Self-Regulatory Organizations; National Securities Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Revise the Excess Capital Premium Charge, 55058-55060 [2022-19346]
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Federal Register / Vol. 87, No. 173 / Thursday, September 8, 2022 / Notices
transparency in the Exchange’s rules
and consistency across the rules of the
Nasdaq affiliated options exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
khammond on DSKJM1Z7X2PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days of such date (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the Exchange
consents, the Commission shall: (a) by
order approve or disapprove such
proposed rule change, or (b) institute
proceedings to determine whether the
proposed rule change should be
disapproved.
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 the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MRX–2022–11 and should
be submitted on or before September 29,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Deputy Secretary.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
[FR Doc. 2022–19412 Filed 9–7–22; 8:45 am]
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–
MRX–2022–11 on the subject line.
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To Revise the Excess
Capital Premium Charge
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–MRX–2022–11. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
September 1, 2022.
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18:19 Sep 07, 2022
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95656; File No. SR–NSCC–
2022–005]
I. Introduction
On May 20, 2022, National Securities
Clearing Corporation (‘‘NSCC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–NSCC–2022–005 (the
‘‘Proposed Rule Change’’) pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The Proposed Rule
Change was published for comment in
the Federal Register on June 8, 2022,3
and the Commission has received
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 95026
(June 2, 2022), 87 FR 34913 (June 8, 2022) (File No.
SR–NSCC–2022–005). The Notice referred to an
incorrect filing date of May 30, 2022; however, the
proposal was filed on May 20, 2022, as indicated
here.
comments regarding the changes
proposed in the Proposed Rule Change.4
On July 11, 2022, pursuant to Section
19(b)(2) of the Act,5 the Commission
designated a longer period within which
to approve, disapprove, or institute
proceedings to determine whether to
approve or disapprove the Proposed
Rule Change.6 This order institutes
proceedings, pursuant to Section
19(b)(2)(B) of the Act,7 to determine
whether to approve or disapprove the
Proposed Rule Change.
II. Summary of the Proposed Rule
Change
A key tool that NSCC uses to manage
its respective credit exposures to its
members is the daily collection of
margin from each member, which is
referred to as each member’s Required
Fund Deposit. The aggregated amount of
all members’ margin constitutes the
Clearing Fund, which NSCC would
access should a defaulted member’s
own margin be insufficient to satisfy
losses to NSCC caused by the
liquidation of that member’s portfolio.
The Excess Capital Premium (ECP)
charge is a component of the Clearing
Fund that is designed to mitigate the
heightened default risk a member could
pose to NSCC if it operates with lower
capital levels relative to its margin
requirements. Each Business Day, NSCC
determines if a member may be subject
to the ECP charge by first determining
its Calculated Amount. The Calculated
Amount is a portion of a member’s
Required Fund Deposit designed to
represent its margin requirements to
NSCC.
As described in the Notice, NSCC
proposes to modify Procedure XV
(Clearing Fund Formula and Other
Matters) of NSCC’s Rules & Procedures
(‘‘Rules’’) to revise the ECP charge by
enhancing the methodology for
calculating the charge to (1) compare a
member’s applicable capital amounts
with the amount it contributes to the
Clearing Fund that represents its
volatility charge, (2) for members that
are broker-dealers, use net capital
amounts rather than excess net capital
amounts in the calculation of the ECP
charge; and for all other members, use
equity capital in the calculation of the
ECP charge, and (3) establish a cap of
2.0 for the Excess Capital Ratio that is
used in calculating a member’s ECP
1 15
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4 Comments are available at https://www.sec.gov/
comments/sr-nscc-2022-005/srnscc2022005.htm.
5 15 U.S.C. 78s(b)(2).
6 Securities Exchange Act Release No. 95245 (July
11, 2022), 87 FR 42523 (July 15, 2022) (SR–NSCC–
2022–005).
7 15 U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 87, No. 173 / Thursday, September 8, 2022 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
charge.8 In addition, NSCC proposes to
make additional changes directed at the
transparency of the Rules regarding the
ECP charge, including (1) clarifying the
capital amounts that are used in the
calculation of the charge by introducing
new defined terms, (2) removing NSCC’s
discretion to waive or reduce the charge,
and (3) providing that NSCC may
calculate the charge based on updated
capital information.
