Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Advance Notice To Enhance National Securities Clearing Corporation's Haircut-Based Volatility Charge Applicable to Municipal Bonds, 2197-2202 [2020-00366]
Download as PDF
<![CDATA[
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
‘‘actively participate in any litigation
against the Plans’’ means, or should the
Amendments require additional detail?
2. Do commenters believe that the
Plans should require additional public
disclosures of any personal, business,
commercial, or financial interests, and
any employment relationships that
could materially affect the ability of the
Advisory Committee Member to
participate impartially in discussing
actions of the Plans? Please explain.
3. Do commenters believe that
Advisory Committee members that
purchase SIP data products should
participate in discussions regarding the
pricing of SIP data products? If so, how
do commenters believe Advisory
Committee members should address
that potential conflict?
Participant Statement Regarding
Competition
1. The Participants state in their filing
that the Amendments do not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Do
commenters believe that the
Amendments to the Plans impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act?
2. What effect might the Amendments
have on competition, if any? Please
explain. How would any effect on
competition from the proposal benefit or
harm the national market system and/or
various market participants? Please
describe and explain how, if at all,
aspects of the national market system or
different market participants would be
affected. Please support any response
with data, if possible.
Comments may be submitted by any
of the following methods:
lotter on DSKBCFDHB2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CTA/CQ–2019–01 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CTA/CQ–2019–01. 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
website (https://www.sec.gov/rules/
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
sro.shtml). Copies of the submission, all
written statements with respect to the
proposed Amendments that are filed
with the Commission, and all written
communications relating to the
proposed Amendments 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 website
viewing and printing at the principal
office of the Plans. 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–CTA/CQ–2019–01 and
should be submitted on or before
February 4, 2020.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–00363 Filed 1–13–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87911; File No. SR–NSCC–
2019–801]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of
Advance Notice To Enhance National
Securities Clearing Corporation’s
Haircut-Based Volatility Charge
Applicable to Municipal Bonds
January 8, 2020.
Pursuant to Section 806(e)(1) of Title
VIII of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
entitled the Payment, Clearing, and
Settlement Supervision Act of 2010
(‘‘Clearing Supervision Act’’) 1 and Rule
19b–4(n)(1)(i) under the Securities
Exchange Act of 1934 (‘‘Act’’),2 notice is
hereby given that on December 13, 2019,
National Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the advance notice SR–NSCC–2019–801
(‘‘Advance Notice’’) as described in
1 12
2 17
PO 00000
U.S.C. 5465(e)(1).
CFR 240.19b–4(n)(1)(i).
Frm 00094
Fmt 4703
Sfmt 4703
2197
Items I, II and III below, which Items
have been prepared by the clearing
agency.3 The Commission is publishing
this notice to solicit comments on the
Advance Notice from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Advance
Notice
This Advance Notice consists of
amendments to NSCC’s Rules &
Procedures (‘‘Rules’’) 4 in order to
enhance NSCC’s haircut-based volatility
charge applicable to municipal bonds
(the ‘‘Bond Haircut’’). References to the
Bond Haircut in this document refer
only to that charge as applied to
municipal bonds. The proposed changes
are described in greater detail below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Advance Notice
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the Advance Notice and discussed any
comments it received on the Advance
Notice. 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 and B below, of the most
significant aspects of such statements.
(A) Clearing Agency’s Statement on
Comments on the Advance Notice
Received From Members, Participants,
or Others
NSCC has not received or solicited
any written comments relating to this
proposal. NSCC will notify the
Commission of any written comments
received by NSCC.
(B) Advance Notice Filed Pursuant to
Section 806(e) of the Clearing
Supervision Act
Description of Proposed Changes
NSCC is proposing a number of
enhancements to NSCC’s Bond Haircut,
as described in greater detail below.
The Required Fund Deposit and the
Bond Haircut
As part of its market risk management
strategy, NSCC manages its credit
exposure to Members by determining
3 On December13, 2019, NSCC filed this Advance
Notice as a proposed rule change (SR–NSCC–2019–
004) with the Commission pursuant to Section
19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule
19b–4 thereunder, 17 CFR 240.19b–4. A copy of the
proposed rule change is available at https://
www.dtcc.com/legal/sec-rule-filings.aspx.
4 Capitalized terms not defined herein are defined
in the Rules, available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
E:\FR\FM\14JAN1.SGM
14JAN1
2198
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
lotter on DSKBCFDHB2PROD with NOTICES
the appropriate Required Fund Deposit
for each Member and monitoring its
sufficiency, as provided for in the
Rules.5 The Required Fund Deposit
serves as each Member’s margin. The
objective of a Member’s Required Fund
Deposit is to mitigate potential losses to
NSCC associated with liquidation of the
Member’s portfolio in the event NSCC
ceases to act for that Member
(hereinafter referred to as a ‘‘default’’).6
The aggregate of all Members’ Required
Fund Deposits, together with certain
other deposits required under the Rules,
constitute the Clearing Fund of NSCC,
which it would access should a
defaulting Member’s own Required
Fund Deposit be insufficient to satisfy
losses to NSCC caused by the
liquidation of that Member’s portfolio.
Pursuant to the Rules, each Member’s
Required Fund Deposit amount consists
of a number of applicable components,
each of which is calculated to address
specific risks faced by NSCC, as
identified within Procedure XV.7
Generally, the largest component of
Members’ Required Fund Deposits is the
volatility component. The volatility
component is designed to calculate the
amount of money that could be lost on
a portfolio over a given period of time
assumed necessary to liquidate the
portfolio, within a 99% confidence
level.
NSCC has two methodologies for
calculating the volatility component.
For the majority of Net Unsettled
Positions,8 NSCC calculates the
volatility component as the greater of (1)
the larger of two separate calculations
that utilize a parametric Value at Risk
(‘‘VaR’’) model, (2) a gap risk measure
calculation based on the largest nonindex position in a portfolio that
exceeds a concentration threshold, and
5 See Rule 4 (Clearing Fund) and Procedure XV
(Clearing Fund Formula and Other Matters) of the
Rules (‘‘Procedure XV’’), supra note 4. NSCC’s
market risk management strategy is designed to
comply with Rule 17Ad–22(e)(4) under the Act,
where these risks are referred to as ‘‘credit risks.’’
17 CFR 240.17Ad–22(e)(4).
6 The Rules identify when NSCC may cease to act
for a Member and the types of actions NSCC may
take. For example, NSCC may suspend a firm’s
membership with NSCC or prohibit or limit a
Member’s access to NSCC’s services in the event
that Member defaults on a financial or other
obligation to NSCC. See Rule 46 (Restrictions on
Access to Services) of the Rules, supra note 4.
7 Procedure XV, supra note 4.
8 ‘‘Net Unsettled Positions’’ and ‘‘Net Balance
Order Unsettled Positions’’ refer to net positions
that have not yet passed their settlement date, or
did not settle on their settlement date, and are
referred to collectively in this filing as Net
Unsettled Positions. NSCC does not take into
account any offsets, such as inventory held at other
clearing agencies, when determining Net Unsettled
Positions for the purpose of calculating the
volatility component. See Procedure XV, supra note
4.
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
(3) a portfolio margin floor calculation
based on the market values of the long
and short positions in the portfolio
(‘‘VaR Charge’’).9 Pursuant to Sections
I(A)(1)(a)(ii) and I(A)(2)(a)(ii) of
Procedure XV, certain positions in
certain classes of securities, including
municipal bonds, are excluded from the
calculation of the VaR Charge and are
instead charged a haircut-based
volatility component that is calculated
by multiplying the absolute value of
such positions by a percentage
designated by NSCC which shall not be
less than 2%.10
Existing Municipal Bond Haircut
Methodology
The existing methodology for
calculating the Bond Haircut is
described in Sections I(A)(1)(a)(iii)(B)
and I(A)(2)(a)(iii)(B) of Procedure XV.11
In order to determine the current Bond
Haircut, municipal bonds are
categorized into tenor-based groups (i.e.,
based on remaining time to maturity)
and separately categorized by municipal
sector. Sections I(A)(1)(a)(iii)(B) and
I(A)(2)(a)(iii)(B) of Procedure XV
provide that NSCC shall establish a
percentage applicable to each tenorbased group and pursuant to those
sections NSCC has established a
percentage (which is not less than 2%)
for each tenor-based group which is
used to calculate the haircut-based
charge applicable to that group.12 For
municipal bonds rated higher than
BBB+, NSCC has established a tenorbased haircut for each tenor-based
group. For example, a municipal bond
rated above BBB+ with 3 years to
maturity and $10MM short position,
will be subject to the 2–5 years tenorbased group haircut (5%) which will be
applied to the absolute market value of
the positions resulting in $500K haircutbased charge.
