Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Approval of a Proposed Rule Change To Refine the Margin Liquidity Adjustment (“MLA”) Charge Calculation and the Description of the MLA Charge, 2702-2707 [2024-00630]
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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.51
Sherry R. Haywood,
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[FR Doc. 2024–00638 Filed 1–12–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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[Release No. 34–99303; File No. SR–NSCC–
2023–011]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Granting Approval
of a Proposed Rule Change To Refine
the Margin Liquidity Adjustment
(‘‘MLA’’) Charge Calculation and the
Description of the MLA Charge
January 9, 2024.
I. Introduction
On November 17, 2023, National
Securities Clearing Corporation
51 17
CFR 200.30–3(a)(12).
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(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
proposed rule change SR–NSCC–2023–
011 (‘‘Proposed Rule Change’’) to
modify NSCC’s Rules & Procedures
(‘‘Rules’’) 3 to refine the Margin
Liquidity Adjustment (‘‘MLA’’) charge
calculation and the description of the
MLA Charge, as described in greater
detail below. The Proposed Rule Change
was published for public comment in
the Federal Register on December 1,
2023.4 The Commission has received no
comments on the Proposed Rule
Change. For the reasons discussed
below, the Commission is approving the
Proposed Rule Change.
II. Background
A. Overview of NSCC’s Margin
Methodology
NSCC provides central counterparty
(‘‘CCP’’) services, including clearing,
settlement, risk management, and a
guarantee of completion for virtually all
broker-to-broker trades involving equity
securities, corporate and municipal debt
securities, and certain other securities.
As a CCP, NSCC interposes itself as the
buyer to every seller and seller to every
buyer for the financial transactions it
clears. As such, NSCC is exposed to the
risk that one or more of its members
may fail to make a payment or to deliver
securities.
A key tool that NSCC uses to manage
its credit exposure to its members is
determining and collecting an
appropriate Required Fund Deposit (i.e.,
margin) for each member.5 The objective
of a Member’s margin is to mitigate
potential losses to NSCC associated with
liquidating a Member’s portfolio in the
event NSCC ceases to act for that
Member (hereinafter referred to as a
‘‘default’’).6 The aggregated amount of
all members’ margin constitutes the
NSCC Clearing Fund. NSCC would
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Terms not defined herein are defined in the
NSCC Rules, as applicable, available at https://
dtcc.com/∼/media/Files/Downloads/legal/rules/
nscc_rules.pdf.
4 See Securities Exchange Act Release No. 99022
(Nov. 27, 2023), 88 FR 83993 (Dec. 1, 2023) (File
No. SR–NSCC–2023–011) (‘‘Notice of Filing’’).
5 See Rule 4 (Clearing Fund) and Procedure XV
(Clearing Fund Formula and Other Matters) of the
Rules, supra note 3.
6 The Rules identify when NSCC may cease to act
for a Member and the types of actions NSCC may
take. For example, NSCC may suspend a firm’s
membership with NSCC or prohibit or limit a
Member’s access to NSCC’s services in the event
that Member defaults on a financial or other
obligation to NSCC. See Rule 46 (Restrictions on
Access to Services) of the Rules, supra note 3.
2 17
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access its Clearing Fund should a
defaulting Member’s own margin be
insufficient to satisfy losses to NSCC
caused by the liquidation of that
Member’s portfolio.7 Each member’s
margin consists of several components,
each of which is designed to address
specific risks faced by NSCC arising out
of its members’ trading activity.
B. NSCC’s MLA Charge
The MLA Charge 8 is a margin
component designed to address the
market impact costs of liquidating a
defaulted Member’s portfolio that may
increase when that portfolio includes
large Net Unsettled Positions in a
particular group of securities with a
similar risk profile or in a particular
asset type (referred to as ‘‘asset
groups’’), thereby causing those costs to
be higher than the amount collected for
the Member’s volatility charge.9 A
portfolio with large Net Unsettled
Positions in a particular group of
securities with a similar risk profile or
in a particular asset type may be more
difficult to liquidate in the market in the
event the Member defaults because a
concentration in that group of securities
or in an asset type could reduce the
marketability of those large positions.
Therefore, such portfolios create a risk
that NSCC may face increased market
impact cost to liquidate that portfolio in
the assumed margin period of risk of
three business days at market prices.
The MLA Charge is calculated to
address this increased market impact
cost by determining an amount of
margin to mitigate this risk. The MLA
Charge is calculated for different asset
groups. Essentially, the calculation is
designed to compare the total market
value of a Net Unsettled Position in a
particular asset group, which NSCC
would be required to liquidate in the
event of a Member default, to the
available trading volume of that asset
group or equities subgroup in the
market.10
Specifically, when calculating the
MLA Charge, NSCC currently
categorizes securities into separate asset
groups that have similar risk profiles—
(1) equities 11 (excluding equities
7 See
Rule 4 (Clearing Fund), supra note 3.
Securities Exchange Act Release Nos. 90181
(Oct. 14, 2020), 85 FR 66646 (Oct. 20, 2020) (File
No. SR–NSCC–2020–016) and 90034 (Sep. 28,
2020), 85 FR 62342 (Oct. 2, 2020) (File No. SR–
NSCC–2020–804) (introduced the MLA Charge).
9 The volatility charge is designed to capture the
market price risk associated with liquidating each
Member’s portfolio at a 99th percentile level of
confidence. See Notice of Filing, supra note 4, at
83994.