First, NSCC proposes to revise the
ECP Charge to use the members’
Volatility Component 9 as the Calculated
Amount. Specifically, it proposes to
replace the Calculated Amount with the
amount collected as that member’s
volatility component as determined
pursuant to Sections I(A)(1)(a)(i)–(iii)
and (2)(a)(i)–(iii) of Procedure XV of the
Rules.
Second, NSCC proposes to make
changes to the calculation of the ECP
charge based on whether or not a
member is a broker-dealer. Specifically,
for broker-dealer members, it would
revise the capital measure used to
calculate the ECP charge to replace
excess net capital with net capital. In
addition, it would revise the calculation
of the ECP charge for members that are
not broker-dealers by using equity
capital rather than different measures
that are based on other membership
requirements.
Third, NSCC proposes to set a
maximum amount of Excess Capital
Ratio that is used in calculating
members’ ECP charge to 2.0.
Finally, NSCC proposes certain
changes directed at improving
transparency regarding the Excess
Capital Premium. Specifically, the
proposed changes would eliminate
NSCC’s discretion to waive or reduce
the ECP charge. In addition, the
8 The description of the Proposed Rule Change is
based on the statements prepared by NSCC in the
Notice. See Notice, supra note 3. Capitalized terms
used herein and not otherwise defined herein are
defined in the Rules, available at https://
www.dtcc.com/-/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
9 The volatility component is designed to capture
the market price risk associated with each member’s
portfolio at a 99th percentile level of confidence.
NSCC has two methodologies for calculating the
volatility component—a model-based volatility-atrisk, or VaR, charge and a haircut-based calculation,
for certain positions that are excluded from the VaR
charge calculation. The charge that is applied to a
member’s Required Fund Deposit with respect to
the volatility component is referred to as the
volatility charge and is the sum of the applicable
VaR charge and the haircut-based calculation.
Amounts calculated pursuant to Sections
I(A)(1)(a)(iv) and (2)(a)(iv) of Procedure XV with
respect to long positions in Net Unsettled Positions
in Family-Issued Securities are designed to address
wrong-way risk presented by these positions, not
volatility risks, and, as such, are not a part of a
member’s volatility charge. See Sections I(A)(1)(a)
and (2)(a) of Procedure XV, supra note 3.
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proposed changes would add new
definitions to its Rules to clarify the
description of the capital amounts that
NSCC uses in the calculation of the ECP
charge and provide that NSCC may
calculate the charge based on updated
capital information.
III. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 10 to determine
whether the Proposed Rule Change
should be approved or disapproved.
Institution of proceedings is appropriate
at this time in view of the legal and
policy issues raised by the Proposed
Rule Change. Institution of proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
Rather, the Commission seeks and
encourages interested persons to
comment on the Proposed Rule Change,
providing the Commission with
arguments to support the Commission’s
analysis as to whether to approve or
disapprove the Proposed Rule Change.
Pursuant to Section 19(b)(2)(B) of the
Act,11 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of, and input from
commenters with respect to, the
Proposed Rule Change’s consistency
with Section 17A of the Act,12 and the
rules thereunder, including the
following provisions:
• Section 17A(b)(3)(F) of the Act,13
which requires, among other things, that
the rules of a clearing agency must be
designed to promote the prompt and
accurate clearance and settlement of
securities transactions, to assure the
safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible, and to protect investors and
the public interest; and
• Rule 17Ad–22(e)(4)(i) of the Act, 14
which requires that a 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.
• Rule 17Ad–22(e)(6)(i) of the Act,15
which requires that a covered clearing
agency establish, implement, maintain,
and enforce written policies and
procedures reasonably designed to
cover, if the covered clearing agency
provides central counterparty services,
its credit exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market.
• Rule 17Ad–22(e)(23)(ii) of the Act 16
which requires that a covered clearing
agency establish, implement, maintain,
and enforce written policies and
procedures reasonably designed to
provide sufficient information to enable
participants to identify and evaluate the
risks, fees, and other material costs they
incur by participating in the covered
clearing agency.
