Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Revise the MBSD VaR Floor, 39041-39046 [2019-16938]
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Federal Register / Vol. 84, No. 153 / Thursday, August 8, 2019 / Notices
2019–002 and should be submitted on
or before August 29, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–16940 Filed 8–7–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86553; File No. SR–FICC–
2019–003]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Proposed Rule Change To
Revise the MBSD VaR Floor
August 2, 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 July 18,
2019, Fixed Income Clearing
Corporation (‘‘FICC’’) 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. 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
a proposal to change the calculation of
the VaR Floor (as defined below) and
the corresponding description in the
FICC Mortgage-Backed Securities
Division (‘‘MBSD’’) Clearing Rules
(‘‘MBSD Rules’’) 3 to: (i) Allow FICC,
subject to the governance process set
forth in the Clearing Agency Model Risk
Management Framework
(‘‘Framework’’) 4 (as described below),
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Capitalized terms not defined herein are defined
in the MBSD Rules, available at https://
www.dtcc.com/legal/rules-and-procedures.
4 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). The Framework sets forth the
model risk management practices adopted by FICC,
National Securities Clearing Corporation, and The
Depository Trust Company. 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
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to adjust the ‘‘VaR Floor percentage’’ (as
defined below) within a proposed range
when FICC’s review of the VaR Floor
percentage indicates that the VaR Floor
percentage is not sufficient to cover
FICC’s credit exposure to each Clearing
Member fully with a high degree of
confidence, (ii) state that Clearing
Members would be notified in advance
of any such adjustment to the VaR Floor
percentage, (iii) designate that the VaR
Floor percentage would be subject to at
least monthly model performance
monitoring, and (iv) make certain
technical changes.
The proposed changes would
necessitate changes to the Methodology
and Model Operations Document—
MBSD Quantitative Risk Model (the
‘‘QRM Methodology’’).5 FICC is
requesting confidential treatment of the
QRM Methodology and has filed it
separately with the Secretary of the
Commission.6
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 purpose of the proposed rule
change is to change the calculation of
the VaR Floor (as defined below) and
the corresponding description in the
MBSD Rules to: (i) Allow FICC, subject
to the governance process set forth in
the Framework (as described below), to
procedures; (v) model approval process; and (vi)
model performance procedures.
5 Because FICC requested confidential treatment,
the QRM Methodology was filed separately with the
Commission as part of proposed rule change SR–
FICC–2016–007 (the ‘‘VaR Filing’’). See Securities
Exchange Act Release No. 79868 (January 24, 2017),
82 FR 8780 (January 30, 2017) (SR–FICC–2016–007)
(‘‘VaR Filing Approval Order’’). FICC also filed the
VaR Filing proposal as an advance notice pursuant
to Section 806(e)(1) of the Payment, Clearing, and
Settlement Supervision Act of 2010 (12 U.S.C.
5465(e)(1)) and Rule 19b–4(n)(1)(i) under the Act
(17 CFR 240.19b–4(n)(1)(i)), with respect to which
the Commission issued a Notice of No Objection.
See Securities Exchange Act Release No. 79843
(January 19, 2017), 82 FR 8555 (January 26, 2017)
(SR–FICC–2016–801).
6 17 CFR 240.24b–2.
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39041
adjust the VaR Floor percentage (as
defined below) within a proposed range
when FICC’s review of the VaR Floor
percentage indicates that the VaR Floor
percentage is not sufficient to cover
FICC’s credit exposure to each Clearing
Member fully with a high degree of
confidence, (ii) state that Clearing
Members would be notified in advance
of any such adjustment to the VaR Floor
percentage, (iii) designate that the VaR
Floor percentage would be subject to at
least monthly model performance
monitoring, and (iv) make certain
technical changes. The proposed
changes would necessitate changes to
the QRM Methodology. The proposed
changes are described in detail below.
Background
On January 24, 2017, the Commission
approved FICC’s VaR Filing to make
certain enhancements to the MBSD
value-at-risk (‘‘VaR’’) margin calculation
methodology.7 The VaR Filing amended
the definition of VaR Charge to include
the VaR Floor.8 The VaR Charge
comprises the largest portion of a
Clearing Member’s Required Fund
Deposit amount. The VaR Charge is
calculated using a risk-based margin
methodology that is intended to capture
the market price risk associated with the
securities in a Clearing Member’s
portfolio. The methodology is designed
to project the potential gains or losses
that could occur in connection with the
liquidation of a defaulting Clearing
Member’s portfolio, assuming that a
portfolio would take three days to hedge
or liquidate in normal market
conditions. The projected liquidation
gains or losses are used to determine the
amount of the VaR Charge, which is
calculated to cover projected liquidation
losses at a 99 percent confidence level.9
FICC uses the VaR Floor as an
alternative to the VaR Charge amount
calculated by the VaR model for
Clearing Members’ portfolios where the
VaR Floor calculation is greater than the
model-based calculation. The VaR Floor
addresses the risk that the VaR model
may calculate too low a VaR Charge for
certain portfolios where the VaR model
applies substantial risk offsets among
long and short positions in different
classes of mortgage-backed securities
that have a high degree of historical
price correlation. FICC applies the VaR
7 See
VaR Filing Approval Order, supra note 5.
term ‘‘VaR Floor’’ is defined within the
definition of VaR Charge. See MBSD Rule 1, supra
note 3.
9 Unregistered Investment Pool Clearing Members
are subject to a VaR Charge with a minimum
targeted confidence level assumption of 99.5
percent. See MBSD Rule 4, Section 2(c), supra note
3.
8 The
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Floor at the Clearing Member portfolio
level. Because the historical price
correlation may not persist in future
market conditions,10 FICC believes that
it is prudent to apply a VaR Floor that
is based upon the market value of the
gross unsettled positions in the Clearing
Member’s portfolio in order to protect
FICC against such risk in the event that
FICC is required to liquidate a mortgagebacked securities portfolio in stressed
market conditions.
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(i) Proposed Rule Changes Allowing
FICC To Adjust the VaR Floor
Percentage
The MBSD Rules currently define the
VaR Floor as ‘‘5 basis points of the
market value of a Clearing Member’s
gross unsettled positions.’’ 11 Therefore,
the VaR Floor is utilized as the Clearing
Member’s VaR Charge if the VaR model
yields an amount that is lower than 5
basis points (referred to herein as the
‘‘VaR Floor percentage’’) of the market
value of a Clearing Member’s gross
unsettled positions.
FICC is proposing to revise the
definition of the VaR Floor to allow
FICC, subject to the governance process
set forth in the Framework, to adjust the
VaR Floor percentage within a proposed
range when FICC’s review of the VaR
Floor percentage indicates that the VaR
Floor percentage is not sufficient to
cover FICC’s credit exposure to each
Clearing Member fully with a high
degree of confidence. FICC is proposing
that the VaR Floor percentage would be
no less than 5 basis points and no more
than 30 basis points of the gross
unsettled positions.
FICC believes that the range of 5 to 30
basis points would allow FICC to
effectively set a floor on the VaR Charge
at a level that has historically impacted
only a small number of Clearing
Members based on the impact study
discussed below.12 In order to
10 For example, certain TBAs may have highly
correlated historical price returns despite having
different coupons and, although the net risk
exposure may be adequately modeled under current
market conditions, future market conditions could
cause the risk relationship to change in a way that
may not be adequately captured by the model. TBA
is defined in MBSD Rule 1. See MBSD Rule 1, supra
note 3.
11 See definition of ‘‘VaR Charge.’’ See MBSD
Rule 1, supra note 3.
12 For the period February 27, 2017 through
February 28, 2019, a 5 basis point VaR Floor would
impact less than 0.4% of Clearing Members on
average daily who have a VaR Charge, a 10 basis
point VaR Floor would impact less than 2.3%, a 15
basis point VaR Floor would impact less than 5.0%,
a 20 basis point VaR Floor would impact less than
8.2%, a 25 basis point VaR Floor would impact less
than 11.4%, a 30 basis point VaR Floor would
impact less than 14.4%, a 45 basis point VaR Floor
would impact less than 22.3%, and a 60 basis point
VaR Floor would impact less than 30.6%.
