Self-Regulatory Organizations; National Securities Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Stress Testing Framework and Liquidity Risk Management Framework, 56735-56736 [2022-19913]
Download as PDF
<![CDATA[
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 178 / Thursday, September 15, 2022 / Notices
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 18a–1 (17 CFR 240.18a–1), under
the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) (‘‘Exchange Act’’).
Rule 18a–1 establishes net capital
requirements for nonbank securitybased swap dealers that are not also
broker-dealers registered with the
Commission (‘‘stand-alone SBSDs’’).
First, under paragraphs (a)(2) and (d) of
Rule 18a–1, a stand-alone SBSD may
apply to the Commission to be
authorized to use internal value-at-risk
(‘‘VaR) models to compute net capital
and a stand-alone SBSD authorized to
use internal models must review and
update the models it uses to compute
market and credit risk, as well as backtest the models. Second, under
paragraph (f) of Rule 18a–1, a standalone SBSD is required to comply with
certain requirements of Exchange Act
Rule 15c3–4 (17 CFR 240.15c3–4). Rule
15c3–4 requires OTC derivatives dealers
and firms subject to its provisions to
establish, document, and maintain a
system of internal risk management
controls to assist the firm in managing
the risks associated with business
activities, including market, credit,
leverage, liquidity, legal, and
operational risks. Third, for purposes of
calculating ‘‘haircuts’’ on credit default
swaps, paragraph (c)(1)(vi)(B)(1)(iii) of
Rule 18a–1 requires stand-alone SBSDs
that are not using internal models to use
an industry sector classification system
that is documented and reasonable in
terms of grouping types of companies
with similar business activities and risk
characteristics. Fourth, under paragraph
(h) of Rule 18a–1, stand-alone SBSDs
are required to provide the Commission
with certain written notices with respect
to equity withdrawals. Fifth, under
paragraph (c)(5) of Appendix D to Rule
18a–1 (17 CFR 240.18a–1d), stand-alone
SBSDs are required to file with the
Commission two copies of any proposed
subordinated loan agreement (including
nonconforming subordinated loan
agreements) at least 30 days prior to the
proposed execution date of the
agreement. Finally, under paragraph
(c)(1)(ix)(C) of Rule 18a–1, a nonbank
SBSD may treat collateral held by a
third-party custodian to meet an initial
margin requirement of a security-based
swap or swap customer as being held by
the nonbank SBSD for purposes of the
capital in lieu of margin charge
provisions of the rule if certain
conditions are met. In particular, the
SBSD must execute an account control
agreement and must maintain written
documentation of its analysis that in the
VerDate Sep<11>2014
16:56 Sep 14, 2022
Jkt 256001
event of a legal challenge the account
control agreement would be held to be
legal, valid, binding, and enforceable
under the applicable law.
The aggregate annual burden for all
respondents is estimated to be 21,024
hours. The aggregate annual cost burden
for all respondents is estimated to be $
2,598,500.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent by
October 17, 2022 to (i) www.reginfo.gov/
public/do/PRAMain and (ii) David
Bottom, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o John Pezzullo, 100 F
Street NE, Washington, DC 20549, or by
sending an email to: PRA_Mailbox@
sec.gov.
Dated: September 12, 2022.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–20018 Filed 9–14–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95725; File No. SR–NSCC–
2022–006]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To Amend the Stress
Testing Framework and Liquidity Risk
Management Framework
September 9, 2022.
I. Introduction
On May 26, 2022, National Securities
Clearing Corporation (‘‘NSCC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–NSCC–2022–006 (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
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00116
Fmt 4703
Sfmt 4703
56735
the Federal Register on June 15, 2022,3
and the Commission has received no
comments regarding the changes
proposed in the Proposed Rule Change.
On July 14, 2022, pursuant to Section
19(b)(2) of the Act,4 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.5 This order institutes
proceedings, pursuant to Section
19(b)(2)(B) of the Act,6 to determine
whether to approve or disapprove the
Proposed Rule Change.