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
Proposed Rule Change. In particular, the
Commission invites the written views of
interested persons concerning whether
the Proposed Rule Change is consistent
with Section 17A(b)(3)(F) of the Act,17
and Rules 17Ad–22(e)(4)(i), (e)(6)(i) and
(e)(23)(ii) of the Act,18 or any other
provision of the Act, or the rules and
regulations thereunder.
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
Proposed Rule Change should be
approved or disapproved by September
29, 2022. Any person who wishes to file
a rebuttal to any other person’s
submission must file that rebuttal by
October 13, 2022.
The Commission asks that
commenters address the sufficiency of
NSCC’s statements in support of the
Proposed Rule Change, which are set
forth in the Notice,19 in addition to any
other comments they may wish to
submit about the Proposed Rule Change.
Comments may be submitted by any
of the following methods:
15 17
10 15
U.S.C. 78s(b)(2)(B).
12 15
U.S.C. 78q–1.
U.S.C. 78q–1(b)(3)(F).
14 17 CFR 240.17Ad–22(e)(4)(i).
13 15
PO 00000
Frm 00106
Fmt 4703
CFR 240.17Ad–22(e)(6)(i).
CFR 240.17Ad–22(e)(23)(ii).
17 15 U.S.C. 78q–1(b)(3)(F).
18 17 CFR 240.17Ad–22(e)(4)(i), (e)(6)(i) and
(e)(23)(ii).
19 See Notice, supra note 3.
16 17
11 Id.
Sfmt 4703
55059
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Federal Register / Vol. 87, No. 173 / Thursday, September 8, 2022 / 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–
NSCC–2022–005 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.
khammond on DSKJM1Z7X2PROD with NOTICES
All submissions should refer to File
Number SR–NSCC–2022–005. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the Proposed Rule
Change that are filed with the
Commission, and all written
communications relating to the
Proposed Rule Change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of 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–
2022–005 and should be submitted on
or before September 29, 2022. Rebuttal
comments should be submitted by
October 13, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–19346 Filed 9–7–22; 8:45 am]
BILLING CODE 8011–01–P
20 17
CFR 200.30–3(a)(31).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95658; File No. SR–
CboeBZX–2022–037]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order Approving
a Proposed Rule Change, as Modified
by Amendment Nos. 1 and 2, To
Amend BZX Rule 11.17, Clearly
Erroneous Executions
September 1, 2022.
I. Introduction
On July 11, 2022, Cboe BZX
Exchange, Inc. (the ‘‘Exchange’’ or
‘‘BZX’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to (i) make the
current clearly erroneous execution
(‘‘CEE’’) pilot permanent, and (ii) apply
the Limit Up-Limit Down (‘‘LULD’’)
mechanism in place of the CEE review
process during regular trading hours,
except in limited circumstances. The
proposed rule change was published for
comment in the Federal Register on July
18, 2022.3 On July 29, 2022, the
Exchange filed Amendment No. 1 to the
proposed rule change.4 On August 26,
2022, the Exchange filed Amendment
No. 2 to the proposed rule change.5 This
order approves the proposed rule
change, as modified by Amendment
Nos. 1 and 2.
II. Description of the Proposed Rule
Change, as Modified by Amendment
Nos. 1 and 2
A. Background
On September 10, 2010, the
Commission approved, on a pilot basis,
changes to BZX Rule 11.17 (Clearly
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 95259
(July 12, 2022), 87 FR 42760 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange made
technical and non-substantive corrections to the
proposal. Specifically, the Exchange corrected an
erroneous mismarking in the rule text and removed
certain redundant language in the proposal.
Because Amendment No. 1 does not materially alter
the substance of the proposed rule change,
Amendment No. 1 is not subject to notice and
comment. Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-cboebzx-2022-037/
srcboebzx2022037-20135398-306303.pdf.
5 In Amendment No. 2, the Exchange revised the
proposal to provide information on the
implementation date of the proposal. Because
Amendment No. 2 does not materially alter the
substance of the proposed rule change, Amendment
No. 2 is not subject to notice and comment.