10 See id.
11 NSCC excludes long positions in Family-Issued
Securities, as defined in Rule 1 (Definitions) of the
8 See
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defined as Illiquid Securities pursuant
to the Rules),12 (2) Illiquid Securities,
(3) unit investment trusts, or UITs, (4)
municipal bonds (including municipal
bond ETPs), and (5) corporate bonds
(including corporate bond ETPs).13
NSCC then further segments the equities
asset group into the following
subgroups: (i) micro-capitalization
equities, (ii) small capitalization
equities, (iii) medium capitalization
equities, (iv) large capitalization
equities, (v) treasury ETPs, and (vi) all
other ETPs.14 NSCC then calculates a
measurement of market impact cost for
each asset group and equities asset
subgroup for which a Member has Net
Unsettled Positions in its portfolio.15
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III. Description of the Proposed Rule
Change
NSCC proposes to refine the MLA
Charge calculation to more accurately
calculate the impact costs of liquidating
a security/portfolio by (i) moving all
exchange traded products (‘‘ETPs’’)
(other than those deemed to be Illiquid
Securities) into the equities asset group
Rules, from the MLA Charge. NSCC believes the
margin charge applicable to long Net Unsettled
Positions in Family-Issued Securities pursuant to
Sections I(A)(1)(a)(iv) and (2)(a)(iv) of Procedure XV
of the Rules provides adequate mitigation of the
risks presented by those Net Unsettled Positions,
such that an MLA Charge would not be triggered.
See id. at n.14. See also supra note 3.
12 See Rule 1 (Definitions), supra note 3.
13 See Sections I(A)(1)(g) and I(A)(2)(f) of
Procedure XV of the Rules, supra note 3. Additional
details regarding the calculation of the MLA Charge
are set forth in the NSCC’s Methodology
Documentation for Quantitative Margin Risk
Models (‘‘Methodology Documentation’’). NSCC
would revise the Methodology Documentation to
incorporate the changes in the Proposed Rule
Change and included copies of changes to the
Methodology Documentation in Exhibit 3b to the
Proposed Rule Change. Pursuant to 17 CFR
240.24b–2, NSCC requested confidential treatment
of Exhibit 3b.
14 Id. The market capitalization categorizations
currently are as follows: (i) micro-capitalization
equities have a capitalization of less than $300
million, (ii) small capitalization equities have a
capitalization of equal to or greater than $300
million and less than $2 billion, (iii) medium
capitalization equities have a capitalization of equal
to or greater than $2 billion and less than $10
billion, and (iv) large capitalization equities have a
capitalization of equal to or greater than $10 billion.
NSCC reviews these categories annually, and any
changes that NSCC deems appropriate are subject
to NSCC’s model risk management governance
procedures set forth in the Clearing Agency Model
Risk Management Framework (‘‘Model Risk
Management Framework’’). See Securities Exchange
Act Release Nos. 81485 (Aug. 25, 2017), 82 FR
41433 (Aug. 31, 2017) (File No. SR–NSCC–2017–
008); 84458 (Oct. 19, 2018), 83 FR 53925 (Oct. 25,
2018) (File No. SR–NSCC–2018–009); 88911 (May
20, 2020), 85 FR 31828 (May 27, 2020) (File No. SR–
NSCC–2020–008); 92381 (July 13, 2021), 86 FR
38163 (July 19, 2021) (SR–NSCC–2021–008); and
94272 (Feb. 17, 2022), 87 FR 10419 (Feb., 24 2022)
(SR–NSCC–2022–001).
15 See Sections I(A)(1)(g) and I(A)(2)(f) of
Procedure XV of the Rules, supra note 3.
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and calculating impact cost at the
security level rather than at the
subgroup level for the equities asset
subgroups, and (ii) improving the
calculations relating to exchange traded
funds (‘‘ETFs’’) by adding a calculation
for latent liquidity for equity ETFs with
in-kind baskets. In addition, NSCC
proposes to amend the description of
the MLA Charge to clarify the
description of the calculation with
respect to SFT Positions in connection
with Securities Financing Transactions.
A. Moving Liquid ETPs Into Equities
Asset Group and Providing Security
Level Market Impact Cost Calculations
NSCC proposes to move all ETPs,
including corporate bond ETPs and
municipal bond ETPs, other than ETPs
that are deemed to be Illiquid Securities,
into the equities asset group. Currently,
corporate bond ETPs and municipal
bond ETPs are included as corporate
bonds and municipal bonds,
respectively, for purposes of the MLA
Charge calculation. ETPs are traded on
an exchange giving them equity-like
properties, such as trading volume data
at the security level apart from their
underlying assets which may not be
actively traded. Therefore, the impact
costs of liquidating ETPs can be
estimated in the same manner as other
items in the equities asset subgroups, at
the security level, as discussed below.
ETPs that are deemed to be Illiquid
Securities would be included in the
Illiquid Securities category.16
NSCC also proposes to revise the
market impact cost calculation for the
equities asset group and subgroups to
calculate the impact cost at the security
level. Based on a review of its margin
methodologies (and the ETF Study
discussed below), NSCC has determined
that equities and liquid ETPs display a
wide disparity of trading volumes (as
measured by average daily volumes)
even within subgroups, and the market
impact costs are more dependent on
specific securities than the subgroup.17
As a result, NSCC is proposing to
calculate the market impact costs for
securities in the equities asset group,
including liquid ETPs, at the security
level rather than at the subgroup level,
which NSCC states has shown to be a
more accurate calculation of market
impact costs for these securities.18
16 See definition of ‘‘Illiquid Security’’ in Rule 1,
supra note 3. For instance, if an ETP is not listed
on a specified securities exchange or has a limited
trading history, as defined in the definition, it
would be treated as an Illiquid Security for
purposes of the MLA Charge calculations.