Sections I(A)(1)(a)(iii)(B) and
I(A)(2)(a)(iii)(B) of Procedure XV
provide that NSCC shall assign each
municipal sector a risk factor.13 For
municipal bonds rated lower than a predetermined threshold, which shall be no
lower than BBB+, and non-rated
municipal bonds, NSCC has established
a percentage based on a sector-based
risk factor which is also applied to the
tenor-based haircut. For example, a
municipal bond in the healthcare sector,
rated BBB+ or lower with 3 years to
9 Sections I(A)(1)(a)(i) and I(A)(2)(a)(i) of
Procedure XV, supra note 4.
10 Sections I(A)(1)(a)(ii) and I(A)(2)(a)(ii) of
Procedure XV, supra note 4.
11 Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV, supra note 4.
12 Id.
13 Id.
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
maturity and $10MM short position,
will be subject to the 2–5 years tenorbased group haircut (5%) multiplied by
the sector-based factor (1.2), resulting in
6% haircut-based charge of $600K. This
additional sector-based risk factor is
added because variable risk factors exist
between municipal sectors based on the
various industries in which the bonds
are issued and the source of repayment
for the bonds. For instance, general
obligation bonds are typically backed by
the taxing power of their issuer and
repaid from general taxes whereas
transportation or healthcare-related
bonds may be repaid from funds from a
specific project based on the revenues of
the project. Such risk factor is based on
the sector index’s spread to a
benchmark index.14 NSCC uses a
vendor to match bonds to particular
sectors. If a municipal bond does not fit
within any particular sector, the highest
sector-based risk factor is applied to
such municipal bond. Currently, the
highest sector-based risk factor is 2.6
used for bonds in the housing sector.
Enhancements to Municipal Bond
Haircut Methodology
NSCC regularly assesses its market
and liquidity risks, as such risks are
related to its margining methodologies,
to evaluate whether margin levels are
commensurate with the particular risk
attributes of each relevant product,
portfolio, and market. In connection
with such regular reviews, NSCC has
determined based on impact studies
that, under current market conditions,
the current margin levels with respect to
municipal bonds using the current
methodology exceed the levels
necessary to offset the risks with respect
to these securities. Based on impact
studies, NSCC has determined that
changes to its current methodology for
municipal bonds would result in margin
levels that are lower and more
commensurate with the risk attributes of
those securities. In particular, as
described below, NSCC is proposing to
replace the municipal sector-based risk
factor for lower rated municipal bonds
with a percentage derived using the
historical returns of applicable
benchmark indices.
NSCC is proposing the following
enhancements to the methodology used
for calculating the Bond Haircut.
First, NSCC is proposing to recalibrate the Bond Haircut not less
frequently than annually. Sections
I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
14 The ‘‘spread’’ is the difference in the yield
curve of the sector index to the yield curve of a
benchmark index which is indicative of the added
risk presented by the sector.
E:\FR\FM\14JAN1.SGM
14JAN1
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
lotter on DSKBCFDHB2PROD with NOTICES
Procedure XV currently provide that
each municipal sector is assigned a risk
factor no less frequently than
annually.15 As discussed above and
below, the enhanced methodology for
calculating Bond Haircuts would no
longer include the straight risk factor by
sector. The re-calibration of the Bond
Haircut not less frequently than
annually would replace the assignment
of a straight risk factor no less
frequently than annually. NSCC believes
that the periodic re-calibration would
help ensure that NSCC is reviewing the
Bond Haircut with enough regularity to
ensure that the margin levels are
commensurate with the particular risk
attributes of municipal bonds.
While the proposed rule change
would provide that NSCC would recalibrate not less frequently than
annually, NSCC would initially recalibrate the Bond Haircut on a
quarterly basis. NSCC could change how
often it recalibrates from time to time
based on its regular review of margining
methodologies; provided, that it would
recalibrate not less frequently than
annually pursuant to the proposed rule
change. Changes to the frequency of
calibration would be subject to NSCC’s
risk management practices which would
require, among other things, approval by
the DTCC Model Risk Governance
Committee (‘‘MRGC’’).16
Second, municipal bonds would be
grouped into tenor-based groups and by
credit rating, and municipal bonds that
are rated BBB+ or lower, or that are not
rated, would also be separately
categorized by municipal sector. NSCC
would then establish a percentage
haircut for each group based on the (1)
the historical returns of applicable
benchmark indices, such as tenor-based
indices (i.e., based on time to maturity),
municipal bond sector-based indices,
and high-yield indices; (2) a predetermined look-back period, which
shall not be shorter than 10 years; and
(3) a pre-determined calibration
15 Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV, supra note 4.
16 See Securities Exchange Act Release No. 81485
(August 25, 2017), 82 FR 41433 (August 31, 2017)
(File No. SR–NSCC–2017–008) (describes the
adoption of the Clearing Agency Model Risk
Management Framework (‘‘Model Risk Management
Framework’’) of NSCC which sets forth the model
risk management practices of NSCC) and Securities
Exchange Act Release No. 84458 (October 19, 2018),
83 FR 53925 (October 25, 2018) (File No. SR–
NSCC–2018–009) (amends the Model Risk
Management Framework). The Model Risk
Management Framework describes the model
management practices adopted by NSCC, which
have been designed to assist NSCC in identifying,
measuring, monitoring, and managing the risks
associated with the design, development,
implementation, use, and validation of ‘‘models’’
which would include the methodology for the Bond
Haircut. Id.
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
percentile, which shall not be less than
99%.
For municipal bonds that are rated
higher than BBB+, NSCC is proposing to
use a tenor-based index (i.e., based on
time to maturity) as the applicable
benchmark index. While the proposed
rule change would provide that NSCC
would base such percentage for bonds
that are rated higher than BBB+ on
historical returns of applicable
benchmark indices, such as tenor-based
indices (i.e., based on time to maturity),
municipal bond sector-based indices,
and high-yield indices; NSCC would
initially base the percentage derived
from a benchmark municipal tenorbased index over a 3-day price return
from the index. NSCC could change
which applicable benchmark indices it
uses and the applicable period for the
price return used in the calculation from
time to time based on its regular review
of margining methodologies. Changes to
the frequency of calibration would be
subject to NSCC’s risk management
practices which would require, among
other things, approval by the MRGC.17
For municipal bonds that are rated
BBB+ or lower, or are not rated, NSCC
is proposing to use a percentage derived
from the maximum of the applicable
tenor-based index, municipal bond
sector-based indices and a high-yield
index. Rather than multiply the tenorbased haircut by a straight risk factor for
each municipal sector, as is done under
the current methodology, the Bond
Haircut for these lower rated or nonrated municipal bonds would be
determined by using the maximum
percent derived from either the
applicable tenor-based index, the
municipal bond sector-based indices or
a high yield index. The enhancement
would account for risks represented by
the tenor, sector and high-yield
characteristics that may be presented by
these municipal bonds by using the
maximum percent that is derived from
either a tenor-based index, sector-based
indices or a high yield index, rather
than addressing these risks by
multiplying the percent derived from a
tenor-based index by a straight sectorbased risk factor. Based on analysis of
the impact studies, NSCC believes that
the use of a risk factor based on the
tenor-based index, municipal bond
sector-based indices and a high-yield
index would result in lower margins
with respect to these securities that are
sufficient to offset the risks with respect
to these securities.
While the proposed rule change
would provide that NSCC would base
such percentage on historical returns of
17 See
PO 00000
note 16.
