Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Advance Notice To Enhance the Calculation of the Family-Issued Securities Charge, 11437-11440 [2020-03997]

Download as PDF Federal Register / Vol. 85, No. 39 / Thursday, February 27, 2020 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88267; File No. SR–NSCC– 2020–801] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Advance Notice To Enhance the Calculation of the Family-Issued Securities Charge February 24, 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 January 28, 2020, National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the advance notice SR–NSCC–2020–801 (‘‘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. I. Clearing Agency’s Statement of the Terms of Substance of the Advance Notice This Advance Notice consists of modifications to NSCC’s Rules and Procedures (‘‘Rules’’) 4 in connection with a proposal to enhance the calculation of NSCC’s existing charge applied to long positions in FamilyIssued Securities 5 (‘‘FIS Charge’’) by using the same haircut percentages for all Members and no longer using Members’ ratings on the Credit Risk Rating Matrix (‘‘CRRM’’) 6 in calculating this charge, as described below. 1 12 U.S.C. 5465(e)(1). CFR 240.19b–4(n)(1)(i). 3 On January 28, 2020, NSCC filed this Advance Notice as a proposed rule change (SR–NSCC–2020– 002) 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 Terms not defined herein are defined in the Rules, available at www.dtcc.com/∼/media/Files/ Downloads/legal/rules/nscc_rules.pdf. 5 A Family-Issued Security is defined in Rule 1 (Definitions and Descriptions) of the Rules as ‘‘a security that was issued by a Member or an affiliate of that Member.’’ Supra note 4. 6 See Rule 1 and Section 4 of Rule 2B of the Rules, supra note 4. See also Securities Exchange Act Release Nos. 80734 (May 19, 2017), 82 FR 24177 (May 25, 2017) (SR–DTC–2017–002, SR–FICC– 2017–006, SR–NSCC–2017–002); and 80731 (May 19, 2017), 82 FR 24174 (May 25, 2017) (SR–DTC– lotter on DSKBCFDHB2PROD with NOTICES 2 17 VerDate Sep<11>2014 17:26 Feb 26, 2020 Jkt 250001 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 to modify the Rules to enhance the calculation of the FIS Charge by using the same haircut percentages for all Members and no longer using Members’ ratings on the CRRM in calculating this charge. By using the same haircut percentages to calculate the FIS Charge for all Members, NSCC believes this proposed enhancement would better mitigate the specific wrong-way risk posed by long positions in Family-Issued Securities that the charge was designed to address, as described below. Background As a central counterparty, NSCC occupies an important role in the securities settlement system by interposing itself between counterparties to financial transactions, thereby reducing the risk faced by participants and contributing to global financial stability. The effectiveness of a central counterparty’s risk controls and the adequacy of its financial resources are critical to achieving these riskreducing goals. As part of its market risk management strategy, NSCC manages its credit exposure to Members by determining the appropriate Required Fund Deposits to the Clearing Fund and monitoring its sufficiency, as provided for in the Rules.7 The Required Fund 2017–801, SR–FICC–2017–804, SR–NSCC–2017– 801). 7 See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund Formula and Other Matters) of the Rules, supra note 4. PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 11437 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 liquidating a Member’s portfolio in the event NSCC ceases to act for that Member (hereinafter referred to as a ‘‘default’’).8 The aggregate of all Members’ Required Fund Deposits constitutes the Clearing Fund of NSCC.9 NSCC may access its Clearing Fund 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.10 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 of the Rules.11 NSCC regularly assesses the market, liquidity and other risks that its margining methodologies are designed to mitigate to evaluate whether margin levels are commensurate with the particular risk attributes of each relevant product, portfolio, and market. Among the various risks that NSCC considers when evaluating the effectiveness of its margining methodology are its counterparty risks, including wrong-way risk. In particular, NSCC seeks to identify and mitigate its exposures to specific wrong-way risk, which is defined as the risk that an exposure to a counterparty is highly likely to increase when the creditworthiness of that counterparty deteriorates.12 NSCC has identified exposure to specific wrong-way risk when it acts as central counterparty to a Member with long positions in Family-Issued Securities. In the event a Member with long positions in FamilyIssued Securities defaults, NSCC would close out those positions following a likely drop in the creditworthiness of the issuer, possibly resulting in a loss to NSCC. In order to address this exposure to specific wrong-way risk, NSCC 8 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. 9 See Rule 4 (Clearing Fund) of the Rules, supra note 4. 10 Id. 11 Supra note 4. 