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determine the specific VaR Floor
percentage within the permissible range,
FICC would review, on at least an
annual basis, the impact of alternative
VaR Floor parameters within the
proposed range of 5 to 30 basis points
to the backtesting performance and to
Clearing Members’ margin charges.
Upon approval of this filing, FICC
proposes to initially set the VaR Floor
at 10 basis points based on observed
backtesting coverage on actual Clearing
Members’ positions and hypothetical
portfolios 13 that could result in low VaR
Charges.14
As stated above, any adjustment to the
VaR Floor percentage would be subject
to the governance process set forth in
the Framework. Specifically, the
Framework provides that all model
performance concerns will be escalated
by the Model Validation and Control
Group (‘‘MVC’’) to the Model Risk
Governance Committee (‘‘MRGC’’),
including model performance
enhancement concerns and the MRGC
may further recommend certain matters
for further escalation to the Management
Risk Committee and/or Risk Committee
of the Board.
(ii) Proposed Clearing Member
Notifications Regarding Adjustments to
the VaR Floor Percentage
For adjustments to the VaR Floor
percentage that would fall within the
proposed range, FICC would provide
Clearing Members with 10 Business
Days’ notice prior to the implementation
of such adjustment. Clearing Members
would be notified of the applicable VaR
Floor percentage by an Important Notice
issued no later than 10 Business Days
prior to the implementation of the
adjustment. For adjustments that would
fall outside of the proposed range, FICC
would submit a rule filing to the
Commission. As proposed, FICC would
not apply a VaR Floor percentage that is
less than 5 basis points (which is the
current VaR Floor percentage); however,
the proposed change would allow FICC
to adjust such VaR Floor percentage
above 5 basis points (up to 30 basis
points).
13 For example, FICC can create hypothetical
settlement portfolios with long/short positions
where the net market value is zero to identify
potential settlement portfolios where historical
price changes of different classes of mortgagebacked securities did not experience offsetting price
moves (commonly referred to as ‘‘basis risk’’).
14 FICC’s coverage at the Clearing Agency level is
at 99%. The issue has arisen with respect to certain
Clearing Members whose portfolios are achieving
below 99% coverage on a 12-month rolling basis.
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(iii) Proposed Rule Changes To
Designate that the VaR Floor Percentage
Would Be Subject to at Least Monthly
Model Performance Monitoring
The Framework provides that, as part
of model performance monitoring, on at
least a monthly basis, sensitivity
analysis is performed on FICC’s margin
model, the key parameters and
assumptions for backtesting are
reviewed, and modifications are
considered to ensure FICC’s backtesting
practices are appropriate for
determining the adequacy of the
applicable margin resources of FICC.
The Framework also describes that MVC
performs a model validation for each
FICC model approved for use in
production not less than annually,
including, among other things, on its
margin systems and related models.15
The VaR Floor percentage is currently
subject to periodic model validations as
part of FICC’s margin model validation
on at least an annual basis to determine
if the VaR Floor percentage would
remain adequate to cover FICC’s credit
exposure to Clearing Members with
certain types of portfolios fully with a
high degree of confidence. FICC would
propose, as part of model performance
monitoring, to designate the VaR Floor
percentage as a parameter of its VaR
model that will be reviewed on at least
a monthly basis per the Framework. As
such, FICC proposes to amend the QRM
Methodology to reference the at least
monthly model performance monitoring
of the VaR Floor percentage.
(iv) Proposed Technical Changes
The proposed rule change would also
make technical changes to restate the
calculation of the VaR Floor to provide
more detail than the current provision
and to use defined terms (that is, the
terms Long Positions 16 and Short
Positions 17).
Specifically, FICC would (i) delete ‘‘5
basis points of the market value of a
Clearing Member’s gross unsettled
positions’’ and replace it with ‘‘an
amount designated by the Corporation’’
and (ii) add a new sentence that would
read: ‘‘Such VaR Floor will be
determined by multiplying the sum of
the absolute values of Long Positions
and Short Positions, at market value, by
15 Supra
note 4.
term ‘‘Long Position’’ means a Member’s
obligations with respect to the purchase of an
Eligible Security or an Option Contract, as
determined pursuant to the MBSD Rules. MBSD
Rule 1, supra note 3.
17 The term ‘‘Short Position’’ means a Member’s
obligation with respect to the sale of an Eligible
Security or an Option Contract, as determined
pursuant to the MBSD Rules. MBSD Rule 1, supra
note 3.
16 The
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a percentage designated by the
Corporation that is no less than 0.05%
and no greater than 0.30%. The
Corporation shall determine the
percentage within this range to be
applied based on factors including but
not limited to a review performed at
least annually of the impact of the VaR
Floor parameter at different levels
within the range to the backtesting
performance and to Clearing Members’
margin charges. The Corporation shall
inform Clearing Members of the
applicable percentage utilized by the
VaR Floor by an Important Notice
issued no later than 10 Business Days
prior to the implementation of such
percentage.’’
In addition, FICC proposes a technical
change to the QRM Methodology to
reference that there will be at least
annual model validation of the VaR
Floor percentage; the QRM methodology
currently provides that the VaR Floor
percentage is reviewed annually and
updated.
(v) Review and Need for VaR Floor
Percentage Adjustment
FICC conducted a review of the VaR
Floor percentage in June 2017 and
conducted impact studies beginning in
February 2017, which found that an
increase in the VaR Floor percentage to
10 basis points is necessary to bring the
VaR Charge to a level that would cover
FICC’s credit exposure to certain
Clearing Members that have long-short
portfolios fully with a high degree of
confidence.18 The review, performed in
June 2017, found that portfolios that
contained long-short positions, for
example, where a portfolio was long the
GNMA II/FNMA basis at a higher
coupon and short the GNMA II/FNMA
basis at a lower coupon, were not
adequately covered by a VaR Floor
percentage of 5 basis points during
periods of market volatility. Increasing
the VaR Floor percentage to 10 basis
points would improve the backtesting
coverage of this group to 99.8%. As a
result, FICC began monitoring all
portfolios with a VaR Charge below 10
basis points of the portfolio’s gross
positions for a potential Intraday Markto-Market Charge to ensure sufficient
margin coverage during periods of
market volatility. Although a recent
impact study for the twelve months
ended February 2019 found the
backtesting coverage of the VaR Charge
for certain Clearing Members with longshort portfolios had improved to the
99% confidence level without the
change to the VaR Floor percentage,
18 These are portfolios that net down to a low VaR
Charge amount but represent large gross positions.
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FICC believes it is prudent to make the
change to ensure the VaR Charge
remains adequate if market conditions
change. The June 2017 review of the
VaR Floor percentage that included a
period of market volatility also found
that an increase in the VaR Floor
percentage to 20 basis points if the
alternative volatility calculation (which
was referred to as the ‘‘Margin Proxy’’
in the VaR Filing 19) is applied would
better cover risks of portfolios with
offsetting long and short positions
within the same agency program, given
that the Margin Proxy allows for further
netting among positions within the
same agency program than would occur
within the VaR model.20 The recent
impact study for the twelve months
ended February 2019 found if the VaR
Floor percentage were increased to 20
basis points, the backtesting coverage of
the Margin Proxy 21 would improve to
99% for eleven of the fourteen portfolios
that would otherwise have been below
the 99% confidence level target.
Additionally, the backtesting
deficiencies of the three small portfolios
that would have remained below the
99% confidence target would be
reduced to an average 11 backtesting
deficiencies if the VaR Floor percentage
were increased to 20 basis points, from
an average 45 backtesting deficiencies
utilizing the current VaR Floor
percentage of 5 basis points. If Margin
Proxy were invoked as an alternative
volatility calculation, FICC would
utilize the Backtesting Charge 22 to
further mitigate exposure to FICC
caused by settlement risks that may not
be adequately captured by the
alternative volatility model. Upon
Commission approval of this proposed
rule change, FICC would provide
Clearing Members with 10 Business
Days’ notice of the increase of the VaR
Floor percentage to 10 basis points. The
notice would also inform Clearing
Members that in the event that the
alternative volatility calculation (the
Margin Proxy) would be employed, the
19 The
Margin Proxy is used as an alternative
volatility calculation in the event that the requisite
data used for the methodology (i.e., sensitivity
approach) that is used to calculate the VaR Charge
is unavailable for an extended period of time. See
VaR Filing Approval Order, 82 FR at 8781.
