Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Clearing Agency Investment Policy, 35964-35968 [2023-11614]
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Federal Register / Vol. 88, No. 105 / Thursday, June 1, 2023 / Notices
that can be present between trade date
and settlement date (including the
incidence of failed transactions). In
addition, the Commission believes that
a shorter standard settlement cycle
would reduce liquidity risks that could
arise by allowing investors to obtain the
proceeds of securities transactions
sooner. Given the associated risk
reduction, the Commission finds that
the proposed rule change would
promote investor protection and the
public interest.
In approving the proposed rule
change, the Commission has considered
the proposed rule change’s impact on
efficiency, competition, and capital
formation. Section 15B(b)(2)(C) of the
Act 48 requires that MSRB rules not be
designed to impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. The Commission
believes the proposed rule change to
amend Rule G–12(b)(ii)(B)–(D) and Rule
G–15(b)(ii)(B)–(C) would not impose
any burden on competition and would
not have an impact on competition, as
the proposed rule change would apply
a uniform standard for regular-way
settlement for municipal securities to
align with the standard applicable to,
among other securities, equity and
corporate bond transactions under
Amended Exchange Act Rule 15c6–1.49
In addition, the proposed rule change
would apply equally to all dealers. The
proposed rule would also change to
correct an outdated cross-reference in
Rule G–12(b)(ii)(C) to properly reference
Rule G–34(a)(ii)(E)(2) rather than Rule
G–34(a)(ii)(D)(2), which would not
impose any burden on competition or
have an impact on competition as the
proposed change is technical in nature,
does not impose any new obligation and
enhances understanding of the rule. As
all of these components of the proposed
rule change would be applied equally to
all registered dealers transacting in
municipal securities, the Commission
believes that the proposed rule change
would not impose any additional
burdens on competition that are not
necessary or appropriate in furtherance
of the purposes of the Act.
The Commission also finds that the
proposed rule change will not hinder
capital formation. As noted above, the
proposed rule changes ensures a
uniform settlement cycle across all asset
classes of securities (including
municipal securities), and would be
applied equally to all dealers. As such,
the Commission believes that the
proposed rule change would promote
clearer regulatory requirements for the
clearance and settlements of municipal
securities transactions. Furthermore, a
shorter settlement cycle may reduce the
volume of unsettled transactions that
could potentially pose settlement risk,
and also decrease liquidity risk by
enabling market participants to access
the proceeds of their transactions
sooner. Therefore, the Commission also
finds that the proposed rule change
would promote efficiency of the
clearance and settlement process, would
not negatively impact the municipal
securities market’s operational
efficiency.
As noted above, the Commission
received three comment letters on the
filing. The Commission believes that the
MSRB, through its response, addressed
the commenters’ concerns. For the
reasons noted above, the Commission
believes that the proposed rule change
is consistent with the Exchange Act.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,50
that the proposed rule change (SR–
MSRB–2023–03) be, and hereby is,
approved.
For the Commission, pursuant to delegated
authority.51
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–11611 Filed 5–31–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97595; File No. SR–DTC–
2023–005]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Clearing Agency Investment Policy
May 25, 2023.
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 May 17,
2023, 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. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A)
50 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
51 17
48 15
49 17
U.S.C. 78o–4(b)(2)(C).
CFR 240.15c6–1.
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of the Act 3 and Rule 19b–4(f)(4)
thereunder.4 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 amends the
Clearing Agency Investment Policy
(‘‘Investment Policy’’, or ‘‘Policy’’) of
DTC and its affiliates, Fixed Income
Clearing Corporation (‘‘FICC’’) and
National Securities Clearing Corporation
(‘‘NSCC,’’ and together with FICC, the
‘‘Clearing Agencies’’). Specifically, the
proposed rule change would amend the
Investment Policy to (1) clarify
obligations regarding the separation and
segregation of funds deposited to a
Clearing Agency’s Participants Fund or
Clearing Fund; 5 (2) clarify roles and
responsibilities related to credit reviews
and setting investment limits; (3) update
allowable investments for the respective
Clearing Funds of NSCC and FICC and
other investable funds; (4) include
approvals required for longer term bank
deposits and reverse repurchase
investments; (5) remove descriptions of
hedge transactions; and (6) make
technical corrections and revisions to
clarify and simplify statements in the
Investment Policy, as described in
greater detail 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.
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4).
5 The respective Clearing Funds of NSCC and
FICC, and the DTC Participants Fund are described
in the Rules & Procedures of NSCC (‘‘NSCC Rules’’),
the DTC Rules, By-laws and Organization
Certificate (‘‘DTC Rules’’), the Clearing Rules of the
Mortgage-Backed Securities Division of FICC
(‘‘MBSD Rules’’) or the Rulebook of the Government
Securities Division of FICC (‘‘GSD Rules’’),
respectively, available at https://dtcc.com/legal/
rules-and-procedures. See Rule 4 (Clearing Fund) of
the NSCC Rules, Rule 4 (Participants Fund and
Participants Investment) of the DTC Rules, Rule 4
(Clearing Fund and Loss Allocation) of the GSD
Rules and Rule 4 (Clearing Fund and Loss
Allocation) of the MBSD Rules.
4 17
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(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
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1. Purpose
The Clearing Agencies are proposing
to revise the Investment Policy, which
was adopted in December 2016 6 and is
maintained in compliance with Rule
17Ad–22(e)(16) under the Act.7 The
proposed changes to the Investment
Policy would (i) clarify obligations
regarding the separation and segregation
of funds deposited to a Clearing
Agency’s Participants Fund or Clearing
Fund, (ii) clarify roles and
responsibilities related to credit reviews
and setting investment limits, (iii)
update allowable investments for the
respective Clearing Funds of NSCC and
FICC and other investable funds, (iv)
include approvals required for longer
term bank deposit and reverse
repurchase investments, (v) remove
descriptions of hedge transactions, and
(vi) make technical corrections and
revisions to clarify and simplify
statements in the Investment Policy, as
described in greater detail below.
