their respective Rules to
enhance the process by which they may
allocate losses to their participants if the
size of the losses exceed their prefunded
resources.13 Such revisions included an
amendment to the calculation and
application of the amount of LNA
funded by equity that are currently
referred to in the Capital Policy and
Capital Replenishment Plan as the
Credit Risk Capital Requirement.
Specifically, the DTC Rules
previously provided that DTC could, in
its discretion and in such amounts as it
would determine, charge its existing
retained earnings and undivided profits
to a loss or liability, to the extent that
it is not satisfied by the Actual
Participants Fund Deposit and Preferred
Stock of the defaulting Participant.
Pursuant to these recent changes, the
DTC Rules require that DTC contribute
an amount equal to 50 percent of DTC’s
General Business Risk Capital
Requirement (as such amount is defined
in the Capital Policy) (‘‘Corporate
Contribution’’) towards losses or
liabilities arising from a Participant
default or non-default event. DTC may
also voluntarily apply amounts greater
than the Corporate Contribution, as the
DTC Board of Directors may determine.
The Corporate Contribution applied to
any losses arising from events that may
occur during the next 250 business days
would be reduced to the remaining
unused portion of Corporate
Contribution, if any.14
The amendments to the calculation
and application of the resources that are
now referred to as the Corporate
Contribution did not change how these
resources are described within the
Policy or the Plan. The Corporate
Contribution continues to represent
resources maintained by the Clearing
Agencies to address losses due to a
participant default, as a part of their
management of credit risk.15 These
resources also are still held in addition
to the LNA funded by equity held by
each of the Clearing Agencies as its
General Business Risk Capital
Requirement.
Therefore, the Capital Policy and
Capital Replenishment Plan would be
revised to replace references to the
Credit Risk Capital Requirement with
references to the Corporate
Contribution, and no other changes are
needed to the description of this
amount.
3. Update References to the Recovery &
Wind-Down Plans of the Clearing
Agencies
The proposed revisions would also
update the Capital Policy to make clear
that the Recovery & Wind-down Plans of
the Clearing Agencies have been
adopted by the Clearing Agencies.16
Such references are currently made in
connection with the description of the
calculation of the Recovery/Wind-down
Capital Requirement.
The Recovery/Wind-down Capital
Requirement is an amount based on the
time estimated to execute a recovery or
orderly wind-down of the critical
operations of that Clearing Agency and
is used by the Clearing Agencies to
determine their General Business Risk
Capital Requirement. Each of the
Clearing Agencies recently adopted a
Recovery & Wind-down Plan, which
provide plans for the recovery and
orderly wind-down of each of the
Clearing Agencies necessitated by credit
losses, liquidity shortfalls, losses from
general business risk, or any other
losses.17 The Recovery & Wind-down
14 See
12 This
document is an internal policy that
governs how The Depository Trust & Clearing
Corporation may invest capital in its subsidiaries,
including the Clearing Agencies, as well as
affiliated joint ventures and non-affiliated
companies.
13 Supra note 10.
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supra notes 9 and 10.
noted above, unlike the resources referred
to in the Policy and Plan as the Credit Risk Capital
Requirement, the Corporate Contribution would
also be available to the Clearing Agencies to address
losses due to events other than a participant default.
16 Supra note 11.
17 Id.
15 As
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Plans each include an analysis of the
calculation of the Recovery/Wind-down
Capital Requirement, based on the
formula that is set forth in the Capital
Policy.
The Clearing Agencies are proposing
to revise the Capital Policy to make
clear that the Recovery & Wind-down
Plans have now been adopted by the
Clearing Agencies.
2. Statutory Basis
The Clearing Agencies believe that the
proposed rule change is 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 Capital Policy
and the Capital Replenishment Plan are
both consistent with Section
17A(b)(3)(F) of the Act 18 and Rule
17Ad–22(e)(15) under the Act,19 for the
reasons described below.