20 FICC proposed and received Commission
approval to increase the look-back period and apply
a historical stressed period to the Margin Proxy
calibration. See Securities Exchange Act Release
No. 85944 (May 24, 2019), 84 FR 25315 (May 31,
2019) (SR–FICC–2019–001).
21 The Margin Proxy study was calibrated using
a 10-year historical look-back period plus 1-year
stress period.
22 See definition of ‘‘Backtesting Charge.’’ See
MBSD Rule 1, supra note 3.
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39043
VaR Floor percentage would be
increased to 20 basis points.
(vi) Impact Study
FICC performed an impact study on
Clearing Members’ portfolios for the
period beginning February 27, 2017,
when the changes in the VaR Filing
were implemented, to February 28,
2019, that showed increasing the VaR
Floor percentage to 10 basis points
would impact a small number of
Clearing Members, and the total MBSD
Clearing Fund impact would be small.
Nevertheless, FICC believes this change
is necessary to maintain sufficient
financial resources to cover FICC’s
credit exposures to certain Clearing
Members’ portfolios fully with a high
degree of confidence.
Over the study period, increasing the
VaR Floor percentage to 10 basis points
would have affected, on average, two
portfolios per day, and the average daily
margin increase to MBSD’s Clearing
Fund would have been approximately
$6 million per day (0.12% of the average
daily VaR Charge of $5 billion). The
largest daily increase for the total VaR
Charge over the study period would
have been $37 million for all Clearing
Members, 1% of the total VaR Charge of
$ 3.7 billion on that day.
Although for the twelve months
ended February 28, 2019, 21 portfolios
would have been impacted by the
increase to the VaR Floor percentage
over the study period, for each portfolio
the increase was less than 1% of the
Clearing Member’s Excess Capital 23 and
4 portfolios accounted for over 50% of
the instances of margin increase. The
impact study showed the largest daily
increase of an individual portfolio was
$25.5 million. Given the VaR model
amount for this portfolio was also below
the current 5 basis point VaR Floor, an
increase to a 10 basis point VaR Floor
would have doubled that portfolio’s VaR
Charge for that day.
2. Statutory Basis
FICC believes that this proposal is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a registered
clearing agency. Specifically, FICC
believes that this proposal is consistent
with Section 17A(b)(3)(F) of the Act 24
and Rules 17Ad–22(e)(4)(i), (e)(6)(i) and
23 The term ‘‘Excess Capital’’ means Excess Net
Capital, net assets, or equity capital as applicable
to a Clearing Member based on its type of
regulation. MBSD Rule 1, supra note 3.
24 15 U.S.C. 78q–1(b)(3)(F).
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(e)(23)(ii), each promulgated under the
Act,25 for the reasons described below.
Section 17A(b)(3)(F) of the Act
requires, in part, that the MBSD Rules
be designed to (i) promote the prompt
and accurate clearance and settlement of
securities transactions and (ii) assure
the safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible.26
The proposed changes described in
Item II(A)1(i) above would allow FICC,
subject to the governance process in the
Framework, to adjust the VaR Floor
percentage within a proposed range
when FICC’s review of the VaR Floor
percentage indicates that the VaR Floor
percentage is not sufficient to cover
FICC’s credit exposure to each Clearing
Member fully with a high degree of
confidence. FICC believes these
proposed changes would assure the
safeguarding of securities and funds
which are in the custody or control of
FICC or for which it is responsible.
Specifically, the proposed changes
would provide FICC with discretion to
adjust the VaR Floor percentage, subject
to governance, to cover FICC’s credit
exposure to each Clearing Member with
a high degree of confidence. Covering
FICC’s exposure to each Clearing
Member with a high degree of
confidence would help FICC ensure that
it maintains an appropriate level of
margin to address its risk management
needs. Therefore, FICC believes the
proposed changes described in Item
II(A)1(i) above would safeguard the
securities and funds that are in the
custody and control of FICC or for
which it is responsible, consistent with
Section 17A(b)(3)(F) of the Act.27
FICC believes that the proposed
changes described in Item II(A)1(ii)
above to state that Clearing Members
would be notified in advance of any
adjustment to the VaR Floor percentage
would promote the prompt and accurate
clearance and settlement of securities
transactions. Specifically, FICC believes
that providing notice in advance of the
implementation of any adjustment
would provide Clearing Members with
time to adjust to any new VaR Charge
amounts that result from any
adjustments to the VaR Floor
percentage. FICC believes 10 Business
Days’ prior notice would provide
Clearing Members with sufficient time
to prepare for any new VaR Charge
amounts and thereby ensure that the
Clearing Members have the funds to
25 17 CFR 240.17Ad–22(e)(4)(i), (e)(6)(i) and
(e)(23)(ii).
26 15 U.S.C. 78q–1(b)(3)(F).
27 Id.
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satisfy their new VaR Charge amounts.
This in turn would help FICC ensure
that FICC has an adequate margin to
address its risk management needs.
Therefore, FICC believes the proposed
changes described in Item II(A)1(ii)
above would promote the prompt and
accurate clearance and settlement of
securities transactions, consistent with
Section 17A(b)(3)(F) of the Act.28
In addition, FICC believes that the
proposed changes described in Item
II(A)1(iii) above to the QRM
Methodology to state that the VaR Floor
percentage would be subject to at least
monthly performance monitoring would
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) the Act.29 Specifically, this
would require FICC to monitor the VaR
Floor percentage frequently. This would
help FICC ensure that there is an
appropriate level of margin as FICC
would be monitoring the VaR Floor
percentage at least monthly. This
change would also alert FICC of the
need to make any adjustments to the
VaR Floor percentage. As such, FICC
believes the proposed changes described
in Item II(A)1(iii) above would
safeguard the securities and funds that
are in the custody and control of FICC
or for which it is responsible, consistent
with Section 17A(b)(3)(F) of the Act.30
FICC believes that the proposed
technical changes to the MBSD Rules
described in Item II(A)1(iv) above would
promote the prompt and accurate
clearance and settlement of securities
transactions by ensuring that the MBSD
Rules remain clear and accurate to
Clearing Members. Having clear and
accurate MBSD Rules would facilitate
Clearing Members’ understanding of
those rules and provide Clearing
Members with increased predictability
and certainty regarding their
obligations. FICC also believes that
proposed technical changes to the QRM
Methodology described in Item
II(A)1(iv) above would enhance the
clarity of the QRM Methodology for
FICC. As the QRM Methodology is used
by FICC Risk Management personnel
regarding the frequency of model
validation of the VaR Floor percentage,
FICC believes that enhancing clarity of
the description as to how often this
review should be conducted would
promote the prompt and accurate
clearance and settlement of securities
transactions, consistent with Section
17A(b)(3)(F) the Act.31
Rule 17Ad–22(e)(4)(i) under the Act 32
requires a covered clearing agency to
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to effectively
identify, measure, monitor, and manage
its credit exposures to participants and
those exposures arising from its
payment, clearing, and settlement
processes by maintaining sufficient
financial resources to cover its credit
exposure to each participant fully with
a high degree of confidence. The
proposed changes described in Item
II(A)1(i) would allow adjustment of the
VaR Floor percentage (subject to FICC’s
governance). This change would allow
FICC to limit its credit exposures to
Clearing Members in the event that the
VaR model yields too low a VaR Charge
for such portfolios. Under the proposed
rule changes, the VaR Floor percentage
would be subject to at least monthly
model performance monitoring and
continue to be subject to at least annual
model validations by FICC. In the event
the review reveals that the VaR Floor
percentage is not resulting in coverage
with a high degree of confidence, FICC
would adjust the VaR Floor percentage
within the proposed range after going
through its required governance (and
providing Clearing Members with the 10
Business Days’ notice as described
above). Therefore, FICC believes the
proposed changes are consistent with
the requirements of Rule 17Ad–
22(e)(4)(i) under the Act.33
Rule 17Ad–22(e)(6)(i) under the Act 34
requires a covered clearing agency to
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover, if the
covered clearing agency provides
central counterparty services, its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market. FICC, which provides central
counterparty services, believes that the
proposed changes to allow FICC, subject
to its governance, to adjust the VaR
Floor percentage within a proposed
range (as described in Item II(A)1(i)
above) are consistent with the
requirements of Rule 17Ad–22(e)(6)(i)