Overview of the Investment Policy
The Investment Policy governs the
management, custody and investment of
cash deposited to the respective
Clearing Funds of NSCC and FICC,8 the
DTC Participants Fund,9 the proprietary
liquid net assets (cash and cash
equivalents) of the Clearing Agencies,
and other funds held by the Clearing
Agencies pursuant to their respective
rules.
The Investment Policy identifies the
guiding principles for investments and
defines the roles and responsibilities of
DTCC staff in administering the
Investment Policy pursuant to those
principles. The Investment Policy is coowned by DTCC’s Treasury group
(‘‘Treasury’’) and the Counterparty
Credit Risk team (‘‘CCR’’) within
DTCC’s Group Chief Risk Office
(‘‘GCRO’’). Treasury is responsible for
identifying potential counterparties to
investment transactions, establishing,
and managing investment relationships
with approved investment
counterparties, and making and
monitoring all investment transactions
with respect to the Clearing Agencies.
CCR is responsible for conducting a
credit review of any potential
counterparty, updating those reviews on
6 See Securities Exchange Act Release No. 79528
(December 12, 2016), 81 FR 91232 (December 16,
2016) (SR–DTC–2016–007, SR–FICC–2016–005,
SR–NSCC–2016–003).
7 17 CFR 240.17Ad–22(e)(16).
8 Supra note 5.
9 Id.
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a quarterly basis, and establishing an
investment limit for each counterparty.
CCR is also responsible for ongoing
monitoring of counterparties and
recommending changes to investment
limits when appropriate.
The Investment Policy also identifies
sources of funds that may be invested,
and the permitted investments of those
funds, including the authority required
to make such investments and the
parameters of, and limitations on, each
type of investment. Finally, the
Investment Policy defines the approval
authority required to exceed established
investment limits. As stated above, the
activities and processes carried out
pursuant to the Investment Policy, and
the governance set forth therein, support
the Clearing Agencies’ compliance with
the requirements of Rule 17Ad–
22(e)(16).10
Proposed Revisions to the Investment
Policy
The Investment Policy is reviewed
and approved by the Boards annually.
In connection with the most recent
annual review of the Investment Policy,
the Clearing Agencies have decided to
propose certain revisions and updates.
These proposed revisions, described in
greater detail below, are designed to
update the Investment Policy to reflect
current practices and to help ensure that
it continues to operate as intended.
(i) Proposed Change Regarding the
Separation and Segregation of Funds
Section 3.2 of the Policy addresses the
Clearing Agencies’ approach to
segregation of deposits to their
respective Participants or Clearing
Funds. The Policy currently states that
deposits to the Participants Fund and
Clearing Funds must not be commingled
with each other or with general
corporate funds of the Clearing
Agencies. The Clearing Agencies’
intention in using this approach is to
ensure these funds are not commingled
on the Clearing Agencies’ books and
records but is not intended to restrict
the Clearing Agencies from depositing
those amounts in the same deposit
accounts, for example at their cash
deposit accounts at the Federal Reserve
Bank of New York (‘‘FRBNY’’). In short,
the Clearing Agencies have subaccounts
on their books and records to reflect the
segregation of various funds, but each
Clearing Agency only has one account at
the FRBNY where Clearing Funds and
Participant Fund are held with Clearing
Agency general corporate funds.
For example, deposits to NSCC’s
Clearing Fund currently can be
10 17
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deposited into the same bank deposit
account as NSCC’s general corporate
funds, so long as these amounts are
separated on NSCC’s books and records
and are not deposited into the same
bank account as the DTC Participant
Fund or either of the FICC Clearing
Funds. Additionally, because GSD and
MBSD are divisions of FICC, and FICC,
like NSCC and DTC, has only one cash
deposit account at the FRBNY, the
proposed change also makes clear that
the GSD Clearing Fund and MBSD
Clearing Fund may be commingled in
the same bank deposit account so long
as they are segregated on FICC’s books
and records. Lastly, the proposed
change clarifies that the Clearing
Agencies’ approach to segregation of
funds applies not only to the
relationship between a Clearing
Agency’s general corporate funds and its
Participants Fund or Clearing Fund but
to all investable funds of a Clearing
Agency.
Therefore, the Clearing Agencies are
proposing to clarify that, although
deposits to a Clearing Agencies’
Participant Fund or Clearing Fund must
be segregated on each respective
Clearing Agency’s books and records
from each other and from their
respective general corporate funds,
these amounts may be deposited in the
same bank deposit account as other
investable funds of that Clearing
Agency. The proposed clarification is
consistent with the Clearing Agencies’
existing practices and would not
significantly affect the rights or
obligations of the Clearing Agencies or
their participants. This proposed change
would clarify the Investment Policy and
reflect the Clearing Agencies current
practices regarding Clearing Agencies’
separation and segregation of funds.
(ii) Proposed Change To Clarify Roles
and Responsibilities of CCR and
Treasury
Section 4 of the Policy outlines the
roles and responsibilities of Treasury
and CCR in conducting credit reviews
and setting investment limits of
counterparties. The proposed changes
include clarification of these roles and
responsibilities to improve the
transparency of the Investment Policy to
the DTCC staff who adhere to its
provisions. The proposed changes to
Section 4.2 would add the requirement
that Treasury state the intended type of
investment relationship with a
counterparty when it requests that CCR
perform a credit review of an
investment counterparty. The proposed
changes would also clarify that the
governance of an investment
counterparty credit review depends on
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whether the proposed counterparty is a
participant of a Clearing Agency.