Amendment No. 2 is available at: https://
www.sec.gov/comments/sr-cboebzx-2022-037/
srcboebzx2022037-20137788-308117.pdf
(‘‘Amendment No. 2’’).
Erroneous Executions) that, among other
things: (i) provided for uniform
treatment of CEE reviews in multi-stock
events involving twenty or more
securities; and (ii) reduced the ability of
the Exchange to deviate from the
objective standards set forth in the rule.6
In 2013, BZX Rule 11.17 was further
modified to account for the operation of
the Plan to Address Extraordinary
Market Volatility (the ‘‘LULD Plan’’).7
The Exchange states that in the 12 years
since the initiation of the CEE pilot, the
Exchange, other national securities
exchanges, and Financial Industry
Regulatory Authority (‘‘FINRA’’) have
gained considerable experience in the
operation of the CEE rule, as amended
on a pilot basis.8 Based on that
experience, the Exchange states that the
CEE pilot should continue on a
permanent basis so that equities market
participants and investors can continue
benefit from the increased certainty
provided by the amended CEE rule.9
The CEE pilot is currently set to expire
at the close of business on October 20,
2022.10
When the participants to the LULD
Plan (‘‘Participants’’) filed to introduce
the LULD mechanism, some
commenters noted the potential
discordance between the CEE rules and
the Price Bands 11 used to limit the price
at which trades would be permitted to
be executed pursuant to the LULD
Plan.12 While the Participants
acknowledged that the potential to
prevent CEE would be a ‘‘key benefit’’
of the LULD Plan, the Participants
decided not to amend the CEE rules at
that time in order to study how CEE
rules and the LULD mechanism
interact.13 After gaining experience with
the LULD Plan, the Exchange now
believes that it is appropriate to largely
eliminate CEE review during Regular
Trading Hours (‘‘RTH’’) 14 when Price
1 15
2 17
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Fmt 4703
Sfmt 4703
6 See Securities Exchange Act Release No. 62886
(Sept. 10, 2010), 75 FR 56613 (Sept. 16, 2010) (SR–
BATS–2010–016) (‘‘CEE Pilot Approval Order’’).
7 See Securities Exchange Act Release No. 68797
(Jan. 31, 2013), 78 FR 8635 (Feb. 6, 2013) (SR–
BATS–2013–008).
8 See Notice, supra note 3, at 42761.
9 See id.
10 See Securities Exchange Act Release No. 95288
(July 14, 2022), 87 FR 43346 (July 20, 2022) (SR–
CboeBZX–2022–039).
11 ‘‘Price Bands’’ refers to the term provided in
Section V of the LULD Plan.
12 See Notice, supra note 3, at 42761. The
Exchange states that two commenters on File No.
4–631, Plan to Address Extraordinary Market
Volatility, requested that the clearly erroneous rules
be amended so the presumption would be that
trades executed within the Price Bands would not
be not subject to review. Id.
13 See id. at 42761–62.
14 The term ‘‘Regular Trading Hours’’ means the
time between 9:30 a.m. and 4:00 p.m. Eastern Time.
See BZX Rule 1.5(w).
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]]>Agencies
[Federal Register Volume 87, Number 173 (Thursday, September 8, 2022)]
[Notices]
[Pages 55058-55060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19346]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95656; File No. SR-NSCC-2022-005]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change To Revise the Excess
Capital Premium Charge
September 1, 2022.
I. Introduction
On May 20, 2022, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2022-005 (the ``Proposed
Rule Change'') pursuant to Section 19(b)(1) of the Securities Exchange
Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The Proposed
Rule Change was published for comment in the Federal Register on June
8, 2022,\3\ and the Commission has received comments regarding the
changes proposed in the Proposed Rule Change.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 95026 (June 2, 2022), 87
FR 34913 (June 8, 2022) (File No. SR-NSCC-2022-005). The Notice
referred to an incorrect filing date of May 30, 2022; however, the
proposal was filed on May 20, 2022, as indicated here.
\4\ Comments are available at https://www.sec.gov/comments/sr-nscc-2022-005/srnscc2022005.htm.