II. Summary of the Proposed Rule
Change
As described in the Notice, NSCC
proposes to amend the Clearing Agency
Stress Testing Framework (Market Risk)
(‘‘ST Framework’’) and the Clearing
Agency Liquidity Risk Management
Framework (‘‘LRM Framework,’’ and,
together with the ST Framework, the
‘‘Frameworks’’) of NSCC and its
affiliates, The Depository Trust
Company (‘‘DTC’’) and Fixed Income
Clearing Corporation (‘‘FICC,’’ and
together with NSCC and DTC, the
‘‘Clearing Agencies’’).7
First, the proposed changes would
amend both the ST Framework and the
LRM Framework to move descriptions
of the Clearing Agencies’ liquidity stress
testing activities from the LRM
Framework to the ST Framework. In
connection with this proposed change,
the Clearing Agencies propose to
recategorize the stress scenarios used for
liquidity risk management, such that all
such stress scenarios are described as
either regulatory or informational
scenarios.
Second, the proposed changes would
amend the ST Framework to (1) enhance
stress testing for the Government
Securities Division of FICC (‘‘GSD’’) to
obtain certain data utilized in stress
testing from external vendors and
implement a back-up stress testing
calculation that would be utilized in the
event such data is not supplied by its
vendors, and amend the ST Framework
to reflect these practices for both GSD
3 Securities Exchange Act Release No. 95078
(June 10, 2022), 87 FR 36158 (June 15, 2022) (File
No. SR–NSCC–2022–006).
4 15 U.S.C. 78s(b)(2).
5 Securities Exchange Act Release No. 95283 (July
14, 2022), 87 FR 43354 (July 20, 2022) (SR–NSCC–
2022–006).
6 15 U.S.C. 78s(b)(2)(B).
7 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.
E:\FR\FM\15SEN1.SGM
15SEN1
56736
Federal Register / Vol. 87, No. 178 / Thursday, September 15, 2022 / Notices
lotter on DSK11XQN23PROD with NOTICES1
and the Mortgage-Backed Securities
Division of FICC (‘‘MBSD’’); (2) reflect
that a stress testing team is primarily
responsible for the actions described in
the ST Framework, and (3) make other
revisions to update and clarify certain
statements in the ST Framework.
Third, the proposed changes would
amend the LRM Framework to update
and clarify certain statements in the
LRM Framework.
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 8 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,9 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,10 and the
rules thereunder, including the
following provisions:
• Section 17A(b)(3)(F) of the Act,11
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) of the Act,12
which requires that a covered clearing
agency establish, implement, maintain,
and enforce written policies and
procedures reasonably designed to
effectively identify, measure, monitor,
8 15
and manage its credit exposures to
participants and those arising from its
payment, clearing, and settlement
processes.
• Rule 17Ad–22(e)(7) of the Act,13
which requires a covered clearing
agency to effectively measure, monitor,
and manage the liquidity risk that arises
in or is borne by the covered clearing
agency, including measuring,
monitoring, and managing its settlement
and funding flows on an ongoing and
timely basis, and its use of intraday
liquidity.
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,14
and Rules 17Ad–22(e)(4) and (e)(7) of
the Act,15 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 October 6,
2022. Any person who wishes to file a
rebuttal to any other person’s
submission must file that rebuttal by
October 20, 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,16 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:
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–2022–006 on the subject line.
All submissions should refer to File
Number SR–NSCC–2022–006. 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–
2022–006 and should be submitted on
or before October 6, 2022. Rebuttal
comments should be submitted by
October 20, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–19913 Filed 9–14–22; 8:45 am]
BILLING CODE 8011–01–P
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
U.S.C. 78s(b)(2)(B).
9 Id.
13 17
10 15
14 15
CFR 240.17Ad–22(e)(7).
U.S.C. 78q–1(b)(3)(F).
15 17 CFR 240.17Ad–22(e)(4) and (e)(7).
16 See Notice, supra note 3.
U.S.C. 78q–1.
11 15 U.S.C. 78q–1(b)(3)(F).
12 17 CFR 240.17Ad–22(e)(4).
VerDate Sep<11>2014
16:56 Sep 14, 2022
Jkt 256001
PO 00000
Frm 00117
Fmt 4703
Sfmt 9990
17 17
E:\FR\FM\15SEN1.SGM
CFR 200.30–3(a)(31).
