Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change To Amend the GSD and MBSD Methodology Documents and the MBSD Clearing Rules, 25315-25318 [2019-11322]

Download as PDF Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices issuance of the securities rather than at the time of entry into a binding agreement. This distinction is necessary to accommodate the Exchange’s longstanding interpretation under Section 303A.08 that the issuance of shares in lieu of cash at the election of participants in a deferred compensation arrangement is not subject to shareholder approval under Section 303A.08 if the number of shares issued in lieu of cash compensation is based on the fair market value of the shares at the time of issuance. Arrangements of this type are common and they are protective of investors as they are designed to ensure that the issuances under the deferred compensation arrangement are not economically dilutive to the other shareholders at the time of such issuance. The proposed amendments to Section 312.04(j) simply clarify the rule text and has [sic] no substantive effect. IV. Solicitation of Comments B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change would simply clarify the applicable rule to ensure that it will be applied in a manner that is consistent with the Exchange’s long standing interpretation of that rule. As such, the amendment is neither intended to, nor expected to, impose any burden on competition. The proposed amendments to Section 312.04(j) clarify the rule text and have no substantive effect. All submissions should refer to File Number SR–NYSE–2019–28. 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 filing also will be available for inspection and copying at the principal office of the Exchange. 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–NYSE–2019–28, and should be submitted on or before June 21, 2019. khammond on DSKBBV9HB2PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 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: • 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– NYSE–2019–28 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. Frm 00085 Fmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–11318 Filed 5–30–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments PO 00000 25315 Sfmt 4703 [Release No. 34–85944; File No. SR–FICC– 2019–001] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change To Amend the GSD and MBSD Methodology Documents and the MBSD Clearing Rules May 24, 2019. I. Introduction On April 5, 2019, Fixed Income Clearing Corporation (‘‘FICC’’) 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 proposed rule change SR–FICC–2019–001. The proposed rule change was published for comment in the Federal Register on April 23, 2019.3 The Commission did not receive any comment letters on the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change 4 FICC proposes to amend the GSD Methodology Document—GSD Initial Market Risk Margin Model (‘‘GSD QRM Methodology Document’’) 5 and the MBSD Methodology and Model Operations Document—MBSD 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 85676 (April 17, 2019), 84 FR 16921 (April 23, 2019) (SR– FICC–2019–001) (‘‘Notice’’). 4 Capitalized terms used herein and not defined shall have the meaning assigned to such terms in the FICC Government Securities Division (‘‘GSD’’) Rulebook (‘‘GSD Rules’’) and the FICC MortgageBacked Securities Division (‘‘MBSD,’’ and together with GSD, the ‘‘Divisions’’) Clearing Rules (‘‘MBSD Rules’’), as applicable, available at https:// www.dtcc.com/legal/rules-and-procedures.aspx. 5 FICC filed the GSD QRM Methodology Document as a confidential exhibit in the rule filing and advance notice for GSD sensitivity VaR. See Securities Exchange Act Release No. 83362 (June 1, 2018), 83 FR 26514 (June 7, 2018) (SR–FICC–2018– 001) (‘‘GSD Approval Order’’) and Securities Exchange Act Release No. 83223 (May 11, 2018), 83 FR 23020 (May 17, 2018) (SR–FICC–2018–801) (‘‘GSD Advance Notice’’). 6 1 15 E:\FR\FM\31MYN1.SGM 31MYN1 25316 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices Quantitative Risk Model 6 (‘‘MBSD QRM Methodology Document,’’ and together with the GSD QRM Methodology Document, the ‘‘QRM Methodology Documents’’ 7) to (i) modify the lookback periods for the Margin Proxy of GSD and MBSD,8 and the GSD Haircut Rates, (ii) make clarifications, corrections, and technical changes to the GSD QRM Methodology Document, and (iii) make clarification and technical changes to the MBSD QRM Methodology Document. FICC also proposes to make clarifying changes to the MBSD Rules. khammond on DSKBBV9HB2PROD with NOTICES A. Replacing Specific References to the Look-Back Periods for the Margin Proxy of GSD and MBSD and the GSD Haircut Rates With More General Language in the QRM Methodology Documents FICC is proposing to amend the QRM Methodology Documents to remove the specific references to the current lookback periods in use and replace them with general language that would (i) refer to a monthly parameter report, (ii) state that the look-back period would not be less than one year, and (iii) specify the governance around changing the look-back periods.9 The QRM Methodology Documents provide the methodology by which FICC calculates the GSD and MBSD VaR Charges.10 Specifically, the QRM Methodology Documents specify model inputs, parameters, and assumptions, among other information.11 With respect to the Margin Proxy, which is an alternative volatility calculation of GSD and MBSD, each of the QRM Methodology Documents refers to specific look-back periods, which are in 6 FICC filed the MBSD QRM Methodology Document as a confidential exhibit in the rule filing and advance notice for MBSD sensitivity VaR. See Securities Exchange Act Release No. 79868 (January 24, 2017), 82 FR 8780 (January 30, 2017) (SR–FICC– 2016–007) (‘‘MBSD Approval Order’’) and Securities Exchange Act Release No. 79843 (January 19, 2017), 82 FR 8555 (January 26, 2017) (SR–FICC– 2016–801) (‘‘MBSD Advance Notice’’). 7 FICC requested confidential treatment of the QRM Methodology Documents and has filed them separately with the Secretary of the Commission. See 17 CFR 240–24b–2. 