12 See Principles for financial market infrastructures, issued by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions, pg. 47 n.65 (April 2012), available at https://www.bis.org/publ/cpss101a.pdf. E:\FR\FM\27FEN1.SGM 27FEN1 11438 Federal Register / Vol. 85, No. 39 / Thursday, February 27, 2020 / Notices lotter on DSKBCFDHB2PROD with NOTICES implemented the FIS Charge in 2015.13 The FIS Charge is applied to a Member’s long positions in Family-Issued Securities, which are the positions NSCC would need to sell into the market following a Member default.14 When the FIS Charge was initially implemented, it was only applied to Members that were placed on the Watch List based on the CRRM rating.15 As part of its ongoing monitoring of its membership, NSCC utilizes the internal CRRM to evaluate its credit risk exposures to its Members based on a scale from strongest to weakest.16 Members that fall within the higher risk rating categories are considered on NSCC’s Watch List and may be subject to enhanced surveillance or additional margin charges, as permitted under the Rules.17 Therefore, the FIS Charge was applied only to Members on the Watch List based on the reasoning that these Members present a heightened credit risk to NSCC or have demonstrated higher risk related to their ability to meet settlement. However, in the Initial FIS Filing, NSCC proposed to further evaluate its exposure to wrong-way risk presented by positions in Family-Issued Securities by reviewing the impact of expanding the application of the FIS Charge to positions in Family-Issued Securities of all Members.18 Following that evaluation, NSCC implemented the current methodology for calculating the FIS Charge, which expanded the application of the charge to all Members, but continues to take into account Members’ ratings on the CRRM in calculating the applicable charge.19 Therefore, under the current methodology, in calculating its Members’ Required Fund Deposits, NSCC first excludes long positions in Family-Issued Securities of Members from the applicable volatility charge, and instead charges an amount calculated by multiplying the absolute value of the long Net Unsettled Positions (as such term is defined in Procedure XV of the Rules) in that 13 See Securities Exchange Act Release No. 76077 (October 5, 2015), 80 FR 61256 (October 9, 2015) (SR–NSCC–2015–003) (‘‘Initial FIS Filing’’). 14 Short positions in Family-Issued Securities are not subject to the FIS Charge and are subject to the applicable volatility charge, as provided for under the Rules. See Sections I.(A)(1)(a)(iv) and I.(A)(2)(a)(iv) of Procedure XV (Clearing Fund Formula and Other Matters) of the Rules, supra note 4. 15 See supra note 13. 16 See supra note 6. 17 Id. 18 Supra note 13, at 61257. 19 See Securities Exchange Act Release Nos. 81550 (September 7, 2017), 82 FR 43061 (September 13, 2017) (SR–NSCC–2017–010); and 81545 (September 7, 2017), 82 FR 43054 (September 13, 2017) (SR–NSCC–2017–804). VerDate Sep<11>2014 17:26 Feb 26, 2020 Jkt 250001 Member’s Family-Issued Securities by a percentage that is no less than 40 percent.20 The percentage that is used in calculating the FIS Charge depends on a Member’s rating on the CRRM. Under Procedure XV of the Rules, long Net Unsettled Positions in (1) fixed income securities that are Family-Issued Securities are charged a haircut rate of no less than 80 percent for Members that are rated 6 or 7 on the CRRM, and no less than 40 percent for Members that are rated 1 through 5 on the CRRM; and (2) equity securities that are FamilyIssued Securities are charged a haircut rate of 100 percent for Members that are rated 6 or 7 on the CRRM, and no less than 50 percent for Members that are rated 1 through 5 on the CRRM.21 The haircut rates used in the FIS Charge as applied to positions in fixed income securities were calibrated based on historical corporate issue recovery rate data and address the risk that the Family-Issued Securities of a Member would be devalued in the event of that Member’s default. Proposed Change NSCC is now proposing to enhance the methodology for calculating the FIS Charge by using the higher applicable percentage for all Members, and no longer using a Member’s CRRM rating in the calculation. Since implementation of the current calculation, NSCC has continued to monitor its exposure to specific wrongway risk and determined that the risk characteristics to be considered when margining Family-Issued Securities extend beyond Members’ creditworthiness as measured through the CRRM. More specifically, NSCC believes it may be exposed to specific wrong-way risk despite a Members’ rating on the CRRM, and NSCC can better mitigate its exposure to this risk by calculating the FIS Charge without considering Members’ CRRM ratings. While the current methodology appropriately assumes that Members with a higher rating on the CRRM present a heightened credit risk to NSCC or have demonstrated higher risk related to their ability to meet settlement, NSCC believes this approach does not take into account the risk that a firm may default due to unanticipated causes (referred to as a ‘‘jump-to-default’’ scenario) not captured by the CRRM rating. The CRRM rating necessarily relies on historical data as a predictor of future risks. Jump-to-default scenarios 20 See Sections I.(A)(1)(a)(iv) and I.(A)(2)(a)(iv) of Procedure XV (Clearing Fund Formula and Other Matters) of the Rules, supra note 4. 21 Id. PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 are triggered by unanticipated causes that could not be predicted based on historical trends or data, for example fraud or other bad acts by management. The proposed change is designed to improve NSCC’s ability to cover the specific wrong-way risk posed by long positions in Family-Issued Securities by applying the higher applicable percentage in calculating the FIS Charge for all Members. In order to implement this proposal, NSCC would amend Sections I.(A)(1)(a)(iv) and I.