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of the
Clearing Agencies 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.20 Together, the Capital
Policy and the Capital Replenishment
Plan are designed to ensure that each of
the Clearing Agencies hold sufficient
LNA funded by equity to cover potential
general business losses so that it can
continue the prompt and accurate
clearance and settlement of securities
transactions and can continue to assure
the safeguarding of securities and funds
which are in its custody or control or for
which it is responsible if those losses
materialize. By correcting errors and
updating the Capital Policy and Capital
Replenishment Plan to be consistent
with recent changes implemented by the
Clearing Agencies, the proposed
revisions would allow the Clearing
Agencies to maintain these documents
to operate in the way they were
intended. Therefore, such proposed
revisions would be consistent with the
requirements of Section 17A(b)(3)(F) of
the Act.21
Rule 17Ad–22(e)(15) requires the
Clearing Agencies to establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to identify,
monitor, and manage their respective
general business risk and hold sufficient
18 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(15).
20 15 U.S.C. 78q–1(b)(3)(F).
21 Id.
19 17
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liquid net assets funded by equity to
cover potential general business losses
so that the Clearing Agencies can
continue operations and services as a
going concern if those losses
materialize.22 As originally
implemented, the Capital Policy and the
Capital Replenishment Plan were
designed to meet the requirements of
Rule 17Ad–22(e)(15) under the Act.23
As stated above, the proposed revisions
would update the Capital Policy and
Capital Replenishment Plan to be
consistent with recent changes
implemented by the Clearing Agencies.
In this way, the proposed changes
would allow the Clearing Agencies to
maintain these documents in a way that
to meet these requirements. Therefore,
such proposed revisions would be
consistent with the requirements of Rule
17Ad–22(e)(15) under the Act.24
(B) Clearing Agency’s Statement on
Burden on Competition
Each of the Clearing Agencies believes
that none of the proposed revisions to
the Capital Policy and the Capital
Replenishment Plan would have any
impact, or impose any burden, on
competition. The Policy and the Plan
are maintained by the Clearing Agencies
in order to satisfy their regulatory
requirements and generally reflect
internal tools and procedures. Tools and
procedures that have a direct impact on
the rights, responsibilities or obligations
of members or participants of the
Clearing Agencies are reflected in the
Clearing Agencies’ Rules. Accordingly,
the Capital Policy and Capital
Replenishment Plan themselves are
documents that enhance the Clearing
Agencies’ regulatory compliance and
internal management and do not have
any impact, or impose any burden, on
competition.
The proposed revisions to correct and
update the Capital Policy and Capital
Replenishment Plan would not affect
any changes on the fundamental
purpose or operation of these
documents and, as such, would also not
have any impact, or impose any burden,
on competition.
amozie on DSK3GDR082PROD with NOTICES1
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change 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
CFR 240.17Ad–22(e)(15).
supra note 5.
24 17 CFR 240.17Ad–22(e)(15).
Commission of any written comments
received by the Clearing Agencies.
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 25 and paragraph (f) of Rule
19b–4 thereunder.26 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is 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–2018–008 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–2018–008. 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
22 17
23 See
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17:25 Oct 18, 2018
25 15
26 17
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PO 00000
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
Frm 00115
Fmt 4703
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 DTC 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–DTC–
2018–008 and should be submitted on
or before November 9, 2018
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–22779 Filed 10–18–18; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15746 and #15747;
NORTH CAROLINA Disaster Number NC–
00100]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of North Carolina
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of North Carolina (FEMA–
4393–DR), dated 10/12/2018.
Incident: Hurricane Florence.
Incident Period: 09/07/2018 through
09/29/2018.
DATES: Issued on 10/12/2018.
Physical Loan Application Deadline
Date: 12/11/2018.
Economic Injury (EIDL) Loan
Application Deadline Date: 07/12/2019.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT:
A. Escobar, Office of Disaster
Assistance, U.S. Small Business
Administration, 409 3rd Street SW,
Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
SUMMARY:
27 17
Sfmt 4703
53141
E:\FR\FM\19OCN1.SGM
CFR 200.30–3(a)(12).