8 FICC has adopted procedures that would govern in the event that the vendor fails to provide risk analytics data used by FICC to calculate the VaR Charge (which is defined in GSD Rule 1 and MBSD Rule 1). Supra note 4. These procedures include the application of the Margin Proxy. Specifically, each Division’s Margin Proxy would be applied as an alternative volatility calculation for the VaR Charge (subject to the VaR Floor) if FICC determines that the data disruption will extend beyond five (5) business days. For more detailed and complete information about the GSD and the MBSD Margin Proxy, see GSD Approval Order and MBSD Approval Order, supra notes 5 and 6. 9 Notice, supra note 3, at 16922. 10 Id. 11 Id. VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 use today.12 Similarly, the GSD QRM Methodology Document refers to the specific look-back periods for the two haircut rates that form the basis of the GSD haircut charge.13 Currently, if FICC observes material differences between the Margin Proxy calculations and the aggregate Clearing Fund requirement calculated using the proposed VaR model (i.e., the sensitivity approach), or if the Margin Proxy’s backtesting results do not meet FICC’s 99 percent confidence level, management may recommend remedial actions to the Model Risk Governance Committee (‘‘MRGC’’), and to the extent necessary the Management Risk Committee (‘‘MRC’’), such as increasing the look-back period and/or applying an appropriate historical stressed period to the Margin Proxy calibration.14 In addition, the GSD Rules provide that the Margin Proxy shall cover such range of historical market price moves and parameters as FICC from time to time deems appropriate.15 With respect to the GSD haircut charge, the GSD QRM Methodology Document provides that certain key model parameters, including the look-back periods for the GSD Haircut Rates, are subject to periodic review and recalibration.16 Under the proposal, the QRM Methodology Documents would provide that the look-back periods for the Margin Proxy and the two GSD Haircut Rates would be tracked in a monthly parameter report. The QRM 12 Id. 13 Id. FICC states that, occasionally, portfolios contain classes of securities that reflect market price changes that are not consistently related to historical risk factors. FICC further states that the value of these securities is often uncertain because the securities’ market volume varies widely, thus the price histories are limited. Because the volume and price information for such securities is not robust, a historical simulation approach would not generate VaR Charge amounts that adequately reflect the risk profile of such securities. FICC utilizes a haircut method (hereinafter referred to as the ‘‘GSD haircut charge’’) based on the volatility of historic index returns for any security that lacks sufficient historical data to be incorporated into the sensitivity approach. See GSD Approval Order and MBSD Approval Order, supra notes 5 and 6. The GSD haircut charge consists of two haircut rates: (i) The haircut rate for mortgage-backed securities (‘‘MBS’’) pools without sensitivity analytics data and (ii) the haircut rate for Treasury and Agency bonds without sensitivity analytics data (hereinafter, the ‘‘GSD Haircut Rates’’). The proposal applies to the look-back periods for the GSD Haircut Rates. 14 Notice, supra note 3, at 16922; see Securities Exchange Act Release No. 82588 (January 26, 2018), 83 FR 4687, 4692 (February 1, 2018) (SR–FICC– 2018–001) (‘‘Notice of GSD Rule Filing’’); Securities Exchange Act Release No. 79491 (December 7, 2016), 81 FR 90001, 90005 (December 13, 2016) (SR–FICC–2016–007) (‘‘Notice of MBSD Rule Filing’’); MBSD Approval Order, supra note 6, at 8782–8783. 15 GSD Rules, Rule 1—Definitions, supra note 4. 16 Notice, supra note 3, at 16922. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 Methodology Documents would also provide that these look-back periods shall not be less than one year. Finally, the QRM Methodology Documents would state that any changes to these look-back periods would be subject to the governance process set forth in the Clearing Agency Model Risk Management Framework (the ‘‘Framework’’).17 The Framework provides that the Model Validation and Control Group (‘‘MVC’’) prepares Model performance monitoring reports on both a monthly and daily basis.18 On a monthly basis, MVC (i) performs sensitivity analysis on each of FICC’s Models,19 (ii) reviews key parameters and assumptions for backtesting, and (iii) considers modifications to ensure that the backtesting practices of FICC are appropriate for determining the adequacy of its applicable margin resources.20 The Framework states that MRGC will review the Model performance monitoring, which includes review of risk-based Models used to calculate margin requirements and relevant parameters/threshold indicators, sensitivity analysis, and Model backtesting results, and serious performance concerns will be escalated to the MRC.21 B. Clarifications, Corrections, and Technical Changes to the GSD QRM Methodology Document First, FICC would make certain clarifications to the GSD QRM Methodology Document.22 In the section of the GSD QRM Methodology Document that describes key parameters (where the look-back periods are currently listed), FICC proposes to 17 Id.; see Securities Exchange Act Release No. 81485 (August 25, 2017), 82 FR 41433 (August 31, 2017) (SR–DTC–2017–008; SR–FICC–2017–014; SR–NSCC–2017–008) (‘‘Framework Approval Order’’). In general, the Framework describes the model risk management practices adopted by FICC, National Securities Clearing Corporation, and The Depository Trust Company. FICC states that the Framework is designed to help identify, measure, monitor, and manage the risks associated with the design, development, implementation, use, and validation of quantitative models. The Framework describes (i) governance of the Framework; (ii) key terms; (iii) model inventory procedures; (iv) model validation procedures; (v) model approval process; and (vi) model performance procedures. Framework Approval Order, at 41435. 18 Notice, supra note 3, at 16922. 19 Id. The term ‘‘Model’’ refers to a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates. Framework Approval Order, supra note 17, at 41433. 20 Notice, supra note 3, at 16922; Framework Approval Order, supra note 17, at 41435. 21 Notice, supra note 3, at 16922; Framework Approval Order, supra note 17, at 41435. 