Counterparties that are not participants
must be approved by a Managing
Director of CCR and counterparties that
are participants are reviewed using a
risk-based criteria based on the
participants’ membership level.
An additional proposed change to
Section 4.2 would remove the
requirement that a Managing Director of
GCRO approve counterparty investment
limits. This proposed change would
clarify that CCR is responsible for
setting the aggregate investment limits
assigned to a counterparty in connection
with the credit reviews for that
counterparty.
In addition, the Clearing Agencies are
proposing changes to Section 4.2 to
specify the management of the quarterly
credit reviews and changes to
counterparty investment limits. The
Policy currently states that CCR will
notify Treasury if an investment
counterparty’s external credit rating is
downgraded, if CCR believes an
investment counterparty’s investment
limit should change, or if an investment
transaction should be terminated. The
purpose of this procedure is to quickly
capture any changes to an investment
counterparty’s credit rating that may
affect the Clearing Agencies’ exposure to
such counterparty and, therefore,
require change to the allowable
investment limit applicable to that
counterparty under the Policy. The
proposed changes to this Section would
clarify that CCR only notifies Treasury
if an investment counterparty’s external
credit ratings fall below the minimum
ratings in the Policy or requires a
change to that counterparties’
investment limit. The proposed changes
would also clarify that CCR may advise
Treasury if it is appropriate to set a
counterparty’s investment limit lower
than the investment limits provided
within the Policy or to terminate an
investment transaction. These proposed
changes would clarify that either of
these investment limit changes require
approval by a Managing Director of
GCRO.
The proposed changes are consistent
with the Clearing Agencies’ existing
practices and would not significantly
affect the rights or obligations of the
Clearing Agencies or their participants.
(iii) Proposed Change To Update
Allowable Investments and Investment
Limits
The Clearing Agencies are proposing
to amend the table of allowable
investments in Section 6 of the Policy
to reflect their current investment
practice of only investing the Clearing
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Funds of NSCC and FICC; NSCC’s Fully
Paid-For Account, DTC Short Position
Cash, Corporate Actions Payments and
Principal & Interest Payments; and GSD
Forward Margin in bank deposits. The
table identifies the sources of investable
funds that are invested by the Clearing
Agencies, and groups these sources of
funds into separate categories. The
Policy currently permits the Clearing
Agencies to invest the investable funds
listed above in multiple types of
investment vehicles, for example
reverse repurchase agreements. The
Clearing Agencies believe that it is
prudent investment practice to limit the
investment of these funds to only bank
deposits and have, in practice, already
limited such investments accordingly.
The proposed changes to this table
would also delete footnotes that include
information that is no longer necessary
given this change in investment
practice.
Two proposed changes to Section
6.2.1 of the Policy would conform the
Investment Policy to current practice.
First, this section currently states that
the DTC Participant Fund may only be
invested in demand deposit, savings or
checking accounts that provide same
day access to funds. The Clearing
Agencies would update this section to
make clear that these criteria also
applies to investment of the NSCC and
FICC Clearing Funds. Finally, the
proposed changes would include adding
‘‘unless an exception has been granted
pursuant to Section 4.2 of this Policy’’
following the requirement for approved
bank counterparty minimum external
credit ratings, for clarification purposes
in terms of the interplay of the various
sections in the Policy.
(iv) Proposed Change To Include
Approvals Required for Longer Term
Transactions
The Clearing Agencies are proposing
to amend the Policy to describe the
approval requirements for investments
in bank deposits and reverse repurchase
agreements with a term maturity longer
than overnight. The Policy is currently
silent as to the approval process for
these longer-term transactions. The
proposed changes would describe the
requirement that CCR approve such
longer-term transactions and would
align the parameters around establishing
investment limits for such transactions
to the guidelines provided in Section
6.2.1 of the Policy, for longer term bank
deposit investments, and Section 6.2.2,
for reverse repurchase agreements,
unless an exception has been granted
pursuant to Section 4.2 of the Policy.
The proposed changes would also
describe the requirement that CCR
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assess the creditworthiness of a
counterparty when determining term to
maturity for such longer-term
transactions requested by Treasury.
These proposed changes would improve
the Investment Policy by clearly
describing the approval process for
these types of investments.
(v) Proposed Change To Remove
Reference to Hedge Transactions
The proposed changes would remove
references to the Clearing Agencies’
process involving hedge transactions
from the Policy. Section 6.2.6 of the
Policy currently describes allowable
hedge transactions, limitations on hedge
transaction maturity dates and value
amounts, and the approval process for
hedge transactions. The proposed
changes would remove this section from
the Policy because hedging activity is
different from investment activity.
Additionally, hedging activity is
conducted using only general corporate
funds of the Clearing Agencies, thereby
posing very little risk to the Clearing
Agencies’ Clearing Fund or Participant
Fund. Therefore, the Clearing Agencies
believe it is appropriate to establish a
stand-alone internal hedging policy
reflecting the processes, procedures and
philosophy regarding hedge transactions
that is currently captured in this
Investment Policy. Such internal
hedging policy would provide greater
detail and clarity related to the current
hedging practices of the Clearing
Agency. Further, the proposed removal
of references to hedging activity would
improve the Investment Policy in
clarifying and focusing its purpose.