Frm 00096
Fmt 4703
Sfmt 4703
2199
applicable benchmark indices, such as
tenor-based indices (i.e., based on time
to maturity), municipal bond sectorbased indices, and high-yield indices;
NSCC would initially base the
percentage derived from a tenor-based
index, municipal bond sector-based
indices and a high-yield index over a 3day price return from the indices. NSCC
could change which applicable
benchmark indices it uses and the
applicable period for the price return
used in the calculation from time to
time based on its regular review of
margining methodologies in accordance
with its risk management practices
which would require, among other
things, approval by the MRGC.18
In extraordinary circumstances, a
certain municipality or issuer may
present unique risks beyond the
calibrated tenor, sector and high-yield
factors. For example, the market price
risk for issues of a municipality facing
technical default following a natural
disaster may not be fully captured due
to the liquidity profile of municipal
securities. Therefore, NSCC would
reserve the right to apply the highest
haircut of all municipal bonds to a
specific issuer in such instances. NSCC
would apply the highest haircut in
accordance with its risk management
practices, including approval by an
officer of NSCC in the risk management
department, following a review of the
circumstances facing the municipality
and a finding that the market price
movement raises risks that are not
accounted for by the Bond Haircut
methodology.
Finally, the recalibration of the Bond
Haircut would apply a pre-determined
look-back period. NSCC would initially
apply a look-back period of a 10-year
rolling window plus a one calendar year
‘‘worst case scenario’’ stress period.
NSCC believes this look-back period is
appropriate because it would capture
relevant data and is adequate to cover
enough market activity, while not
diluting the ‘‘tail’’ with an abundance of
data.19
While the proposed rule change
would provide that NSCC would apply
a pre-determined look-back period,
which shall not be shorter than 10 years,
NSCC would initially apply a look-back
period of a 10-year rolling window plus
a one calendar year ‘‘worst case
scenario’’ stress period. NSCC could
18 See
note 16.
believes that a 10-year window with a
one-year stress period is typically long enough to
capture at least two recent market cycles. NSCC
believes that data over a longer period will ‘‘flatten’’
out the results because recent volatile periods will
be offset by non-volatile periods, making the more
recent volatility appear less significant.
19 NSCC
E:\FR\FM\14JAN1.SGM
14JAN1
2200
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
change the look-back period from time
to time based on its regular review of
margining methodologies in accordance
with its risk management practices
which would require, among other
things, approval by the MRGC.20
lotter on DSKBCFDHB2PROD with NOTICES
Proposed Rule Changes to Procedure XV
In order to implement the proposed
enhancements to the Bond Haircut
methodology described above, Sections
I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV would be revised to
provide that: (i) Municipal bonds would
be grouped by both ‘‘remaining time to
maturity’’ and credit rating, and
municipal bonds that are BBB+ or
lower, or that are not rated, would be
separately categorized by municipal
sector, (ii) NSCC would establish the
Bond Haircut percentages no less
frequently than annually, (iii) the Bond
Haircut percentage to be applied to
municipal bonds would apply to each
grouping of municipal bonds and (iv)
the Bond Haircut percentage to be
applied to municipal bonds would be
based on (1) the historical returns of
applicable benchmark indices, such as
tenor-based indices (i.e., based on time
to maturity), municipal bond sectorbased indices, and high-yield indices;
(2) a pre-determined look-back period;
and (3) a pre-determined calibration
percentile, which shall not be less than
99%. In addition, Sections
I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV would be revised to
remove the references to the municipal
sector factor and the current application
of the municipal sector factor in the last
four sentences in Sections
I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV. A sentence would also be
added to Sections I(A)(1)(a)(iii)(B) and
I(A)(2)(a)(iii)(B) of Procedure XV to
provide that in extraordinary
circumstances where NSCC determines
that a certain municipality or issuer of
municipal bonds presents unique risks
that are not captured by the grouping set
forth in those subsections, NSCC may,
in its discretion, apply the highest
percentage being applied to any
municipal bond group pursuant to those
subsections to municipal bonds issued
by such municipality or issuer.
Expected Effect on and Management of
Risk
NSCC believes that the proposed
changes to enhance the Bond Haircut
would enable NSCC to better limit its
risk exposures to Members arising out of
their Net Unsettled Positions.
First, the proposal to enhance the
methodology for determining the Bond
Haircut would improve NSCC’s ability
to limit its risk exposures posed by Net
Unsettled Positions in these municipal
bonds by allowing it to (1) better
identify the risks with respect to
municipal bonds, and (2) calculate a
volatility margin component that is
appropriate for those risks.
Second, the proposal to re-calibrate
the Bond Haircut no less frequently than
annually, to calibrate the percent to a
pre-determined percentile that would be
not be less than 99% and to apply a predetermined look back period would
ensure that the Bond Haircut continues
to accurately measure the risks
presented by municipal bonds and to
better limit its credit exposures posed
by municipal bonds. The proposal
would more appropriately address the
risks presented by a Net Unsettled
Position in municipal bonds by
applying a calculation that more
accurately measures the risks when
determining the Bond Haircut to be
used in that calculation. Therefore, by
enabling NSCC to calculate and collect
margin that more accurately reflects the
risk characteristics of municipal bonds,
these proposals would enhance NSCC’s
risk management capabilities.
By providing NSCC with a more
effective measurement of its exposures,
as described above, the proposed change
would also mitigate risk for Members
because lowering the risk profile for
NSCC would in turn lower the risk
exposure that Members may have with
respect to NSCC in its role as a central
counterparty.
Consistency With the Clearing
Supervision Act
Although the Clearing Supervision
Act does not specify a standard of
review for an advance notice, its stated
purpose is instructive: To mitigate
systemic risk in the financial system
and promote financial stability by,
among other things, promoting uniform
risk management standards for
systemically important financial market
utilities and strengthening the liquidity
of systemically important financial
market utilities.21
Section 805(a)(2) of the Clearing
Supervision Act 22 authorizes the
Commission to prescribe risk
management standards for the payment,
clearing and settlement activities of
designated clearing entities, like NSCC,
and financial institutions engaged in
designated activities for which the
Commission is the supervisory agency
or the appropriate financial regulator.
Section 805(b) of the Clearing
note 16.
VerDate Sep<11>2014
22 12
18:41 Jan 13, 2020
Jkt 250001
(i) Consistency With Section 805(b) of
the Clearing Supervision Act
For the reasons described below,
NSCC believes that the proposed
changes in this advance notice are
consistent with the objectives and
principles of these risk management
standards as described in Section 805(b)
of the Clearing Supervision Act and in
the Covered Clearing Agency Standards.
As discussed above, NSCC is
proposing changes to the way it
calculates the volatility component of
the Clearing Fund as applied to Net
Unsettled Positions in municipal bonds.
The volatility charge is one of the
components of its Members’ Required
Fund Deposits—a key tool that NSCC
uses to mitigate potential losses to
NSCC associated with liquidating a
Member’s portfolio in the event of
Member default. NSCC believes the
proposed changes are consistent with
promoting robust risk management
because they are designed to enable
NSCC to better limit its exposure to
Members in the event of a Member
default.
First, NSCC’s proposal to re-calibrate
the Bond Haircut no less frequently than
annually, to calibrate the percent to a
pre-determined percentile that would be
not be less than 99% and to apply a predetermined look back period would
better enable NSCC to limit its
exposures to Net Unsettled Positions in
municipal bonds. Second, the proposal
to apply a risk factor based on a tenorbased index, municipal bond sectorbased indices and a high-yield index for
lower rated or non-rated municipal
23 12
U.S.C. 5464(b).
U.S.C. 5464(a)(2).
25 See 17 CFR 240.17Ad–22(e).
26 Id.
24 12
21 See
20 See
Supervision Act 23 states that the
objectives and principles for the risk
management standards prescribed under
Section 805(a) shall be to, among other
things, promote robust risk
management, promote safety and
soundness, reduce systemic risks, and
support the stability of the broader
financial system. The Commission has
adopted risk management standards
under Section 805(a)(2) of the Clearing
Supervision Act 24 and Section 17A of
the Exchange Act (‘‘Covered Clearing
Agency Standards’’).25 The Covered
Clearing Agency Standards require
registered clearing agencies to establish,
implement, maintain, and enforce
written policies and procedures that are
reasonably designed to meet certain
minimum requirements for their
operations and risk management
practices on an ongoing basis.26
PO 00000
12 U.S.C. 5461(b).
U.S.C. 5464(a)(2).
