Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Amend the Clearing Agency Liquidity Risk Management Framework To Include a New Section Describing the Process by Which FICC Would Designate Uncommitted Resources as Qualifying Liquid Resources and Make Other Changes, 67527-67531 [2022-24286]
Download as PDF
<![CDATA[
Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Notices
become BZX Options market
participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 16 and Rule 19b–
4(f)(6) thereunder.17
A proposed rule change filed under
Rule 19b–4(f)(6) 18 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 19 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange states that waiver
of the 30-day operative delay will allow
it to extend the Pilot Programs prior to
their expiration on November 7, 2022,
and maintain the status quo, thereby
reducing market disruption. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest as it will allow the Pilot
Programs to continue uninterrupted,
thereby avoiding investor confusion that
could result from a temporary
interruption in the Pilot Programs.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposed rule change as
operative upon filing.20
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
18 17 CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6)(iii).
20 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
lotter on DSK11XQN23PROD with NOTICES1
17 17
VerDate Sep<11>2014
16:56 Nov 07, 2022
Jkt 259001
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2022–052 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–CboeBZX–2022–052. 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 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–CboeBZX–2022–052 and
should be submitted on or before
November 29, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–24287 Filed 11–7–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96211; File No. SR–DTC–
2022–011]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change To
Amend the Clearing Agency Liquidity
Risk Management Framework To
Include a New Section Describing the
Process by Which FICC Would
Designate Uncommitted Resources as
Qualifying Liquid Resources and Make
Other Changes
November 2, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
20, 2022, The Depository Trust
Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the clearing agency. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
amendments to the Clearing Agency
Liquidity Risk Management Framework
(‘‘Framework’’) of DTC and its affiliates,
Fixed Income Clearing Corporation
(‘‘FICC’’) and National Securities
Clearing Corporation (‘‘NSCC,’’ and
together with FICC and DTC, the
21 17
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
67527
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\08NON1.SGM
08NON1
67528
Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Notices
‘‘Clearing Agencies’’).3 Specifically, the
proposed rule changes would (1) add a
new section describing the process by
which FICC would designate
uncommitted liquidity resources as
qualifying liquid resources (‘‘QLR’’); 4
(2) clarify that FICC may have access to
liquidity resources that are not
designated as QLR; (3) delete the standalone section on due diligence and
testing of liquidity providers, and
instead add due diligence and testing
descriptions where each liquidity
resource is described or state where
testing is not performed, as applicable;
(4) clarify the description of FICC’s
QLR; (5) clarify the description of
NSCC’s and DTC’s QLR, add language to
reflect NSCC’s and DTC’s current due
diligence and testing processes for their
committed line of credit, and make a
correction to the description of DTC’s
Collateral Monitor; and (6) make
technical changes, as described below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
lotter on DSK11XQN23PROD with NOTICES1
The Clearing Agencies adopted the
Framework 5 to set forth the manner in
which they measure, monitor and
manage the liquidity risks that arise in
or are borne by each of the Clearing
Agencies, including (i) the manner in
which each Clearing Agency deploys
their respective liquidity tools to meet
its settlement obligations on an ongoing
and timely basis, and (ii) each
applicable Clearing Agency’s use of
3 Capitalized terms not defined herein are defined
in the DTC Rules, By-Laws and Organization
Certificate, the FICC Government Securities
Division Rulebook, the FICC Mortgage-Backed
Securities Division Clearing Rules, or the NSCC
Rules & Procedures (‘‘NSCC Rules’’), as applicable,
available at https://dtcc.com/legal/rules-andprocedures.
4 See 17 CFR 240.17Ad–22(a)(14).
5 See Securities Exchange Act Release No. 82377
(December 21, 2017), 82 FR 61617 (December 28,
2017) (SR–DTC–2017–004; SR–NSCC–2017–005;
SR–FICC–2017–008).
VerDate Sep<11>2014
16:56 Nov 07, 2022
Jkt 259001
intraday liquidity.6 In this way, the
Framework describes the liquidity risk
management of each of the Clearing
Agencies and how the Clearing
Agencies meet the applicable
requirements of Rule 17Ad–22(e)(7)
under the Act.7
The proposed changes to the
Framework would (1) add a new section
describing the process by which FICC
would designate uncommitted liquidity
resources as QLR; 8 (2) clarify that FICC
may have access to liquidity resources
that are not designated as QLR; (3)
delete the stand-alone section on due
diligence and testing of liquidity
providers, and instead add due
diligence and testing descriptions where
each liquidity resource is described or
state where testing is not performed, as
applicable; (4) clarify the description of
FICC’s QLR; (5) clarify the description
of NSCC’s and DTC’s QLR, add language
to reflect NSCC’s and DTC’s current due
diligence and testing processes for their
committed line of credit, and make a
correction to the description of DTC’s
Collateral Monitor; and (6) make
technical changes. Each of these
proposed changes is described in greater
detail below.
i. Proposed Amendments To Add a New
Section Describing the Process by
Which FICC Would Designate
Uncommitted Liquidity Resources as
QLR
The Clearing Agencies would add a
new section to the Framework that
pertains specifically to FICC’s
designation of uncommitted liquidity
resources as QLR pursuant to the
requirements of Rule 17Ad–
22(a)(14)(ii)(B) under the Act.9 FICC
does not at this time have uncommitted
liquidity resources designated as QLR;
however, the proposed new section
would allow FICC to have such QLR to
the extent the requirements of Rule
17Ad–22(a)(14)(ii)(B) are followed.
In addition, and consistent with its
existing processes, FICC would consider
whether any uncommitted liquidity
resources, including those that are
designated as QLR, would require a
proposed rule change with the
Commission pursuant to Section
19(b)(1) of the Act,10 and the rules
thereunder, or an advance notice with
the Commission pursuant to Section
806(e)(1) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
6 See 17 CFR 240.17Ad–22(e)(7)(i), (ii), and (iv)
through (ix).