(vi) Proposed Change To Make
Technical Corrections and Revisions
Finally, the proposed changes would
make technical corrections to statements
in the Investment Policy, delete
irrelevant processes, and add clarifying
words or sentences throughout the
Policy. These changes are (1) change the
word ‘‘Subject’’ to ‘‘Pursuant’’ in the
footnote to the table in Section 5 and
delete the second footnote, (2) change
the heading of subparagraph 6.2.4 from
Reverse Repurchase Agreements
(Reverse Repos) to Money Market
Mutual Funds (MMMFs) as the content
of the subparagraph discusses MMMFs
instead of Reverse Repos, (3) change the
word ‘‘percent’’ as it relates to a
counterparty’s shareholders’ equity
capital in Section 6.2.1 to ‘‘multiple’’ for
consistency with the use of the word
multiple in the corresponding table, (4)
remove reference to Hold-in custody
Reverse Repos in Section 6.2.2 as the
Clearing Agencies do not engage in such
transactions, (5) change numeric
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representations in the table in 6.2.1 for
consistency throughout the Policy, (6)
delete any footnotes made inaccurate or
unnecessary by the other proposed
changes to the Policy, and (7) add the
word ‘‘amount’’ in front of the words
‘‘by 30%’’ in Section 7.1 for clarification
purposes. These changes are not
substantive changes to the Clearing
Agencies’ investment practices.
2. Statutory Basis
The Clearing Agencies believe that the
proposed rule changes are consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a registered clearing
agency.11 In particular, the Clearing
Agencies believe that the proposed
modifications to the Investment Policy
are consistent with Section 17A(b)(3)(F)
of the Act 12 and Rule 17Ad–22(e)(16)
under the Act,13 for the reasons
described below.
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of the
Clearing Agencies be designed to assure
the safeguarding of securities and funds
that are in the custody or control of each
of the Clearing Agencies or for which
they are responsible.14 The investment
guidelines and governance procedures
set forth in the Investment Policy are
designed to safeguard funds that are in
the custody or control of the Clearing
Agencies or for which they are
responsible. Such protections include,
for example, following a prudent and
conservative investment philosophy
that places the highest priority on
maximizing liquidity and risk
avoidance. The Clearing Agencies
believe the proposed change to reflect
the Clearing Agencies’ current
investment practice to only invest NSCC
and FICC Clearing Funds, Fully PaidFor Account, Short Position Cash,
Corporate Actions Payments, Principal
& Interest Payments, and GSD Forward
Margin in bank deposits would allow it
to adhere to these guidelines by
maximizing liquidity and minimizing
the risk posed by other, potentially
longer term, investments. Therefore, the
Clearing Agencies believe the proposed
change would allow the Clearing
Agencies to continue to invest pursuant
to the Investment Policy in a prudent
and conservative manner that assures
the safeguarding of securities and funds
that are in their custody and control, or
for which they are responsible.
Section 17A(b)(3)(F) of the Act also
requires, in part, that the rules of the
CFR 240.17Ad–22(e)(16).
U.S.C. 78q–1(b)(3)(F).
13 17 CFR 240.17Ad–22(e)(16).
14 15 U.S.C. 78q–1(b)(3)(F).
Clearing Agencies be designed to foster
cooperation and coordination with
persons engaged in the clearance and
settlement of securities transactions.15
The proposed changes to (1) clarify
obligations regarding the separation and
segregation of funds deposited to a
Clearing Agency’s Participants Fund or
Clearing Funds; (2) clarify roles and
responsibilities related to credit reviews
and setting investment limits; (3)
remove descriptions of hedge
transactions; and (4) make technical
corrections and revisions to clarify and
simplify statements in the Investment
Policy would help clarify the
administration of the procedures
outlined in the Policy and therefore aid
in the cooperation and coordination
between the DTCC staff who adhere to
its provisions.
Additionally, the proposed change to
provide approval requirements for
investments in bank deposits and
reverse repurchase agreements with a
term maturity longer than overnight
would improve the effectiveness of the
Investment Policy and allow the
Clearing Agencies to administer the
Investment Policy in alignment with the
investment guidelines and governance
procedures set forth therein.
Specifically, the Investment Policy sets
forth guiding principles for the
investment of funds, which include
adherence to a prudent and conservative
investment philosophy that places the
highest priority on maximizing liquidity
and avoiding risk. The guiding
principles of the Investment Policy also
address the process for evaluating the
credit ratings of counterparties and
setting investment limits. Given that
such guidelines and governance
procedures are designed to safeguard
funds that are in the custody or control
of the Clearing Agencies or for which
they are responsible, the Clearing
Agencies believe the proposed changes
are consistent with the requirements of
Section 17A(b)(3)(F) of the Act.16
Rule 17Ad–22(e)(16) under the Act
requires, in part, the Clearing Agencies
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to safeguard the
Clearing Agencies’ own and their
participants’ assets, minimize the risk of
loss and delay in access to these assets,
and invest such assets in instruments
with minimal credit, market, and
liquidity risks.17 The Clearing Agencies
believe that the Investment Policy, as
amended by the proposed changes,
follows a prudent and conservative
investment philosophy, placing the
highest priority on maximizing liquidity
and avoiding risk of loss, by setting
appropriate investment practices and
creating clear guidelines. As originally
implemented, the Investment Policy
was designed to meet the requirements
of Rule 17Ad–22(e)(16) under the Act.18
For the reasons stated above, the
Clearing Agencies believe that the
proposed revisions to (1) clarify
obligations regarding the separation and
segregation of funds deposited to a
Clearing Agency’s Participants Fund or
Clearing Funds; (2) update allowable
investments for the Clearing Agencies’
respective Clearing Funds and other
investable funds; and (3) include
approvals required for longer term bank
deposits and reverse repo investments
would both strengthen the risk
management objectives of the
Investment Policy and improve the
clarity of the Policy and, therefore, make
the Investment Policy more effective in
governing the management, custody,
and investment of funds of and held by
the Clearing Agencies. In this way, these
proposed changes would better allow
the Clearing Agencies to maintain this
document in a way that is designed to
meet the requirements of Rule 17Ad–
22(e)(16).19 Therefore, the Clearing
Agencies believe these proposed
revisions would be consistent with the
requirements of Rule 17Ad–22(e)(16)
under the Act.20
(B) Clearing Agency’s Statement on
Burden on Competition
Each of the Clearing Agencies believes
that none of the proposed revisions to
the Investment Policy would have any
impact, or impose any burden, on
competition. The Investment Policy
applies equally to the allowable
investments of the Clearing Agencies,
including the FICC and NSCC Clearing
Funds and DTC Participants Fund
deposits, and establishes a uniform
policy at the Clearing Agencies. The
proposed changes to the Investment
Policy would not affect any changes on
the fundamental purpose or operation of
this document and, as such, would also
not have any impact, or impose any
burden, on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
DTC has not received or solicited any
written comments relating to this
proposal. If any written comments are
11 17
12 15
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15 Id.