Frm 00097
Fmt 4703
Sfmt 4703
E:\FR\FM\14JAN1.SGM
14JAN1
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
lotter on DSKBCFDHB2PROD with NOTICES
bonds rather than a straight sector-based
risk factor would better enable NSCC to
limit its exposures to Members by
basing this calculation on a more
accurate measure of the risks relating to
municipal bonds.
Furthermore, NSCC believes that the
changes proposed in this advance notice
are consistent with promoting safety
and soundness, which, in turn, is
consistent with reducing systemic risks
and supporting the stability of the
broader financial system, consistent
with Section 805(b) of the Clearing
Supervision Act.27 The proposed
changes are designed to better limit
NSCC’s exposures to Members in the
event of Member default. As discussed
above, the proposed enhancements to
the Bond Haircut are designed to more
accurately calculate the necessary
margin relating to municipal bonds and
would allow NSCC to limit its exposure
to Members by applying a volatility
component that is a more appropriate
measure of volatility for Net Unsettled
Positions in municipal bonds. The
proposed enhancements to the Bond
Haircut would allow NSCC to collect
margin at levels that reflect the risk
presented by Net Unsettled Positions in
municipal bonds and would help NSCC
limit its exposures to Members.
By better limiting NSCC’s exposures
to Members in the event of a Member
default, the proposed changes are
consistent with promoting safety and
soundness, which, in turn, is consistent
with reducing systemic risks and
supporting the stability of the broader
financial system.
(ii) Consistency With Rule 17Ad–
22(e)(4)(i) and (e)(6)(i) and (v) Under the
Act
NSCC believes that the proposed
changes are consistent with Rule 17Ad–
22(e)(4)(i) and (e)(6)(i) and (v), each
promulgated under the Act.28
Rule 17Ad–22(e)(4)(i) under the Act 29
requires that NSCC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to effectively
identify, measure, monitor, and manage
its credit exposures to participants and
those arising from its payment, clearing,
and settlement processes, including by
maintaining sufficient financial
resources to cover its credit exposure to
each participant fully with a high degree
of confidence.
As described above, NSCC believes
that the proposed changes would help
27 12
28 17
U.S.C. 5464(b).
CFR 240.17Ad–22(e)(4)(i) and (e)(6)(i) and
(v).
29 17
CFR 240.17Ad–22(e)(4)(i).
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
enable it to better identify, measure,
monitor, and, through the collection of
Members’ Required Fund Deposits,
manage its credit exposures to Members
by maintaining sufficient resources to
cover those credit exposures fully with
a high degree of confidence. More
specifically, the proposed changes to the
methodology for Bond Haircuts to apply
a risk factor based on multiple
benchmark indices for lower rated or
non-rated municipal bonds rather than
a straight risk factor by sector would
help allow NSCC to more accurately
identify the credit exposure relating to
Net Unsettled Positions in municipal
bonds for purposes of applying an
appropriate margin charge and to help
provide NSCC with a more effective
measure of the risks that may be
presented to NSCC by positions in the
securities. The proposed changes to (i)
re-calibrate the Bond Haircut no less
frequently than annually, (ii) calibrate
the percent to a pre-determined
percentile that would not be less than
99% level, and (iii) apply a predetermined look-back period would
enable NSCC to apply the proposed
enhanced methodology discussed above
and to better monitor its credit exposure
relating to Net Unsettled Positions in
municipal bonds. By providing that
NSCC would be required to re-calibrate
the Bond Haircut no less frequently than
annually, the proposed rule change
would help ensure that NSCC would
periodically review the Bond Haircut to
ensure that it continued to accurately
reflect the risks presented by municipal
bonds. Finally, by reserving the right to
apply the highest group factor in
extraordinary circumstances, NSCC
would help protect itself in
circumstances where the assigned factor
does not adequately account for risks
presented by extraordinary events, such
as natural disasters.
Based on backtesting results in which
the proposed methodology was applied,
NSCC believes that the proposed
changes would help allow it to collect
Required Fund Deposits that are more
accurate to offset the risks presented by
municipal bonds and provide a better
method of managing risks presented by
those securities. Therefore, NSCC
believes that the proposed changes
would help enhance NSCC’s ability to
effectively identify, measure, monitor
and manage its credit exposures and
would help enhance its ability to
maintain sufficient financial resources
to cover its credit exposure to each
participant fully with a high degree of
confidence. As such, NSCC believes the
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
2201
proposed changes are consistent with
Rule 17Ad–22(e)(4)(i) under the Act.30
Rule 17Ad–22(e)(6)(i) under the Act 31
requires that NSCC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to cover its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market.
The Required Fund Deposit is made
up of risk-based components (as margin)
that are calculated and assessed daily to
limit NSCC’s credit exposures to
Members. NSCC is proposing changes
that are designed to more effectively
address risk characteristics of Net
Unsettled Positions in municipal bonds
by capturing risks more accurately by
applying multiple indices. Rather than
multiply the tenor-based haircut for
lower rated bonds by a straight risk
factor for each municipal sector, the
Bond Haircut for lower rated or nonrated municipal bonds would be
determined by using the maximum
percent derived from either the tenorbased index, the municipal bond sectorbased indices or a high yield index.
Based on backtesting results, NSCC
believes that deriving the percent using
a maximum of the indices more
accurately captures the risk of such
municipal bonds that may be presented
by tenor, sector and the higher yield of
these securities compared to the present
use of a straight sector-based risk factor.
Based on such results, NSCC believes
that these changes would help enable
NSCC to produce margin levels that are
more commensurate with the particular
risk attributes of these securities. These
proposed changes are designed to assist
NSCC in maintaining a risk-based
margin system that considers, and
produces margin levels commensurate
with, the risks and particular attributes
of portfolios relating to municipal
bonds, including risks and attributes
related to tenor, municipal sector and
higher yields. Therefore, NSCC believes
the proposed change is consistent with
Rule 17Ad–22(e)(6)(i) under the Act.32
Rule 17Ad–22(e)(6)(v) under the
Act 33 requires that NSCC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to cover its credit
exposures to its participants by
establishing a risk-based margin system
30 Id.
31 17
CFR 240.17Ad–22(e)(6)(i).
32 Id.
33 17
E:\FR\FM\14JAN1.SGM
CFR 240.17Ad–22(e)(6)(v).
14JAN1
2202
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
that, at a minimum, uses an appropriate
method for measuring credit exposure
that accounts for relevant product risk
factors and portfolio effects across
products. NSCC is proposing to enhance
the Bond Haircut because NSCC
believes that the proposed methodology
would help provide NSCC with a more
effective measure of the credit exposure
presented by municipal bonds. In
particular, as described above, NSCC
believes that the enhancements would
result in a more effective measure of the
tenor, sector and higher yield risks
presented by municipal bonds that are
rated BBB+ or lower, or are not rated.
Therefore, NSCC believes the proposed
change is consistent with Rule 17Ad–
22(e)(6)(v) under the Act.34
lotter on DSKBCFDHB2PROD with NOTICES
III. Date of Effectiveness of the Advance
Notice, and Timing for Commission
Action
The proposed change may be
implemented if the Commission does
not object to the proposed change
within 60 days of the later of (i) the date
that the proposed change was filed with
the Commission or (ii) the date that any
additional information requested by the
Commission is received. The clearing
agency shall not implement the
proposed change if the Commission has
any objection to the proposed change.
The Commission may extend the
period for review by an additional 60
days if the proposed change raises novel
or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension. A proposed change may
be implemented in less than 60 days
from the date the advance notice is
filed, or the date further information
requested by the Commission is
received, if the Commission notifies the
clearing agency in writing that it does
not object to the proposed change and
authorizes the clearing agency to
implement the proposed change on an
earlier date, subject to any conditions
imposed by the Commission.
The clearing agency shall post notice
on its website of proposed changes that
are implemented.
The proposal shall not take effect
until all regulatory actions required
with respect to the proposal are
completed.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the Advance Notice
is consistent with the Clearing
Supervision Act. Comments may be
34 17
submitted by any of the following
methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–87908; File No. S7–24–89]
• 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–
NSCC–2019–801 on the subject line.
Joint Industry Plan; Notice of Filing of
the Forty-Fourth Amendment to the
Joint Self-Regulatory Organization
Plan Governing the Collection,
Consolidation and Dissemination of
Quotation and Transaction Information
for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading
Privileges Basis
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–NSCC–2019–801. 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 Advance Notice that
are filed with the Commission, and all
written communications relating to the
Advance Notice 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 NSCC 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–NSCC–
2019–801 and should be submitted on
or before January 29, 2020.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–00366 Filed 1–13–20; 8:45 am]
BILLING CODE 8011–01–P
CFR 240.17Ad–22(e)(6)(v).