7 Id.
8 See 17 CFR 240.17Ad–22(a)(14).
9 17 CFR 240.17Ad–22(a)(14)(ii)(B).
10 15 U.S.C. 78s(b)(1).
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
entitled the Payment, Clearing, and
Settlement Supervision Act of 2010,11
and the rules thereunder.
The proposed new section would
explain that, in order to designate an
uncommitted liquidity resource as a
QLR, FICC would first identify the
properties of each financing
arrangement, including the underlying
collateral and the liquidity providers.
Based on the nature of the liquidity
resource, FICC would then determine
the nature of the rigorous analysis that
is appropriate for that resource and
would conduct that analysis at least
annually.
The proposed new section to the
Framework would also state that,
following completion of that analysis,
both (1) the components of that analysis
and (2) the results of that analysis,
would be presented to the Board Risk
Committee on at least on an annual
basis. When considering whether to
designate the uncommitted resource as
a QLR, the Board Risk Committee would
determine if the uncommitted liquid
resource is highly reliable under
extreme but plausible market conditions
consistent with Rule 17Ad–
22(a)(14)(ii)(B) under the Act.12
ii. Proposed Amendments To Clarify
That FICC May Have Access to
Liquidity Resources That Are Not
Designated as QLR
The proposed changes to the
Framework would also make clear that
FICC may have access to liquidity
resources that are not designated as
QLR. At this time, FICC maintains
uncommitted master repurchase
agreements (‘‘MRAs’’) that can be
utilized to finance via the repo market
11 12
U.S.C. 5465(e)(1).
CFR 240.17Ad–22(a)(14)(ii)(B). Examples of
the type of information that the Board Risk
Committee could rely on in order to determine
whether it would be appropriate to designate the
proposed uncommitted resource as a QLR would
include whether (i) FICC has identified securities
that may be pledged pursuant to the proposed
financing arrangement and that such securities are
reasonably likely to be readily available for
pledging and acceptable as collateral; (ii) FICC has
reviewed the terms of the proposed financing
arrangement to confirm such terms are current,
appropriate and not expected to restrict FICC’s use
of the proposed financing arrangement; (iii) FICC
has completed due diligence of each liquidity
provider as required by Rule 17Ad–22(e)(7)(iv)
under the Act; and (iv) FICC has developed
procedures to test the proposed financing
arrangement at least annually to confirm the
liquidity providers are operationally able to perform
their commitments and are familiar with the
drawdown process, consistent with the
requirements of Rule 17Ad–22(e)(7)(v) under the
Act. 17 CFR 240.17Ad–22(e)(7)(iv) and (v). In
addition, FICC would include in the analysis
presented to the Board Risk Committee
recommendations and analyses of an independent
third party that the proposed resource is highly
reliable in extreme but plausible market conditions.
12 17
E:\FR\FM\08NON1.SGM
08NON1
Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Notices
the securities in FICC’s Clearing Funds
and those purchased on behalf of a
defaulting Member to raise funds. While
not designated as QLR, amounts
available under the MRAs may be
utilized as liquidity resources in the
event of a Member default. The
proposed rule change states that on a
weekly basis, a study to estimate the
depth of the repo market under
prevailing market conditions as well as
a sample stress scenario to assess
potential available liquidity in the event
of default of the largest Member would
be performed.
In addition, the proposed rule
changes provide that, at least annually,
FICC would conduct counterparty due
diligence reviews that would assess
each non-QLR liquidity provider’s
ability to provide liquidity to FICC
under current market conditions and
would provide a summary of these
reviews to the Board Risk Committee.13
The proposed rule change also states
that FICC would test any non-QLR
annually with the respective liquidity
providers to confirm that such liquidity
providers are operationally able to
perform their commitments and are
familiar with the applicable process.
As a conforming change, the proposed
rule change would delete language
referring to MRAs as QLR. The proposed
rule change would add a sentence
stating that FICC may count MRAs as
QLR if the procedures for designating
them as such (as described above) are
followed. As a further conforming
change, the proposed rule change would
specify that the section of the
Framework regarding liquidity
resources that are not designated as QLR
applies specifically to FICC.
lotter on DSK11XQN23PROD with NOTICES1
iii. Proposed Amendments To Delete the
Stand-Alone Section on Due Diligence
and Testing, and Instead Add Due
Diligence and Testing Descriptions
Where Each Liquidity Resource Is
Described or State Where Testing Is Not
Performed, as Applicable
The current Framework contains a
stand-alone section (‘‘Stand-Alone
Section’’) on the due diligence and
testing of liquidity providers that the
Clearing Agencies perform. The
proposed rule changes would delete the
Stand-Alone Section and would instead
add descriptions of the due diligence
and testing performed in connection
with each type of liquidity resource in
the section of the Framework where
each resource is described, as further
13 Such due diligence includes reviews of, for
example, relevant member financial metrics, results
of operational testing, and relevant market data
applicable to the type of securities being financed.
VerDate Sep<11>2014
16:56 Nov 07, 2022
Jkt 259001
described below in subsection v. The
proposed rule changes also state where
testing is not performed, where
applicable, as further described below
in subsections iv. and v.