---------------------------------------------------------------------------
On July 11, 2022, pursuant to Section 19(b)(2) of the Act,\5\ the
Commission designated a longer period within which to approve,
disapprove, or institute proceedings to determine whether to approve or
disapprove the Proposed Rule Change.\6\ This order institutes
proceedings, pursuant to Section 19(b)(2)(B) of the Act,\7\ to
determine whether to approve or disapprove the Proposed Rule Change.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(2).
\6\ Securities Exchange Act Release No. 95245 (July 11, 2022),
87 FR 42523 (July 15, 2022) (SR-NSCC-2022-005).
\7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Summary of the Proposed Rule Change
A key tool that NSCC uses to manage its respective credit exposures
to its members is the daily collection of margin from each member,
which is referred to as each member's Required Fund Deposit. The
aggregated amount of all members' margin constitutes the Clearing Fund,
which NSCC would access should a defaulted member's own margin be
insufficient to satisfy losses to NSCC caused by the liquidation of
that member's portfolio.
The Excess Capital Premium (ECP) charge is a component of the
Clearing Fund that is designed to mitigate the heightened default risk
a member could pose to NSCC if it operates with lower capital levels
relative to its margin requirements. Each Business Day, NSCC determines
if a member may be subject to the ECP charge by first determining its
Calculated Amount. The Calculated Amount is a portion of a member's
Required Fund Deposit designed to represent its margin requirements to
NSCC.
As described in the Notice, NSCC proposes to modify Procedure XV
(Clearing Fund Formula and Other Matters) of NSCC's Rules & Procedures
(``Rules'') to revise the ECP charge by enhancing the methodology for
calculating the charge to (1) compare a member's applicable capital
amounts with the amount it contributes to the Clearing Fund that
represents its volatility charge, (2) for members that are broker-
dealers, use net capital amounts rather than excess net capital amounts
in the calculation of the ECP charge; and for all other members, use
equity capital in the calculation of the ECP charge, and (3) establish
a cap of 2.0 for the Excess Capital Ratio that is used in calculating a
member's ECP
[[Page 55059]]
charge.\8\ In addition, NSCC proposes to make additional changes
directed at the transparency of the Rules regarding the ECP charge,
including (1) clarifying the capital amounts that are used in the
calculation of the charge by introducing new defined terms, (2)
removing NSCC's discretion to waive or reduce the charge, and (3)
providing that NSCC may calculate the charge based on updated capital
information.
---------------------------------------------------------------------------
\8\ The description of the Proposed Rule Change is based on the
statements prepared by NSCC in the Notice. See Notice, supra note 3.
Capitalized terms used herein and not otherwise defined herein are
defined in the Rules, available at https://www.dtcc.com/-/media/Files/Downloads/legal/rules/nscc_rules.pdf.
---------------------------------------------------------------------------
First, NSCC proposes to revise the ECP Charge to use the members'
Volatility Component \9\ as the Calculated Amount. Specifically, it
proposes to replace the Calculated Amount with the amount collected as
that member's volatility component as determined pursuant to Sections
I(A)(1)(a)(i)-(iii) and (2)(a)(i)-(iii) of Procedure XV of the Rules.
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\9\ The volatility component is designed to capture the market
price risk associated with each member's portfolio at a 99th
percentile level of confidence. NSCC has two methodologies for
calculating the volatility component--a model-based volatility-at-
risk, or VaR, charge and a haircut-based calculation, for certain
positions that are excluded from the VaR charge calculation. The
charge that is applied to a member's Required Fund Deposit with
respect to the volatility component is referred to as the volatility
charge and is the sum of the applicable VaR charge and the haircut-
based calculation. Amounts calculated pursuant to Sections
I(A)(1)(a)(iv) and (2)(a)(iv) of Procedure XV with respect to long
positions in Net Unsettled Positions in Family-Issued Securities are
designed to address wrong-way risk presented by these positions, not
volatility risks, and, as such, are not a part of a member's
volatility charge. See Sections I(A)(1)(a) and (2)(a) of Procedure
XV, supra note 3.