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
January 8, 2020.
I. Introduction
Pursuant to Section 11A of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 608 of Regulation
National Market System (‘‘NMS’’)
thereunder,2 notice is hereby given that
on July 5, 2019,3 the Joint SelfRegulatory Organization Plan Governing
the Collection, Consolidation and
Dissemination of Quotation and
Transaction Information for NasdaqListed Securities Traded on Exchanges
on an Unlisted Trading Privileges Basis
(‘‘Nasdaq/UTP Plan’’ or ‘‘Plan’’) 4
participants (‘‘Participants’’) 5 filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
a proposal to amend the Nasdaq/UTP
Plan. The amendment represents the
44th amendment to the Nasdaq/UTP
Plan (‘‘Amendment’’). As described in
the Amendment, the Participants
propose to make mandatory a conflicts
1 15
U.S.C. 78k–1.
CFR 242.608.
3 See Letter from Robert Books, Chair, Nasdaq/
UTP Plan Operating Committee, to Vanessa
Countryman, Secretary, Commission, dated July 3,
2019 (‘‘Transmittal Letter’’).
4 The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation
information and transaction reports in Eligible
Securities for its Participants. This consolidated
information informs investors of the current
quotation and recent trade prices of Nasdaq
securities. It enables investors to ascertain from one
data source the current prices in all the markets
trading Nasdaq securities. The Plan serves as the
required transaction reporting plan for its
Participants, which is a prerequisite for their
trading Eligible Securities. See Securities Exchange
Act Release No. 55647 (April 19, 2007), 72 FR
20891 (April 26, 2007).
5 The Participants are the national securities
association and national securities exchanges that
submit trades and quotes to the Plan and include:
Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange,
Inc., Cboe Exchange, Inc., NYSE Chicago, Inc.,
Financial Industry Regulatory Authority, Inc., The
Investors’ Exchange LLC, Long-Term Stock
Exchange, Inc., Nasdaq BX, Inc., Nasdaq ISE, LLC,
Nasdaq PHLX, Inc., The Nasdaq Stock Market LLC,
New York Stock Exchange LLC, NYSE American
LLC, NYSE Arca, Inc., and NYSE National, Inc.
(each a ‘‘Participant’’ and collectively, the
‘‘Participants’’). Participants are also members of
the Plan’s Operating Committee.
2 17
E:\FR\FM\14JAN1.SGM
14JAN1
]]>Agencies
[Federal Register Volume 85, Number 9 (Tuesday, January 14, 2020)]
[Notices]
[Pages 2197-2202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00366]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87911; File No. SR-NSCC-2019-801]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Advance Notice To Enhance National
Securities Clearing Corporation's Haircut-Based Volatility Charge
Applicable to Municipal Bonds
January 8, 2020.
Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act entitled the Payment,
Clearing, and Settlement Supervision Act of 2010 (``Clearing
Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) under the Securities
Exchange Act of 1934 (``Act''),\2\ notice is hereby given that on
December 13, 2019, National Securities Clearing Corporation (``NSCC'')
filed with the Securities and Exchange Commission (``Commission'') the
advance notice SR-NSCC-2019-801 (``Advance Notice'') as described in
Items I, II and III below, which Items have been prepared by the
clearing agency.\3\ The Commission is publishing this notice to solicit
comments on the Advance Notice from interested persons.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 5465(e)(1).
\2\ 17 CFR 240.19b-4(n)(1)(i).
\3\ On December13, 2019, NSCC filed this Advance Notice as a
proposed rule change (SR-NSCC-2019-004) with the Commission pursuant
to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule 19b-4
thereunder, 17 CFR 240.19b-4. A copy of the proposed rule change is
available at https://www.dtcc.com/legal/sec-rule-filings.aspx.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the Advance
Notice
This Advance Notice consists of amendments to NSCC's Rules &
Procedures (``Rules'') \4\ in order to enhance NSCC's haircut-based
volatility charge applicable to municipal bonds (the ``Bond Haircut'').
References to the Bond Haircut in this document refer only to that
charge as applied to municipal bonds. The proposed changes are
described in greater detail below.
---------------------------------------------------------------------------
\4\ Capitalized terms not defined herein are defined in the
Rules, available at https://dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Advance Notice
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the Advance Notice
and discussed any comments it received on the Advance Notice. 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 and B below, of the most significant aspects of such
statements.
(A) Clearing Agency's Statement on Comments on the Advance Notice
Received From Members, Participants, or Others
NSCC has not received or solicited any written comments relating to
this proposal. NSCC will notify the Commission of any written comments
received by NSCC.
(B) Advance Notice Filed Pursuant to Section 806(e) of the Clearing
Supervision Act
Description of Proposed Changes
NSCC is proposing a number of enhancements to NSCC's Bond Haircut,
as described in greater detail below.
The Required Fund Deposit and the Bond Haircut
As part of its market risk management strategy, NSCC manages its
credit exposure to Members by determining
[[Page 2198]]
the appropriate Required Fund Deposit for each Member and monitoring
its sufficiency, as provided for in the Rules.\5\ The Required Fund
Deposit serves as each Member's margin. The objective of a Member's
Required Fund Deposit is to mitigate potential losses to NSCC
associated with liquidation of the Member's portfolio in the event NSCC
ceases to act for that Member (hereinafter referred to as a
``default'').\6\ The aggregate of all Members' Required Fund Deposits,
together with certain other deposits required under the Rules,
constitute the Clearing Fund of NSCC, which it would access should a
defaulting Member's own Required Fund Deposit be insufficient to
satisfy losses to NSCC caused by the liquidation of that Member's
portfolio.
---------------------------------------------------------------------------
\5\ See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund
Formula and Other Matters) of the Rules (``Procedure XV''), supra
note 4. NSCC's market risk management strategy is designed to comply
with Rule 17Ad-22(e)(4) under the Act, where these risks are
referred to as ``credit risks.'' 17 CFR 240.17Ad-22(e)(4).
\6\ The Rules identify when NSCC may cease to act for a Member
and the types of actions NSCC may take. For example, NSCC may
suspend a firm's membership with NSCC or prohibit or limit a
Member's access to NSCC's services in the event that Member defaults
on a financial or other obligation to NSCC. See Rule 46
(Restrictions on Access to Services) of the Rules, supra note 4.
---------------------------------------------------------------------------
Pursuant to the Rules, each Member's Required Fund Deposit amount
consists of a number of applicable components, each of which is
calculated to address specific risks faced by NSCC, as identified
within Procedure XV.\7\ Generally, the largest component of Members'
Required Fund Deposits is the volatility component. The volatility
component is designed to calculate the amount of money that could be
lost on a portfolio over a given period of time assumed necessary to
liquidate the portfolio, within a 99% confidence level.
---------------------------------------------------------------------------
\7\ Procedure XV, supra note 4.
---------------------------------------------------------------------------
NSCC has two methodologies for calculating the volatility
component. For the majority of Net Unsettled Positions,\8\ NSCC
calculates the volatility component as the greater of (1) the larger of
two separate calculations that utilize a parametric Value at Risk
(``VaR'') model, (2) a gap risk measure calculation based on the
largest non-index position in a portfolio that exceeds a concentration
threshold, and (3) a portfolio margin floor calculation based on the
market values of the long and short positions in the portfolio (``VaR
Charge'').\9\ Pursuant to Sections I(A)(1)(a)(ii) and I(A)(2)(a)(ii) of
Procedure XV, certain positions in certain classes of securities,
including municipal bonds, are excluded from the calculation of the VaR
Charge and are instead charged a haircut-based volatility component
that is calculated by multiplying the absolute value of such positions
by a percentage designated by NSCC which shall not be less than 2%.\10\
---------------------------------------------------------------------------
\8\ ``Net Unsettled Positions'' and ``Net Balance Order
Unsettled Positions'' refer to net positions that have not yet
passed their settlement date, or did not settle on their settlement
date, and are referred to collectively in this filing as Net
Unsettled Positions. NSCC does not take into account any offsets,
such as inventory held at other clearing agencies, when determining
Net Unsettled Positions for the purpose of calculating the
volatility component. See Procedure XV, supra note 4.