(A)(2)(a)(iv) of Procedure XV of the Rules, which describe the methodology for calculating the FIS Charge, and provide that (1) fixed income securities that are Family-Issued Securities shall be charged a haircut rate of no less than 80 percent; and (2) equity securities that are Family-Issued Securities shall be charged a haircut rate of 100 percent. Anticipated Effect on and Management of Risk NSCC believes that the proposed change to enhance the calculation of the FIS Charge would improve the riskbased methodology NSCC employs to measure market price risk and would better limit NSCC’s credit exposures to Members. Specifically, the proposed change would use the higher applicable haircut percentage in calculating the FIS Charge for all Members. These haircut percentages as applied to positions in fixed income securities were calibrated to address the risk that the FamilyIssued Securities of a Member would be devalued in the event of that Member’s default. Therefore, the proposed FIS Charge would better address NSCC’s exposures to specific wrong-way risk with respect to all Members’ positions in Family-Issued Securities, particularly in jump-to-default scenarios. By mitigating specific wrong-way risk for NSCC, 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. Further, the proposal is designed to meet NSCC’s risk management goals and its regulatory obligations, as described below. 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 E:\FR\FM\27FEN1.SGM 27FEN1 Federal Register / Vol. 85, No. 39 / Thursday, February 27, 2020 / Notices lotter on DSKBCFDHB2PROD with NOTICES systemically important financial market utilities and strengthening the liquidity of systemically important financial market utilities.22 NSCC believes that the proposal is consistent with the Clearing Supervision Act, specifically with the risk management objectives and principles of Section 805(b), and with certain of the risk management standards adopted by the Commission pursuant to Section 805(a)(2), for the reasons described below.23 Consistency With Section 805(b) of the Clearing Supervision Act NSCC believes the proposal is consistent with Section 805(b) of the Clearing Supervision Act because it would enhance the margin methodology applied to long positions in FamilyIssued Securities by using the higher applicable percentage for all Members, rather than considering Members’ CRRM ratings in the calculation. The proposal would improve NSCC’s ability to mitigate specific wrong-way risk exposures in a jump-to-default scenario and, in this way, would assist NSCC in collecting margin that more accurately reflects NSCC’s exposure to a Member that clears Family-Issued Securities. The proposal would also assist NSCC in its continuous efforts to improve the reliability and effectiveness of its riskbased margining methodology by taking into account specific wrong-way risk. As such, the proposal would help NSCC, as a central counterparty, promote robust risk management, and thus promote the prompt and accurate clearance and settlement of securities transactions, as well as, in general, protect investors and the public interest. In its critical role as a central counterparty, NSCC interposes itself between counterparties to financial transactions, thereby reducing the risk faced by its Members and contributing to global financial stability. NSCC’s liquidity risk management plays an integral part in NSCC’s ability to perform its role as a central counterparty. Therefore, improving the reliability and effectiveness of its riskbased margining methodology would be expected to also reduce systemic risk in the financial system and would promote financial stability by having a positive impact on the safety and soundness of the clearing system. As a result, NSCC believes the proposal would be consistent with the objectives and principles of Section 805(b) of the Clearing Supervision Act, which specify the promotion of robust 22 12 U.S.C. 5461(b). 23 12 U.S.C. 5464(a)(2) and (b). VerDate Sep<11>2014 17:26 Feb 26, 2020 Jkt 250001 risk management, promotion of safety and soundness, reduction of systemic risks and support of the stability of the broader financial system.24 Consistency With Section 805(a)(2) of the Clearing Supervision Act Section 805(a)(2) of the Clearing Supervision Act 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.25 The Commission has accordingly adopted risk management standards under Section 805(a)(2) of the Clearing Supervision Act and Section 17A of the Act (‘‘Covered Clearing Agency Standards’’).26 The Covered Clearing Agency Standards require covered 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.27 NSCC believes that the proposed change is consistent with the Covered Clearing Agency Standards, in particular Rules 17Ad–22(e)(4)(i),28 and (e)(6)(i) and (v),29 each promulgated under the Act, for the reasons described below. Rule 17Ad–22(e)(4)(i) under the Act requires that each covered clearing agency 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.30 The specific wrong-way risk presented by Family-Issued Securities is the risk that, in the event a Member with unsettled long positions in Family-Issued Securities defaults, NSCC would close out those positions following a likely drop in the credit-worthiness of the issuer, possibly resulting in a loss to NSCC. The haircut rates used in calculating the FIS Charge as applied to 24 12 U.S.C. 5464(b). U.S.C. 5464(a)(2). 26 17 CFR 240.17Ad–22(e). 27 Id. 28 17 CFR 240.17Ad–22(e)(4)(i). 29 17 CFR 240.17Ad–22(e)(6)(i) and (v). 30 17 CFR 240.17Ad–22(e)(4)(i). 