22 Notice, supra note 3, at 16923. E:\FR\FM\31MYN1.SGM 31MYN1 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices khammond on DSKBBV9HB2PROD with NOTICES rearrange the list so that the look-back periods associated with sensitivity VaR are grouped together and the look-back periods for GSD Haircut Rates are grouped together.23 FICC also proposes to add sub-headings to enhance readability and clarity.24 In addition, in the section of the GSD QRM Methodology Document that describes key parameters, FICC would amend the language describing the GSD Haircut Rates to correspond to the language used in later sections for clarity and consistency.25 Where the GSD QRM Methodology Document references the governance practice regarding the review and recalibration of the look-back periods, FICC also proposes to specifically reference the Framework.26 FICC would provide additional clarity by adding language describing types of data that would be used to determine key model parameters.27 FICC would also clarify the GSD QRM Methodology Document by adding language stating that management may implement any approved changes by MRGC or MRC.28 Currently, the GSD QRM Methodology Document states that if the Margin Proxy’s backtesting results do not meet FICC’s 99 percent confidence level, management may recommend remedial actions to MRGC, and to the extent necessary the MRC, such as increasing the look-back period and/or applying an appropriate historical stressed period to the Margin Proxy calibration.29 With respect to the descriptions of some of the GSD Haircut Rates, FICC would add clarifying terminology and delete duplicative explanations and replace them with a cross-reference to the appendix, which contains the same explanation.30 Second, FICC proposes to make certain corrections to the GSD QRM Methodology Document.31 FICC would correct a typographical error in the description of key parameters by revising a reference from MBSD to MBS.32 In addition, to correct what FICC states is an omission in the GSD QRM Methodology Document, FICC would add that if FICC observes material differences between the Margin Proxy calculations and the aggregate Clearing Fund requirement calculated using the VaR model, management may recommend remedial actions (as was stated in the GSD sensitivity VaR rule filing).33 Finally, FICC proposes to make certain technical changes (e.g., word usage, spacing corrections, grammar changes, and revising certain references from singular to plural) to the GSD QRM Methodology Document.34 For example, for consistency, FICC proposes to revise a reference from ‘‘window’’ to ‘‘period’’ in the description of key parameters and all references from ‘‘lookback’’ to ‘‘lookback’’ and from ‘‘TBA/pool’’ to ‘‘PoolTBA.’’ 35 C. Clarification and Technical Changes to the MBSD QRM Methodology Document FICC proposes to clarify the MBSD QRM Methodology Document by adding language stating that management may implement any approved changes by MRGC or MRC.36 Currently, the MBSD QRM Methodology Document states that if FICC observes material differences between the Margin Proxy calculations and the aggregate Clearing Fund requirement calculated using the VaR model, or the Margin Proxy’s backtesting results do not meet FICC’s 99 percent confidence level, management may recommend remedial actions to the MRGC, and to the extent necessary the MRC, such as increasing the look-back period and/or applying an appropriate historical stressed period to the Margin Proxy calibration.37 In addition, FICC proposes to make certain technical changes to the MBSD QRM Methodology Document (e.g., grammar changes and revising certain references from singular to plural).38 FICC would also revise a reference from ‘‘lookback’’ to ‘‘look-back’’ for consistency.39 FICC would remove the revision history because it is solely administrative and would not affect the calculation of margin or Clearing Members’ substantive rights or obligations.40 D. Clarifications to the MBSD Rules FICC proposes to make certain clarifications to the MBSD Rules.41 Specifically, FICC would add a definition of ‘‘Margin Proxy’’ and use such term in the definition of ‘‘VaR Charge.’’ 42 In addition, FICC would clarify the definition of ‘‘VaR Charge’’ in the MBSD Rules by adding the word ‘‘Clearing’’ before the word ‘‘Members.’’ 43 III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act 44 directs the Commission to approve a proposed rule change of a selfregulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to such organization. After carefully considering the proposed rule change, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to FICC. In particular, the Commission finds that the proposed rule change is consistent with Sections 17A(b)(3)(F) 45 of the Act and Rule 17Ad–22(e)(23)(ii) thereunder.46 A. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, in part, that the rules of a clearing agency be designed ‘‘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.’’ 47 First, as described above in Section II.A., the proposed rule change would amend the QRM Methodology Documents to remove specific references (and explanations relating thereto) to the look-back periods for (1) the Margin Proxy of GSD and MBSD and (2) the two GSD Haircut Rates, and replace them with more general language. The proposed rule change would state that the specific look-back periods would be tracked in the monthly parameter report, any changes to the look-back periods would not be less than one year, and any changes would be subject to the governance process set forth in the Framework.48 The Commission believes that such change, which is subject to the minimum look-back period and the governance process, would help FICC to better cover its credit exposures to its Members because the changes would help FICC to more accurately adjust the look-back periods under the following circumstances: 23 Id. 33 Id. 24 Id. 34 Id. 25 Id. 35 Id. 26 Id. 36 Id. 43 Id. 27 Id. 37 Notice, 44 15 supra note 3, at 16922. 38 Notice, supra note 3, at 16923. 39 Id. 40 Id. 41 Id. 42 Id. 28 Id. 29 Notice, 30 Notice, supra note 3, at 16922. supra note 3, at 16923. 31 Id. 32 Id. VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 25317 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 46 17 CFR 240.17Ad–22(e)(23)(ii). 47 15 U.S.C. 78q–1(b)(3)(F). 48 Notice, supra note 3, at 16922; Framework Approval Order, supra note 17. 