17 See Notice of Filing, supra note 4, at 83996.
18 Id.
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2703
Currently, the MLA Charge
calculation for the equity asset
subgroups includes a measurement of
the concentration of the Net Unsettled
Position in the subgroup.19 Since the
market impact cost would be calculated
at the security level for the equities asset
group, rather than the subgroup level,
this measurement would no longer be
necessary and would be removed.
In addition, for each asset group or
subgroup, NSCC currently compares the
calculated market impact cost to a
portion of the volatility charge that is
allocated to Net Unsettled Positions in
that asset group or subgroup and
compares that ratio to a threshold to
determine if an MLA Charge is
applicable to that asset group or
subgroup.20 Since the market impact
cost would be calculated at the security
level for all assets in the equity asset
group, rather than the subgroup level,
this comparison would be at the asset
group level for all asset groups,
including the equities asset group, and
would no longer be made at the
subgroup level for subgroups within the
equities asset group.
To reflect these changes in the Rules,
NSCC would amend Sections I(A)(1)(g)
and I(A)(2)(f) of Procedure XV of the
Rules 21 to move all ETP categories as
subgroups in the equities asset group
other than ETPs that are deemed to be
Illiquid Securities, which would be
categorized as Illiquid Securities. A
footnote in each of these sections would
be added to the ‘‘all other ETPs’’
category to clarify that ETPs with
underlying securities separately
categorized in an equities asset
subgroup would be categorized by the
asset types and capitalizations of their
underlying securities, and that ETPs
that are deemed Illiquid Securities
would be categorized in the Illiquid
Securities asset group.
Sections I(A)(1)(g) and I(A)(2)(f) of
Procedure XV would be restructured to
reflect that the market impact
calculation for securities in the equities
asset group would be calculated at the
security level rather than the subgroup
19 See
id. at 83995.
note 3. NSCC’s margining methodology
uses a three-day assumed period of risk. For
purposes of this calculation, NSCC uses a portion
of the applicable volatility charge that is based on
one-day assumed period of risk and calculated by
applying a simple square-root of time scaling,
referred to in this proposed rule change as ‘‘1-day
volatility charge.’’ Any changes that NSCC deems
appropriate to this assumed period of risk would be
subject to NSCC’s model risk management
governance procedures set forth in the Model Risk
Management Framework. See supra note 14. See
also Sections I(A)(1)(g) and I(A)(2)(f) of Procedure
XV of the Rules, supra note 3.
21 See Sections I(A)(1)(g) and I(A)(2)(f) of
Procedure XV of the Rules, supra note 3.
20 Supra
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level, as discussed above. As a result of
this change, the current component that
measures the concentration of each Net
Unsettled Position in a subgroup would
be removed from Sections I(A)(1)(g)(i)(4)
and I(A)(2)(f)(i)(4) of Procedure XV.
References to subgroup calculations
would also be removed in applicable
provisions, including the provisions
relating to comparing the calculated
market impact cost at the subgroup level
to the volatility charge applicable to the
Net Unsettled Positions and an
applicable MLA Charge at the subgroup
level and a sentence that states that all
MLA Charges for each of the equities
subgroups shall be added together to
result in one MLA Charge for the
equities subgroup. In addition,
references to subgroups with respect to
calculations relating to asset groups
other than the equities asset group
currently in Sections I(A)(1)(g)(ii) and
I(A)(2)(f)(ii) (i.e., references to the
treasury ETP and other ETP subgroups)
would be removed since those would be
calculated as part of the equities asset
group, as discussed above.
NSCC would add language to clarify
that for each Member, all MLA Charges
for each of the asset groups shall be
added together to result in a total MLA
Charge.
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B. Changes to ETF Calculations
NSCC proposes to amend the impact
cost calculations for ETFs to more
accurately account for the market
impact of these securities and in
response to regulatory feedback on
NSCC’s margin methodologies, by
incorporating ‘‘latent’’ liquidity to more
accurately reflect the market liquidity of
ETFs.22 ETFs are securities that are
traded on an exchange and that track
underlying securities, indexes or other
financial instruments, including
equities, corporate and municipal bonds
and treasury instruments. Unlike
mutual funds, ETFs are created with the
assistance of certain financial
institutions called authorized
participants (‘‘APs’’), often banks, that
are given the ability to create and
redeem ETF shares directly from the
ETF issuer. To create ETF shares, an AP
can either deliver a pre-specified bundle
of securities underlying the ETFs (i.e.,
an ‘‘in-kind basket’’) in exchange for
ETF shares, or provide cash equal to the
value of the cost of purchasing
underlying securities for the ETF shares.
To redeem ETF shares, an AP would do
the opposite—deliver ETF shares to the
ETF issuer in exchange for an in-kind
basket of underlying securities or cash
22 See
Notice of Filing, supra note 4, at 83996.
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equal to the value of the underlying
securities.
Throughout the life of an ETF, APs
create and redeem shares depending on
the market and arbitrage opportunities.
As a result, ETFs, particularly those
with in-kind creation/redemption
mechanisms, tend to trade close to the
value of the underlying securities. For
instance, if the market price of the ETF
on the secondary market (discussed
below) is above the value of the
securities underlying the ETF, the AP
can purchase underlying securities (at
the lower price) and exchange those
securities to create new ETFs. Likewise,
if the market price of the ETF falls
below the value of the securities
underlying the ETFs, an AP can buy
ETF shares on the secondary market and
redeem them with the ETF issuer in
exchange for the underlying securities.
As a result of this structure, ETF
market liquidity can be divided into two
markets: the primary market and the
secondary market. The primary market
consists of APs creating and redeeming
ETF shares directly with the ETF issuer.