25 12 PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 11439 positions in fixed income securities were calibrated based on historical corporate issue recovery rate data, and, therefore, address the risk that the Family-Issued Securities of a Member would be devalued in the event of that Member’s default. The proposal to apply the higher haircuts to all Members would assist NSCC in addressing specific wrong-way risk exposures in a jump-to-default scenario. By addressing this additional risk exposure, NSCC believes the proposal would allow it to calculate the FIS Charge in a way that more accurately reflects the risk characteristics of Family-Issued Securities. The proposal would, therefore, permit NSCC to more accurately identify, measure, monitor and manage its credit exposures to Members with long positions in FamilyIssued Securities, and would assist NSCC in collecting and maintaining financial resources that reflect its credit exposures to those Members. Therefore, NSCC believes the proposed change is consistent with Rule 17Ad–22(e)(4)(i).31 Rule 17Ad–22(e)(6)(i) under the Act requires that each covered clearing agency that provides central counterparty services 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.32 Rule 17Ad–22(e)(6)(v) under the Act requires that each covered clearing agency that provides central counterparty services 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, uses an appropriate method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across products.33 As stated above, long positions in Family-Issued Securities present NSCC with exposure to specific wrong-way risk that, in the event a Member with these positions defaults, NSCC would close out those positions following a likely drop in the credit-worthiness of the issuer, possibly resulting in a loss to NSCC. The haircut rates used in the current methodology would continue to be used in the proposed methodology 31 Id. 32 17 33 17 E:\FR\FM\27FEN1.SGM CFR 240.17Ad–22(e)(6)(i). CFR 240.17Ad–22(e)(6)(v). 27FEN1 11440 Federal Register / Vol. 85, No. 39 / Thursday, February 27, 2020 / Notices and as applied to positions in fixed income securities were calibrated based on historical corporate issue recovery rate data and address the risk that the Family-Issued Securities of a Member would be devalued in the event of that Member’s default. Therefore, the calculation of the charge would continue to reflect the risk characteristics of Family-Issued Securities. As described above, the proposed change to apply the higher haircut rates to all Members would improve NSCC’s ability to mitigate its exposure to specific wrong-way risk in a jump-to-default scenario. In this way, the proposal would assist NSCC in maintaining a risk-based margin system that considers, and produces margin levels commensurate with, the risks and particular attributes of long positions in Family-Issued Securities. Additionally, NSCC believes the proposed enhancement to the methodology for calculating the FIS Charge is an appropriate method for measuring its credit exposures to its Members, because the FIS Charge would continue to account for the risk factors presented by these securities, i.e. the risk that these securities would be devalued in the event of a Member default. Therefore, NSCC believes the proposed change is consistent with Rule 17Ad– 22(e)(6)(i) and (v).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 34 17 CFR 240.17Ad–22(e)(6)(i) and (v). VerDate Sep<11>2014 17:26 Feb 26, 2020 Jkt 250001 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 rule-comments@ sec.gov. Please include File Number SR– NSCC–2020–801 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–2020–801. 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 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 information that you wish to make available publicly. All submissions should refer to File Number SR–NSCC– 2020–801 and should be submitted on or before March 13, 2020. By the Commission. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–03997 Filed 2–26–20; 8:45 am] BILLING CODE 8011–01–P SURFACE TRANSPORTATION BOARD 30-Day Notice of Intent To Seek Extension of Approval: Arbitration ‘‘Opt-In’’ Notices Notice and request for comments. ACTION: AGENCY: Surface Transportation Board. SUMMARY: As required by the Paperwork Reduction Act of 1995 (PRA), the Surface Transportation Board (STB or Board) gives notice of its intent to seek approval from the Office of Management and Budget (OMB) for an extension of the collection of arbitration ‘‘opt-in’’ notices, described below. The Board previously published a notice about this collection in the Federal Register on December 12, 2019. That notice allowed for a 60-day public review and comment period. No comments were received. DATES: Comments on this information collection should be submitted by March 30, 2020. ADDRESSES: Written comments should be identified as ‘‘Paperwork Reduction Act Comments, Surface Transportation Board: Arbitration ‘Opt-in’ Notices.’’ These comments should be directed to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention: Michael J. McManus, Surface Transportation Board Desk Officer: by email at oira_submission@ omb.eop.gov; by fax at (202) 395–1743; or by mail to Room 10235, 725 17th Street NW, Washington, DC 20503. Please also direct comments to Chris Oehrle, PRA Officer, Surface Transportation Board, 395 E Street SW, Washington, DC 20423–0001, or to PRA@stb.gov. For further information regarding this collection, contact Michael Higgins, Deputy Director, Office of Public Assistance, Governmental Affairs, and Compliance at (202) 245–0284 or at michael.higgins@stb.gov. SUPPLEMENTARY INFORMATION: Comments are requested concerning: (1) The accuracy of the Board’s burden estimates; (2) ways to enhance the quality, utility, and clarity of the information collected; (3) ways to E:\FR\FM\27FEN1.SGM 27FEN1