45 15 E:\FR\FM\31MYN1.SGM 31MYN1 khammond on DSKBBV9HB2PROD with NOTICES 25318 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices • When FICC observes material differences between the Margin Proxy calculations and the aggregate Clearing Fund requirement calculated using the VaR model; • when the Margin Proxy’s backtesting results do not meet FICC’s 99 percent confidence level; or • when FICC observes that the asset class backtesting performance associated with the GSD Haircut Rates is not at the 99 percent confidence level. The Commission believes that the changes would help enhance FICC’s ability to calculate and collect adequate margin from its Clearing Members and Netting Members, and in turn, better manage the risks associated with losses arising from member defaults, protecting non-defaulting Clearing Members and Netting Members from such losses. Therefore, the Commission believes that the proposed rule changes to the look-back periods would allow FICC to effectively cover its losses, and assure the safeguarding of securities and funds which are in the custody or control of FICC or for which it is responsible, consistent with Section 17A(b)(3)(F) of the Act.49 Second, as described above in Sections II.B. and II.C., the proposed rule change would clarify, correct, and technically change the GSD QRM Methodology Document, and clarify and technically change the MBSD QRM Methodology Document to state how FICC would calculate the components of the margin calculation. The Commission believes that the changes described in Sections II.B. and II.C. would help enhance the clarity of the QRM Methodology Documents for FICC. FICC states that the QRM Methodology Documents are used by FICC Risk Management personnel to calculate margin requirements. Accordingly, helping to enhance the clarity of the QRM Methodology Documents would help FICC Risk Management personnel to accurately understand and implement the margining process, charge an appropriate level of margin, and in turn, allow FICC to better manage its risks from loss events. Therefore, the Commission believes that the changes described in Sections II.B. and II.C. would assure the safeguarding of securities and funds which are in the custody or control of FICC or for which it is responsible, consistent with Section 17A(b)(3)(F) of the Act.50 Third, as described in Section II.D., the proposed rule change would add and clarify certain definitions. The Commission believes that the proposed 49 15 U.S.C. 78q–1(b)(3)(F). 50 Id. VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 clarifications to Rule 1 of the MBSD Rules would help ensure that the calculation of margin is clear and transparent to Clearing Members and FICC, and thereby help ensure that FICC calculates and collects adequate margin from Clearing Members, and that Clearing Members understand the relevant definition. Therefore, the Commission believes that the proposed clarifications to Rule 1 of the MBSD Rules would also assure the safeguarding of securities and funds which are in the custody and control of FICC or for which it is responsible, consistent with Section 17A(b)(3)(F) of the Act.51 B. Consistency With Rule 17Ad– 22(e)(23)(ii) Under the Act Rule 17Ad–22(e)(23)(ii) under the Act requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to provide sufficient information to enable participants to identify and evaluate the risks, fees, and other material costs they incur by participating in the covered clearing agency.52 As described above in Section II.D., the proposal would help to clarify Rule 1 of the MBSD Rules, which in turn, would help ensure that the calculation of margin is transparent and clear to Clearing Members, thereby enabling Clearing Members to better understand the calculation of margin, as well as providing them with increased predictability and certainty regarding their obligations. As such, the Commission believes that the proposed rule changes are consistent with Rule 17Ad–22(e)(23)(ii) under the Act.53 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and, in particular, with the requirements of Section 17A of the Act 54 and the rules and regulations promulgated thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act 55 that proposed rule change SR–FICC–2019– 001, be, and hereby is, APPROVED.56 51 Id. 52 17 CFR 240.17Ad–22(e)(23)(ii). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.57 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–11322 Filed 5–30–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85940; File No. SR–LCH SA–2019–003] Self-Regulatory Organizations; LCH SA; Notice of Filing of Proposed Rule Change, as Modified by Amendments No. 1 and 2, To Implement Settled-toMarket Treatment of Variation Margin, Permit the Creation of Multiple Account Structures, Permit Select Members To Provide Clearing Services to Affiliated Firms, and Update the Onboarding Procedures May 24, 2019. 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 May 13, 2019, Banque Centrale de Compensation, which conducts business under the name LCH SA (‘‘LCH SA’’), filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) the proposed rule change described in Items I, II and III below, which Items have been prepared primarily by LCH SA. On May 21, 2019, LCH SA filed Amendment No. 1 to the proposed rule change, and on May 24, 2019, LCH SA filed Amendment No. 2 to the proposed rule change.3 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendments No. 1 and 2, from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change LCH SA is proposing to amend its (i) CDS Clearing Rule Book (‘‘Rule Book’’), (ii) CDS Clearing Supplement (‘‘Supplement’’), and (iii) CDS Clearing Procedures (‘‘Procedures’’) (collectively the ‘‘CDS Clearing Rules’’) to incorporate new terms and to make conforming, clarifying, and clean-up changes intended to: (1) Implement a ‘‘settled-to-market’’ (‘‘STM’’) treatment 53 Id. 54 15 U.S.C. 78q–1. U.S.C. 78s(b)(2). 56 In approving the proposed rule change, the Commission considered the proposals’ impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 57 17 CFR 200.30–3(a)(12). 55 15 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Amendments No. 1 and 2 both corrected technical issues with the initial filing of the proposed rule change but did not make any changes to the substance of the filing or the text of the proposed rule change. 2 17 E:\FR\FM\31MYN1.SGM 31MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Notices]
[Pages 25315-25318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11322]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85944; File No. SR-FICC-2019-001]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Approving a Proposed Rule Change To Amend the GSD and MBSD 
Methodology Documents and the MBSD Clearing Rules