19OCN1
Agencies
[Federal Register Volume 83, Number 203 (Friday, October 19, 2018)]
[Notices]
[Pages 53138-53141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22779]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84426; File No. SR-DTC-2018-008]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Clearing Agency Policy on Capital Requirements and the
Clearing Agency Capital Replenishment Plan
October 15, 2018.
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 October 4, 2018, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II and III below, which Items have
been prepared by the clearing agency. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to (i) the Clearing
Agency Policy on Capital Requirements (``Capital Policy'' or
``Policy'') of DTC and its affiliates, National Securities Clearing
Corporation (``NSCC'') and Fixed Income Clearing Corporation (``FICC,''
and together with DTC and NSCC, the ``Clearing Agencies''); and (ii)
the Clearing Agency Capital Replenishment Plan (``Capital Replenishment
Plan'' or ``Plan'') of the
[[Page 53139]]
Clearing Agencies. In particular, the proposed revisions to the Capital
Policy and Capital Replenishment Plan would (1) correct typographical
errors and make other technical revisions to correct and simplify
statements in the Policy and Plan; (2) replace references in the Policy
and Plan to the ``Credit Risk Capital Requirement'' with the
``Corporate Contribution;'' and (3) update references in the Policy to
the Recovery & Wind-down Plans of each of the Clearing Agencies, which
were recently adopted by the Clearing Agencies, as described in greater
detail below.
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements 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 clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The Clearing Agencies are proposing to revise the Capital Policy
and Capital Replenishment Plan, which were adopted by the Clearing
Agencies in July 2017 \5\ and are maintained by the Clearing Agencies
in compliance with Rule 17Ad-22(e)(15) under the Act.\6\
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\5\ See Securities Exchange Act Release No. 81105 (July 7,
2017), 82 FR 32399 (July 13, 2017) (SR-DTC-2017-003, SR-FICC-2017-
007, SR-NSCC-2017-004).
\6\ 17 CFR 240.17Ad-22(e)(15).
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Overview of the Capital Policy and Capital Replenishment Plan
The Capital Policy sets forth the manner in which each Clearing
Agency identifies, monitors, and manages its general business risk with
respect to the requirement to hold sufficient liquid net assets
(``LNA'') funded by equity to cover potential general business losses
so the Clearing Agency can continue operations and services as a going
concern if such losses materialize.\7\ The amount of LNA funded by
equity to be held by each of the Clearing Agencies for this purpose is
defined in the Policy as the General Business Risk Capital Requirement.
The Policy provides that the General Business Risk Requirement is
calculated for each Clearing Agency as the greatest of three separate
calculations--(1) an amount based on that Clearing Agency's general
business risk profile (``Risk-Based Capital Requirement''), (2) an
amount based on the time estimated to execute a recovery or orderly
wind-down of the critical operations of that Clearing Agency
(``Recovery/Wind-down Capital Requirement''), and (3) an amount based
on an analysis of that Clearing Agency's estimated operating expenses
for a six month period (``Operating Expense Capital Requirement''). On
an annual basis, each of these three capital requirements are measured,
and the General Business Risk Capital Requirement for each Clearing
Agency are determined as the greatest of these calculations.
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\7\ Id.
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Currently, the Capital Policy also addresses how each Clearing
Agency maintains a portion of retained earnings as LNA funded by equity
as its Credit Risk Capital Requirement, as a part of its management of
credit risk \8\ and pursuant to their respective rules.\9\ These
resources are maintained to address losses due to a participant
default, and are held in addition to the LNA funded by equity held by
each of the Clearing Agencies as its General Business Risk Capital
Requirement. The Capital Policy describes how each Clearing Agency's
General Business Risk Capital Requirement and Credit Risk Capital
Requirement fit within the Clearing Agencies' Capital Framework, where
the Total Capital Requirement of each Clearing Agency is calculated as
the sum of its General Business Risk Capital Requirement and Credit
Risk Capital Requirement.