Agencies

[Federal Register Volume 85, Number 39 (Thursday, February 27, 2020)]
[Notices]
[Pages 11437-11440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03997]



[[Page 11437]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88267; File No. SR-NSCC-2020-801]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Advance Notice To Enhance the 
Calculation of the Family-Issued Securities Charge

February 24, 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 
January 28, 2020, National Securities Clearing Corporation (``NSCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
advance notice SR-NSCC-2020-801 (``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.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ On January 28, 2020, NSCC filed this Advance Notice as a 
proposed rule change (SR-NSCC-2020-002) 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.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    This Advance Notice consists of modifications to NSCC's Rules and 
Procedures (``Rules'') \4\ in connection with a proposal to enhance the 
calculation of NSCC's existing charge applied to long positions in 
Family-Issued Securities \5\ (``FIS Charge'') by using the same haircut 
percentages for all Members and no longer using Members' ratings on the 
Credit Risk Rating Matrix (``CRRM'') \6\ in calculating this charge, as 
described below.
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    \4\ Terms not defined herein are defined in the Rules, available 
at www.dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf.
    \5\ A Family-Issued Security is defined in Rule 1 (Definitions 
and Descriptions) of the Rules as ``a security that was issued by a 
Member or an affiliate of that Member.'' Supra note 4.
    \6\ See Rule 1 and Section 4 of Rule 2B of the Rules, supra note 
4. See also Securities Exchange Act Release Nos. 80734 (May 19, 
2017), 82 FR 24177 (May 25, 2017) (SR-DTC-2017-002, SR-FICC-2017-
006, SR-NSCC-2017-002); and 80731 (May 19, 2017), 82 FR 24174 (May 
25, 2017) (SR-DTC-2017-801, SR-FICC-2017-804, SR-NSCC-2017-801).
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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 to modify the Rules to enhance the calculation of 
the FIS Charge by using the same haircut percentages for all Members 
and no longer using Members' ratings on the CRRM in calculating this 
charge. By using the same haircut percentages to calculate the FIS 
Charge for all Members, NSCC believes this proposed enhancement would 
better mitigate the specific wrong-way risk posed by long positions in 
Family-Issued Securities that the charge was designed to address, as 
described below.
Background
    As a central counterparty, NSCC occupies an important role in the 
securities settlement system by interposing itself between 
counterparties to financial transactions, thereby reducing the risk 
faced by participants and contributing to global financial stability. 
The effectiveness of a central counterparty's risk controls and the 
adequacy of its financial resources are critical to achieving these 
risk-reducing goals. As part of its market risk management strategy, 
NSCC manages its credit exposure to Members by determining the 
appropriate Required Fund Deposits to the Clearing Fund and monitoring 
its sufficiency, as provided for in the Rules.\7\ The Required Fund 
Deposit serves as each Member's margin.
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    \7\ See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund 
Formula and Other Matters) of the Rules, supra note 4.
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    The objective of a Member's Required Fund Deposit is to mitigate 
potential losses to NSCC associated with liquidating a Member's 
portfolio in the event NSCC ceases to act for that Member (hereinafter 
referred to as a ``default'').\8\ The aggregate of all Members' 
Required Fund Deposits constitutes the Clearing Fund of NSCC.\9\ NSCC 
may access its Clearing Fund 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.\10\
---------------------------------------------------------------------------

    \8\ 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.
    \9\ See Rule 4 (Clearing Fund) of the Rules, supra note 4.
    \10\ Id.
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    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 of the Rules.\11\ NSCC regularly assesses the 
market, liquidity and other risks that its margining methodologies are 
designed to mitigate to evaluate whether margin levels are commensurate 
with the particular risk attributes of each relevant product, 
portfolio, and market.
---------------------------------------------------------------------------

    \11\ Supra note 4.
---------------------------------------------------------------------------

    Among the various risks that NSCC considers when evaluating the 
effectiveness of its margining methodology are its counterparty risks, 
including wrong-way risk. In particular, NSCC seeks to identify and 
mitigate its exposures to specific wrong-way risk, which is defined as 
the risk that an exposure to a counterparty is highly likely to 
increase when the creditworthiness of that counterparty 
deteriorates.\12\ NSCC has identified exposure to specific wrong-way 
risk when it acts as central counterparty to a Member with long 
positions in Family-Issued Securities. In the event a Member with long 
positions in Family-Issued Securities defaults, NSCC would close out 
those positions following a likely drop in the creditworthiness of the 
issuer, possibly resulting in a loss to NSCC.
---------------------------------------------------------------------------