The secondary market consists of
investors buying and selling ETFs
through exchanges. Often the stocks
underlying an ETF basket have much
larger trading volumes than the trading
volume of the ETF itself. Upon the
liquidation of a portfolio with ETFs, the
ability of APs to create and redeem ETF
shares provides additional liquidity,
also called ‘‘latent liquidity,’’ which
changes the market risk profile of ETFs
with in-kind basket creation/redemption
processes.
The current impact cost calculation
for the MLA Charge does not include
calculations measuring the impact
relating to latent liquidity. NSCC
recently commissioned a review of ETFs
(‘‘ETF Study’’) that included an ETF
market review, risk characteristics, and
an independent simulation of market
impact costs associated with sample
clearing portfolios.23 Based on the ETF
Study, it was observed that most equity
ETFs with an in-kind creation/
redemption process trade with very
tight premium/discount to net asset
value (‘‘NAV’’), or close to the value of
the underlying securities.24 Often,
however, the stocks underlying the
equity ETF baskets have a much larger
23 NSCC included the ETF Study in Exhibit 3c to
the Proposed Rule Change. Pursuant to 17 CFR
240.24b–2, NSCC requested confidential treatment
of Exhibit 3c.
24 Id. When an ETF’s market price is higher than
its NAV, it’s trading at a premium, when it’s lower,
it’s trading at a discount. The spread between the
premium or discount to the NAV represents a
potential cost to close out the paired ETF and its
in-kind basket.
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trading volume than the equity ETF
itself, which creates latent liquidity.
As a result, NSCC is proposing to
include, as part of its impact
calculation, a measure of the latent
liquidity for equity ETFs with in-kind
basket creation/redemption processes
and a measure of the costs associated
with primary market activity to more
accurately assess the impact costs
relating to liquidating portfolios
containing equity ETFs. The proposed
calculation would take into account
liquidity in the primary and secondary
market for liquid equity ETFs with inkind creation/redemption processes, by
comparing the market impact cost of
such equity ETFs based on a
hypothetical liquidation in the primary
market and in the secondary market.
To determine the impact costs of a
liquidation of equity ETFs with in-kind
baskets, NSCC would run the proposed
MLA Charge calculations described
above in two scenarios for portfolios
that contain such ETFs and compare the
two calculations to determine the
impact cost. NSCC would run a baseline
calculation (‘‘Baseline Calculation’’) to
simulate all the ETF positions being
liquidated in the secondary market and
the impact cost calculation would be at
the security level (i.e., the ETF shares)
as liquid equities (as discussed above).
NSCC would also run an alternative
calculation (‘‘Create/Redeem
Calculation’’) to simulate the ETF
positions being liquidated in the
primary market using the creation/
redemption process.
The Create/Redeem Calculation
would be calculated as follows:
• First, the liquid equity ETFs eligible
for in-kind create/redeem process would
be fully decomposed into (a) the
corresponding underlying baskets of the
liquid equity ETFs and (b) pairs of such
ETFs and their corresponding
underlying baskets;
• Second, the decomposed
underlying baskets and the residual
securities in the portfolio (i.e., the
securities in the original portfolio that
are not ETFs eligible for in-kind create/
redeem process) would be netted at the
security level;
• Third, the impact cost on the
portfolio from the second step would be
calculated assuming all the securities
would be liquidated in the secondary
market, and the impact costs would be
calculated as described above as if such
securities are liquid equities;
• Fourth, the impact cost calculated
in the third step would be adjusted by
an amount to account for the portfolio
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risk difference 25 from the netted
securities resulting from the second
step, as compared to the original
portfolio;
• Fifth, the impact cost for paired
ETFs and their corresponding
underlying baskets would be calculated
by multiplying the gross market amount
of the ETFs by a haircut representing the
premium/discount; 26 and
• Lastly, the impact costs from step
four and step five would be added
together.
NSCC would then use the smaller
calculated impact costs of either the
Baseline Calculation or the Create/
Redeem Calculation for purposes of
calculating the MLA Charge.
To reflect these changes in the Rules,
NSCC would add language in Sections
I(A)(1)(g) and I(A)(2)(f) of Procedure XV
stating that the impact cost for ETFs
with in-kind baskets would include
calculations comparing impact costs in
the secondary market and the primary
market for such equity ETFs, as
discussed above. NSCC would indicate
that it would calculate impact costs in
two scenarios: (1) a baseline calculation
to simulate such ETFs being liquidated
in the secondary market where the
impact costs would be calculated at the
security level (i.e., the ETF shares)
utilizing the equities asset subgroup
security level and (2) a create/redeem
calculation to simulate an authorized
participant using the primary market to
liquidate such ETFs using the creation/
redemption process. The proposed
language would include a description of
the how the impact costs for the create/
redeem calculation would be calculated
by decomposing the ETFs into their
underlying securities and calculating
impact costs of such underlying
securities utilizing the equity asset
subgroup calculations (as discussed
above). The proposed language would
also state that an adjustment would be
made in the create/redeem calculation
to reflect the different portfolio risks of
the original portfolio used in the
baseline calculation and the
25 The original portfolio used in the Baseline
Calculation and the decomposed portfolio from step
two would have different portfolio risks. As a
result, because such portfolios would contain
different positions, they would have different VaR
Charges if calculated separately. The VaR Charge of
the original portfolio is a component of the MLA
Charge calculation for the portfolio from step two.
Step four would adjust for those differences as part
of the impact cost.
26 The haircut is calculated as an estimate of the
cost of closing out the ETFs and underlying pairs
using the create/redeem process. The haircut is a
model parameter and will be reviewed at least
monthly in accordance with the model risk
management governance procedures set forth in the
model Risk Management Framework. See supra
note 14.