cited above. Specifically, FICC believes
the proposed changes would provide
FICC with the discretion (subject to its
31 Id.
28 Id.
32 17
29 Id.
33 Id.
30 Id.
34 17
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governance) to appropriately limit
FICC’s credit exposure to Clearing
Members in the event that the VaR
model yields too low a VaR Charge. The
proposed changes would therefore allow
FICC to continue to produce margin
levels commensurate with the risks and
particular attributes of each relevant
product, portfolio, and market. As such,
FICC believes that the proposed changes
are consistent with the requirements of
Rule 17Ad–22(e)(6)(i) under the Act.35
The proposed technical changes to the
MBSD Rules described in Item II(A)1(iv)
above are designed to be consistent with
Rule 17Ad–22(e)(23)(ii) under the Act.36
Rule 17Ad–22(e)(23)(ii) under the Act
requires a covered clearing agency to
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.37 The proposed
technical changes to the MBSD Rules
would provide more details as to how
the VaR Floor is calculated than is
currently set forth in the MBSD Rules.
As such, FICC believes the proposed
changes would enable Clearing
Members to have a better understanding
of the operation of the VaR Floor
because there would be more clarity as
to how the VaR Floor to which they are
subject is calculated. FICC believes the
additional details would provide
Clearing Members with sufficient
information to enable them to evaluate
the costs they incur by participating in
FICC. As such, FICC believes that the
proposed technical changes to the
MBSD Rules described in Item II(A)1(iv)
above are consistent with Rule 17Ad–
22(e)(23)(ii) under the Act.38
(B) Clearing Agency’s Statement on
Burden on Competition
FICC believes the proposed rule
changes described in Item II(A)1(i)
above to allow FICC, subject to its
governance, to adjust the VaR Floor
percentage within a proposed range in
the circumstances described above
could both promote competition and
could impose a burden on competition.
In circumstances where FICC exercises
its authority to decrease the VaR Floor
percentage within the proposed range,
Clearing Members would experience
decreases in their VaR Charge. FICC
believes this may promote competition
because Clearing Members would have
35 Id.
36 17
CFR 240.17Ad–22(e)(23)(ii).
a lower VaR Charge, and therefore could
use their funds for other purposes.
However, FICC also believes that the
proposed changes described in Item
II(A)1(i) above could impose a burden
on competition. Specifically, in
circumstances where FICC exercises its
authority to increase the VaR Floor
percentage within the proposed range,
Clearing Members who are affected by
the VaR Floor would experience
increases in their VaR Charge. Such
increases could burden Clearing
Members that have lower operating
margins or higher costs of capital than
other Clearing Members. It is not clear
whether the burden on competition
would necessarily be significant because
it would depend on whether the
affected Clearing Members were
similarly situated in terms of business
type and size. Regardless of whether the
burden on competition is significant,
FICC believes that any burden on
competition that derives from the
proposed rule changes described in Item
II(A)1(i) above would be necessary and
appropriate in furtherance of the
purposes of the Act.39
Specifically, FICC believes that the
proposed rule changes described in Item
II(A)1(i) above would be necessary in
furtherance of the purposes of the Act
because they would allow FICC to make
adjustments to the VaR Floor percentage
within a proposed range when FICC’s
review of the VaR Floor percentage
indicates that the VaR Floor percentage
is not sufficient to cover FICC’s credit
exposure to each Clearing Member with
a high degree of confidence. The
proposed rule changes would provide
FICC with the discretion (subject to its
governance) to limit its exposure to
Clearing Members by ensuring that each
Clearing Member has an appropriate
minimum VaR Charge in the event that
the VaR model yields too low a VaR
Charge for such portfolios. Maintaining
an appropriate minimum VaR Charge
for each Clearing Member would be
necessary in furtherance of the Act
because it would allow FICC to
maintain sufficient financial resources
to cover its credit exposure to each
Clearing Member. FICC also believes
that any burden on competition that
derives from the proposed rule change
would be appropriate in furtherance of
the purposes of the Act because FICC’s
discretion would be limited by its
governance and also the proposed range
for the VaR Floor percentage. Making
any proposed adjustments to the VaR
Floor percentage subject to a required
governance process would be
appropriate in furtherance of the Act
because it would ensure that the final
decision as to whether the adjustment
ought to be made falls on a clear and
transparent decision-making process.
Making any proposed adjustments to the
VaR Floor percentage subject to the
proposed range would be appropriate in
furtherance of the Act because as
described above, the proposed range
would effectively set a floor on the VaR
Charge at a level that has historically
impacted only a small number of
Clearing Members while at the same
time ensuring that FICC can make
adjustments to the VaR Floor percentage
to minimize FICC’s credit exposure to
Clearing Members. Therefore, FICC does
not believe that the proposed changes
described in Item II(A)1(i) above would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the Act.40
FICC does not believe that the
proposed changes described in Item
II(A)1(ii) above to provide Clearing
Members with 10 Business Days’ notice
prior to the implementation of any
adjustment to the VaR Floor percentage
would impact competition. FICC
believes that the proposed change to
provide notification of adjustments to
the VaR Floor percentage would
enhance Clearing Members’ information
regarding their margin requirements;
FICC believes that the proposed 10
Business Days’ notice would provide
Clearing Members with adequate
opportunity to adjust their portfolios if
they wish to do so and adequate time to
prepare for the increase in their VaR
Charge.
FICC does not believe the proposed
changes described in Item II(A)1(iii)
above to state that the VaR Floor
percentage would be subject to monthly
performance monitoring would impact
competition. The proposed rule changes
regarding at least monthly model
performance review would not alter
Clearing Members’ rights and
obligations. Rather, they would enable
FICC to identify any issues with the VaR
Floor percentage on a more frequent
basis than the current annual model
validation. Moreover, the proposed
change regarding at least monthly model
performance reviews would be
consistent with the Framework.
FICC does not believe that the
proposed rule changes described in Item
II(A)1(iv) above to make technical
changes to the MBSD Rules to restate
the calculation of the VaR Floor to
provide more detail than the current
provision and to use defined terms
would impact competition. The
proposed technical changes would
37 Id.
38 Id.
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ensure that the MBSD Rules remain
clear by replacing the current language
with language that sets out in words the
calculation of the VaR Floor amount. By
doing so, Clearing Members can better
understand how the VaR Floor is
calculated and understand whether they
would be subject to it. FICC believes
that the technical changes would not
affect Clearing Members’ rights and
obligations. As such, FICC believes that
these proposed rule changes would not
have any impact on competition.
FICC does not believe that the
proposed technical changes described in
Item II(A)1(iv) to the QRM Methodology
to reflect at least annual model
validation of the VaR Floor percentage
would have any impact on competition.
This change would reflect current
practice and would not alter Clearing
Members’ rights or obligations.
Therefore, FICC does not believe that
these proposed changes to clarify the
language in the QRM Methodology
would have any impact on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
Written comments relating to the
proposed rule changes have not been
solicited or received. FICC will notify
the Commission of any written
comments received by FICC.
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FICC–2019–003 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–86563; File No. SR–
CboeBZX–2019–047]
• 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–FICC–2019–003. 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 FICC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FICC–
2019–003 and should be submitted on
or before August 29, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–16938 Filed 8–7–19; 8:45 am]
BILLING CODE 8011–01–P
On June 6, 2019, Cboe BZX Exchange,
Inc. filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to adopt new Rule
14.11(k) to permit it to list and trade
Managed Portfolio Shares. The proposed
rule change was published for comment
in the Federal Register on June 25,
2019.3 The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is August 9, 2019.
The Commission is extending this 45day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,5 designates
September 23, 2019, as the date by
which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File Number SR–CboeBZX–2019–047).
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86157
(June 19, 2019), 84 FR 29892.