More specifically, the Stand-Alone
Section currently states that the
Counterparty Credit Risk department
(‘‘CCR’’) reviews the limits, outstanding
investments, and collateral held (if
applicable) at each investment
counterparty. The proposed rule change
would (i) restate this language to make
clear that CCR’s review includes a
financial analysis of each counterparty,
the Clearing Agencies’ investments at
each counterparty, and any
recommendations for changes in limits
to these investments and (ii) place the
restated sentence in the section of the
Framework related to the specific
liquidity resource that CCR is
surveilling.14 The Stand-Alone Section
also references formal reviews on the
reliability of QLR providers and
specifically ascribes certain due
diligence and review responsibilities to
CCR. The proposed rule change would
describe CCR’s obligations regarding
liquidity providers in the appropriate
section of the Framework related to the
specific liquidity resource that CCR is
surveilling. The proposed rule change
also indicates where another
department, such as Treasury, is
responsible for actions that the StandAlone Section ascribes to CCR. For nonQLR liquidity resources, the proposed
rule change describes the role of several
departments in reviewing these
resources.
Finally, the Stand-Alone Section
references testing. The proposed rule
change would move the references to
testing where each resource is described
in the Framework.
iv. Proposed Amendments To Clarify
the Description of FICC’s QLR
The proposed changes would make
clear that each FICC division has its
own Clearing Fund that includes
deposits of cash. The proposed changes
would also delete language regarding
the ability of FICC to borrow from the
Clearing Fund as that is already covered
in the rules of each division. The
proposed rule change would clarify the
description of FICC’s QLR by adding
language on same day access to funds
regarding deposits of Clearing Fund in
14 The sentence in the Stand-Alone Section that
refers to a review of each investment counterparty’s
deposit level at the Federal Reserve Bank of New
York would not be retained because it reflects a
drafting error (the Clearing Agencies are concerned
with their deposits at the counterparties and not the
counterparties’ deposits at the Federal Reserve Bank
of New York).
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
67529
creditworthy commercial banks. The
proposed changes would also clarify
that the rules-based committed Capped
Contingency Liquidity Facility programs
are determined for each FICC division
per the division’s respective rules.
In addition, the Framework would
make clear that for purposes of making
FICC Clearing Fund deposits, Members
are not considered ‘‘liquidity providers’’
with reference to Rules 17Ad–
22(e)(7)(iv) and (v) under the Act.15
v. Proposed Amendments To Clarify the
Description of NSCC’s and DTC’s QLR,
Add Language To Reflect NSCC’s and
DTC’s Current Due Diligence and
Testing Processes for Their Committed
Line of Credit, and Make a Correction to
the Description of DTC’s Collateral
Monitor
The proposed rule change would
clarify the description of NSCC’s QLR
by deleting language regarding the
ability of NSCC to borrow from the
Clearing Fund as that is already covered
in the NSCC Rules. In addition, the
proposed changes would replace
‘‘medium- and long-term’’ with ‘‘senior’’
(which covers both medium- and longterm) before ‘‘unsecured notes’’ in the
description of NSCC’s QLR in order to
simplify terminology.
The proposed changes would provide
that, because the process for collecting
Supplemental Liquidity Deposits
(‘‘SLD’’), pursuant to NSCC Rule 4A,16
is the same process used for collecting
required deposits to the NSCC Clearing
Fund, and Members are aware of such
process, no testing is required for
purposes of Rule 17Ad–22(e)(7)(v)
under the Act.17 In addition, the
proposed changes would state that
NSCC conducts Member outreach with
those Members whose liquidity
exposure may require them to make SLD
in the future.
The proposed rule change would
clarify the descriptions of DTC’s and
NSCC’s QLR by adding language on
same day access to funds regarding
deposits of DTC Participants Fund and
NSCC Clearing Fund in creditworthy
commercial banks. In addition, the
proposed changes would make clear
that for purposes of making DTC
Participants Fund deposits and NSCC
Clearing Fund deposits, DTC
Participants and NSCC Members,
respectively, are not considered
‘‘liquidity providers’’ with reference to
15 17
CFR 240.17Ad–22(e)(7)(iv) and (v).
supra note 3.
17 17 CFR 240.17Ad–22(e)(7)(v).
16 See
E:\FR\FM\08NON1.SGM
08NON1
67530
Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Notices
Rules 17Ad–22(e)(7)(iv) and (v) under
the Act.18
The proposed changes would add
language to the descriptions of DTC’s
and NSCC’s QLR to reflect DTC’s and
NSCC’s current practices of conducting
surveillance of bank lenders to their
committed credit facility, and testing
the committed credit facility at least
annually to confirm that the lenders,
agents and respective Clearing Agency
are operationally prepared to meet their
obligations under the facility and are
familiar with the borrowing process.
The proposed rule change would also
make a correction to the description of
DTC’s Collateral Monitor. Currently, the
Framework states that the Liquidity Risk
Product Unit verifies that the Collateral
Monitor will not become negative if the
transaction is processed. Because this
verification is done automatically, the
proposed rule change would correct the
sentence to state that DTC performs this
verification automatically.
vi. Proposed Amendments To Make
Technical Changes
The proposed rule changes include
certain technical changes as follows:
• Make conforming and crossreference changes in the Executive
Summary;
• Delete a sentence that may be
confusing in that it states that liquidity
resources are maintained consistent
with risk tolerances, whereas the correct
statement is that liquidity resources are
maintained consistent with Rule 17Ad–
22(e)(7) under the Act,19 which is
already stated elsewhere in the
Framework;
• Make conforming and crossreference changes in the general section
on ‘‘Liquidity Resources;’’
• Restate the first sentence in the
section describing FICC’s QLR so that it
reads more clearly;
• Remove cross-references and
phrases referencing other sections of the
Framework where such references are
no longer correct;
• Add the word ‘‘FICC’’ to the end of
a sentence where it was inadvertently
deleted; and
• Renumber the last three sections of
the Framework to account for the
deletion of the section on due diligence/
testing.
lotter on DSK11XQN23PROD with NOTICES1
2. Statutory Basis
The Clearing Agencies believe that the
proposed changes are consistent with
Section 17A(b)(3)(F) of the Act,20 and
Rules 17Ad–22(e)(7) and 17Ad–
18 17
CFR 240.17Ad–22(e)(7)(iv) and (v).