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18:57 Jan 12, 2024
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decomposed portfolio used in the
create/redeem calculation. The
proposed language would provide that
NSCC would then use the smaller
calculated impact costs of the scenarios
for purposes of the MLA Charge for such
ETFs.
C. Changes Concerning SFT Positions
Rule 56 describes the SFT Clearing
Service and contains a description of
how the Clearing Fund formula is
calculated with respect to SFT
Positions, including how such positions
are calculated with respect to the MLA
Charge.27 The Proposed Rule Change
would update the language in Rule 56
relating to the MLA Charge to clarify
how NSCC would calculate the MLA
Charge with respect to SFT Positions for
transparency and to reflect the proposed
MLA Charge refinements, but it would
not change how NSCC would calculate
the MLA Charge with respect to SFT
positions. NSCC would clarify how SFT
Positions would be categorized for
purposes of the MLA Charge by
replacing language stating that SFT
Positions are ‘‘aggregated with’’ Net
Unsettled Positions in the same asset
group or subgroup with language that
clarifies that SFT Positions would be
categorized in the same asset groups or
subgroups as the underlying SFT
Securities in such SFT Positions. NSCC
would also clarify language discussing
an added calculation relating to the
MLA Charge in the event a Member’s
portfolio contains both (i) SFT Positions
and (ii) Net Unsettled Positions or Net
Balance Order Unsettled Positions. The
language in Rule 56 relating to the
added calculation for SFT positions
does not reference Net Balance Order
Unsettled Positions which are treated in
the same manner as Net Unsettled
Positions for purposes of the added
calculation when a portfolio contains
both (i) SFT Positions and (ii) Net
Unsettled Positions or Net Balance
Order Unsettled Positions. The
proposed language would add a
reference to Net Balance Order
Unsettled Positions.
NSCC is also proposing to add a
sentence in Sections I(A)(1)(g) and
I(A)(2)(f) of Procedure XV of the Rules
clarifying that if a Member’s portfolio
contains both (i) SFT Positions and (ii)
Net Unsettled Positions or Net Balance
Order Unsettled Positions, the MLA
Charge shall be calculated as set forth in
Rule 56.
27 See Rule 56 (Securities Financing Transaction
Clearing Service) of the Rules, supra note 3.
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2705
IV. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act 28
directs the Commission to approve a
proposed rule change of a selfregulatory organization if it finds that
such proposed rule change is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to such organization. After
carefully considering the proposed rule
change, the Commission finds that the
Proposed Rule Change is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to NSCC. In particular, the
Commission finds that the Proposed
Rule Change is consistent with Section
17A(b)(3)(F) 29 of the Act and Rules
17Ad–22(e)(4)(i), and (e)(6)(i)
thereunder.30
A. Consistency With Section
17A(b)(3)(F) of the Act
1. Prompt and Accurate Clearance and
Settlement
Section 17A(b)(3)(F) of the Act 31
requires that the rules of a clearing
agency, such as NSCC, be designed to,
among other things, promote the prompt
and accurate clearance and settlement of
securities transactions and assure the
safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible.32 The Commission believes
that the Proposed Rule Change is
consistent with Section 17A(b)(3)(F) of
the Act for the reasons stated below.
As described above in Sections III.A
and B, NSCC proposes to refine the
MLA Charge calculation to more
accurately calculate the impact costs of
liquidating a security/portfolio by
moving all ETPs (except for Illiquid
Securities) into the equities asset group
and calculating impact cost at the
security level rather than at the
subgroup level for the equities asset
subgroups, and by adding a calculation
for latent liquidity for equity ETFs. As
a result, the proposal would better align
the MLA Charge with the risks arising
from position concentrations in
portfolios containing ETPs and ETFs.
The Commission believes that a closer
alignment between the MLA Charge and
the risks presented by the concentration
of securities Member portfolios would
help facilitate NSCC’s ability to set
margins that more accurately reflect the
risks posed by such portfolios. Setting
28 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
30 17 CFR 240.17Ad–22(e)(4)(i) and(e)(6)(i).
31 15 U.S.C. 78q–1(b)(3)(F).
32 Id.
29 15
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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
margins that accurately reflect the risks
posed by its members’ portfolios could
reduce the likelihood that NSCC would
not have collected sufficient margin to
address losses arising out of a member
default. Reducing the likelihood that
NSCC holds insufficient margin to
address default losses would, in turn,
further assure that NSCC’s operation of
its critical clearance and settlement
services would not be disrupted because
of insufficient financial resources.
As part of the Proposed Rule Change,
NSCC filed Exhibit 3a—Summary of
Impact Study (‘‘Impact Study’’), which
provided the actual MLA Charges at the
member-level, account-level, and CCPlevel, from January 3, 2022 through June
30, 2023, as compared to the MLA
Charges that NSCC would have assessed
if the proposed amendments had been
in place during that time period.33 The
Commission reviewed and analyzed the
Impact Study, which showed, among
other things, that had the proposed
amendments been in place during that
period, it would have resulted in an
average daily increase of $62 million in
the aggregate MLA Charge. Therefore,
the Commission believes that the Impact
Study demonstrates that the proposed
MLA Charge calculation would enable
NSCC to set more precise margin
coverage levels than those using the
current calculation, providing further
assurance that NSCC’s operation of its
critical clearance and settlement
services would not be disrupted because
of insufficient financial resources.
As described above in Section III.C,
NSCC proposes to provide transparency
to the Rules by updating the language
relating to how the MLA Charge is
calculated with respect to SFT
Positions. Enhancing the clarity of the
NSCC Rules would enable members to
more efficiently and effectively
understand and conduct their business
in accordance with the NSCC Rules.