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\8\ LNA funded by equity held as the Clearing Agencies' Credit
Risk Capital Requirement is held in addition to resources held by
the Clearing Agencies for credit risk in compliance with Rule 17Ad-
22(e)(4) under the Act and in addition to resources held by the
Clearing Agencies for liquidity risk in compliance with Rule 17Ad-
22(e)(7). 17 CFR 240.17Ad-22(e)(4), (7).
\9\ The Rules, By-laws and Organizational Certificate of DTC
(``DTC Rules''), the Rulebook of the Government Securities Division
of FICC (``GSD Rules''), the Clearing Rules of the Mortgage-Backed
Securities Division of FICC (``MBSD Rules''), or the Rules &
Procedures of NSCC (``NSCC Rules,'' together with the DTC Rules, GSD
Rules and MBSD Rules, the ``Clearing Agencies' Rules'' or
``Rules''), available at https://dtcc.com/legal/rules-and-procedures.
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The Policy also provides a plan for the replenishment of capital
through the Capital Replenishment Plan. The Capital Replenishment Plan
was adopted by the Clearing Agencies as a plan for the replenishment of
capital by each Clearing Agency should its equity fall close to or
below the amount being held as its Total Capital Requirement pursuant
to the Capital Policy. The Capital Replenishment Plan identifies the
circumstances that would trigger implementation of the Plan; the roles,
responsibilities, and guiding principles for implementation of the
Plan; and an overview and description of each of the tools that may be
used to replenish capital.
Proposed Revisions to the Capital Policy and Capital Replenishment Plan
As described in greater detail below, the Clearing Agencies are
proposing to make certain revisions to the Capital Policy and Capital
Replenishment Plan.
First, the proposed revisions would correct typographical errors
and make other technical revisions to correct and simplify statements
in the Capital Policy and Capital Replenishment Plan. Second, the
proposed revisions would replace references to the ``Credit Risk
Capital Requirement'' with ``Corporate Contribution.'' This proposed
change would reflect the implementation of recent revisions to the
Clearing Agencies' Rules regarding allocation of losses.\10\ Finally,
the proposed revisions would update the description of the calculation
of the Recovery/Wind-down Capital Requirement in the Capital Policy to
clarify that the Recovery & Wind-down Plans of each of the Clearing
Agencies have been adopted by the Clearing Agencies.\11\
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\10\ See Securities Exchange Act Release Nos. 83969 (August 28,
2018), 83 FR 44955 (September 4, 2018) (SR-DTC-2017-022); 83950
(August 27, 2018), 83 FR 44393 (August 30, 2018) (SR-DTC-2017-804).
\11\ See Securities Exchange Act Release Nos. 83972 (August 28,
2018), 83 FR 44964 (September 4, 2018) (SR-DTC-2017-021); 83953
(August 27, 2018), 83 FR 44381 (August 30, 2018) (SR-DTC-2017-803).
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These proposed revisions are designed to enhance the clarity of the
Policy and Plan and help ensure that they continue to operate as
intended.
1. Technical Revisions
DTC is proposing technical revisions to the descriptions within the
Capital Policy and Capital Replenishment Plan that would correct
typographical errors, including, for example, removing a phrase that
was incorrectly repeated in the same sentence. These revisions would
also correct an error in Section 3 of the Policy, where the document
was incorrectly referred to as the Plan.
Such revisions would also update the documents. For example, the
proposed changes would replace references in the Capital Policy and
Capital Replenishment Plan to the Finance/Capital Committee of the
Boards, which was disbanded September 2017, with
[[Page 53140]]
the Boards, which has taken on the responsibilities of this Committee
set forth in the Policy and Plan. These revisions would also include
updating the Capital Replenishment Plan to revise the name of the
``Capital Contributions to DTCC Subsidiaries and Joint Ventures
Policy'' to the new name of this document, the ``Capital Contributions
Policy.'' \12\
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\12\ This document is an internal policy that governs how The
Depository Trust & Clearing Corporation may invest capital in its
subsidiaries, including the Clearing Agencies, as well as affiliated
joint ventures and non-affiliated companies.