4 15 U.S.C. 78s(b)(2).
5 Id.
2 17
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
16:51 Aug 07, 2019
August 2, 2019.
1 15
Electronic Comments
VerDate Sep<11>2014
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BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Adopt BZX Rule
14.11(k) To Permit the Listing and
Trading of Managed Portfolio Shares
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Agencies
[Federal Register Volume 84, Number 153 (Thursday, August 8, 2019)]
[Notices]
[Pages 39041-39046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16938]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86553; File No. SR-FICC-2019-003]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Revise the MBSD VaR Floor
August 2, 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 July 18, 2019, Fixed Income Clearing Corporation (``FICC'') 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. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of a proposal to change the
calculation of the VaR Floor (as defined below) and the corresponding
description in the FICC Mortgage-Backed Securities Division (``MBSD'')
Clearing Rules (``MBSD Rules'') \3\ to: (i) Allow FICC, subject to the
governance process set forth in the Clearing Agency Model Risk
Management Framework (``Framework'') \4\ (as described below), to
adjust the ``VaR Floor percentage'' (as defined below) within a
proposed range when FICC's review of the VaR Floor percentage indicates
that the VaR Floor percentage is not sufficient to cover FICC's credit
exposure to each Clearing Member fully with a high degree of
confidence, (ii) state that Clearing Members would be notified in
advance of any such adjustment to the VaR Floor percentage, (iii)
designate that the VaR Floor percentage would be subject to at least
monthly model performance monitoring, and (iv) make certain technical
changes.
---------------------------------------------------------------------------
\3\ Capitalized terms not defined herein are defined in the MBSD
Rules, available at https://www.dtcc.com/legal/rules-and-procedures.
\4\ 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). The Framework sets forth the model risk
management practices adopted by FICC, National Securities Clearing
Corporation, and The Depository Trust Company. 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.
---------------------------------------------------------------------------
The proposed changes would necessitate changes to the Methodology
and Model Operations Document--MBSD Quantitative Risk Model (the ``QRM
Methodology'').\5\ FICC is requesting confidential treatment of the QRM
Methodology and has filed it separately with the Secretary of the
Commission.\6\
---------------------------------------------------------------------------
\5\ Because FICC requested confidential treatment, the QRM
Methodology was filed separately with the Commission as part of
proposed rule change SR-FICC-2016-007 (the ``VaR Filing''). See
Securities Exchange Act Release No. 79868 (January 24, 2017), 82 FR
8780 (January 30, 2017) (SR-FICC-2016-007) (``VaR Filing Approval
Order''). FICC also filed the VaR Filing proposal as an advance
notice pursuant to Section 806(e)(1) of the Payment, Clearing, and
Settlement Supervision Act of 2010 (12 U.S.C. 5465(e)(1)) and Rule
19b-4(n)(1)(i) under the Act (17 CFR 240.19b-4(n)(1)(i)), with
respect to which the Commission issued a Notice of No Objection. See
Securities Exchange Act Release No. 79843 (January 19, 2017), 82 FR
8555 (January 26, 2017) (SR-FICC-2016-801).
\6\ 17 CFR 240.24b-2.
---------------------------------------------------------------------------
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 purpose of the proposed rule change is to change the
calculation of the VaR Floor (as defined below) and the corresponding
description in the MBSD Rules to: (i) Allow FICC, subject to the
governance process set forth in the Framework (as described below), to
adjust the VaR Floor percentage (as defined below) within a proposed
range when FICC's review of the VaR Floor percentage indicates that the
VaR Floor percentage is not sufficient to cover FICC's credit exposure
to each Clearing Member fully with a high degree of confidence, (ii)
state that Clearing Members would be notified in advance of any such
adjustment to the VaR Floor percentage, (iii) designate that the VaR
Floor percentage would be subject to at least monthly model performance
monitoring, and (iv) make certain technical changes. The proposed
changes would necessitate changes to the QRM Methodology. The proposed
changes are described in detail below.
Background
On January 24, 2017, the Commission approved FICC's VaR Filing to
make certain enhancements to the MBSD value-at-risk (``VaR'') margin
calculation methodology.\7\ The VaR Filing amended the definition of
VaR Charge to include the VaR Floor.\8\ The VaR Charge comprises the
largest portion of a Clearing Member's Required Fund Deposit amount.
The VaR Charge is calculated using a risk-based margin methodology that
is intended to capture the market price risk associated with the
securities in a Clearing Member's portfolio. The methodology is
designed to project the potential gains or losses that could occur in
connection with the liquidation of a defaulting Clearing Member's
portfolio, assuming that a portfolio would take three days to hedge or
liquidate in normal market conditions. The projected liquidation gains
or losses are used to determine the amount of the VaR Charge, which is
calculated to cover projected liquidation losses at a 99 percent
confidence level.\9\
---------------------------------------------------------------------------
\7\ See VaR Filing Approval Order, supra note 5.
\8\ The term ``VaR Floor'' is defined within the definition of
VaR Charge. See MBSD Rule 1, supra note 3.
\9\ Unregistered Investment Pool Clearing Members are subject to
a VaR Charge with a minimum targeted confidence level assumption of
99.5 percent. See MBSD Rule 4, Section 2(c), supra note 3.
---------------------------------------------------------------------------
FICC uses the VaR Floor as an alternative to the VaR Charge amount
calculated by the VaR model for Clearing Members' portfolios where the
VaR Floor calculation is greater than the model-based calculation. The
VaR Floor addresses the risk that the VaR model may calculate too low a
VaR Charge for certain portfolios where the VaR model applies
substantial risk offsets among long and short positions in different
classes of mortgage-backed securities that have a high degree of
historical price correlation. FICC applies the VaR
[[Page 39042]]
Floor at the Clearing Member portfolio level. Because the historical
price correlation may not persist in future market conditions,\10\ FICC
believes that it is prudent to apply a VaR Floor that is based upon the
market value of the gross unsettled positions in the Clearing Member's
portfolio in order to protect FICC against such risk in the event that
FICC is required to liquidate a mortgage-backed securities portfolio in
stressed market conditions.
---------------------------------------------------------------------------
\10\ For example, certain TBAs may have highly correlated
historical price returns despite having different coupons and,
although the net risk exposure may be adequately modeled under
current market conditions, future market conditions could cause the
risk relationship to change in a way that may not be adequately
captured by the model. TBA is defined in MBSD Rule 1. See MBSD Rule
1, supra note 3.
---------------------------------------------------------------------------
(i) Proposed Rule Changes Allowing FICC To Adjust the VaR Floor
Percentage
The MBSD Rules currently define the VaR Floor as ``5 basis points
of the market value of a Clearing Member's gross unsettled positions.''
\11\ Therefore, the VaR Floor is utilized as the Clearing Member's VaR
Charge if the VaR model yields an amount that is lower than 5 basis
points (referred to herein as the ``VaR Floor percentage'') of the
market value of a Clearing Member's gross unsettled positions.
---------------------------------------------------------------------------
\11\ See definition of ``VaR Charge.'' See MBSD Rule 1, supra
note 3.
---------------------------------------------------------------------------
FICC is proposing to revise the definition of the VaR Floor to
allow FICC, subject to the governance process set forth in the
Framework, to adjust the VaR Floor percentage within a proposed range
when FICC's review of the VaR Floor percentage indicates that the VaR
Floor percentage is not sufficient to cover FICC's credit exposure to
each Clearing Member fully with a high degree of confidence. FICC is
proposing that the VaR Floor percentage would be no less than 5 basis
points and no more than 30 basis points of the gross unsettled
positions.
FICC believes that the range of 5 to 30 basis points would allow
FICC to effectively set a floor on the VaR Charge at a level that has
historically impacted only a small number of Clearing Members based on
the impact study discussed below.\12\ In order to determine the
specific VaR Floor percentage within the permissible range, FICC would
review, on at least an annual basis, the impact of alternative VaR
Floor parameters within the proposed range of 5 to 30 basis points to
the backtesting performance and to Clearing Members' margin charges.