\9\ Sections I(A)(1)(a)(i) and I(A)(2)(a)(i) of Procedure XV,
supra note 4.
\10\ Sections I(A)(1)(a)(ii) and I(A)(2)(a)(ii) of Procedure XV,
supra note 4.
---------------------------------------------------------------------------
Existing Municipal Bond Haircut Methodology
The existing methodology for calculating the Bond Haircut is
described in Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV.\11\ In order to determine the current Bond Haircut,
municipal bonds are categorized into tenor-based groups (i.e., based on
remaining time to maturity) and separately categorized by municipal
sector. Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of Procedure
XV provide that NSCC shall establish a percentage applicable to each
tenor-based group and pursuant to those sections NSCC has established a
percentage (which is not less than 2%) for each tenor-based group which
is used to calculate the haircut-based charge applicable to that
group.\12\ For municipal bonds rated higher than BBB+, NSCC has
established a tenor-based haircut for each tenor-based group. For
example, a municipal bond rated above BBB+ with 3 years to maturity and
$10MM short position, will be subject to the 2-5 years tenor-based
group haircut (5%) which will be applied to the absolute market value
of the positions resulting in $500K haircut-based charge.
---------------------------------------------------------------------------
\11\ Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV, supra note 4.
\12\ Id.
---------------------------------------------------------------------------
Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of Procedure XV
provide that NSCC shall assign each municipal sector a risk factor.\13\
For municipal bonds rated lower than a pre-determined threshold, which
shall be no lower than BBB+, and non-rated municipal bonds, NSCC has
established a percentage based on a sector-based risk factor which is
also applied to the tenor-based haircut. For example, a municipal bond
in the healthcare sector, rated BBB+ or lower with 3 years to maturity
and $10MM short position, will be subject to the 2-5 years tenor-based
group haircut (5%) multiplied by the sector-based factor (1.2),
resulting in 6% haircut-based charge of $600K. This additional sector-
based risk factor is added because variable risk factors exist between
municipal sectors based on the various industries in which the bonds
are issued and the source of repayment for the bonds. For instance,
general obligation bonds are typically backed by the taxing power of
their issuer and repaid from general taxes whereas transportation or
healthcare-related bonds may be repaid from funds from a specific
project based on the revenues of the project. Such risk factor is based
on the sector index's spread to a benchmark index.\14\ NSCC uses a
vendor to match bonds to particular sectors. If a municipal bond does
not fit within any particular sector, the highest sector-based risk
factor is applied to such municipal bond. Currently, the highest
sector-based risk factor is 2.6 used for bonds in the housing sector.
---------------------------------------------------------------------------
\13\ Id.
\14\ The ``spread'' is the difference in the yield curve of the
sector index to the yield curve of a benchmark index which is
indicative of the added risk presented by the sector.
---------------------------------------------------------------------------
Enhancements to Municipal Bond Haircut Methodology
NSCC regularly assesses its market and liquidity risks, as such
risks are related to its margining methodologies, to evaluate whether
margin levels are commensurate with the particular risk attributes of
each relevant product, portfolio, and market. In connection with such
regular reviews, NSCC has determined based on impact studies that,
under current market conditions, the current margin levels with respect
to municipal bonds using the current methodology exceed the levels
necessary to offset the risks with respect to these securities. Based
on impact studies, NSCC has determined that changes to its current
methodology for municipal bonds would result in margin levels that are
lower and more commensurate with the risk attributes of those
securities. In particular, as described below, NSCC is proposing to
replace the municipal sector-based risk factor for lower rated
municipal bonds with a percentage derived using the historical returns
of applicable benchmark indices.
NSCC is proposing the following enhancements to the methodology
used for calculating the Bond Haircut.
First, NSCC is proposing to re-calibrate the Bond Haircut not less
frequently than annually. Sections I(A)(1)(a)(iii)(B) and
I(A)(2)(a)(iii)(B) of
[[Page 2199]]
Procedure XV currently provide that each municipal sector is assigned a
risk factor no less frequently than annually.\15\ As discussed above
and below, the enhanced methodology for calculating Bond Haircuts would
no longer include the straight risk factor by sector. The re-
calibration of the Bond Haircut not less frequently than annually would
replace the assignment of a straight risk factor no less frequently
than annually. NSCC believes that the periodic re-calibration would
help ensure that NSCC is reviewing the Bond Haircut with enough
regularity to ensure that the margin levels are commensurate with the
particular risk attributes of municipal bonds.
---------------------------------------------------------------------------
\15\ Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV, supra note 4.
---------------------------------------------------------------------------
While the proposed rule change would provide that NSCC would re-
calibrate not less frequently than annually, NSCC would initially re-
calibrate the Bond Haircut on a quarterly basis. NSCC could change how
often it recalibrates from time to time based on its regular review of
margining methodologies; provided, that it would recalibrate not less
frequently than annually pursuant to the proposed rule change. Changes
to the frequency of calibration would be subject to NSCC's risk
management practices which would require, among other things, approval
by the DTCC Model Risk Governance Committee (``MRGC'').\16\
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 81485 (August 25,
2017), 82 FR 41433 (August 31, 2017) (File No. SR-NSCC-2017-008)
(describes the adoption of the Clearing Agency Model Risk Management
Framework (``Model Risk Management Framework'') of NSCC which sets
forth the model risk management practices of NSCC) and Securities
Exchange Act Release No. 84458 (October 19, 2018), 83 FR 53925
(October 25, 2018) (File No. SR-NSCC-2018-009) (amends the Model
Risk Management Framework). The Model Risk Management Framework
describes the model management practices adopted by NSCC, which have
been designed to assist NSCC in identifying, measuring, monitoring,
and managing the risks associated with the design, development,
implementation, use, and validation of ``models'' which would
include the methodology for the Bond Haircut. Id.
---------------------------------------------------------------------------
Second, municipal bonds would be grouped into tenor-based groups
and by credit rating, and municipal bonds that are rated BBB+ or lower,
or that are not rated, would also be separately categorized by
municipal sector. NSCC would then establish a percentage haircut for
each group based on the (1) the historical returns of applicable
benchmark indices, such as tenor-based indices (i.e., based on time to
maturity), municipal bond sector-based indices, and high-yield indices;
(2) a pre-determined look-back period, which shall not be shorter than
10 years; and (3) a pre-determined calibration percentile, which shall
not be less than 99%.
For municipal bonds that are rated higher than BBB+, NSCC is
proposing to use a tenor-based index (i.e., based on time to maturity)
as the applicable benchmark index. While the proposed rule change would
provide that NSCC would base such percentage for bonds that are rated
higher than BBB+ on historical returns of applicable benchmark indices,
such as tenor-based indices (i.e., based on time to maturity),
municipal bond sector-based indices, and high-yield indices; NSCC would
initially base the percentage derived from a benchmark municipal tenor-
based index over a 3-day price return from the index. NSCC could change
which applicable benchmark indices it uses and the applicable period
for the price return used in the calculation from time to time based on
its regular review of margining methodologies. Changes to the frequency
of calibration would be subject to NSCC's risk management practices
which would require, among other things, approval by the MRGC.\17\
---------------------------------------------------------------------------
\17\ See note 16.
---------------------------------------------------------------------------
For municipal bonds that are rated BBB+ or lower, or are not rated,
NSCC is proposing to use a percentage derived from the maximum of the
applicable tenor-based index, municipal bond sector-based indices and a
high-yield index. Rather than multiply the tenor-based haircut by a
straight risk factor for each municipal sector, as is done under the
current methodology, the Bond Haircut for these lower rated or non-
rated municipal bonds would be determined by using the maximum percent
derived from either the applicable tenor-based index, the municipal
bond sector-based indices or a high yield index. The enhancement would
account for risks represented by the tenor, sector and high-yield
characteristics that may be presented by these municipal bonds by using
the maximum percent that is derived from either a tenor-based index,
sector-based indices or a high yield index, rather than addressing
these risks by multiplying the percent derived from a tenor-based index
by a straight sector-based risk factor. Based on analysis of the impact
studies, NSCC believes that the use of a risk factor based on the
tenor-based index, municipal bond sector-based indices and a high-yield
index would result in lower margins with respect to these securities
that are sufficient to offset the risks with respect to these
securities.