18 Id.
16 Id.
17 17
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35968
Federal Register / Vol. 88, No. 105 / Thursday, June 1, 2023 / Notices
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-submitcomments. 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.
DTC reserve the right not to respond
to any comments received.
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A) 21 of the Act and paragraph
(f) 22 of Rule 19b–4 thereunder. 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.
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:
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
22 17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Sherry R. Haywood,
Assistant Secretary.
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
[FR Doc. 2023–11614 Filed 5–31–23; 8:45 am]
17:37 May 31, 2023
May 25, 2023.
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 May 16,
2023, NYSE American LLC (‘‘NYSE
American’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 9232 and Rule 308-Equities to
reflect the consolidation of the
Acceptability Board with the Hearing
Board as defined in Rule 9232(b) and
make conforming changes. The
proposed rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Sep<11>2014
[Release No. 34–97581; File No. SR–
NYSEAMER–2023–29]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Amend Rule 9232 and Rule
308-Equities
• 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–2023–005 on the subject line.
21 15
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–DTC–2023–005. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of DTC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to File
Number SR–DTC–2023–005 and should
be submitted on or before June 22, 2023.
BILLING CODE 8011–01–P
Electronic Comments
ddrumheller on DSK120RN23PROD with NOTICES1
Paper Comments
23 17
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CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 88, Number 105 (Thursday, June 1, 2023)]
[Notices]
[Pages 35964-35968]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-11614]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97595; File No. SR-DTC-2023-005]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Clearing Agency Investment Policy
May 25, 2023.
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 May 17, 2023, 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. DTC filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4)
thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change amends the Clearing Agency Investment
Policy (``Investment Policy'', or ``Policy'') of DTC and its
affiliates, Fixed Income Clearing Corporation (``FICC'') and National
Securities Clearing Corporation (``NSCC,'' and together with FICC, the
``Clearing Agencies''). Specifically, the proposed rule change would
amend the Investment Policy to (1) clarify obligations regarding the
separation and segregation of funds deposited to a Clearing Agency's
Participants Fund or Clearing Fund; \5\ (2) clarify roles and
responsibilities related to credit reviews and setting investment
limits; (3) update allowable investments for the respective Clearing
Funds of NSCC and FICC and other investable funds; (4) include
approvals required for longer term bank deposits and reverse repurchase
investments; (5) remove descriptions of hedge transactions; and (6)
make technical corrections and revisions to clarify and simplify
statements in the Investment Policy, as described in greater detail
below.
---------------------------------------------------------------------------
\5\ The respective Clearing Funds of NSCC and FICC, and the DTC
Participants Fund are described in the Rules & Procedures of NSCC
(``NSCC Rules''), the DTC Rules, By-laws and Organization
Certificate (``DTC Rules''), the Clearing Rules of the Mortgage-
Backed Securities Division of FICC (``MBSD Rules'') or the Rulebook
of the Government Securities Division of FICC (``GSD Rules''),
respectively, available at https://dtcc.com/legal/rules-and-procedures. See Rule 4 (Clearing Fund) of the NSCC Rules, Rule 4
(Participants Fund and Participants Investment) of the DTC Rules,
Rule 4 (Clearing Fund and Loss Allocation) of the GSD Rules and Rule
4 (Clearing Fund and Loss Allocation) of the MBSD Rules.
---------------------------------------------------------------------------
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.
[[Page 35965]]
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The Clearing Agencies are proposing to revise the Investment
Policy, which was adopted in December 2016 \6\ and is maintained in
compliance with Rule 17Ad-22(e)(16) under the Act.\7\ The proposed
changes to the Investment Policy would (i) clarify obligations
regarding the separation and segregation of funds deposited to a
Clearing Agency's Participants Fund or Clearing Fund, (ii) clarify
roles and responsibilities related to credit reviews and setting
investment limits, (iii) update allowable investments for the
respective Clearing Funds of NSCC and FICC and other investable funds,
(iv) include approvals required for longer term bank deposit and
reverse repurchase investments, (v) remove descriptions of hedge
transactions, and (vi) make technical corrections and revisions to
clarify and simplify statements in the Investment Policy, as described
in greater detail below.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 79528 (December 12,
2016), 81 FR 91232 (December 16, 2016) (SR-DTC-2016-007, SR-FICC-
2016-005, SR-NSCC-2016-003).
\7\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------
Overview of the Investment Policy
The Investment Policy governs the management, custody and
investment of cash deposited to the respective Clearing Funds of NSCC
and FICC,\8\ the DTC Participants Fund,\9\ the proprietary liquid net
assets (cash and cash equivalents) of the Clearing Agencies, and other
funds held by the Clearing Agencies pursuant to their respective rules.
---------------------------------------------------------------------------
\8\ Supra note 5.