May 24, 2019.

I. Introduction

    On April 5, 2019, Fixed Income Clearing Corporation (``FICC'') 
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\ proposed rule change SR-
FICC-2019-001. The proposed rule change was published for comment in 
the Federal Register on April 23, 2019.\3\ The Commission did not 
receive any comment letters on the proposed rule change. For the 
reasons discussed below, the Commission is approving the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 85676 (April 17, 2019), 
84 FR 16921 (April 23, 2019) (SR-FICC-2019-001) (``Notice'').
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II. Description of the Proposed Rule Change \4\
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    \4\ Capitalized terms used herein and not defined shall have the 
meaning assigned to such terms in the FICC Government Securities 
Division (``GSD'') Rulebook (``GSD Rules'') and the FICC Mortgage-
Backed Securities Division (``MBSD,'' and together with GSD, the 
``Divisions'') Clearing Rules (``MBSD Rules''), as applicable, 
available at https://www.dtcc.com/legal/rules-and-procedures.aspx.
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    FICC proposes to amend the GSD Methodology Document--GSD Initial 
Market Risk Margin Model (``GSD QRM Methodology Document'') \5\ and the 
MBSD Methodology and Model Operations Document--MBSD

[[Page 25316]]

Quantitative Risk Model \6\ (``MBSD QRM Methodology Document,'' and 
together with the GSD QRM Methodology Document, the ``QRM Methodology 
Documents'' \7\) to (i) modify the look-back periods for the Margin 
Proxy of GSD and MBSD,\8\ and the GSD Haircut Rates, (ii) make 
clarifications, corrections, and technical changes to the GSD QRM 
Methodology Document, and (iii) make clarification and technical 
changes to the MBSD QRM Methodology Document. FICC also proposes to 
make clarifying changes to the MBSD Rules.
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    \5\ FICC filed the GSD QRM Methodology Document as a 
confidential exhibit in the rule filing and advance notice for GSD 
sensitivity VaR. See Securities Exchange Act Release No. 83362 (June 
1, 2018), 83 FR 26514 (June 7, 2018) (SR-FICC-2018-001) (``GSD 
Approval Order'') and Securities Exchange Act Release No. 83223 (May 
11, 2018), 83 FR 23020 (May 17, 2018) (SR-FICC-2018-801) (``GSD 
Advance Notice'').
    \6\ FICC filed the MBSD QRM Methodology Document as a 
confidential exhibit in the rule filing and advance notice for MBSD 
sensitivity VaR. See Securities Exchange Act Release No. 79868 
(January 24, 2017), 82 FR 8780 (January 30, 2017) (SR-FICC-2016-007) 
(``MBSD Approval Order'') and Securities Exchange Act Release No. 
79843 (January 19, 2017), 82 FR 8555 (January 26, 2017) (SR-FICC-
2016-801) (``MBSD Advance Notice'').
    \7\ FICC requested confidential treatment of the QRM Methodology 
Documents and has filed them separately with the Secretary of the 
Commission. See 17 CFR 240-24b-2.
    \8\ FICC has adopted procedures that would govern in the event 
that the vendor fails to provide risk analytics data used by FICC to 
calculate the VaR Charge (which is defined in GSD Rule 1 and MBSD 
Rule 1). Supra note 4. These procedures include the application of 
the Margin Proxy. Specifically, each Division's Margin Proxy would 
be applied as an alternative volatility calculation for the VaR 
Charge (subject to the VaR Floor) if FICC determines that the data 
disruption will extend beyond five (5) business days. For more 
detailed and complete information about the GSD and the MBSD Margin 
Proxy, see GSD Approval Order and MBSD Approval Order, supra notes 5 
and 6.
---------------------------------------------------------------------------

A. Replacing Specific References to the Look-Back Periods for the 
Margin Proxy of GSD and MBSD and the GSD Haircut Rates With More 
General Language in the QRM Methodology Documents

    FICC is proposing to amend the QRM Methodology Documents to remove 
the specific references to the current look-back periods in use and 
replace them with general language that would (i) refer to a monthly 
parameter report, (ii) state that the look-back period would not be 
less than one year, and (iii) specify the governance around changing 
the look-back periods.\9\
---------------------------------------------------------------------------

    \9\ Notice, supra note 3, at 16922.
---------------------------------------------------------------------------

    The QRM Methodology Documents provide the methodology by which FICC 
calculates the GSD and MBSD VaR Charges.\10\ Specifically, the QRM 
Methodology Documents specify model inputs, parameters, and 
assumptions, among other information.\11\ With respect to the Margin 
Proxy, which is an alternative volatility calculation of GSD and MBSD, 
each of the QRM Methodology Documents refers to specific look-back 
periods, which are in use today.\12\ Similarly, the GSD QRM Methodology 
Document refers to the specific look-back periods for the two haircut 
rates that form the basis of the GSD haircut charge.\13\
---------------------------------------------------------------------------