While the proposed rule change would provide that NSCC would base
such percentage on historical returns of applicable benchmark indices,
such as tenor-based indices (i.e., based on time to maturity),
municipal bond sector-based indices, and high-yield indices; NSCC would
initially base the percentage derived from a tenor-based index,
municipal bond sector-based indices and a high-yield index over a 3-day
price return from the indices. NSCC could change which applicable
benchmark indices it uses and the applicable period for the price
return used in the calculation from time to time based on its regular
review of margining methodologies in accordance with its risk
management practices which would require, among other things, approval
by the MRGC.\18\
---------------------------------------------------------------------------
\18\ See note 16.
---------------------------------------------------------------------------
In extraordinary circumstances, a certain municipality or issuer
may present unique risks beyond the calibrated tenor, sector and high-
yield factors. For example, the market price risk for issues of a
municipality facing technical default following a natural disaster may
not be fully captured due to the liquidity profile of municipal
securities. Therefore, NSCC would reserve the right to apply the
highest haircut of all municipal bonds to a specific issuer in such
instances. NSCC would apply the highest haircut in accordance with its
risk management practices, including approval by an officer of NSCC in
the risk management department, following a review of the circumstances
facing the municipality and a finding that the market price movement
raises risks that are not accounted for by the Bond Haircut
methodology.
Finally, the recalibration of the Bond Haircut would apply a pre-
determined look-back period. NSCC would initially apply a look-back
period of a 10-year rolling window plus a one calendar year ``worst
case scenario'' stress period. NSCC believes this look-back period is
appropriate because it would capture relevant data and is adequate to
cover enough market activity, while not diluting the ``tail'' with an
abundance of data.\19\
---------------------------------------------------------------------------
\19\ NSCC believes that a 10-year window with a one-year stress
period is typically long enough to capture at least two recent
market cycles. NSCC believes that data over a longer period will
``flatten'' out the results because recent volatile periods will be
offset by non-volatile periods, making the more recent volatility
appear less significant.
---------------------------------------------------------------------------
While the proposed rule change would provide that NSCC would apply
a pre-determined look-back period, which shall not be shorter than 10
years, NSCC would initially apply a look-back period of a 10-year
rolling window plus a one calendar year ``worst case scenario'' stress
period. NSCC could
[[Page 2200]]
change the look-back period from time to time based on its regular
review of margining methodologies in accordance with its risk
management practices which would require, among other things, approval
by the MRGC.\20\
---------------------------------------------------------------------------
\20\ See note 16.
---------------------------------------------------------------------------
Proposed Rule Changes to Procedure XV
In order to implement the proposed enhancements to the Bond Haircut
methodology described above, Sections I(A)(1)(a)(iii)(B) and
I(A)(2)(a)(iii)(B) of Procedure XV would be revised to provide that:
(i) Municipal bonds would be grouped by both ``remaining time to
maturity'' and credit rating, and municipal bonds that are BBB+ or
lower, or that are not rated, would be separately categorized by
municipal sector, (ii) NSCC would establish the Bond Haircut
percentages no less frequently than annually, (iii) the Bond Haircut
percentage to be applied to municipal bonds would apply to each
grouping of municipal bonds and (iv) the Bond Haircut percentage to be
applied to municipal bonds would be based on (1) the historical returns
of applicable benchmark indices, such as tenor-based indices (i.e.,
based on time to maturity), municipal bond sector-based indices, and
high-yield indices; (2) a pre-determined look-back period; and (3) a
pre-determined calibration percentile, which shall not be less than
99%. In addition, Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of
Procedure XV would be revised to remove the references to the municipal
sector factor and the current application of the municipal sector
factor in the last four sentences in Sections I(A)(1)(a)(iii)(B) and
I(A)(2)(a)(iii)(B) of Procedure XV. A sentence would also be added to
Sections I(A)(1)(a)(iii)(B) and I(A)(2)(a)(iii)(B) of Procedure XV to
provide that in extraordinary circumstances where NSCC determines that
a certain municipality or issuer of municipal bonds presents unique
risks that are not captured by the grouping set forth in those
subsections, NSCC may, in its discretion, apply the highest percentage
being applied to any municipal bond group pursuant to those subsections
to municipal bonds issued by such municipality or issuer.
Expected Effect on and Management of Risk
NSCC believes that the proposed changes to enhance the Bond Haircut
would enable NSCC to better limit its risk exposures to Members arising
out of their Net Unsettled Positions.
First, the proposal to enhance the methodology for determining the
Bond Haircut would improve NSCC's ability to limit its risk exposures
posed by Net Unsettled Positions in these municipal bonds by allowing
it to (1) better identify the risks with respect to municipal bonds,
and (2) calculate a volatility margin component that is appropriate for
those risks.
Second, the proposal to re-calibrate the Bond Haircut no less
frequently than annually, to calibrate the percent to a pre-determined
percentile that would be not be less than 99% and to apply a pre-
determined look back period would ensure that the Bond Haircut
continues to accurately measure the risks presented by municipal bonds
and to better limit its credit exposures posed by municipal bonds. The
proposal would more appropriately address the risks presented by a Net
Unsettled Position in municipal bonds by applying a calculation that
more accurately measures the risks when determining the Bond Haircut to
be used in that calculation. Therefore, by enabling NSCC to calculate
and collect margin that more accurately reflects the risk
characteristics of municipal bonds, these proposals would enhance
NSCC's risk management capabilities.
By providing NSCC with a more effective measurement of its
exposures, as described above, the proposed change would also mitigate
risk for Members because lowering the risk profile for NSCC would in
turn lower the risk exposure that Members may have with respect to NSCC
in its role as a central counterparty.
Consistency With the Clearing Supervision Act
Although the Clearing Supervision Act does not specify a standard
of review for an advance notice, its stated purpose is instructive: To
mitigate systemic risk in the financial system and promote financial
stability by, among other things, promoting uniform risk management
standards for systemically important financial market utilities and
strengthening the liquidity of systemically important financial market
utilities.\21\
---------------------------------------------------------------------------
\21\ See 12 U.S.C. 5461(b).
---------------------------------------------------------------------------
Section 805(a)(2) of the Clearing Supervision Act \22\ authorizes
the Commission to prescribe risk management standards for the payment,
clearing and settlement activities of designated clearing entities,
like NSCC, and financial institutions engaged in designated activities
for which the Commission is the supervisory agency or the appropriate
financial regulator. Section 805(b) of the Clearing Supervision Act
\23\ states that the objectives and principles for the risk management
standards prescribed under Section 805(a) shall be to, among other
things, promote robust risk management, promote safety and soundness,
reduce systemic risks, and support the stability of the broader
financial system. The Commission has adopted risk management standards
under Section 805(a)(2) of the Clearing Supervision Act \24\ and
Section 17A of the Exchange Act (``Covered Clearing Agency
Standards'').\25\ The Covered Clearing Agency Standards require
registered clearing agencies to establish, implement, maintain, and
enforce written policies and procedures that are reasonably designed to
meet certain minimum requirements for their operations and risk
management practices on an ongoing basis.\26\
---------------------------------------------------------------------------
\22\ 12 U.S.C. 5464(a)(2).
\23\ 12 U.S.C. 5464(b).
\24\ 12 U.S.C. 5464(a)(2).
\25\ See 17 CFR 240.17Ad-22(e).
\26\ Id.
---------------------------------------------------------------------------
(i) Consistency With Section 805(b) of the Clearing Supervision Act
For the reasons described below, NSCC believes that the proposed
changes in this advance notice are consistent with the objectives and
principles of these risk management standards as described in Section
805(b) of the Clearing Supervision Act and in the Covered Clearing
Agency Standards.
As discussed above, NSCC is proposing changes to the way it
calculates the volatility component of the Clearing Fund as applied to
Net Unsettled Positions in municipal bonds. The volatility charge is
one of the components of its Members' Required Fund Deposits--a key
tool that NSCC uses to mitigate potential losses to NSCC associated
with liquidating a Member's portfolio in the event of Member default.
NSCC believes the proposed changes are consistent with promoting robust
risk management because they are designed to enable NSCC to better
limit its exposure to Members in the event of a Member default.