\9\ Id.
---------------------------------------------------------------------------
The Investment Policy identifies the guiding principles for
investments and defines the roles and responsibilities of DTCC staff in
administering the Investment Policy pursuant to those principles. The
Investment Policy is co-owned by DTCC's Treasury group (``Treasury'')
and the Counterparty Credit Risk team (``CCR'') within DTCC's Group
Chief Risk Office (``GCRO''). Treasury is responsible for identifying
potential counterparties to investment transactions, establishing, and
managing investment relationships with approved investment
counterparties, and making and monitoring all investment transactions
with respect to the Clearing Agencies. CCR is responsible for
conducting a credit review of any potential counterparty, updating
those reviews on a quarterly basis, and establishing an investment
limit for each counterparty. CCR is also responsible for ongoing
monitoring of counterparties and recommending changes to investment
limits when appropriate.
The Investment Policy also identifies sources of funds that may be
invested, and the permitted investments of those funds, including the
authority required to make such investments and the parameters of, and
limitations on, each type of investment. Finally, the Investment Policy
defines the approval authority required to exceed established
investment limits. As stated above, the activities and processes
carried out pursuant to the Investment Policy, and the governance set
forth therein, support the Clearing Agencies' compliance with the
requirements of Rule 17Ad-22(e)(16).\10\
---------------------------------------------------------------------------
\10\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------
Proposed Revisions to the Investment Policy
The Investment Policy is reviewed and approved by the Boards
annually. In connection with the most recent annual review of the
Investment Policy, the Clearing Agencies have decided to propose
certain revisions and updates. These proposed revisions, described in
greater detail below, are designed to update the Investment Policy to
reflect current practices and to help ensure that it continues to
operate as intended.
(i) Proposed Change Regarding the Separation and Segregation of Funds
Section 3.2 of the Policy addresses the Clearing Agencies' approach
to segregation of deposits to their respective Participants or Clearing
Funds. The Policy currently states that deposits to the Participants
Fund and Clearing Funds must not be commingled with each other or with
general corporate funds of the Clearing Agencies. The Clearing
Agencies' intention in using this approach is to ensure these funds are
not commingled on the Clearing Agencies' books and records but is not
intended to restrict the Clearing Agencies from depositing those
amounts in the same deposit accounts, for example at their cash deposit
accounts at the Federal Reserve Bank of New York (``FRBNY''). In short,
the Clearing Agencies have subaccounts on their books and records to
reflect the segregation of various funds, but each Clearing Agency only
has one account at the FRBNY where Clearing Funds and Participant Fund
are held with Clearing Agency general corporate funds.
For example, deposits to NSCC's Clearing Fund currently can be
deposited into the same bank deposit account as NSCC's general
corporate funds, so long as these amounts are separated on NSCC's books
and records and are not deposited into the same bank account as the DTC
Participant Fund or either of the FICC Clearing Funds. Additionally,
because GSD and MBSD are divisions of FICC, and FICC, like NSCC and
DTC, has only one cash deposit account at the FRBNY, the proposed
change also makes clear that the GSD Clearing Fund and MBSD Clearing
Fund may be commingled in the same bank deposit account so long as they
are segregated on FICC's books and records. Lastly, the proposed change
clarifies that the Clearing Agencies' approach to segregation of funds
applies not only to the relationship between a Clearing Agency's
general corporate funds and its Participants Fund or Clearing Fund but
to all investable funds of a Clearing Agency.
Therefore, the Clearing Agencies are proposing to clarify that,
although deposits to a Clearing Agencies' Participant Fund or Clearing
Fund must be segregated on each respective Clearing Agency's books and
records from each other and from their respective general corporate
funds, these amounts may be deposited in the same bank deposit account
as other investable funds of that Clearing Agency. The proposed
clarification is consistent with the Clearing Agencies' existing
practices and would not significantly affect the rights or obligations
of the Clearing Agencies or their participants. This proposed change
would clarify the Investment Policy and reflect the Clearing Agencies
current practices regarding Clearing Agencies' separation and
segregation of funds.
(ii) Proposed Change To Clarify Roles and Responsibilities of CCR and
Treasury
Section 4 of the Policy outlines the roles and responsibilities of
Treasury and CCR in conducting credit reviews and setting investment
limits of counterparties. The proposed changes include clarification of
these roles and responsibilities to improve the transparency of the
Investment Policy to the DTCC staff who adhere to its provisions. The
proposed changes to Section 4.2 would add the requirement that Treasury
state the intended type of investment relationship with a counterparty
when it requests that CCR perform a credit review of an investment
counterparty. The proposed changes would also clarify that the
governance of an investment counterparty credit review depends on
[[Page 35966]]
whether the proposed counterparty is a participant of a Clearing
Agency. Counterparties that are not participants must be approved by a
Managing Director of CCR and counterparties that are participants are
reviewed using a risk-based criteria based on the participants'
membership level.
An additional proposed change to Section 4.2 would remove the
requirement that a Managing Director of GCRO approve counterparty
investment limits. This proposed change would clarify that CCR is
responsible for setting the aggregate investment limits assigned to a
counterparty in connection with the credit reviews for that
counterparty.
In addition, the Clearing Agencies are proposing changes to Section
4.2 to specify the management of the quarterly credit reviews and
changes to counterparty investment limits. The Policy currently states
that CCR will notify Treasury if an investment counterparty's external
credit rating is downgraded, if CCR believes an investment
counterparty's investment limit should change, or if an investment
transaction should be terminated. The purpose of this procedure is to
quickly capture any changes to an investment counterparty's credit
rating that may affect the Clearing Agencies' exposure to such
counterparty and, therefore, require change to the allowable investment
limit applicable to that counterparty under the Policy. The proposed
changes to this Section would clarify that CCR only notifies Treasury
if an investment counterparty's external credit ratings fall below the
minimum ratings in the Policy or requires a change to that
counterparties' investment limit. The proposed changes would also
clarify that CCR may advise Treasury if it is appropriate to set a
counterparty's investment limit lower than the investment limits
provided within the Policy or to terminate an investment transaction.