Accordingly, for the reasons above,
the Commission finds that the Proposed
Rule Change should help NSCC to
continue providing prompt and accurate
clearance and settlement of securities
transactions, consistent with Section
17A(b)(3)(F) of the Act.34
2. Safeguarding Securities and Funds
In the event that a defaulted member’s
own margin be insufficient to satisfy
losses to NSCC caused by the
liquidation of that member’s portfolio,
NSCC would access the mutualized
Clearing Fund. As discussed above in
Section IV.A.1, NSCC’s proposed
33 NSCC has requested confidential treatment of
Exhibit 3a, pursuant to 17 CFR 240.24b–2.
34 15 U.S.C. 78q–1(b)(3)(F).
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18:57 Jan 12, 2024
Jkt 262001
enhancements to the MLA Charge
calculation discussed in Sections III.A
and B should help facilitate NSCC’s
ability to promptly respond to changing
risk profiles of its members’ portfolios,
and thereby set margins that more
accurately reflect the risks posed by
such portfolios. As a result, the proposal
would better align the MLA Charge with
the risks arising from position
concentrations in portfolios containing
ETPs and ETFs should help ensure that
NSCC collects sufficient margin from its
members. Accordingly, the Proposed
Rule Change should help minimize the
likelihood that NSCC would have to
access the Clearing Fund, thereby
limiting non-defaulting members’
exposure to mutualized losses.
The Commission believes that by
helping to limit the exposure of NSCC’s
non-defaulting members to mutualized
losses, the Proposed Rule Change would
help NSCC assure the safeguarding of
securities and funds which are in its
custody or control, consistent with
Section 17A(b)(3)(F) of the Act.35
B. Consistency With Rule 17Ad–
22(e)(4)(i) Under the Act
Rule 17Ad–22(e)(4)(i) under the Act
requires that each covered clearing
agency that provides central
counterparty services, such as NSCC,
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to effectively
identify, measure, monitor, and manage
its credit exposures to participants and
those arising from its payment, clearing,
and settlement processes, including by
maintaining sufficient financial
resources to cover its credit exposure to
each participant fully with a high degree
of confidence.36 The Commission
believes that the proposal is consistent
with Rule 17Ad–22(e)(4)(i) under the
Act for the reasons stated below.
As discussed above in Section IV.A,
NSCC’s proposed enhancements to the
MLA Charge calculation would
apportion a higher MLA Charge to those
members’ accounts that present greater
potential risk to NSCC due to large Net
Unsettled Positions in a particular group
of securities with a similar risk profile
or asset types that may be more difficult
to liquidate in the market in the event
the member defaults. As a result, the
proposal would better align the MLA
Charge with the risks arising from
position concentration in such
portfolios. The Commission has
reviewed and analyzed the filing
materials, including the Impact Study,37
and agrees that the proposed
enhancements to the MLA Charge
calculation should better enable NSCC
to collect margin amounts that are
sufficient to mitigate NSCC’s credit
exposures to its members’ portfolios, as
compared to the current methodology.
Accordingly, the Commission finds
the Proposed Rule Change is consistent
with Rule 17Ad–22(e)(4)(i) under the
Act because it is designed to assist
NSCC in managing its credit exposures
to its members by maintaining sufficient
financial resources to cover its credit
exposure to the portfolios of members
with ETP and equity ETF positions in
their respective portfolios.38
C. Consistency With Rule 17Ad–
22(e)(6)(i) Under the Act
Rule 17Ad–22(e)(6)(i) under the Act
requires that each covered clearing
agency that provides central
counterparty services, such as NSCC,
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to cover its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market.39 The Commission believes that
the proposal is consistent with Rule
17Ad–22(e)(6)(i) under the Act for the
reasons stated below.
As discussed above in Section IV.A,
NSCC’s proposed enhancements to the
MLA Charge calculation would
apportion a higher MLA Charge to those
member accounts that present greater
potential risk to NSCC due to large Net
Unsettled Positions in a particular group
of securities with a similar risk profile
or asset types that may be more difficult
to liquidate in the market in the event
the member defaults. As a result, the
proposal would better align the MLA
Charge with the risks arising from
position concentration in such member
portfolios. The Commission has
reviewed and analyzed the filing
materials, including the Impact Study,40
and agrees that the proposed
enhancements to the MLA Charge
calculation would enable NSCC to set
margins that more accurately reflect the
risks posed by such portfolios than the
current methodology. As a result,
implementing the Proposed Rule
Change would better enable NSCC to set
and collect margin at levels
35 Id.
38 17
36 17
39 17
CFR 240.17Ad–22(e)(4)(i).
37 See supra note 33.
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Fmt 4703
Sfmt 4703
CFR 240.17Ad–22(e)(4)(i).
CFR 240.17Ad–22(e)(6)(i).
40 See supra note 33.
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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices
commensurate with the risks associated
with the portfolios of its members.
Accordingly, the Commission finds
the Proposed Rule Change is consistent
with Rule 17Ad–22(e)(6)(i) under the
Act because it is designed to assist
NSCC in maintaining a risk-based
margin system that considers, and
produces margin levels commensurate
with, the risks and particular attributes
of members’ portfolios.41
VII. Conclusion
On the basis of the foregoing, the
Commission finds that the Proposed
Rule Change is consistent with the
requirements of the Act and in
particular with the requirements of
Section 17A of the Act 42 and the rules
and regulations promulgated
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 43 that
Proposed Rule Change SR–NSCC–2023–
011, be, and hereby is, approved.44
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.45
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–00630 Filed 1–12–24; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. 2013–0259]
Agency Information Collection
Activities: Requests for Comments;
Clearance of Renewed Approval of
Information Collection: Advisory
Circular: Reporting of Laser
Illumination of Aircraft
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice and request for
comments.