First, NSCC's proposal to re-calibrate the Bond Haircut no less
frequently than annually, to calibrate the percent to a pre-determined
percentile that would be not be less than 99% and to apply a pre-
determined look back period would better enable NSCC to limit its
exposures to Net Unsettled Positions in municipal bonds. Second, the
proposal to apply a risk factor based on a tenor-based index, municipal
bond sector-based indices and a high-yield index for lower rated or
non-rated municipal
[[Page 2201]]
bonds rather than a straight sector-based risk factor would better
enable NSCC to limit its exposures to Members by basing this
calculation on a more accurate measure of the risks relating to
municipal bonds.
Furthermore, NSCC believes that the changes proposed in this
advance notice are consistent with promoting safety and soundness,
which, in turn, is consistent with reducing systemic risks and
supporting the stability of the broader financial system, consistent
with Section 805(b) of the Clearing Supervision Act.\27\ The proposed
changes are designed to better limit NSCC's exposures to Members in the
event of Member default. As discussed above, the proposed enhancements
to the Bond Haircut are designed to more accurately calculate the
necessary margin relating to municipal bonds and would allow NSCC to
limit its exposure to Members by applying a volatility component that
is a more appropriate measure of volatility for Net Unsettled Positions
in municipal bonds. The proposed enhancements to the Bond Haircut would
allow NSCC to collect margin at levels that reflect the risk presented
by Net Unsettled Positions in municipal bonds and would help NSCC limit
its exposures to Members.
---------------------------------------------------------------------------
\27\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------
By better limiting NSCC's exposures to Members in the event of a
Member default, the proposed changes are consistent with promoting
safety and soundness, which, in turn, is consistent with reducing
systemic risks and supporting the stability of the broader financial
system.
(ii) Consistency With Rule 17Ad-22(e)(4)(i) and (e)(6)(i) and (v) Under
the Act
NSCC believes that the proposed changes are consistent with Rule
17Ad-22(e)(4)(i) and (e)(6)(i) and (v), each promulgated under the
Act.\28\
---------------------------------------------------------------------------
\28\ 17 CFR 240.17Ad-22(e)(4)(i) and (e)(6)(i) and (v).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(4)(i) under the Act \29\ requires that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to effectively identify, measure,
monitor, and manage its credit exposures to participants and those
arising from its payment, clearing, and settlement processes, including
by maintaining sufficient financial resources to cover its credit
exposure to each participant fully with a high degree of confidence.
---------------------------------------------------------------------------
\29\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------
As described above, NSCC believes that the proposed changes would
help enable it to better identify, measure, monitor, and, through the
collection of Members' Required Fund Deposits, manage its credit
exposures to Members by maintaining sufficient resources to cover those
credit exposures fully with a high degree of confidence. More
specifically, the proposed changes to the methodology for Bond Haircuts
to apply a risk factor based on multiple benchmark indices for lower
rated or non-rated municipal bonds rather than a straight risk factor
by sector would help allow NSCC to more accurately identify the credit
exposure relating to Net Unsettled Positions in municipal bonds for
purposes of applying an appropriate margin charge and to help provide
NSCC with a more effective measure of the risks that may be presented
to NSCC by positions in the securities. The proposed changes to (i) re-
calibrate the Bond Haircut no less frequently than annually, (ii)
calibrate the percent to a pre-determined percentile that would not be
less than 99% level, and (iii) apply a pre-determined look-back period
would enable NSCC to apply the proposed enhanced methodology discussed
above and to better monitor its credit exposure relating to Net
Unsettled Positions in municipal bonds. By providing that NSCC would be
required to re-calibrate the Bond Haircut no less frequently than
annually, the proposed rule change would help ensure that NSCC would
periodically review the Bond Haircut to ensure that it continued to
accurately reflect the risks presented by municipal bonds. Finally, by
reserving the right to apply the highest group factor in extraordinary
circumstances, NSCC would help protect itself in circumstances where
the assigned factor does not adequately account for risks presented by
extraordinary events, such as natural disasters.
Based on backtesting results in which the proposed methodology was
applied, NSCC believes that the proposed changes would help allow it to
collect Required Fund Deposits that are more accurate to offset the
risks presented by municipal bonds and provide a better method of
managing risks presented by those securities. Therefore, NSCC believes
that the proposed changes would help enhance NSCC's ability to
effectively identify, measure, monitor and manage its credit exposures
and would help enhance its ability to maintain sufficient financial
resources to cover its credit exposure to each participant fully with a
high degree of confidence. As such, NSCC believes the proposed changes
are consistent with Rule 17Ad-22(e)(4)(i) under the Act.\30\
---------------------------------------------------------------------------
\30\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(i) under the Act \31\ requires that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that, at a
minimum, considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market.
---------------------------------------------------------------------------
\31\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------
The Required Fund Deposit is made up of risk-based components (as
margin) that are calculated and assessed daily to limit NSCC's credit
exposures to Members. NSCC is proposing changes that are designed to
more effectively address risk characteristics of Net Unsettled
Positions in municipal bonds by capturing risks more accurately by
applying multiple indices. Rather than multiply the tenor-based haircut
for lower rated bonds by a straight risk factor for each municipal
sector, the Bond Haircut for lower rated or non-rated municipal bonds
would be determined by using the maximum percent derived from either
the tenor-based index, the municipal bond sector-based indices or a
high yield index. Based on backtesting results, NSCC believes that
deriving the percent using a maximum of the indices more accurately
captures the risk of such municipal bonds that may be presented by
tenor, sector and the higher yield of these securities compared to the
present use of a straight sector-based risk factor. Based on such
results, NSCC believes that these changes would help enable NSCC to
produce margin levels that are more commensurate with the particular
risk attributes of these securities. These proposed changes are
designed to assist NSCC in maintaining a risk-based margin system that
considers, and produces margin levels commensurate with, the risks and
particular attributes of portfolios relating to municipal bonds,
including risks and attributes related to tenor, municipal sector and
higher yields. Therefore, NSCC believes the proposed change is
consistent with Rule 17Ad-22(e)(6)(i) under the Act.\32\
---------------------------------------------------------------------------
\32\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(v) under the Act \33\ requires that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system
[[Page 2202]]
that, at a minimum, uses an appropriate method for measuring credit
exposure that accounts for relevant product risk factors and portfolio
effects across products. NSCC is proposing to enhance the Bond Haircut
because NSCC believes that the proposed methodology would help provide
NSCC with a more effective measure of the credit exposure presented by
municipal bonds. In particular, as described above, NSCC believes that
the enhancements would result in a more effective measure of the tenor,
sector and higher yield risks presented by municipal bonds that are
rated BBB+ or lower, or are not rated. Therefore, NSCC believes the
proposed change is consistent with Rule 17Ad-22(e)(6)(v) under the
Act.\34\
---------------------------------------------------------------------------
\33\ 17 CFR 240.17Ad-22(e)(6)(v).
\34\ 17 CFR 240.17Ad-22(e)(6)(v).
---------------------------------------------------------------------------
III. Date of Effectiveness of the Advance Notice, and Timing for
Commission Action
The proposed change may be implemented if the Commission does not
object to the proposed change within 60 days of the later of (i) the
date that the proposed change was filed with the Commission or (ii) the
date that any additional information requested by the Commission is
received. The clearing agency shall not implement the proposed change
if the Commission has any objection to the proposed change.
The Commission may extend the period for review by an additional 60
days if the proposed change raises novel or complex issues, subject to
the Commission providing the clearing agency with prompt written notice
of the extension. A proposed change may be implemented in less than 60
days from the date the advance notice is filed, or the date further
information requested by the Commission is received, if the Commission
notifies the clearing agency in writing that it does not object to the
proposed change and authorizes the clearing agency to implement the
proposed change on an earlier date, subject to any conditions imposed
by the Commission.
The clearing agency shall post notice on its website of proposed
changes that are implemented.
The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the Advance
Notice is consistent with the Clearing Supervision 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-NSCC-2019-801 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-NSCC-2019-801. 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 Advance Notice that are filed with the
Commission, and all written communications relating to the Advance
Notice 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 NSCC 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-NSCC-2019-801 and should be submitted on
or before January 29, 2020.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-00366 Filed 1-13-20; 8:45 am]
BILLING CODE 8011-01-P