19 17 CFR 240.17Ad–22(e)(7).
20 15 U.S.C. 78q–1(b)(3)(F).
VerDate Sep<11>2014
16:56 Nov 07, 2022
Jkt 259001
22(a)(14)(ii)(B) under the Act,21 for the
reasons described below.
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of a
registered clearing agency be designed
to promote the prompt and accurate
clearance and settlement of securities
transactions, and 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,22 for the reasons described
below. The proposed changes described
above in Items II(A)1.i. and II(A)1.ii.
would update the Framework to (1) add
a new section describing the process by
which FICC would designate
uncommitted liquidity resources as
QLR; 23 and (2) clarify that FICC may
have access to liquidity resources that
are not designated as QLR. By updating
the Framework to reflect these changes,
the Clearing Agencies believe the
proposed rule change would make the
Framework more effective in describing
FICC’s liquidity risk management
procedures as they relate to FICC’s
liquidity resources. The proposed rule
changes would introduce clarity to the
Framework through the addition of a
specific process regarding FICC’s
designation of uncommitted resources
as QLR and would better explain the
section regarding FICC’s resources that
are not QLR. Because FICC’s liquidity
resources support the ability of FICC to
effect timely settlement, and because the
proposed changes are designed to
ensure that any uncommitted resource
that is designated as QLR would be
highly reliable in extreme but plausible
market conditions and therefore also
potentially facilitate timely settlement,
the Clearing Agencies believe that the
proposed changes described in Items
II(A)1.i. and II(A)1.ii. above are
consistent with Section 17A(b)(3)(F) of
the Act.
The proposed changes described in
Items II(A)1.iii. through II(A)1.vi. above
would (1) delete the stand-alone section
on due diligence and testing of liquidity
providers, and instead add due
diligence and testing descriptions where
each liquidity resource is described; (2)
clarify the description of FICC’s QLR;
(3) clarify the description of NSCC’s and
DTC’s QLR, add language to reflect
NSCC’s and DTC’s current due diligence
and testing processes regarding their
committed line of credit, and make a
correction to the description of DTC’s
Collateral Monitor; and (4) make
technical changes. These proposed
21 17 CFR 240.17Ad–22(e)(7) and 17 CFR
240.17Ad–22(a)(14)(ii)(B).
22 15 U.S.C. 78q–1(b)(3)(F).
23 See 17 CFR 240.17Ad–22(a)(14).
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
changes would improve the clarity of
the descriptions of various liquidity
management processes of the Clearing
Agencies. The improvement in the
clarity of the descriptions of liquidity
risk management processes within the
Framework would assist the Clearing
Agencies in carrying out these
functions. Therefore, the Clearing
Agencies believe the proposed changes
are consistent with the requirements of
Section 17A(b)(3)(F) of the Act 24 that
the rules of a registered clearing agency
be designed to promote the prompt and
accurate clearance and settlement of
securities transactions, and 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.
The Clearing Agencies believe that the
proposed changes are consistent with
Rule 17Ad–22(e)(7) under the Act,25
which requires a covered clearing
agency to establish, implement,
maintain and enforce written policies
and procedures reasonably designed to,
as applicable, 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 by, at a minimum, doing the
requirements set forth in Rule 17Ad–
22(e)(7). The proposed rule changes
described above have been designed to
enhance the Clearing Agencies’
compliance with Rule 17Ad–22(e)(7) by
addressing the designation of QLR and
liquidity resources that are not QLR and
providing various clarifications. By
addressing the designation of QLR and
liquidity resources that are not QLR and
providing various clarifications, the
proposed rule changes would reduce
ambiguity and thus assist risk
management staff in the performance of
their duties associated with compliance
of Rule 17Ad–22(e)(7).
In addition, the proposed changes are
designed to ensure that any
uncommitted resource that is designated
as QLR would be highly reliable in
extreme but plausible market
conditions, in accordance with Rule
17Ad–22(a)(14)(ii)(B) under the Act.26
(B) Clearing Agency’s Statement on
Burden on Competition
The Clearing Agencies do not believe
the proposed rule change would have
any impact, or impose any burden, on
competition. As described above, the
24 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(7).
26 17 CFR 240.17Ad–22(a)(14)(ii)(B).
25 17
E:\FR\FM\08NON1.SGM
08NON1
Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Notices
proposed changes would update the
Framework to describe the process by
which FICC would designate
uncommitted liquidity resources as
QLR, clarify that FICC may have access
to liquidity resources that are not
designated as QLR, and improve the
clarity of the descriptions of the
Clearing Agencies’ liquidity risk
management functions. Therefore, the
proposed changes relate mostly to the
operation of the Framework and/or are
technical in nature. As such, the
Clearing Agencies do not believe that
the proposed rule change would have
any impact on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
The Clearing Agencies have not
received or solicited any written
comments relating to this proposal. If
any written comments are received, they
will be publicly filed as an Exhibit 2 to
this filing, as required by Form 19b–4
and the General Instructions thereto.
Persons submitting comments are
cautioned that, according to Section IV
(Solicitation of Comments) of the
Exhibit 1A in the General Instructions to
Form 19b–4, the Commission does not
edit personal identifying information
from comment submissions.
Commenters should submit only
information that they wish to make
available publicly, including their
name, email address, and any other
identifying information.
All prospective commenters should
follow the Commission’s instructions on
how to submit comments, available at
https://www.sec.gov/regulatory-actions/
how-to-submit-comments. General
questions regarding the rule filing
process or logistical questions regarding
this filing should be directed to the
Main Office of the Commission’s
Division of Trading and Markets at
tradingandmarkets@sec.gov or 202–
551–5777.