These proposed changes would clarify that either of these investment
limit changes require approval by a Managing Director of GCRO.
The proposed changes are consistent with the Clearing Agencies'
existing practices and would not significantly affect the rights or
obligations of the Clearing Agencies or their participants.
(iii) Proposed Change To Update Allowable Investments and Investment
Limits
The Clearing Agencies are proposing to amend the table of allowable
investments in Section 6 of the Policy to reflect their current
investment practice of only investing the Clearing Funds of NSCC and
FICC; NSCC's Fully Paid-For Account, DTC Short Position Cash, Corporate
Actions Payments and Principal & Interest Payments; and GSD Forward
Margin in bank deposits. The table identifies the sources of investable
funds that are invested by the Clearing Agencies, and groups these
sources of funds into separate categories. The Policy currently permits
the Clearing Agencies to invest the investable funds listed above in
multiple types of investment vehicles, for example reverse repurchase
agreements. The Clearing Agencies believe that it is prudent investment
practice to limit the investment of these funds to only bank deposits
and have, in practice, already limited such investments accordingly.
The proposed changes to this table would also delete footnotes that
include information that is no longer necessary given this change in
investment practice.
Two proposed changes to Section 6.2.1 of the Policy would conform
the Investment Policy to current practice. First, this section
currently states that the DTC Participant Fund may only be invested in
demand deposit, savings or checking accounts that provide same day
access to funds. The Clearing Agencies would update this section to
make clear that these criteria also applies to investment of the NSCC
and FICC Clearing Funds. Finally, the proposed changes would include
adding ``unless an exception has been granted pursuant to Section 4.2
of this Policy'' following the requirement for approved bank
counterparty minimum external credit ratings, for clarification
purposes in terms of the interplay of the various sections in the
Policy.
(iv) Proposed Change To Include Approvals Required for Longer Term
Transactions
The Clearing Agencies are proposing to amend the Policy to describe
the approval requirements for investments in bank deposits and reverse
repurchase agreements with a term maturity longer than overnight. The
Policy is currently silent as to the approval process for these longer-
term transactions. The proposed changes would describe the requirement
that CCR approve such longer-term transactions and would align the
parameters around establishing investment limits for such transactions
to the guidelines provided in Section 6.2.1 of the Policy, for longer
term bank deposit investments, and Section 6.2.2, for reverse
repurchase agreements, unless an exception has been granted pursuant to
Section 4.2 of the Policy.
The proposed changes would also describe the requirement that CCR
assess the creditworthiness of a counterparty when determining term to
maturity for such longer-term transactions requested by Treasury. These
proposed changes would improve the Investment Policy by clearly
describing the approval process for these types of investments.
(v) Proposed Change To Remove Reference to Hedge Transactions
The proposed changes would remove references to the Clearing
Agencies' process involving hedge transactions from the Policy. Section
6.2.6 of the Policy currently describes allowable hedge transactions,
limitations on hedge transaction maturity dates and value amounts, and
the approval process for hedge transactions. The proposed changes would
remove this section from the Policy because hedging activity is
different from investment activity. Additionally, hedging activity is
conducted using only general corporate funds of the Clearing Agencies,
thereby posing very little risk to the Clearing Agencies' Clearing Fund
or Participant Fund. Therefore, the Clearing Agencies believe it is
appropriate to establish a stand-alone internal hedging policy
reflecting the processes, procedures and philosophy regarding hedge
transactions that is currently captured in this Investment Policy. Such
internal hedging policy would provide greater detail and clarity
related to the current hedging practices of the Clearing Agency.
Further, the proposed removal of references to hedging activity would
improve the Investment Policy in clarifying and focusing its purpose.
(vi) Proposed Change To Make Technical Corrections and Revisions
Finally, the proposed changes would make technical corrections to
statements in the Investment Policy, delete irrelevant processes, and
add clarifying words or sentences throughout the Policy. These changes
are (1) change the word ``Subject'' to ``Pursuant'' in the footnote to
the table in Section 5 and delete the second footnote, (2) change the
heading of subparagraph 6.2.4 from Reverse Repurchase Agreements
(Reverse Repos) to Money Market Mutual Funds (MMMFs) as the content of
the subparagraph discusses MMMFs instead of Reverse Repos, (3) change
the word ``percent'' as it relates to a counterparty's shareholders'
equity capital in Section 6.2.1 to ``multiple'' for consistency with
the use of the word multiple in the corresponding table, (4) remove
reference to Hold-in custody Reverse Repos in Section 6.2.2 as the
Clearing Agencies do not engage in such transactions, (5) change
numeric
[[Page 35967]]
representations in the table in 6.2.1 for consistency throughout the
Policy, (6) delete any footnotes made inaccurate or unnecessary by the
other proposed changes to the Policy, and (7) add the word ``amount''
in front of the words ``by 30%'' in Section 7.1 for clarification
purposes. These changes are not substantive changes to the Clearing
Agencies' investment practices.
2. Statutory Basis
The Clearing Agencies believe that the proposed rule changes are
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a registered clearing agency.\11\
In particular, the Clearing Agencies believe that the proposed
modifications to the Investment Policy are consistent with Section
17A(b)(3)(F) of the Act \12\ and Rule 17Ad-22(e)(16) under the Act,\13\
for the reasons described below.