15SEN1
]]>Agencies
[Federal Register Volume 87, Number 178 (Thursday, September 15, 2022)]
[Notices]
[Pages 56735-56736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19913]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95725; File No. SR-NSCC-2022-006]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change To Amend the Stress
Testing Framework and Liquidity Risk Management Framework
September 9, 2022.
I. Introduction
On May 26, 2022, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2022-006 (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
15, 2022,\3\ and the Commission has received no comments regarding the
changes proposed in the Proposed Rule Change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 95078 (June 10, 2022),
87 FR 36158 (June 15, 2022) (File No. SR-NSCC-2022-006).
---------------------------------------------------------------------------
On July 14, 2022, pursuant to Section 19(b)(2) of the Act,\4\ 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.\5\ This order institutes
proceedings, pursuant to Section 19(b)(2)(B) of the Act,\6\ to
determine whether to approve or disapprove the Proposed Rule Change.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ Securities Exchange Act Release No. 95283 (July 14, 2022),
87 FR 43354 (July 20, 2022) (SR-NSCC-2022-006).
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Summary of the Proposed Rule Change
As described in the Notice, NSCC proposes to amend the Clearing
Agency Stress Testing Framework (Market Risk) (``ST Framework'') and
the Clearing Agency Liquidity Risk Management Framework (``LRM
Framework,'' and, together with the ST Framework, the ``Frameworks'')
of NSCC and its affiliates, The Depository Trust Company (``DTC'') and
Fixed Income Clearing Corporation (``FICC,'' and together with NSCC and
DTC, the ``Clearing Agencies'').\7\
---------------------------------------------------------------------------
\7\ 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, the proposed changes would amend both the ST Framework and
the LRM Framework to move descriptions of the Clearing Agencies'
liquidity stress testing activities from the LRM Framework to the ST
Framework. In connection with this proposed change, the Clearing
Agencies propose to recategorize the stress scenarios used for
liquidity risk management, such that all such stress scenarios are
described as either regulatory or informational scenarios.
Second, the proposed changes would amend the ST Framework to (1)
enhance stress testing for the Government Securities Division of FICC
(``GSD'') to obtain certain data utilized in stress testing from
external vendors and implement a back-up stress testing calculation
that would be utilized in the event such data is not supplied by its
vendors, and amend the ST Framework to reflect these practices for both
GSD
[[Page 56736]]
and the Mortgage-Backed Securities Division of FICC (``MBSD''); (2)
reflect that a stress testing team is primarily responsible for the
actions described in the ST Framework, and (3) make other revisions to
update and clarify certain statements in the ST Framework.
Third, the proposed changes would amend the LRM Framework to update
and clarify certain statements in the LRM Framework.
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 \8\ 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\9\ 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,\10\ and the
rules thereunder, including the following provisions:
---------------------------------------------------------------------------
\9\ Id.
\10\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act,\11\ 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
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(4) of the Act,\12\ 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.
---------------------------------------------------------------------------
\12\ 17 CFR 240.17Ad-22(e)(4).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(7) of the Act,\13\ which requires a
covered clearing agency to effectively measure, monitor, and manage the
liquidity risk that arises in or is borne by the covered clearing
agency, including measuring, monitoring, and managing its settlement
and funding flows on an ongoing and timely basis, and its use of
intraday liquidity.
---------------------------------------------------------------------------
\13\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
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,\14\ and
Rules 17Ad-22(e)(4) and (e)(7) of the Act,\15\ or any other provision
of the Act, or the rules and regulations thereunder.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78q-1(b)(3)(F).
\15\ 17 CFR 240.17Ad-22(e)(4) and (e)(7).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change should be approved
or disapproved by October 6, 2022. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
October 20, 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,\16\ in addition to any other comments they may
wish to submit about the Proposed Rule Change.
---------------------------------------------------------------------------
\16\ See Notice, supra note 3.
---------------------------------------------------------------------------
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-2022-006 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-2022-006. 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-2022-006 and should be submitted on
or before October 6, 2022. Rebuttal comments should be submitted by
October 20, 2022.
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(31).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19913 Filed 9-14-22; 8:45 am]
BILLING CODE 8011-01-P