The Clearing Agencies reserve the
right to not respond to any comments
received.
lotter on DSK11XQN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
VerDate Sep<11>2014
16:56 Nov 07, 2022
Jkt 259001
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2022–011 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–DTC–2022–011. 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 DTC 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–DTC–
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
67531
2022–011 and should be submitted on
or before November 29, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–24286 Filed 11–7–22; 8:45 am]
BILLING CODE 8011–01–P
SOCIAL SECURITY ADMINISTRATION
[Docket No: SSA–2022–0058]
Agency Information Collection
Activities: Proposed Request
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
Public Law 104–13, the Paperwork
Reduction Act of 1995, effective October
1, 1995. This notice includes one
revision of an OMB-approved
information collection.
SSA is soliciting comments on the
accuracy of the agency’s burden
estimate; the need for the information;
its practical utility; ways to enhance its
quality, utility, and clarity; and ways to
minimize burden on respondents,
including the use of automated
collection techniques or other forms of
information technology. Mail, email, or
fax your comments and
recommendations on the information
collection(s) to the OMB Desk Officer
and SSA Reports Clearance Officer at
the following addresses or fax numbers.
(OMB) Office of Management and
Budget, Attn: Desk Officer for SSA,
Comments: https://www.reginfo.gov/
public/do/PRAMain. Submit your
comments online referencing Docket ID
Number [SSA–2022–0058].
(SSA) Social Security Administration,
OLCA, Attn: Reports Clearance Director,
3100 West High Rise, 6401 Security
Blvd., Baltimore, MD 21235, Fax: 410–
966–2830, email address:
OR.Reports.Clearance@ssa.gov. Or you
may submit your comments online
through https://www.reginfo.gov/public/
do/PRAMain, referencing Docket ID
Number [SSA–2022–0058].
The information collection below is
pending at SSA. SSA will submit it to
OMB within 60 days from the date of
this notice. To be sure we consider your
comments, we must receive them no
later than January 9, 2023. Individuals
can obtain copies of the collection
instrument by writing to the above
email address.
27 17
E:\FR\FM\08NON1.SGM
CFR 200.30–3(a)(12).
08NON1
]]>Agencies
[Federal Register Volume 87, Number 215 (Tuesday, November 8, 2022)]
[Notices]
[Pages 67527-67531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24286]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96211; File No. SR-DTC-2022-011]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change To Amend the Clearing Agency
Liquidity Risk Management Framework To Include a New Section Describing
the Process by Which FICC Would Designate Uncommitted Resources as
Qualifying Liquid Resources and Make Other Changes
November 2, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 20, 2022, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II and III below, which Items have
been prepared by the clearing agency. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to the Clearing
Agency Liquidity Risk Management Framework (``Framework'') of DTC and
its affiliates, Fixed Income Clearing Corporation (``FICC'') and
National Securities Clearing Corporation (``NSCC,'' and together with
FICC and DTC, the
[[Page 67528]]
``Clearing Agencies'').\3\ Specifically, the proposed rule changes
would (1) add a new section describing the process by which FICC would
designate uncommitted liquidity resources as qualifying liquid
resources (``QLR''); \4\ (2) clarify that FICC may have access to
liquidity resources that are not designated as QLR; (3) delete the
stand-alone section on due diligence and testing of liquidity
providers, and instead add due diligence and testing descriptions where
each liquidity resource is described or state where testing is not
performed, as applicable; (4) clarify the description of FICC's QLR;
(5) clarify the description of NSCC's and DTC's QLR, add language to
reflect NSCC's and DTC's current due diligence and testing processes
for their committed line of credit, and make a correction to the
description of DTC's Collateral Monitor; and (6) make technical
changes, as described below.
---------------------------------------------------------------------------
\3\ Capitalized terms not defined herein are defined in the DTC
Rules, By-Laws and Organization Certificate, the FICC Government
Securities Division Rulebook, the FICC Mortgage-Backed Securities
Division Clearing Rules, or the NSCC Rules & Procedures (``NSCC
Rules''), as applicable, available at https://dtcc.com/legal/rules-and-procedures.
\4\ See 17 CFR 240.17Ad-22(a)(14).
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The Clearing Agencies adopted the Framework \5\ to set forth the
manner in which they measure, monitor and manage the liquidity risks
that arise in or are borne by each of the Clearing Agencies, including
(i) the manner in which each Clearing Agency deploys their respective
liquidity tools to meet its settlement obligations on an ongoing and
timely basis, and (ii) each applicable Clearing Agency's use of
intraday liquidity.\6\ In this way, the Framework describes the
liquidity risk management of each of the Clearing Agencies and how the
Clearing Agencies meet the applicable requirements of Rule 17Ad-
22(e)(7) under the Act.\7\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 82377 (December 21,
2017), 82 FR 61617 (December 28, 2017) (SR-DTC-2017-004; SR-NSCC-
2017-005; SR-FICC-2017-008).
\6\ See 17 CFR 240.17Ad-22(e)(7)(i), (ii), and (iv) through
(ix).
\7\ Id.
---------------------------------------------------------------------------
The proposed changes to the Framework would (1) add a new section
describing the process by which FICC would designate uncommitted
liquidity resources as QLR; \8\ (2) clarify that FICC may have access
to liquidity resources that are not designated as QLR; (3) delete the
stand-alone section on due diligence and testing of liquidity
providers, and instead add due diligence and testing descriptions where
each liquidity resource is described or state where testing is not
performed, as applicable; (4) clarify the description of FICC's QLR;
(5) clarify the description of NSCC's and DTC's QLR, add language to
reflect NSCC's and DTC's current due diligence and testing processes
for their committed line of credit, and make a correction to the
description of DTC's Collateral Monitor; and (6) make technical
changes. Each of these proposed changes is described in greater detail
below.