Upon approval of this filing, FICC proposes to initially set the VaR
Floor at 10 basis points based on observed backtesting coverage on
actual Clearing Members' positions and hypothetical portfolios \13\
that could result in low VaR Charges.\14\
---------------------------------------------------------------------------
\12\ For the period February 27, 2017 through February 28, 2019,
a 5 basis point VaR Floor would impact less than 0.4% of Clearing
Members on average daily who have a VaR Charge, a 10 basis point VaR
Floor would impact less than 2.3%, a 15 basis point VaR Floor would
impact less than 5.0%, a 20 basis point VaR Floor would impact less
than 8.2%, a 25 basis point VaR Floor would impact less than 11.4%,
a 30 basis point VaR Floor would impact less than 14.4%, a 45 basis
point VaR Floor would impact less than 22.3%, and a 60 basis point
VaR Floor would impact less than 30.6%.
\13\ For example, FICC can create hypothetical settlement
portfolios with long/short positions where the net market value is
zero to identify potential settlement portfolios where historical
price changes of different classes of mortgage-backed securities did
not experience offsetting price moves (commonly referred to as
``basis risk'').
\14\ FICC's coverage at the Clearing Agency level is at 99%. The
issue has arisen with respect to certain Clearing Members whose
portfolios are achieving below 99% coverage on a 12-month rolling
basis.
---------------------------------------------------------------------------
As stated above, any adjustment to the VaR Floor percentage would
be subject to the governance process set forth in the Framework.
Specifically, the Framework provides that all model performance
concerns will be escalated by the Model Validation and Control Group
(``MVC'') to the Model Risk Governance Committee (``MRGC''), including
model performance enhancement concerns and the MRGC may further
recommend certain matters for further escalation to the Management Risk
Committee and/or Risk Committee of the Board.
(ii) Proposed Clearing Member Notifications Regarding Adjustments to
the VaR Floor Percentage
For adjustments to the VaR Floor percentage that would fall within
the proposed range, FICC would provide Clearing Members with 10
Business Days' notice prior to the implementation of such adjustment.
Clearing Members would be notified of the applicable VaR Floor
percentage by an Important Notice issued no later than 10 Business Days
prior to the implementation of the adjustment. For adjustments that
would fall outside of the proposed range, FICC would submit a rule
filing to the Commission. As proposed, FICC would not apply a VaR Floor
percentage that is less than 5 basis points (which is the current VaR
Floor percentage); however, the proposed change would allow FICC to
adjust such VaR Floor percentage above 5 basis points (up to 30 basis
points).
(iii) Proposed Rule Changes To Designate that the VaR Floor Percentage
Would Be Subject to at Least Monthly Model Performance Monitoring
The Framework provides that, as part of model performance
monitoring, on at least a monthly basis, sensitivity analysis is
performed on FICC's margin model, the key parameters and assumptions
for backtesting are reviewed, and modifications are considered to
ensure FICC's backtesting practices are appropriate for determining the
adequacy of the applicable margin resources of FICC. The Framework also
describes that MVC performs a model validation for each FICC model
approved for use in production not less than annually, including, among
other things, on its margin systems and related models.\15\
---------------------------------------------------------------------------
\15\ Supra note 4.
---------------------------------------------------------------------------
The VaR Floor percentage is currently subject to periodic model
validations as part of FICC's margin model validation on at least an
annual basis to determine if the VaR Floor percentage would remain
adequate to cover FICC's credit exposure to Clearing Members with
certain types of portfolios fully with a high degree of confidence.
FICC would propose, as part of model performance monitoring, to
designate the VaR Floor percentage as a parameter of its VaR model that
will be reviewed on at least a monthly basis per the Framework. As
such, FICC proposes to amend the QRM Methodology to reference the at
least monthly model performance monitoring of the VaR Floor percentage.
(iv) Proposed Technical Changes
The proposed rule change would also make technical changes to
restate the calculation of the VaR Floor to provide more detail than
the current provision and to use defined terms (that is, the terms Long
Positions \16\ and Short Positions \17\).
---------------------------------------------------------------------------
\16\ The term ``Long Position'' means a Member's obligations
with respect to the purchase of an Eligible Security or an Option
Contract, as determined pursuant to the MBSD Rules. MBSD Rule 1,
supra note 3.
\17\ The term ``Short Position'' means a Member's obligation
with respect to the sale of an Eligible Security or an Option
Contract, as determined pursuant to the MBSD Rules. MBSD Rule 1,
supra note 3.
---------------------------------------------------------------------------
Specifically, FICC would (i) delete ``5 basis points of the market
value of a Clearing Member's gross unsettled positions'' and replace it
with ``an amount designated by the Corporation'' and (ii) add a new
sentence that would read: ``Such VaR Floor will be determined by
multiplying the sum of the absolute values of Long Positions and Short
Positions, at market value, by
[[Page 39043]]
a percentage designated by the Corporation that is no less than 0.05%
and no greater than 0.30%. The Corporation shall determine the
percentage within this range to be applied based on factors including
but not limited to a review performed at least annually of the impact
of the VaR Floor parameter at different levels within the range to the
backtesting performance and to Clearing Members' margin charges. The
Corporation shall inform Clearing Members of the applicable percentage
utilized by the VaR Floor by an Important Notice issued no later than
10 Business Days prior to the implementation of such percentage.''
In addition, FICC proposes a technical change to the QRM
Methodology to reference that there will be at least annual model
validation of the VaR Floor percentage; the QRM methodology currently
provides that the VaR Floor percentage is reviewed annually and
updated.
(v) Review and Need for VaR Floor Percentage Adjustment
FICC conducted a review of the VaR Floor percentage in June 2017
and conducted impact studies beginning in February 2017, which found
that an increase in the VaR Floor percentage to 10 basis points is
necessary to bring the VaR Charge to a level that would cover FICC's
credit exposure to certain Clearing Members that have long-short
portfolios fully with a high degree of confidence.\18\ The review,
performed in June 2017, found that portfolios that contained long-short
positions, for example, where a portfolio was long the GNMA II/FNMA
basis at a higher coupon and short the GNMA II/FNMA basis at a lower
coupon, were not adequately covered by a VaR Floor percentage of 5
basis points during periods of market volatility. Increasing the VaR
Floor percentage to 10 basis points would improve the backtesting
coverage of this group to 99.8%. As a result, FICC began monitoring all
portfolios with a VaR Charge below 10 basis points of the portfolio's
gross positions for a potential Intraday Mark-to-Market Charge to
ensure sufficient margin coverage during periods of market volatility.
Although a recent impact study for the twelve months ended February
2019 found the backtesting coverage of the VaR Charge for certain
Clearing Members with long-short portfolios had improved to the 99%
confidence level without the change to the VaR Floor percentage, FICC
believes it is prudent to make the change to ensure the VaR Charge
remains adequate if market conditions change. The June 2017 review of
the VaR Floor percentage that included a period of market volatility
also found that an increase in the VaR Floor percentage to 20 basis
points if the alternative volatility calculation (which was referred to
as the ``Margin Proxy'' in the VaR Filing \19\) is applied would better
cover risks of portfolios with offsetting long and short positions
within the same agency program, given that the Margin Proxy allows for
further netting among positions within the same agency program than
would occur within the VaR model.\20\ The recent impact study for the
twelve months ended February 2019 found if the VaR Floor percentage
were increased to 20 basis points, the backtesting coverage of the
Margin Proxy \21\ would improve to 99% for eleven of the fourteen
portfolios that would otherwise have been below the 99% confidence
level target. Additionally, the backtesting deficiencies of the three
small portfolios that would have remained below the 99% confidence
target would be reduced to an average 11 backtesting deficiencies if
the VaR Floor percentage were increased to 20 basis points, from an
average 45 backtesting deficiencies utilizing the current VaR Floor
percentage of 5 basis points. If Margin Proxy were invoked as an
alternative volatility calculation, FICC would utilize the Backtesting
Charge \22\ to further mitigate exposure to FICC caused by settlement
risks that may not be adequately captured by the alternative volatility
model. Upon Commission approval of this proposed rule change, FICC
would provide Clearing Members with 10 Business Days' notice of the
increase of the VaR Floor percentage to 10 basis points. The notice
would also inform Clearing Members that in the event that the
alternative volatility calculation (the Margin Proxy) would be
employed, the VaR Floor percentage would be increased to 20 basis
points.