---------------------------------------------------------------------------
\11\ 17 CFR 240.17Ad-22(e)(16).
\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of the Clearing Agencies be designed to assure the safeguarding of
securities and funds that are in the custody or control of each of the
Clearing Agencies or for which they are responsible.\14\ The investment
guidelines and governance procedures set forth in the Investment Policy
are designed to safeguard funds that are in the custody or control of
the Clearing Agencies or for which they are responsible. Such
protections include, for example, following a prudent and conservative
investment philosophy that places the highest priority on maximizing
liquidity and risk avoidance. The Clearing Agencies believe the
proposed change to reflect the Clearing Agencies' current investment
practice to only invest NSCC and FICC Clearing Funds, Fully Paid-For
Account, Short Position Cash, Corporate Actions Payments, Principal &
Interest Payments, and GSD Forward Margin in bank deposits would allow
it to adhere to these guidelines by maximizing liquidity and minimizing
the risk posed by other, potentially longer term, investments.
Therefore, the Clearing Agencies believe the proposed change would
allow the Clearing Agencies to continue to invest pursuant to the
Investment Policy in a prudent and conservative manner that assures the
safeguarding of securities and funds that are in their custody and
control, or for which they are responsible.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act also requires, in part, that the
rules of the Clearing Agencies be designed to foster cooperation and
coordination with persons engaged in the clearance and settlement of
securities transactions.\15\ The proposed changes to (1) clarify
obligations regarding the separation and segregation of funds deposited
to a Clearing Agency's Participants Fund or Clearing Funds; (2) clarify
roles and responsibilities related to credit reviews and setting
investment limits; (3) remove descriptions of hedge transactions; and
(4) make technical corrections and revisions to clarify and simplify
statements in the Investment Policy would help clarify the
administration of the procedures outlined in the Policy and therefore
aid in the cooperation and coordination between the DTCC staff who
adhere to its provisions.
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
Additionally, the proposed change to provide approval requirements
for investments in bank deposits and reverse repurchase agreements with
a term maturity longer than overnight would improve the effectiveness
of the Investment Policy and allow the Clearing Agencies to administer
the Investment Policy in alignment with the investment guidelines and
governance procedures set forth therein. Specifically, the Investment
Policy sets forth guiding principles for the investment of funds, which
include adherence to a prudent and conservative investment philosophy
that places the highest priority on maximizing liquidity and avoiding
risk. The guiding principles of the Investment Policy also address the
process for evaluating the credit ratings of counterparties and setting
investment limits. Given that such guidelines and governance procedures
are designed to safeguard funds that are in the custody or control of
the Clearing Agencies or for which they are responsible, the Clearing
Agencies believe the proposed changes are consistent with the
requirements of Section 17A(b)(3)(F) of the Act.\16\
---------------------------------------------------------------------------
\16\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(16) under the Act requires, in part, the Clearing
Agencies to establish, implement, maintain and enforce written policies
and procedures reasonably designed to safeguard the Clearing Agencies'
own and their participants' assets, minimize the risk of loss and delay
in access to these assets, and invest such assets in instruments with
minimal credit, market, and liquidity risks.\17\ The Clearing Agencies
believe that the Investment Policy, as amended by the proposed changes,
follows a prudent and conservative investment philosophy, placing the
highest priority on maximizing liquidity and avoiding risk of loss, by
setting appropriate investment practices and creating clear guidelines.
As originally implemented, the Investment Policy was designed to meet
the requirements of Rule 17Ad-22(e)(16) under the Act.\18\
---------------------------------------------------------------------------
\17\ 17 CFR 240.17Ad-22(e)(16).
\18\ Id.
---------------------------------------------------------------------------
For the reasons stated above, the Clearing Agencies believe that
the proposed revisions to (1) clarify obligations regarding the
separation and segregation of funds deposited to a Clearing Agency's
Participants Fund or Clearing Funds; (2) update allowable investments
for the Clearing Agencies' respective Clearing Funds and other
investable funds; and (3) include approvals required for longer term
bank deposits and reverse repo investments would both strengthen the
risk management objectives of the Investment Policy and improve the
clarity of the Policy and, therefore, make the Investment Policy more
effective in governing the management, custody, and investment of funds
of and held by the Clearing Agencies. In this way, these proposed
changes would better allow the Clearing Agencies to maintain this
document in a way that is designed to meet the requirements of Rule
17Ad-22(e)(16).\19\ Therefore, the Clearing Agencies believe these
proposed revisions would be consistent with the requirements of Rule
17Ad-22(e)(16) under the Act.\20\
---------------------------------------------------------------------------
\19\ Id.
\20\ Id.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
Each of the Clearing Agencies believes that none of the proposed
revisions to the Investment Policy would have any impact, or impose any
burden, on competition. The Investment Policy applies equally to the
allowable investments of the Clearing Agencies, including the FICC and
NSCC Clearing Funds and DTC Participants Fund deposits, and establishes
a uniform policy at the Clearing Agencies. The proposed changes to the
Investment Policy would not affect any changes on the fundamental
purpose or operation of this document and, as such, would also not have
any impact, or impose any burden, on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
DTC has not received or solicited any written comments relating to
this proposal. If any written comments are
[[Page 35968]]
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-submitcomments. 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.
DTC reserve the right not to respond to any comments received.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \21\ of the Act and paragraph (f) \22\ of Rule 19b-4
thereunder. 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.
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f).
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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-2023-005 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-DTC-2023-005. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of DTC and on DTCC's website
(https://dtcc.com/legal/sec-rule-filings.aspx). Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-DTC-2023-005 and should be submitted on or
before June 22, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-11614 Filed 5-31-23; 8:45 am]
BILLING CODE 8011-01-P