---------------------------------------------------------------------------
\8\ See 17 CFR 240.17Ad-22(a)(14).
---------------------------------------------------------------------------
i. Proposed Amendments To Add a New Section Describing the Process by
Which FICC Would Designate Uncommitted Liquidity Resources as QLR
The Clearing Agencies would add a new section to the Framework that
pertains specifically to FICC's designation of uncommitted liquidity
resources as QLR pursuant to the requirements of Rule 17Ad-
22(a)(14)(ii)(B) under the Act.\9\ FICC does not at this time have
uncommitted liquidity resources designated as QLR; however, the
proposed new section would allow FICC to have such QLR to the extent
the requirements of Rule 17Ad-22(a)(14)(ii)(B) are followed.
---------------------------------------------------------------------------
\9\ 17 CFR 240.17Ad-22(a)(14)(ii)(B).
---------------------------------------------------------------------------
In addition, and consistent with its existing processes, FICC would
consider whether any uncommitted liquidity resources, including those
that are designated as QLR, would require a proposed rule change with
the Commission pursuant to Section 19(b)(1) of the Act,\10\ and the
rules thereunder, or an advance notice with the Commission pursuant to
Section 806(e)(1) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act entitled the Payment, Clearing, and Settlement
Supervision Act of 2010,\11\ and the rules thereunder.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(1).
\11\ 12 U.S.C. 5465(e)(1).
---------------------------------------------------------------------------
The proposed new section would explain that, in order to designate
an uncommitted liquidity resource as a QLR, FICC would first identify
the properties of each financing arrangement, including the underlying
collateral and the liquidity providers. Based on the nature of the
liquidity resource, FICC would then determine the nature of the
rigorous analysis that is appropriate for that resource and would
conduct that analysis at least annually.
The proposed new section to the Framework would also state that,
following completion of that analysis, both (1) the components of that
analysis and (2) the results of that analysis, would be presented to
the Board Risk Committee on at least on an annual basis. When
considering whether to designate the uncommitted resource as a QLR, the
Board Risk Committee would determine if the uncommitted liquid resource
is highly reliable under extreme but plausible market conditions
consistent with Rule 17Ad-22(a)(14)(ii)(B) under the Act.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 240.17Ad-22(a)(14)(ii)(B). Examples of the type of
information that the Board Risk Committee could rely on in order to
determine whether it would be appropriate to designate the proposed
uncommitted resource as a QLR would include whether (i) FICC has
identified securities that may be pledged pursuant to the proposed
financing arrangement and that such securities are reasonably likely
to be readily available for pledging and acceptable as collateral;
(ii) FICC has reviewed the terms of the proposed financing
arrangement to confirm such terms are current, appropriate and not
expected to restrict FICC's use of the proposed financing
arrangement; (iii) FICC has completed due diligence of each
liquidity provider as required by Rule 17Ad-22(e)(7)(iv) under the
Act; and (iv) FICC has developed procedures to test the proposed
financing arrangement at least annually to confirm the liquidity
providers are operationally able to perform their commitments and
are familiar with the drawdown process, consistent with the
requirements of Rule 17Ad-22(e)(7)(v) under the Act. 17 CFR
240.17Ad-22(e)(7)(iv) and (v). In addition, FICC would include in
the analysis presented to the Board Risk Committee recommendations
and analyses of an independent third party that the proposed
resource is highly reliable in extreme but plausible market
conditions.
---------------------------------------------------------------------------
ii. Proposed Amendments To Clarify That FICC May Have Access to
Liquidity Resources That Are Not Designated as QLR
The proposed changes to the Framework would also make clear that
FICC may have access to liquidity resources that are not designated as
QLR. At this time, FICC maintains uncommitted master repurchase
agreements (``MRAs'') that can be utilized to finance via the repo
market
[[Page 67529]]
the securities in FICC's Clearing Funds and those purchased on behalf
of a defaulting Member to raise funds. While not designated as QLR,
amounts available under the MRAs may be utilized as liquidity resources
in the event of a Member default. The proposed rule change states that
on a weekly basis, a study to estimate the depth of the repo market
under prevailing market conditions as well as a sample stress scenario
to assess potential available liquidity in the event of default of the
largest Member would be performed.
In addition, the proposed rule changes provide that, at least
annually, FICC would conduct counterparty due diligence reviews that
would assess each non-QLR liquidity provider's ability to provide
liquidity to FICC under current market conditions and would provide a
summary of these reviews to the Board Risk Committee.\13\ The proposed
rule change also states that FICC would test any non-QLR annually with
the respective liquidity providers to confirm that such liquidity
providers are operationally able to perform their commitments and are
familiar with the applicable process.
---------------------------------------------------------------------------
\13\ Such due diligence includes reviews of, for example,
relevant member financial metrics, results of operational testing,
and relevant market data applicable to the type of securities being
financed.
---------------------------------------------------------------------------
As a conforming change, the proposed rule change would delete
language referring to MRAs as QLR. The proposed rule change would add a
sentence stating that FICC may count MRAs as QLR if the procedures for
designating them as such (as described above) are followed. As a
further conforming change, the proposed rule change would specify that
the section of the Framework regarding liquidity resources that are not
designated as QLR applies specifically to FICC.
iii. Proposed Amendments To Delete the Stand-Alone Section on Due
Diligence and Testing, and Instead Add Due Diligence and Testing
Descriptions Where Each Liquidity Resource Is Described or State Where
Testing Is Not Performed, as Applicable
The current Framework contains a stand-alone section (``Stand-Alone
Section'') on the due diligence and testing of liquidity providers that
the Clearing Agencies perform. The proposed rule changes would delete
the Stand-Alone Section and would instead add descriptions of the due
diligence and testing performed in connection with each type of
liquidity resource in the section of the Framework where each resource
is described, as further described below in subsection v. The proposed
rule changes also state where testing is not performed, where
applicable, as further described below in subsections iv. and v.