    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ Id. FICC states that, occasionally, portfolios contain 
classes of securities that reflect market price changes that are not 
consistently related to historical risk factors. FICC further states 
that the value of these securities is often uncertain because the 
securities' market volume varies widely, thus the price histories 
are limited. Because the volume and price information for such 
securities is not robust, a historical simulation approach would not 
generate VaR Charge amounts that adequately reflect the risk profile 
of such securities. FICC utilizes a haircut method (hereinafter 
referred to as the ``GSD haircut charge'') based on the volatility 
of historic index returns for any security that lacks sufficient 
historical data to be incorporated into the sensitivity approach. 
See GSD Approval Order and MBSD Approval Order, supra notes 5 and 6. 
The GSD haircut charge consists of two haircut rates: (i) The 
haircut rate for mortgage-backed securities (``MBS'') pools without 
sensitivity analytics data and (ii) the haircut rate for Treasury 
and Agency bonds without sensitivity analytics data (hereinafter, 
the ``GSD Haircut Rates''). The proposal applies to the look-back 
periods for the GSD Haircut Rates.
---------------------------------------------------------------------------

    Currently, if FICC observes material differences between the Margin 
Proxy calculations and the aggregate Clearing Fund requirement 
calculated using the proposed VaR model (i.e., the sensitivity 
approach), or if the Margin Proxy's backtesting results do not meet 
FICC's 99 percent confidence level, management may recommend remedial 
actions to the Model Risk Governance Committee (``MRGC''), and to the 
extent necessary the Management Risk Committee (``MRC''), such as 
increasing the look-back period and/or applying an appropriate 
historical stressed period to the Margin Proxy calibration.\14\ In 
addition, the GSD Rules provide that the Margin Proxy shall cover such 
range of historical market price moves and parameters as FICC from time 
to time deems appropriate.\15\ With respect to the GSD haircut charge, 
the GSD QRM Methodology Document provides that certain key model 
parameters, including the look-back periods for the GSD Haircut Rates, 
are subject to periodic review and recalibration.\16\
---------------------------------------------------------------------------

    \14\ Notice, supra note 3, at 16922; see Securities Exchange Act 
Release No. 82588 (January 26, 2018), 83 FR 4687, 4692 (February 1, 
2018) (SR-FICC-2018-001) (``Notice of GSD Rule Filing''); Securities 
Exchange Act Release No. 79491 (December 7, 2016), 81 FR 90001, 
90005 (December 13, 2016) (SR-FICC-2016-007) (``Notice of MBSD Rule 
Filing''); MBSD Approval Order, supra note 6, at 8782-8783.
    \15\ GSD Rules, Rule 1--Definitions, supra note 4.
    \16\ Notice, supra note 3, at 16922.
---------------------------------------------------------------------------

    Under the proposal, the QRM Methodology Documents would provide 
that the look-back periods for the Margin Proxy and the two GSD Haircut 
Rates would be tracked in a monthly parameter report. The QRM 
Methodology Documents would also provide that these look-back periods 
shall not be less than one year. Finally, the QRM Methodology Documents 
would state that any changes to these look-back periods would be 
subject to the governance process set forth in the Clearing Agency 
Model Risk Management Framework (the ``Framework'').\17\
---------------------------------------------------------------------------

    \17\ Id.; see Securities Exchange Act Release No. 81485 (August 
25, 2017), 82 FR 41433 (August 31, 2017) (SR-DTC-2017-008; SR-FICC-
2017-014; SR-NSCC-2017-008) (``Framework Approval Order''). In 
general, the Framework describes the model risk management practices 
adopted by FICC, National Securities Clearing Corporation, and The 
Depository Trust Company. FICC states that the Framework is designed 
to help identify, measure, monitor, and manage the risks associated 
with the design, development, implementation, use, and validation of 
quantitative models. The Framework describes (i) governance of the 
Framework; (ii) key terms; (iii) model inventory procedures; (iv) 
model validation procedures; (v) model approval process; and (vi) 
model performance procedures. Framework Approval Order, at 41435.
---------------------------------------------------------------------------

    The Framework provides that the Model Validation and Control Group 
(``MVC'') prepares Model performance monitoring reports on both a 
monthly and daily basis.\18\ On a monthly basis, MVC (i) performs 
sensitivity analysis on each of FICC's Models,\19\ (ii) reviews key 
parameters and assumptions for backtesting, and (iii) considers 
modifications to ensure that the backtesting practices of FICC are 
appropriate for determining the adequacy of its applicable margin 
resources.\20\ The Framework states that MRGC will review the Model 
performance monitoring, which includes review of risk-based Models used 
to calculate margin requirements and relevant parameters/threshold 
indicators, sensitivity analysis, and Model backtesting results, and 
serious performance concerns will be escalated to the MRC.\21\
---------------------------------------------------------------------------

    \18\ Notice, supra note 3, at 16922.
    \19\ Id. The term ``Model'' refers to a quantitative method, 
system, or approach that applies statistical, economic, financial, 
or mathematical theories, techniques, and assumptions to process 
input data into quantitative estimates. Framework Approval Order, 
supra note 17, at 41433.
    \20\ Notice, supra note 3, at 16922; Framework Approval Order, 
supra note 17, at 41435.
    \21\ Notice, supra note 3, at 16922; Framework Approval Order, 
supra note 17, at 41435.
---------------------------------------------------------------------------