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\18\ These are portfolios that net down to a low VaR Charge
amount but represent large gross positions.
\19\ The Margin Proxy is used as an alternative volatility
calculation in the event that the requisite data used for the
methodology (i.e., sensitivity approach) that is used to calculate
the VaR Charge is unavailable for an extended period of time. See
VaR Filing Approval Order, 82 FR at 8781.
\20\ FICC proposed and received Commission approval to increase
the look-back period and apply a historical stressed period to the
Margin Proxy calibration. See Securities Exchange Act Release No.
85944 (May 24, 2019), 84 FR 25315 (May 31, 2019) (SR-FICC-2019-001).
\21\ The Margin Proxy study was calibrated using a 10-year
historical look-back period plus 1-year stress period.
\22\ See definition of ``Backtesting Charge.'' See MBSD Rule 1,
supra note 3.
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(vi) Impact Study
FICC performed an impact study on Clearing Members' portfolios for
the period beginning February 27, 2017, when the changes in the VaR
Filing were implemented, to February 28, 2019, that showed increasing
the VaR Floor percentage to 10 basis points would impact a small number
of Clearing Members, and the total MBSD Clearing Fund impact would be
small. Nevertheless, FICC believes this change is necessary to maintain
sufficient financial resources to cover FICC's credit exposures to
certain Clearing Members' portfolios fully with a high degree of
confidence.
Over the study period, increasing the VaR Floor percentage to 10
basis points would have affected, on average, two portfolios per day,
and the average daily margin increase to MBSD's Clearing Fund would
have been approximately $6 million per day (0.12% of the average daily
VaR Charge of $5 billion). The largest daily increase for the total VaR
Charge over the study period would have been $37 million for all
Clearing Members, 1% of the total VaR Charge of $ 3.7 billion on that
day.
Although for the twelve months ended February 28, 2019, 21
portfolios would have been impacted by the increase to the VaR Floor
percentage over the study period, for each portfolio the increase was
less than 1% of the Clearing Member's Excess Capital \23\ and 4
portfolios accounted for over 50% of the instances of margin increase.
The impact study showed the largest daily increase of an individual
portfolio was $25.5 million. Given the VaR model amount for this
portfolio was also below the current 5 basis point VaR Floor, an
increase to a 10 basis point VaR Floor would have doubled that
portfolio's VaR Charge for that day.
---------------------------------------------------------------------------
\23\ The term ``Excess Capital'' means Excess Net Capital, net
assets, or equity capital as applicable to a Clearing Member based
on its type of regulation. MBSD Rule 1, supra note 3.
---------------------------------------------------------------------------
2. Statutory Basis
FICC believes that this proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a registered clearing agency. Specifically, FICC believes
that this proposal is consistent with Section 17A(b)(3)(F) of the Act
\24\ and Rules 17Ad-22(e)(4)(i), (e)(6)(i) and
[[Page 39044]]
(e)(23)(ii), each promulgated under the Act,\25\ for the reasons
described below.
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\24\ 15 U.S.C. 78q-1(b)(3)(F).
\25\ 17 CFR 240.17Ad-22(e)(4)(i), (e)(6)(i) and (e)(23)(ii).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act requires, in part, that the MBSD
Rules be designed to (i) promote the prompt and accurate clearance and
settlement of securities transactions and (ii) assure the safeguarding
of securities and funds which are in the custody or control of the
clearing agency or for which it is responsible.\26\
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\26\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The proposed changes described in Item II(A)1(i) above would allow
FICC, subject to the governance process in the Framework, to adjust the
VaR Floor percentage within a proposed range when FICC's review of the
VaR Floor percentage indicates that the VaR Floor percentage is not
sufficient to cover FICC's credit exposure to each Clearing Member
fully with a high degree of confidence. FICC believes these proposed
changes would assure the safeguarding of securities and funds which are
in the custody or control of FICC or for which it is responsible.
Specifically, the proposed changes would provide FICC with discretion
to adjust the VaR Floor percentage, subject to governance, to cover
FICC's credit exposure to each Clearing Member with a high degree of
confidence. Covering FICC's exposure to each Clearing Member with a
high degree of confidence would help FICC ensure that it maintains an
appropriate level of margin to address its risk management needs.
Therefore, FICC believes the proposed changes described in Item
II(A)1(i) above would safeguard the securities and funds that are in
the custody and control of FICC or for which it is responsible,
consistent with Section 17A(b)(3)(F) of the Act.\27\
---------------------------------------------------------------------------
\27\ Id.
---------------------------------------------------------------------------
FICC believes that the proposed changes described in Item
II(A)1(ii) above to state that Clearing Members would be notified in
advance of any adjustment to the VaR Floor percentage would promote the
prompt and accurate clearance and settlement of securities
transactions. Specifically, FICC believes that providing notice in
advance of the implementation of any adjustment would provide Clearing
Members with time to adjust to any new VaR Charge amounts that result
from any adjustments to the VaR Floor percentage. FICC believes 10
Business Days' prior notice would provide Clearing Members with
sufficient time to prepare for any new VaR Charge amounts and thereby
ensure that the Clearing Members have the funds to satisfy their new
VaR Charge amounts. This in turn would help FICC ensure that FICC has
an adequate margin to address its risk management needs. Therefore,
FICC believes the proposed changes described in Item II(A)1(ii) above
would promote the prompt and accurate clearance and settlement of
securities transactions, consistent with Section 17A(b)(3)(F) of the
Act.\28\
---------------------------------------------------------------------------
\28\ Id.
---------------------------------------------------------------------------
In addition, FICC believes that the proposed changes described in
Item II(A)1(iii) above to the QRM Methodology to state that the VaR
Floor percentage would be subject to at least monthly performance
monitoring would 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) the Act.\29\ Specifically, this
would require FICC to monitor the VaR Floor percentage frequently. This
would help FICC ensure that there is an appropriate level of margin as
FICC would be monitoring the VaR Floor percentage at least monthly.
This change would also alert FICC of the need to make any adjustments
to the VaR Floor percentage. As such, FICC believes the proposed
changes described in Item II(A)1(iii) above would safeguard the
securities and funds that are in the custody and control of FICC or for
which it is responsible, consistent with Section 17A(b)(3)(F) of the
Act.\30\
---------------------------------------------------------------------------
\29\ Id.
\30\ Id.
---------------------------------------------------------------------------
FICC believes that the proposed technical changes to the MBSD Rules
described in Item II(A)1(iv) above would promote the prompt and
accurate clearance and settlement of securities transactions by
ensuring that the MBSD Rules remain clear and accurate to Clearing
Members. Having clear and accurate MBSD Rules would facilitate Clearing
Members' understanding of those rules and provide Clearing Members with
increased predictability and certainty regarding their obligations.
FICC also believes that proposed technical changes to the QRM
Methodology described in Item II(A)1(iv) above would enhance the
clarity of the QRM Methodology for FICC. As the QRM Methodology is used
by FICC Risk Management personnel regarding the frequency of model
validation of the VaR Floor percentage, FICC believes that enhancing
clarity of the description as to how often this review should be
conducted would promote the prompt and accurate clearance and
settlement of securities transactions, consistent with Section
17A(b)(3)(F) the Act.\31\
---------------------------------------------------------------------------
\31\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(4)(i) under the Act \32\ requires a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to effectively identify,
measure, monitor, and manage its credit exposures to participants and
those exposures arising from its payment, clearing, and settlement
processes by maintaining sufficient financial resources to cover its
credit exposure to each participant fully with a high degree of
confidence. The proposed changes described in Item II(A)1(i) would
allow adjustment of the VaR Floor percentage (subject to FICC's
governance). This change would allow FICC to limit its credit exposures
to Clearing Members in the event that the VaR model yields too low a
VaR Charge for such portfolios. Under the proposed rule changes, the
VaR Floor percentage would be subject to at least monthly model
performance monitoring and continue to be subject to at least annual
model validations by FICC. In the event the review reveals that the VaR
Floor percentage is not resulting in coverage with a high degree of
confidence, FICC would adjust the VaR Floor percentage within the
proposed range after going through its required governance (and
providing Clearing Members with the 10 Business Days' notice as
described above). Therefore, FICC believes the proposed changes are
consistent with the requirements of Rule 17Ad-22(e)(4)(i) under the
Act.\33\
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\32\ 17 CFR 240.17Ad-22(e)(4)(i).