    \12\ See Principles for financial market infrastructures, issued 
by the Committee on Payment and Settlement Systems and the Technical 
Committee of the International Organization of Securities 
Commissions, pg. 47 n.65 (April 2012), available at https://www.bis.org/publ/cpss101a.pdf.
---------------------------------------------------------------------------

    In order to address this exposure to specific wrong-way risk, NSCC

[[Page 11438]]

implemented the FIS Charge in 2015.\13\ The FIS Charge is applied to a 
Member's long positions in Family-Issued Securities, which are the 
positions NSCC would need to sell into the market following a Member 
default.\14\
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    \13\ See Securities Exchange Act Release No. 76077 (October 5, 
2015), 80 FR 61256 (October 9, 2015) (SR-NSCC-2015-003) (``Initial 
FIS Filing'').
    \14\ Short positions in Family-Issued Securities are not subject 
to the FIS Charge and are subject to the applicable volatility 
charge, as provided for under the Rules. See Sections 
I.(A)(1)(a)(iv) and I.(A)(2)(a)(iv) of Procedure XV (Clearing Fund 
Formula and Other Matters) of the Rules, supra note 4.
---------------------------------------------------------------------------

    When the FIS Charge was initially implemented, it was only applied 
to Members that were placed on the Watch List based on the CRRM 
rating.\15\ As part of its ongoing monitoring of its membership, NSCC 
utilizes the internal CRRM to evaluate its credit risk exposures to its 
Members based on a scale from strongest to weakest.\16\ Members that 
fall within the higher risk rating categories are considered on NSCC's 
Watch List and may be subject to enhanced surveillance or additional 
margin charges, as permitted under the Rules.\17\ Therefore, the FIS 
Charge was applied only to Members on the Watch List based on the 
reasoning that these Members present a heightened credit risk to NSCC 
or have demonstrated higher risk related to their ability to meet 
settlement. However, in the Initial FIS Filing, NSCC proposed to 
further evaluate its exposure to wrong-way risk presented by positions 
in Family-Issued Securities by reviewing the impact of expanding the 
application of the FIS Charge to positions in Family-Issued Securities 
of all Members.\18\
---------------------------------------------------------------------------

    \15\ See supra note 13.
    \16\ See supra note 6.
    \17\ Id.
    \18\ Supra note 13, at 61257.
---------------------------------------------------------------------------

    Following that evaluation, NSCC implemented the current methodology 
for calculating the FIS Charge, which expanded the application of the 
charge to all Members, but continues to take into account Members' 
ratings on the CRRM in calculating the applicable charge.\19\ 
Therefore, under the current methodology, in calculating its Members' 
Required Fund Deposits, NSCC first excludes long positions in Family-
Issued Securities of Members from the applicable volatility charge, and 
instead charges an amount calculated by multiplying the absolute value 
of the long Net Unsettled Positions (as such term is defined in 
Procedure XV of the Rules) in that Member's Family-Issued Securities by 
a percentage that is no less than 40 percent.\20\ The percentage that 
is used in calculating the FIS Charge depends on a Member's rating on 
the CRRM. Under Procedure XV of the Rules, long Net Unsettled Positions 
in (1) fixed income securities that are Family-Issued Securities are 
charged a haircut rate of no less than 80 percent for Members that are 
rated 6 or 7 on the CRRM, and no less than 40 percent for Members that 
are rated 1 through 5 on the CRRM; and (2) equity securities that are 
Family-Issued Securities are charged a haircut rate of 100 percent for 
Members that are rated 6 or 7 on the CRRM, and no less than 50 percent 
for Members that are rated 1 through 5 on the CRRM.\21\ The haircut 
rates used in the FIS Charge as applied to positions in fixed income 
securities were calibrated based on historical corporate issue recovery 
rate data and address the risk that the Family-Issued Securities of a 
Member would be devalued in the event of that Member's default.
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act Release Nos. 81550 (September 
7, 2017), 82 FR 43061 (September 13, 2017) (SR-NSCC-2017-010); and 
81545 (September 7, 2017), 82 FR 43054 (September 13, 2017) (SR-
NSCC-2017-804).
    \20\ See Sections I.(A)(1)(a)(iv) and I.(A)(2)(a)(iv) of 
Procedure XV (Clearing Fund Formula and Other Matters) of the Rules, 
supra note 4.
    \21\ Id.
---------------------------------------------------------------------------