More specifically, the Stand-Alone Section currently states that
the Counterparty Credit Risk department (``CCR'') reviews the limits,
outstanding investments, and collateral held (if applicable) at each
investment counterparty. The proposed rule change would (i) restate
this language to make clear that CCR's review includes a financial
analysis of each counterparty, the Clearing Agencies' investments at
each counterparty, and any recommendations for changes in limits to
these investments and (ii) place the restated sentence in the section
of the Framework related to the specific liquidity resource that CCR is
surveilling.\14\ The Stand-Alone Section also references formal reviews
on the reliability of QLR providers and specifically ascribes certain
due diligence and review responsibilities to CCR. The proposed rule
change would describe CCR's obligations regarding liquidity providers
in the appropriate section of the Framework related to the specific
liquidity resource that CCR is surveilling. The proposed rule change
also indicates where another department, such as Treasury, is
responsible for actions that the Stand-Alone Section ascribes to CCR.
For non-QLR liquidity resources, the proposed rule change describes the
role of several departments in reviewing these resources.
---------------------------------------------------------------------------
\14\ The sentence in the Stand-Alone Section that refers to a
review of each investment counterparty's deposit level at the
Federal Reserve Bank of New York would not be retained because it
reflects a drafting error (the Clearing Agencies are concerned with
their deposits at the counterparties and not the counterparties'
deposits at the Federal Reserve Bank of New York).
---------------------------------------------------------------------------
Finally, the Stand-Alone Section references testing. The proposed
rule change would move the references to testing where each resource is
described in the Framework.
iv. Proposed Amendments To Clarify the Description of FICC's QLR
The proposed changes would make clear that each FICC division has
its own Clearing Fund that includes deposits of cash. The proposed
changes would also delete language regarding the ability of FICC to
borrow from the Clearing Fund as that is already covered in the rules
of each division. The proposed rule change would clarify the
description of FICC's QLR by adding language on same day access to
funds regarding deposits of Clearing Fund in creditworthy commercial
banks. The proposed changes would also clarify that the rules-based
committed Capped Contingency Liquidity Facility programs are determined
for each FICC division per the division's respective rules.
In addition, the Framework would make clear that for purposes of
making FICC Clearing Fund deposits, Members are not considered
``liquidity providers'' with reference to Rules 17Ad-22(e)(7)(iv) and
(v) under the Act.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 240.17Ad-22(e)(7)(iv) and (v).
---------------------------------------------------------------------------
v. Proposed Amendments To Clarify the Description of NSCC's and DTC's
QLR, Add Language To Reflect NSCC's and DTC's Current Due Diligence and
Testing Processes for Their Committed Line of Credit, and Make a
Correction to the Description of DTC's Collateral Monitor
The proposed rule change would clarify the description of NSCC's
QLR by deleting language regarding the ability of NSCC to borrow from
the Clearing Fund as that is already covered in the NSCC Rules. In
addition, the proposed changes would replace ``medium- and long-term''
with ``senior'' (which covers both medium- and long-term) before
``unsecured notes'' in the description of NSCC's QLR in order to
simplify terminology.
The proposed changes would provide that, because the process for
collecting Supplemental Liquidity Deposits (``SLD''), pursuant to NSCC
Rule 4A,\16\ is the same process used for collecting required deposits
to the NSCC Clearing Fund, and Members are aware of such process, no
testing is required for purposes of Rule 17Ad-22(e)(7)(v) under the
Act.\17\ In addition, the proposed changes would state that NSCC
conducts Member outreach with those Members whose liquidity exposure
may require them to make SLD in the future.
---------------------------------------------------------------------------
\16\ See supra note 3.
\17\ 17 CFR 240.17Ad-22(e)(7)(v).
---------------------------------------------------------------------------
The proposed rule change would clarify the descriptions of DTC's
and NSCC's QLR by adding language on same day access to funds regarding
deposits of DTC Participants Fund and NSCC Clearing Fund in
creditworthy commercial banks. In addition, the proposed changes would
make clear that for purposes of making DTC Participants Fund deposits
and NSCC Clearing Fund deposits, DTC Participants and NSCC Members,
respectively, are not considered ``liquidity providers'' with reference
to
[[Page 67530]]
Rules 17Ad-22(e)(7)(iv) and (v) under the Act.\18\
---------------------------------------------------------------------------
\18\ 17 CFR 240.17Ad-22(e)(7)(iv) and (v).
---------------------------------------------------------------------------
The proposed changes would add language to the descriptions of
DTC's and NSCC's QLR to reflect DTC's and NSCC's current practices of
conducting surveillance of bank lenders to their committed credit
facility, and testing the committed credit facility at least annually
to confirm that the lenders, agents and respective Clearing Agency are
operationally prepared to meet their obligations under the facility and
are familiar with the borrowing process.