B. Clarifications, Corrections, and Technical Changes to the GSD QRM 
Methodology Document

    First, FICC would make certain clarifications to the GSD QRM 
Methodology Document.\22\ In the section of the GSD QRM Methodology 
Document that describes key parameters (where the look-back periods are 
currently listed), FICC proposes to

[[Page 25317]]

rearrange the list so that the look-back periods associated with 
sensitivity VaR are grouped together and the look-back periods for GSD 
Haircut Rates are grouped together.\23\ FICC also proposes to add sub-
headings to enhance readability and clarity.\24\
---------------------------------------------------------------------------

    \22\ Notice, supra note 3, at 16923.
    \23\ Id.
    \24\ Id.
---------------------------------------------------------------------------

    In addition, in the section of the GSD QRM Methodology Document 
that describes key parameters, FICC would amend the language describing 
the GSD Haircut Rates to correspond to the language used in later 
sections for clarity and consistency.\25\
---------------------------------------------------------------------------

    \25\ Id.
---------------------------------------------------------------------------

    Where the GSD QRM Methodology Document references the governance 
practice regarding the review and recalibration of the look-back 
periods, FICC also proposes to specifically reference the 
Framework.\26\ FICC would provide additional clarity by adding language 
describing types of data that would be used to determine key model 
parameters.\27\ FICC would also clarify the GSD QRM Methodology 
Document by adding language stating that management may implement any 
approved changes by MRGC or MRC.\28\ Currently, the GSD QRM Methodology 
Document states that if the Margin Proxy's backtesting results do not 
meet FICC's 99 percent confidence level, management may recommend 
remedial actions to MRGC, and to the extent necessary the MRC, such as 
increasing the look-back period and/or applying an appropriate 
historical stressed period to the Margin Proxy calibration.\29\
---------------------------------------------------------------------------

    \26\ Id.
    \27\ Id.
    \28\ Id.
    \29\ Notice, supra note 3, at 16922.
---------------------------------------------------------------------------

    With respect to the descriptions of some of the GSD Haircut Rates, 
FICC would add clarifying terminology and delete duplicative 
explanations and replace them with a cross-reference to the appendix, 
which contains the same explanation.\30\
---------------------------------------------------------------------------

    \30\ Notice, supra note 3, at 16923.
---------------------------------------------------------------------------

    Second, FICC proposes to make certain corrections to the GSD QRM 
Methodology Document.\31\ FICC would correct a typographical error in 
the description of key parameters by revising a reference from MBSD to 
MBS.\32\ In addition, to correct what FICC states is an omission in the 
GSD QRM Methodology Document, FICC would add that if FICC observes 
material differences between the Margin Proxy calculations and the 
aggregate Clearing Fund requirement calculated using the VaR model, 
management may recommend remedial actions (as was stated in the GSD 
sensitivity VaR rule filing).\33\
---------------------------------------------------------------------------

    \31\ Id.
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------

    Finally, FICC proposes to make certain technical changes (e.g., 
word usage, spacing corrections, grammar changes, and revising certain 
references from singular to plural) to the GSD QRM Methodology 
Document.\34\ For example, for consistency, FICC proposes to revise a 
reference from ``window'' to ``period'' in the description of key 
parameters and all references from ``lookback'' to ``look-back'' and 
from ``TBA/pool'' to ``Pool-TBA.'' \35\
---------------------------------------------------------------------------

    \34\ Id.
    \35\ Id.
---------------------------------------------------------------------------

C. Clarification and Technical Changes to the MBSD QRM Methodology 
Document

    FICC proposes to clarify the MBSD QRM Methodology Document by 
adding language stating that management may implement any approved 
changes by MRGC or MRC.\36\ Currently, the MBSD QRM Methodology 
Document states that if FICC observes material differences between the 
Margin Proxy calculations and the aggregate Clearing Fund requirement 
calculated using the VaR model, or the Margin Proxy's backtesting 
results do not meet FICC's 99 percent confidence level, management may 
recommend remedial actions to the MRGC, and to the extent necessary the 
MRC, such as increasing the look-back period and/or applying an 
appropriate historical stressed period to the Margin Proxy 
calibration.\37\
---------------------------------------------------------------------------

    \36\ Id.
    \37\ Notice, supra note 3, at 16922.
---------------------------------------------------------------------------

    In addition, FICC proposes to make certain technical changes to the 
MBSD QRM Methodology Document (e.g., grammar changes and revising 
certain references from singular to plural).\38\ FICC would also revise 
a reference from ``lookback'' to ``look-back'' for consistency.\39\ 
FICC would remove the revision history because it is solely 
administrative and would not affect the calculation of margin or 
Clearing Members' substantive rights or obligations.\40\
---------------------------------------------------------------------------

    \38\ Notice, supra note 3, at 16923.
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------

D. Clarifications to the MBSD Rules

    FICC proposes to make certain clarifications to the MBSD Rules.\41\ 
Specifically, FICC would add a definition of ``Margin Proxy'' and use 
such term in the definition of ``VaR Charge.'' \42\ In addition, FICC 
would clarify the definition of ``VaR Charge'' in the MBSD Rules by 
adding the word ``Clearing'' before the word ``Members.'' \43\
---------------------------------------------------------------------------