\33\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(i) under the Act \34\ requires a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover, if the covered
clearing agency provides central counterparty services, its credit
exposures to its participants by establishing a risk-based margin
system that, at a minimum, considers, and produces margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market. FICC, which provides central
counterparty services, believes that the proposed changes to allow
FICC, subject to its governance, to adjust the VaR Floor percentage
within a proposed range (as described in Item II(A)1(i) above) are
consistent with the requirements of Rule 17Ad-22(e)(6)(i) cited above.
Specifically, FICC believes the proposed changes would provide FICC
with the discretion (subject to its
[[Page 39045]]
governance) to appropriately limit FICC's credit exposure to Clearing
Members in the event that the VaR model yields too low a VaR Charge.
The proposed changes would therefore allow FICC to continue to produce
margin levels commensurate with the risks and particular attributes of
each relevant product, portfolio, and market. As such, FICC believes
that the proposed changes are consistent with the requirements of Rule
17Ad-22(e)(6)(i) under the Act.\35\
---------------------------------------------------------------------------
\34\ 17 CFR 240.17Ad-22(e)(6)(i).
\35\ Id.
---------------------------------------------------------------------------
The proposed technical changes to the MBSD Rules described in Item
II(A)1(iv) above are designed to be consistent with Rule 17Ad-
22(e)(23)(ii) under the Act.\36\ Rule 17Ad-22(e)(23)(ii) under the Act
requires a covered clearing agency to 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.\37\ The proposed
technical changes to the MBSD Rules would provide more details as to
how the VaR Floor is calculated than is currently set forth in the MBSD
Rules. As such, FICC believes the proposed changes would enable
Clearing Members to have a better understanding of the operation of the
VaR Floor because there would be more clarity as to how the VaR Floor
to which they are subject is calculated. FICC believes the additional
details would provide Clearing Members with sufficient information to
enable them to evaluate the costs they incur by participating in FICC.
As such, FICC believes that the proposed technical changes to the MBSD
Rules described in Item II(A)1(iv) above are consistent with Rule 17Ad-
22(e)(23)(ii) under the Act.\38\
---------------------------------------------------------------------------
\36\ 17 CFR 240.17Ad-22(e)(23)(ii).
\37\ Id.
\38\ Id.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
FICC believes the proposed rule changes described in Item II(A)1(i)
above to allow FICC, subject to its governance, to adjust the VaR Floor
percentage within a proposed range in the circumstances described above
could both promote competition and could impose a burden on
competition. In circumstances where FICC exercises its authority to
decrease the VaR Floor percentage within the proposed range, Clearing
Members would experience decreases in their VaR Charge. FICC believes
this may promote competition because Clearing Members would have a
lower VaR Charge, and therefore could use their funds for other
purposes.
However, FICC also believes that the proposed changes described in
Item II(A)1(i) above could impose a burden on competition.
Specifically, in circumstances where FICC exercises its authority to
increase the VaR Floor percentage within the proposed range, Clearing
Members who are affected by the VaR Floor would experience increases in
their VaR Charge. Such increases could burden Clearing Members that
have lower operating margins or higher costs of capital than other
Clearing Members. It is not clear whether the burden on competition
would necessarily be significant because it would depend on whether the
affected Clearing Members were similarly situated in terms of business
type and size. Regardless of whether the burden on competition is
significant, FICC believes that any burden on competition that derives
from the proposed rule changes described in Item II(A)1(i) above would
be necessary and appropriate in furtherance of the purposes of the
Act.\39\
---------------------------------------------------------------------------
\39\ 15.U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------
Specifically, FICC believes that the proposed rule changes
described in Item II(A)1(i) above would be necessary in furtherance of
the purposes of the Act because they would allow FICC to make
adjustments to the VaR Floor percentage within a proposed range when
FICC's review of the VaR Floor percentage indicates that the VaR Floor
percentage is not sufficient to cover FICC's credit exposure to each
Clearing Member with a high degree of confidence. The proposed rule
changes would provide FICC with the discretion (subject to its
governance) to limit its exposure to Clearing Members by ensuring that
each Clearing Member has an appropriate minimum VaR Charge in the event
that the VaR model yields too low a VaR Charge for such portfolios.
Maintaining an appropriate minimum VaR Charge for each Clearing Member
would be necessary in furtherance of the Act because it would allow
FICC to maintain sufficient financial resources to cover its credit
exposure to each Clearing Member. FICC also believes that any burden on
competition that derives from the proposed rule change would be
appropriate in furtherance of the purposes of the Act because FICC's
discretion would be limited by its governance and also the proposed
range for the VaR Floor percentage. Making any proposed adjustments to
the VaR Floor percentage subject to a required governance process would
be appropriate in furtherance of the Act because it would ensure that
the final decision as to whether the adjustment ought to be made falls
on a clear and transparent decision-making process. Making any proposed
adjustments to the VaR Floor percentage subject to the proposed range
would be appropriate in furtherance of the Act because as described
above, the proposed range would effectively set a floor on the VaR
Charge at a level that has historically impacted only a small number of
Clearing Members while at the same time ensuring that FICC can make
adjustments to the VaR Floor percentage to minimize FICC's credit
exposure to Clearing Members. Therefore, FICC does not believe that the
proposed changes described in Item II(A)1(i) above would impose any
burden on competition that is not necessary or appropriate in
furtherance of the Act.\40\
---------------------------------------------------------------------------
\40\ Id.
---------------------------------------------------------------------------
FICC does not believe that the proposed changes described in Item
II(A)1(ii) above to provide Clearing Members with 10 Business Days'
notice prior to the implementation of any adjustment to the VaR Floor
percentage would impact competition. FICC believes that the proposed
change to provide notification of adjustments to the VaR Floor
percentage would enhance Clearing Members' information regarding their
margin requirements; FICC believes that the proposed 10 Business Days'
notice would provide Clearing Members with adequate opportunity to
adjust their portfolios if they wish to do so and adequate time to
prepare for the increase in their VaR Charge.
FICC does not believe the proposed changes described in Item
II(A)1(iii) above to state that the VaR Floor percentage would be
subject to monthly performance monitoring would impact competition. The
proposed rule changes regarding at least monthly model performance
review would not alter Clearing Members' rights and obligations.
Rather, they would enable FICC to identify any issues with the VaR
Floor percentage on a more frequent basis than the current annual model
validation. Moreover, the proposed change regarding at least monthly
model performance reviews would be consistent with the Framework.
FICC does not believe that the proposed rule changes described in
Item II(A)1(iv) above to make technical changes to the MBSD Rules to
restate the calculation of the VaR Floor to provide more detail than
the current provision and to use defined terms would impact
competition. The proposed technical changes would
[[Page 39046]]
ensure that the MBSD Rules remain clear by replacing the current
language with language that sets out in words the calculation of the
VaR Floor amount. By doing so, Clearing Members can better understand
how the VaR Floor is calculated and understand whether they would be
subject to it. FICC believes that the technical changes would not
affect Clearing Members' rights and obligations. As such, FICC believes
that these proposed rule changes would not have any impact on
competition.
FICC does not believe that the proposed technical changes described
in Item II(A)1(iv) to the QRM Methodology to reflect at least annual
model validation of the VaR Floor percentage would have any impact on
competition. This change would reflect current practice and would not
alter Clearing Members' rights or obligations. Therefore, FICC does not
believe that these proposed changes to clarify the language in the QRM
Methodology would have any impact on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
Written comments relating to the proposed rule changes have not
been solicited or received. FICC will notify the Commission of any
written comments received by FICC.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
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-FICC-2019-003 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-FICC-2019-003. 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 FICC and on DTCC's website
(https://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FICC-2019-003 and should be submitted on
or before August 29, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
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\41\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-16938 Filed 8-7-19; 8:45 am]
BILLING CODE 8011-01-P