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Finally, the proposed revisions would also simplify the
descriptions in these documents. For example, these revisions would add
a defined term for the Clearing Agencies' Rules to the Policy in order
to simplify references to such rules and procedures in this document.
2. Addition of Corporate Contribution
The proposed revisions would also replace references in the Capital
Policy and Capital Replenishment Plan to the ``Credit Risk Capital
Requirement'' with the ``Corporate Contribution.'' Currently, the
Capital Policy describes how each Clearing Agency maintains a portion
of retained earnings as LNA funded by equity as its Credit Risk Capital
Requirement, in accordance with their respective Rules. Recently, the
Clearing Agencies implemented revisions to their respective Rules to
enhance the process by which they may allocate losses to their
participants if the size of the losses exceed their prefunded
resources.\13\ Such revisions included an amendment to the calculation
and application of the amount of LNA funded by equity that are
currently referred to in the Capital Policy and Capital Replenishment
Plan as the Credit Risk Capital Requirement.
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\13\ Supra note 10.
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Specifically, the DTC Rules previously provided that DTC could, in
its discretion and in such amounts as it would determine, charge its
existing retained earnings and undivided profits to a loss or
liability, to the extent that it is not satisfied by the Actual
Participants Fund Deposit and Preferred Stock of the defaulting
Participant. Pursuant to these recent changes, the DTC Rules require
that DTC contribute an amount equal to 50 percent of DTC's General
Business Risk Capital Requirement (as such amount is defined in the
Capital Policy) (``Corporate Contribution'') towards losses or
liabilities arising from a Participant default or non-default event.
DTC may also voluntarily apply amounts greater than the Corporate
Contribution, as the DTC Board of Directors may determine. The
Corporate Contribution applied to any losses arising from events that
may occur during the next 250 business days would be reduced to the
remaining unused portion of Corporate Contribution, if any.\14\
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\14\ See supra notes 9 and 10.
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The amendments to the calculation and application of the resources
that are now referred to as the Corporate Contribution did not change
how these resources are described within the Policy or the Plan. The
Corporate Contribution continues to represent resources maintained by
the Clearing Agencies to address losses due to a participant default,
as a part of their management of credit risk.\15\ These resources also
are still held in addition to the LNA funded by equity held by each of
the Clearing Agencies as its General Business Risk Capital Requirement.
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\15\ As noted above, unlike the resources referred to in the
Policy and Plan as the Credit Risk Capital Requirement, the
Corporate Contribution would also be available to the Clearing
Agencies to address losses due to events other than a participant
default.
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Therefore, the Capital Policy and Capital Replenishment Plan would
be revised to replace references to the Credit Risk Capital Requirement
with references to the Corporate Contribution, and no other changes are
needed to the description of this amount.
3. Update References to the Recovery & Wind-Down Plans of the Clearing
Agencies
The proposed revisions would also update the Capital Policy to make
clear that the Recovery & Wind-down Plans of the Clearing Agencies have
been adopted by the Clearing Agencies.\16\ Such references are
currently made in connection with the description of the calculation of
the Recovery/Wind-down Capital Requirement.
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\16\ Supra note 11.
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The Recovery/Wind-down Capital Requirement is an amount based on
the time estimated to execute a recovery or orderly wind-down of the
critical operations of that Clearing Agency and is used by the Clearing
Agencies to determine their General Business Risk Capital Requirement.
Each of the Clearing Agencies recently adopted a Recovery & Wind-down
Plan, which provide plans for the recovery and orderly wind-down of
each of the Clearing Agencies necessitated by credit losses, liquidity
shortfalls, losses from general business risk, or any other losses.\17\
The Recovery & Wind-down Plans each include an analysis of the
calculation of the Recovery/Wind-down Capital Requirement, based on the
formula that is set forth in the Capital Policy.