    \41\ Id.
    \42\ Id.
    \43\ Id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \44\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and rules and regulations thereunder applicable 
to such organization. After carefully considering the proposed rule 
change, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to FICC. In particular, the 
Commission finds that the proposed rule change is consistent with 
Sections 17A(b)(3)(F) \45\ of the Act and Rule 17Ad-22(e)(23)(ii) 
thereunder.\46\
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b)(2)(C).
    \45\ 15 U.S.C. 78q-1(b)(3)(F).
    \46\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------

A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, in part, that the rules 
of a clearing agency be designed ``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.'' \47\
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    First, as described above in Section II.A., the proposed rule 
change would amend the QRM Methodology Documents to remove specific 
references (and explanations relating thereto) to the look-back periods 
for (1) the Margin Proxy of GSD and MBSD and (2) the two GSD Haircut 
Rates, and replace them with more general language. The proposed rule 
change would state that the specific look-back periods would be tracked 
in the monthly parameter report, any changes to the look-back periods 
would not be less than one year, and any changes would be subject to 
the governance process set forth in the Framework.\48\ The Commission 
believes that such change, which is subject to the minimum look-back 
period and the governance process, would help FICC to better cover its 
credit exposures to its Members because the changes would help FICC to 
more accurately adjust the look-back periods under the following 
circumstances:
---------------------------------------------------------------------------

    \48\ Notice, supra note 3, at 16922; Framework Approval Order, 
supra note 17.

---------------------------------------------------------------------------

[[Page 25318]]

     When FICC observes material differences between the Margin 
Proxy calculations and the aggregate Clearing Fund requirement 
calculated using the VaR model;
     when the Margin Proxy's backtesting results do not meet 
FICC's 99 percent confidence level; or
     when FICC observes that the asset class backtesting 
performance associated with the GSD Haircut Rates is not at the 99 
percent confidence level.
    The Commission believes that the changes would help enhance FICC's 
ability to calculate and collect adequate margin from its Clearing 
Members and Netting Members, and in turn, better manage the risks 
associated with losses arising from member defaults, protecting non-
defaulting Clearing Members and Netting Members from such losses. 
Therefore, the Commission believes that the proposed rule changes to 
the look-back periods would allow FICC to effectively cover its losses, 
and assure the safeguarding of securities and funds which are in the 
custody or control of FICC or for which it is responsible, consistent 
with Section 17A(b)(3)(F) of the Act.\49\
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Second, as described above in Sections II.B. and II.C., the 
proposed rule change would clarify, correct, and technically change the 
GSD QRM Methodology Document, and clarify and technically change the 
MBSD QRM Methodology Document to state how FICC would calculate the 
components of the margin calculation. The Commission believes that the 
changes described in Sections II.B. and II.C. would help enhance the 
clarity of the QRM Methodology Documents for FICC. FICC states that the 
QRM Methodology Documents are used by FICC Risk Management personnel to 
calculate margin requirements. Accordingly, helping to enhance the 
clarity of the QRM Methodology Documents would help FICC Risk 
Management personnel to accurately understand and implement the 
margining process, charge an appropriate level of margin, and in turn, 
allow FICC to better manage its risks from loss events. Therefore, the 
Commission believes that the changes described in Sections II.B. and 
II.C. would assure the safeguarding of securities and funds which are 
in the custody or control of FICC or for which it is responsible, 
consistent with Section 17A(b)(3)(F) of the Act.\50\
---------------------------------------------------------------------------

    \50\ Id.
---------------------------------------------------------------------------

    Third, as described in Section II.D., the proposed rule change 
would add and clarify certain definitions. The Commission believes that 
the proposed clarifications to Rule 1 of the MBSD Rules would help 
ensure that the calculation of margin is clear and transparent to 
Clearing Members and FICC, and thereby help ensure that FICC calculates 
and collects adequate margin from Clearing Members, and that Clearing 
Members understand the relevant definition. Therefore, the Commission 
believes that the proposed clarifications to Rule 1 of the MBSD Rules 
would also assure the safeguarding of securities and funds which are in 
the custody and control of FICC or for which it is responsible, 
consistent with Section 17A(b)(3)(F) of the Act.\51\
---------------------------------------------------------------------------

    \51\ Id.
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(23)(ii) Under the Act

    Rule 17Ad-22(e)(23)(ii) under the Act requires that a covered 
clearing agency establish, implement, maintain and enforce written 
policies and procedures reasonably designed to provide sufficient 
information to enable participants to identify and evaluate the risks, 
fees, and other material costs they incur by participating in the 
covered clearing agency.\52\
---------------------------------------------------------------------------

    \52\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------

    As described above in Section II.D., the proposal would help to 
clarify Rule 1 of the MBSD Rules, which in turn, would help ensure that 
the calculation of margin is transparent and clear to Clearing Members, 
thereby enabling Clearing Members to better understand the calculation 
of margin, as well as providing them with increased predictability and 
certainty regarding their obligations. As such, the Commission believes 
that the proposed rule changes are consistent with Rule 17Ad-
22(e)(23)(ii) under the Act.\53\
---------------------------------------------------------------------------

    \53\ Id.
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act 
and, in particular, with the requirements of Section 17A of the Act 
\54\ and the rules and regulations promulgated thereunder.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\55\ that proposed rule change SR-FICC-2019-001, be, and hereby is, 
APPROVED.\56\
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b)(2).
    \56\ In approving the proposed rule change, the Commission 
considered the proposals' impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \57\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\57\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11322 Filed 5-30-19; 8:45 am]
BILLING CODE 8011-01-P

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