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Second, NSCC proposes to make changes to the calculation of the ECP
charge based on whether or not a member is a broker-dealer.
Specifically, for broker-dealer members, it would revise the capital
measure used to calculate the ECP charge to replace excess net capital
with net capital. In addition, it would revise the calculation of the
ECP charge for members that are not broker-dealers by using equity
capital rather than different measures that are based on other
membership requirements.
Third, NSCC proposes to set a maximum amount of Excess Capital
Ratio that is used in calculating members' ECP charge to 2.0.
Finally, NSCC proposes certain changes directed at improving
transparency regarding the Excess Capital Premium. Specifically, the
proposed changes would eliminate NSCC's discretion to waive or reduce
the ECP charge. In addition, the proposed changes would add new
definitions to its Rules to clarify the description of the capital
amounts that NSCC uses in the calculation of the ECP charge and provide
that NSCC may calculate the charge based on updated capital
information.
III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \10\ to determine whether the Proposed Rule
Change should be approved or disapproved. Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the Proposed Rule Change. Institution of proceedings does not
indicate that the Commission has reached any conclusions with respect
to any of the issues involved. Rather, the Commission seeks and
encourages interested persons to comment on the Proposed Rule Change,
providing the Commission with arguments to support the Commission's
analysis as to whether to approve or disapprove the Proposed Rule
Change.
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\10\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\11\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and input from commenters with respect to, the Proposed
Rule Change's consistency with Section 17A of the Act,\12\ and the
rules thereunder, including the following provisions:
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\11\ Id.
\12\ 15 U.S.C. 78q-1.
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Section 17A(b)(3)(F) of the Act,\13\ which requires, among
other things, that the rules of a clearing agency must be designed to
promote the prompt and accurate clearance and settlement of securities
transactions, to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible, and to protect investors and the public interest; and
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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Rule 17Ad-22(e)(4)(i) of the Act, \14\ which requires that
a 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.
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\14\ 17 CFR 240.17Ad-22(e)(4)(i).
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Rule 17Ad-22(e)(6)(i) of the Act,\15\ which requires that
a covered clearing agency establish, implement, maintain, and enforce
written policies and procedures reasonably designed to cover, if the
covered clearing agency provides central counterparty services, its
credit exposures to its participants by establishing a risk-based
margin system that, at a minimum, considers, and produces margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market.
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\15\ 17 CFR 240.17Ad-22(e)(6)(i).
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Rule 17Ad-22(e)(23)(ii) of the Act \16\ which requires
that a covered clearing agency establish, implement, maintain, and
enforce written policies and procedures reasonably designed to provide
sufficient information to enable participants to identify and evaluate
the risks, fees, and other material costs they incur by participating
in the covered clearing agency.
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\16\ 17 CFR 240.17Ad-22(e)(23)(ii).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the Proposed Rule Change. In particular, the Commission invites
the written views of interested persons concerning whether the Proposed
Rule Change is consistent with Section 17A(b)(3)(F) of the Act,\17\ and
Rules 17Ad-22(e)(4)(i), (e)(6)(i) and (e)(23)(ii) of the Act,\18\ or
any other provision of the Act, or the rules and regulations
thereunder.
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\17\ 15 U.S.C. 78q-1(b)(3)(F).
\18\ 17 CFR 240.17Ad-22(e)(4)(i), (e)(6)(i) and (e)(23)(ii).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change should be approved
or disapproved by September 29, 2022. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
October 13, 2022.
The Commission asks that commenters address the sufficiency of
NSCC's statements in support of the Proposed Rule Change, which are set
forth in the Notice,\19\ in addition to any other comments they may
wish to submit about the Proposed Rule Change.
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\19\ See Notice, supra note 3.
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Comments may be submitted by any of the following methods:
[[Page 55060]]
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-2022-005 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-NSCC-2022-005. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the Proposed Rule Change that are filed with
the Commission, and all written communications relating to the Proposed
Rule Change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of 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-2022-005 and should be submitted on
or before September 29, 2022. Rebuttal comments should be submitted by
October 13, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(31).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19346 Filed 9-7-22; 8:45 am]
BILLING CODE 8011-01-P