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\17\ Id.
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The Clearing Agencies are proposing to revise the Capital Policy to
make clear that the Recovery & Wind-down Plans have now been adopted by
the Clearing Agencies.
2. Statutory Basis
The Clearing Agencies believe that the proposed rule change is
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 Capital Policy and
the Capital Replenishment Plan are both consistent with Section
17A(b)(3)(F) of the Act \18\ and Rule 17Ad-22(e)(15) under the Act,\19\
for the reasons described below.
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\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17Ad-22(e)(15).
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Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of the Clearing Agencies 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.\20\
Together, the Capital Policy and the Capital Replenishment Plan are
designed to ensure that each of the Clearing Agencies hold sufficient
LNA funded by equity to cover potential general business losses so that
it can continue the prompt and accurate clearance and settlement of
securities transactions and can continue to assure the safeguarding of
securities and funds which are in its custody or control or for which
it is responsible if those losses materialize. By correcting errors and
updating the Capital Policy and Capital Replenishment Plan to be
consistent with recent changes implemented by the Clearing Agencies,
the proposed revisions would allow the Clearing Agencies to maintain
these documents to operate in the way they were intended. Therefore,
such proposed revisions would be consistent with the requirements of
Section 17A(b)(3)(F) of the Act.\21\
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\20\ 15 U.S.C. 78q-1(b)(3)(F).
\21\ Id.
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Rule 17Ad-22(e)(15) requires the Clearing Agencies to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to identify, monitor, and manage their respective
general business risk and hold sufficient
[[Page 53141]]
liquid net assets funded by equity to cover potential general business
losses so that the Clearing Agencies can continue operations and
services as a going concern if those losses materialize.\22\ As
originally implemented, the Capital Policy and the Capital
Replenishment Plan were designed to meet the requirements of Rule 17Ad-
22(e)(15) under the Act.\23\ As stated above, the proposed revisions
would update the Capital Policy and Capital Replenishment Plan to be
consistent with recent changes implemented by the Clearing Agencies. In
this way, the proposed changes would allow the Clearing Agencies to
maintain these documents in a way that to meet these requirements.
Therefore, such proposed revisions would be consistent with the
requirements of Rule 17Ad-22(e)(15) under the Act.\24\
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\22\ 17 CFR 240.17Ad-22(e)(15).
\23\ See supra note 5.
\24\ 17 CFR 240.17Ad-22(e)(15).
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(B) Clearing Agency's Statement on Burden on Competition
Each of the Clearing Agencies believes that none of the proposed
revisions to the Capital Policy and the Capital Replenishment Plan
would have any impact, or impose any burden, on competition. The Policy
and the Plan are maintained by the Clearing Agencies in order to
satisfy their regulatory requirements and generally reflect internal
tools and procedures. Tools and procedures that have a direct impact on
the rights, responsibilities or obligations of members or participants
of the Clearing Agencies are reflected in the Clearing Agencies' Rules.
Accordingly, the Capital Policy and Capital Replenishment Plan
themselves are documents that enhance the Clearing Agencies' regulatory
compliance and internal management and do not have any impact, or
impose any burden, on competition.
The proposed revisions to correct and update the Capital Policy and
Capital Replenishment Plan would not affect any changes on the
fundamental purpose or operation of these documents and, as such, would
also not have any impact, or impose any burden, on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
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 Change, and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \25\ and paragraph (f) of Rule 19b-4
thereunder.\26\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is 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 [email protected]. Please include
File Number SR-DTC-2018-008 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-2018-008. 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 the filing also will be available for inspection
and copying at the principal office of DTC 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-DTC-2018-008 and should be submitted on
or before November 9, 2018
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Eduardo A. Aleman,
Assistant Secretary.
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\27\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-22779 Filed 10-18-18; 8:45 am]
BILLING CODE 8011-01-P