The proposed rule change would also make a correction to the
description of DTC's Collateral Monitor. Currently, the Framework
states that the Liquidity Risk Product Unit verifies that the
Collateral Monitor will not become negative if the transaction is
processed. Because this verification is done automatically, the
proposed rule change would correct the sentence to state that DTC
performs this verification automatically.
vi. Proposed Amendments To Make Technical Changes
The proposed rule changes include certain technical changes as
follows:
Make conforming and cross-reference changes in the
Executive Summary;
Delete a sentence that may be confusing in that it states
that liquidity resources are maintained consistent with risk
tolerances, whereas the correct statement is that liquidity resources
are maintained consistent with Rule 17Ad-22(e)(7) under the Act,\19\
which is already stated elsewhere in the Framework;
---------------------------------------------------------------------------
\19\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
Make conforming and cross-reference changes in the general
section on ``Liquidity Resources;''
Restate the first sentence in the section describing
FICC's QLR so that it reads more clearly;
Remove cross-references and phrases referencing other
sections of the Framework where such references are no longer correct;
Add the word ``FICC'' to the end of a sentence where it
was inadvertently deleted; and
Renumber the last three sections of the Framework to
account for the deletion of the section on due diligence/testing.
2. Statutory Basis
The Clearing Agencies believe that the proposed changes are
consistent with Section 17A(b)(3)(F) of the Act,\20\ and Rules 17Ad-
22(e)(7) and 17Ad-22(a)(14)(ii)(B) under the Act,\21\ for the reasons
described below.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78q-1(b)(3)(F).
\21\ 17 CFR 240.17Ad-22(e)(7) and 17 CFR 240.17Ad-
22(a)(14)(ii)(B).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a registered clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions, and 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,\22\ for the reasons described below. The proposed changes
described above in Items II(A)1.i. and II(A)1.ii. would update the
Framework to (1) add a new section describing the process by which FICC
would designate uncommitted liquidity resources as QLR; \23\ and (2)
clarify that FICC may have access to liquidity resources that are not
designated as QLR. By updating the Framework to reflect these changes,
the Clearing Agencies believe the proposed rule change would make the
Framework more effective in describing FICC's liquidity risk management
procedures as they relate to FICC's liquidity resources. The proposed
rule changes would introduce clarity to the Framework through the
addition of a specific process regarding FICC's designation of
uncommitted resources as QLR and would better explain the section
regarding FICC's resources that are not QLR. Because FICC's liquidity
resources support the ability of FICC to effect timely settlement, and
because the proposed changes are designed to ensure that any
uncommitted resource that is designated as QLR would be highly reliable
in extreme but plausible market conditions and therefore also
potentially facilitate timely settlement, the Clearing Agencies believe
that the proposed changes described in Items II(A)1.i. and II(A)1.ii.
above are consistent with Section 17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78q-1(b)(3)(F).
\23\ See 17 CFR 240.17Ad-22(a)(14).
---------------------------------------------------------------------------
The proposed changes described in Items II(A)1.iii. through
II(A)1.vi. above would (1) delete the stand-alone section on due
diligence and testing of liquidity providers, and instead add due
diligence and testing descriptions where each liquidity resource is
described; (2) clarify the description of FICC's QLR; (3) clarify the
description of NSCC's and DTC's QLR, add language to reflect NSCC's and
DTC's current due diligence and testing processes regarding their
committed line of credit, and make a correction to the description of
DTC's Collateral Monitor; and (4) make technical changes. These
proposed changes would improve the clarity of the descriptions of
various liquidity management processes of the Clearing Agencies. The
improvement in the clarity of the descriptions of liquidity risk
management processes within the Framework would assist the Clearing
Agencies in carrying out these functions. Therefore, the Clearing
Agencies believe the proposed changes are consistent with the
requirements of Section 17A(b)(3)(F) of the Act \24\ that the rules of
a registered clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions, and 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.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Clearing Agencies believe that the proposed changes are
consistent with Rule 17Ad-22(e)(7) under the Act,\25\ which requires a
covered clearing agency to establish, implement, maintain and enforce
written policies and procedures reasonably designed to, as applicable,
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 by, at a minimum,
doing the requirements set forth in Rule 17Ad-22(e)(7). The proposed
rule changes described above have been designed to enhance the Clearing
Agencies' compliance with Rule 17Ad-22(e)(7) by addressing the
designation of QLR and liquidity resources that are not QLR and
providing various clarifications. By addressing the designation of QLR
and liquidity resources that are not QLR and providing various
clarifications, the proposed rule changes would reduce ambiguity and
thus assist risk management staff in the performance of their duties
associated with compliance of Rule 17Ad-22(e)(7).
---------------------------------------------------------------------------
\25\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
In addition, the proposed changes are designed to ensure that any
uncommitted resource that is designated as QLR would be highly reliable
in extreme but plausible market conditions, in accordance with Rule
17Ad-22(a)(14)(ii)(B) under the Act.\26\
---------------------------------------------------------------------------
\26\ 17 CFR 240.17Ad-22(a)(14)(ii)(B).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
The Clearing Agencies do not believe the proposed rule change would
have any impact, or impose any burden, on competition. As described
above, the
[[Page 67531]]
proposed changes would update the Framework to describe the process by
which FICC would designate uncommitted liquidity resources as QLR,
clarify that FICC may have access to liquidity resources that are not
designated as QLR, and improve the clarity of the descriptions of the
Clearing Agencies' liquidity risk management functions. Therefore, the
proposed changes relate mostly to the operation of the Framework and/or
are technical in nature. As such, the Clearing Agencies do not believe
that the proposed rule change would have any impact on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
The Clearing Agencies have not received or solicited any written
comments relating to this proposal. If any written comments are
received, they will be publicly filed as an Exhibit 2 to this filing,
as required by Form 19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General
questions regarding the rule filing process or logistical questions
regarding this filing should be directed to the Main Office of the
Commission's Division of Trading and Markets at
[email protected] or 202-551-5777.
The Clearing Agencies reserve the right to not respond to any
comments received.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-DTC-2022-011 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-DTC-2022-011. 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 DTC 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-DTC-2022-011 and should be submitted on
or before November 29, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
---------------------------------------------------------------------------
\27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24286 Filed 11-7-22; 8:45 am]
BILLING CODE 8011-01-P