AGENCY:
In accordance with the
Paperwork Reduction Act of 1995, FAA
invites public comments about our
intention to request the Office of
Management and Budget (OMB)
approval renew information collection.
The Federal Register Notice with a 60day comment period soliciting
comments on the following collection of
information was published on August
ddrumheller on DSK120RN23PROD with NOTICES1
SUMMARY:
41 17
CFR 240.17Ad–22(e)(6)(i).
U.S.C. 78q–1.
43 15 U.S.C. 78s(b)(2).
44 In approving the Proposed Rule Change, the
Commission considered its impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
45 17 CFR 200.30–3(a)(12).
42 15
VerDate Sep<11>2014
18:57 Jan 12, 2024
Jkt 262001
17, 2023. The collection involves
information to be collected will be used
to and/or is necessary because Advisory
Circular 70–2B provides guidance to
civilian air crews on the reporting of
laser illumination incidents and
recommended mitigation actions to be
taken in order to ensure continued safe
and orderly flight operations.
DATES: Written comments should be
submitted by February 13, 2024.
ADDRESSES: Please send written
comments:
By Electronic Docket:
www.regulations.gov (Enter docket
number into search field)
By mail: Nicholas Torgerson, Federal
Aviation Administration, AJR–223, 800
Independence Ave. SW, Washington,
DC 20591.
FOR FURTHER INFORMATION CONTACT:
Nicholas Torgerson, by email at:
Nicholas.d.torgerson@faa.gov; phone:
202–322–4157
SUPPLEMENTARY INFORMATION:
Public Comments Invited: You are
asked to comment on any aspect of this
information collection, including (a)
Whether the proposed collection of
information is necessary for FAA’s
performance; (b) the accuracy of the
estimated burden; (c) ways for FAA to
enhance the quality, utility and clarity
of the information collection; and (d)
ways that the burden could be
minimized without reducing the quality
of the collected information. The agency
will summarize and/or include your
comments in the request for OMB’s
clearance of this information collection.
OMB Control Number: 2120–0698.
Title: Advisory Circular (AC):
Reporting of Laser Illumination of
Aircraft.
Form Numbers: Advisory Circular 70–
2B, Reporting of Laser Illumination of
Aircraft.
Type of Review: Renewal of an
information collection.
Background: The Federal Register
Notice with a 60-day comment period
soliciting comments on the following
collection of information was published
on August 17, 2023 (88 FR 58633).
Advisory Circular 70–2B provides
guidance to civilian air crews on the
reporting of laser illumination incidents
and recommended mitigation actions to
be taken in order to ensure continued
safe and orderly flight operations.
Information is collected from pilots and
aircrews that are affected by an
unauthorized illumination by lasers.
The requested reporting involves an
immediate broadcast notification to Air
Traffic Control (ATC) when the incident
occurs, as well as a broadcast warning
of the incident if the aircrew is flying in
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Fmt 4703
Sfmt 4703
2707
uncontrolled airspace. In addition, the
AC requests that the aircrew supply a
written report of the incident and send
it by fax or email to the Washington
Operations Control Complex (WOCC) as
soon as possible.
Respondents: Approximately 1,100
pilots and crewmembers.
Frequency: Information is collected
on occasion.
Estimated Average Burden per
Response: 10 minutes.
Estimated Total Annual Burden: 183
hours.
Issued in Washington, DC, on January 10,
2024.
Sandra L. Ray,
Aviation Safety Inspector, AFS–260.
[FR Doc. 2024–00687 Filed 1–12–24; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
[Docket Number FRA–2023–0066]
Petition for Waivers of Compliance
Under part 211 of title 49 Code of
Federal Regulations (CFR), this
document provides the public notice
that on August 10, 2023, Georgia Central
Railway, L.P. and Heart of Georgia
Railroad, Inc. (Petitioners) submitted a
request to the Federal Railroad
Administration (FRA) under 49 CFR
211.51 for approval of a test program,
and the temporary suspension of certain
FRA safety regulations in connection
with that program (Program). Petitioners
explain that the proposed test program
involves a system of a ‘‘novel, selfpropelled, zero-emission, batteryelectric rail vehicle’’ (Vehicle) and its
associated computer and telemetry
technology (System), manufactured by
Parallel Systems, Inc. Petitioners state
that the goal of the technology is to
provide smaller freight railroads an
opportunity to meaningfully compete in
the short-haul transportation of
containers, and the technology also
provides ‘‘numerous public benefits for
the environment, the economy, the
national highway system, and
communities disproportionately
impacted by highway movement of
containers.’’ Petitioners contend that
‘‘safety is an overriding focus of the
proposed program’’ and the Pilot Test
Safety Plan is included in Exhibit C of
the submission. Petitioners state that the
Program is ‘‘designed to evaluate the
effectiveness of the system and new
operational approaches to rail vehicle
technology in the short-haul movement
of containers.’’
E:\FR\FM\16JAN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 10 (Tuesday, January 16, 2024)]
[Notices]
[Pages 2702-2707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00630]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99303; File No. SR-NSCC-2023-011]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Granting Approval of a Proposed Rule Change To
Refine the Margin Liquidity Adjustment (``MLA'') Charge Calculation and
the Description of the MLA Charge
January 9, 2024.
I. Introduction
On November 17, 2023, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
proposed rule change SR-NSCC-2023-011 (``Proposed Rule Change'') to
modify NSCC's Rules & Procedures (``Rules'') \3\ to refine the Margin
Liquidity Adjustment (``MLA'') charge calculation and the description
of the MLA Charge, as described in greater detail below. The Proposed
Rule Change was published for public comment in the Federal Register on
December 1, 2023.\4\ The Commission has received no comments on the
Proposed Rule Change. For the reasons discussed below, the Commission
is approving the Proposed Rule Change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Terms not defined herein are defined in the NSCC Rules, as
applicable, available at https://dtcc.com/~/media/Files/Downloads/
legal/rules/nscc_rules.pdf.