Proposed Change
    NSCC is now proposing to enhance the methodology for calculating 
the FIS Charge by using the higher applicable percentage for all 
Members, and no longer using a Member's CRRM rating in the calculation.
    Since implementation of the current calculation, NSCC has continued 
to monitor its exposure to specific wrong-way risk and determined that 
the risk characteristics to be considered when margining Family-Issued 
Securities extend beyond Members' creditworthiness as measured through 
the CRRM. More specifically, NSCC believes it may be exposed to 
specific wrong-way risk despite a Members' rating on the CRRM, and NSCC 
can better mitigate its exposure to this risk by calculating the FIS 
Charge without considering Members' CRRM ratings. While the current 
methodology appropriately assumes that Members with a higher rating on 
the CRRM present a heightened credit risk to NSCC or have demonstrated 
higher risk related to their ability to meet settlement, NSCC believes 
this approach does not take into account the risk that a firm may 
default due to unanticipated causes (referred to as a ``jump-to-
default'' scenario) not captured by the CRRM rating. The CRRM rating 
necessarily relies on historical data as a predictor of future risks. 
Jump-to-default scenarios are triggered by unanticipated causes that 
could not be predicted based on historical trends or data, for example 
fraud or other bad acts by management. The proposed change is designed 
to improve NSCC's ability to cover the specific wrong-way risk posed by 
long positions in Family-Issued Securities by applying the higher 
applicable percentage in calculating the FIS Charge for all Members.
    In order to implement this proposal, NSCC would amend Sections 
I.(A)(1)(a)(iv) and I.(A)(2)(a)(iv) of Procedure XV of the Rules, which 
describe the methodology for calculating the FIS Charge, and provide 
that (1) fixed income securities that are Family-Issued Securities 
shall be charged a haircut rate of no less than 80 percent; and (2) 
equity securities that are Family-Issued Securities shall be charged a 
haircut rate of 100 percent.
Anticipated Effect on and Management of Risk
    NSCC believes that the proposed change to enhance the calculation 
of the FIS Charge would improve the risk-based methodology NSCC employs 
to measure market price risk and would better limit NSCC's credit 
exposures to Members. Specifically, the proposed change would use the 
higher applicable haircut percentage in calculating the FIS Charge for 
all Members. These haircut percentages as applied to positions in fixed 
income securities were calibrated to address the risk that the Family-
Issued Securities of a Member would be devalued in the event of that 
Member's default. Therefore, the proposed FIS Charge would better 
address NSCC's exposures to specific wrong-way risk with respect to all 
Members' positions in Family-Issued Securities, particularly in jump-
to-default scenarios. By mitigating specific wrong-way risk for NSCC, 
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. Further, the proposal is designed to meet NSCC's 
risk management goals and its regulatory obligations, as described 
below.
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

[[Page 11439]]

systemically important financial market utilities and strengthening the 
liquidity of systemically important financial market utilities.\22\
---------------------------------------------------------------------------

    \22\ 12 U.S.C. 5461(b).
---------------------------------------------------------------------------

    NSCC believes that the proposal is consistent with the Clearing 
Supervision Act, specifically with the risk management objectives and 
principles of Section 805(b), and with certain of the risk management 
standards adopted by the Commission pursuant to Section 805(a)(2), for 
the reasons described below.\23\
---------------------------------------------------------------------------

    \23\ 12 U.S.C. 5464(a)(2) and (b).
---------------------------------------------------------------------------

Consistency With Section 805(b) of the Clearing Supervision Act
    NSCC believes the proposal is consistent with Section 805(b) of the 
Clearing Supervision Act because it would enhance the margin 
methodology applied to long positions in Family-Issued Securities by 
using the higher applicable percentage for all Members, rather than 
considering Members' CRRM ratings in the calculation. The proposal 
would improve NSCC's ability to mitigate specific wrong-way risk 
exposures in a jump-to-default scenario and, in this way, would assist 
NSCC in collecting margin that more accurately reflects NSCC's exposure 
to a Member that clears Family-Issued Securities. The proposal would 
also assist NSCC in its continuous efforts to improve the reliability 
and effectiveness of its risk-based margining methodology by taking 
into account specific wrong-way risk. As such, the proposal would help 
NSCC, as a central counterparty, promote robust risk management, and 
thus promote the prompt and accurate clearance and settlement of 
securities transactions, as well as, in general, protect investors and 
the public interest.
    In its critical role as a central counterparty, NSCC interposes 
itself between counterparties to financial transactions, thereby 
reducing the risk faced by its Members and contributing to global 
financial stability. NSCC's liquidity risk management plays an integral 
part in NSCC's ability to perform its role as a central counterparty. 
Therefore, improving the reliability and effectiveness of its risk-
based margining methodology would be expected to also reduce systemic 
risk in the financial system and would promote financial stability by 
having a positive impact on the safety and soundness of the clearing 
system.
    As a result, NSCC believes the proposal would be consistent with 
the objectives and principles of Section 805(b) of the Clearing 
Supervision Act, which specify the promotion of robust risk management, 
promotion of safety and soundness, reduction of systemic risks and 
support of the stability of the broader financial system.\24\
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

Consistency With Section 805(a)(2) of the Clearing Supervision Act
    Section 805(a)(2) of the Clearing Supervision Act 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.\25\ The Commission has accordingly adopted risk 
management standards under Section 805(a)(2) of the Clearing 
Supervision Act and Section 17A of the Act (``Covered Clearing Agency 
Standards'').\26\
---------------------------------------------------------------------------

    \25\ 12 U.S.C. 5464(a)(2).
    \26\ 17 CFR 240.17Ad-22(e).
---------------------------------------------------------------------------

    The Covered Clearing Agency Standards require covered 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.\27\ NSCC believes that the proposed change is 
consistent with the Covered Clearing Agency Standards, in particular 
Rules 17Ad-22(e)(4)(i),\28\ and (e)(6)(i) and (v),\29\ each promulgated 
under the Act, for the reasons described below.
---------------------------------------------------------------------------

    \27\ Id.
    \28\ 17 CFR 240.17Ad-22(e)(4)(i).
    \29\ 17 CFR 240.17Ad-22(e)(6)(i) and (v).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(4)(i) under the Act requires that each covered 
clearing agency 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.\30\ The specific wrong-way risk presented by Family-Issued 
Securities is the risk that, in the event a Member with unsettled long 
positions in Family-Issued Securities defaults, NSCC would close out 
those positions following a likely drop in the credit-worthiness of the 
issuer, possibly resulting in a loss to NSCC. The haircut rates used in 
calculating the FIS Charge as applied to positions in fixed income 
securities were calibrated based on historical corporate issue recovery 
rate data, and, therefore, address the risk that the Family-Issued 
Securities of a Member would be devalued in the event of that Member's 
default. The proposal to apply the higher haircuts to all Members would 
assist NSCC in addressing specific wrong-way risk exposures in a jump-
to-default scenario. By addressing this additional risk exposure, NSCC 
believes the proposal would allow it to calculate the FIS Charge in a 
way that more accurately reflects the risk characteristics of Family-
Issued Securities. The proposal would, therefore, permit NSCC to more 
accurately identify, measure, monitor and manage its credit exposures 
to Members with long positions in Family-Issued Securities, and would 
assist NSCC in collecting and maintaining financial resources that 
reflect its credit exposures to those Members. Therefore, NSCC believes 
the proposed change is consistent with Rule 17Ad-22(e)(4)(i).\31\
---------------------------------------------------------------------------

    \30\ 17 CFR 240.17Ad-22(e)(4)(i).
    \31\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(i) under the Act requires that each covered 
clearing agency that provides central counterparty services 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.\32\ Rule 17Ad-22(e)(6)(v) under the Act requires that each 
covered clearing agency that provides central counterparty services 
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, uses an appropriate method for measuring credit exposure that 
accounts for relevant product risk factors and portfolio effects across 
products.\33\
---------------------------------------------------------------------------

    \32\ 17 CFR 240.17Ad-22(e)(6)(i).
    \33\ 17 CFR 240.17Ad-22(e)(6)(v).
---------------------------------------------------------------------------

    As stated above, long positions in Family-Issued Securities present 
NSCC with exposure to specific wrong-way risk that, in the event a 
Member with these positions defaults, NSCC would close out those 
positions following a likely drop in the credit-worthiness of the 
issuer, possibly resulting in a loss to NSCC. The haircut rates used in 
the current methodology would continue to be used in the proposed 
methodology

[[Page 11440]]

and as applied to positions in fixed income securities were calibrated 
based on historical corporate issue recovery rate data and address the 
risk that the Family-Issued Securities of a Member would be devalued in 
the event of that Member's default. Therefore, the calculation of the 
charge would continue to reflect the risk characteristics of Family-
Issued Securities. As described above, the proposed change to apply the 
higher haircut rates to all Members would improve NSCC's ability to 
mitigate its exposure to specific wrong-way risk in a jump-to-default 
scenario. In this way, the proposal would assist NSCC in maintaining a 
risk-based margin system that considers, and produces margin levels 
commensurate with, the risks and particular attributes of long 
positions in Family-Issued Securities. Additionally, NSCC believes the 
proposed enhancement to the methodology for calculating the FIS Charge 
is an appropriate method for measuring its credit exposures to its 
Members, because the FIS Charge would continue to account for the risk 
factors presented by these securities, i.e. the risk that these 
securities would be devalued in the event of a Member default. 
Therefore, NSCC believes the proposed change is consistent with Rule 
17Ad-22(e)(6)(i) and (v).\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 240.17Ad-22(e)(6)(i) and (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-2020-801 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-2020-801. 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-2020-801 and should be submitted on 
or before March 13, 2020.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-03997 Filed 2-26-20; 8:45 am]
BILLING CODE 8011-01-P
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