\4\ See Securities Exchange Act Release No. 99022 (Nov. 27,
2023), 88 FR 83993 (Dec. 1, 2023) (File No. SR-NSCC-2023-011)
(``Notice of Filing'').
---------------------------------------------------------------------------
II. Background
A. Overview of NSCC's Margin Methodology
NSCC provides central counterparty (``CCP'') services, including
clearing, settlement, risk management, and a guarantee of completion
for virtually all broker-to-broker trades involving equity securities,
corporate and municipal debt securities, and certain other securities.
As a CCP, NSCC interposes itself as the buyer to every seller and
seller to every buyer for the financial transactions it clears. As
such, NSCC is exposed to the risk that one or more of its members may
fail to make a payment or to deliver securities.
A key tool that NSCC uses to manage its credit exposure to its
members is determining and collecting an appropriate Required Fund
Deposit (i.e., margin) for each member.\5\ The objective of a Member's
margin is to mitigate potential losses to NSCC associated with
liquidating a Member's portfolio in the event NSCC ceases to act for
that Member (hereinafter referred to as a ``default'').\6\ The
aggregated amount of all members' margin constitutes the NSCC Clearing
Fund. NSCC would access its Clearing Fund should a defaulting Member's
own margin be insufficient to satisfy losses to NSCC caused by the
liquidation of that Member's portfolio.\7\ Each member's margin
consists of several components, each of which is designed to address
specific risks faced by NSCC arising out of its members' trading
activity.
---------------------------------------------------------------------------
\5\ See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund
Formula and Other Matters) of the Rules, supra note 3.
\6\ The Rules identify when NSCC may cease to act for a Member
and the types of actions NSCC may take. For example, NSCC may
suspend a firm's membership with NSCC or prohibit or limit a
Member's access to NSCC's services in the event that Member defaults
on a financial or other obligation to NSCC. See Rule 46
(Restrictions on Access to Services) of the Rules, supra note 3.
\7\ See Rule 4 (Clearing Fund), supra note 3.
---------------------------------------------------------------------------
B. NSCC's MLA Charge
The MLA Charge \8\ is a margin component designed to address the
market impact costs of liquidating a defaulted Member's portfolio that
may increase when that portfolio includes large Net Unsettled Positions
in a particular group of securities with a similar risk profile or in a
particular asset type (referred to as ``asset groups''), thereby
causing those costs to be higher than the amount collected for the
Member's volatility charge.\9\ A portfolio with large Net Unsettled
Positions in a particular group of securities with a similar risk
profile or in a particular asset type may be more difficult to
liquidate in the market in the event the Member defaults because a
concentration in that group of securities or in an asset type could
reduce the marketability of those large positions. Therefore, such
portfolios create a risk that NSCC may face increased market impact
cost to liquidate that portfolio in the assumed margin period of risk
of three business days at market prices.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release Nos. 90181 (Oct. 14,
2020), 85 FR 66646 (Oct. 20, 2020) (File No. SR-NSCC-2020-016) and
90034 (Sep. 28, 2020), 85 FR 62342 (Oct. 2, 2020) (File No. SR-NSCC-
2020-804) (introduced the MLA Charge).
\9\ The volatility charge is designed to capture the market
price risk associated with liquidating each Member's portfolio at a
99th percentile level of confidence. See Notice of Filing, supra
note 4, at 83994.
---------------------------------------------------------------------------
The MLA Charge is calculated to address this increased market
impact cost by determining an amount of margin to mitigate this risk.
The MLA Charge is calculated for different asset groups. Essentially,
the calculation is designed to compare the total market value of a Net
Unsettled Position in a particular asset group, which NSCC would be
required to liquidate in the event of a Member default, to the
available trading volume of that asset group or equities subgroup in
the market.\10\
---------------------------------------------------------------------------
\10\ See id.
---------------------------------------------------------------------------
Specifically, when calculating the MLA Charge, NSCC currently
categorizes securities into separate asset groups that have similar
risk profiles--(1) equities \11\ (excluding equities
[[Page 2703]]
defined as Illiquid Securities pursuant to the Rules),\12\ (2) Illiquid
Securities, (3) unit investment trusts, or UITs, (4) municipal bonds
(including municipal bond ETPs), and (5) corporate bonds (including
corporate bond ETPs).\13\ NSCC then further segments the equities asset
group into the following subgroups: (i) micro-capitalization equities,
(ii) small capitalization equities, (iii) medium capitalization
equities, (iv) large capitalization equities, (v) treasury ETPs, and
(vi) all other ETPs.\14\ NSCC then calculates a measurement of market
impact cost for each asset group and equities asset subgroup for which
a Member has Net Unsettled Positions in its portfolio.\15\
---------------------------------------------------------------------------
\11\ NSCC excludes long positions in Family-Issued Securities,
as defined in Rule 1 (Definitions) of the Rules, from the MLA
Charge. NSCC believes the margin charge applicable to long Net
Unsettled Positions in Family-Issued Securities pursuant to Sections
I(A)(1)(a)(iv) and (2)(a)(iv) of Procedure XV of the Rules provides
adequate mitigation of the risks presented by those Net Unsettled
Positions, such that an MLA Charge would not be triggered. See id.
at n.14. See also supra note 3.
\12\ See Rule 1 (Definitions), supra note 3.
\13\ See Sections I(A)(1)(g) and I(A)(2)(f) of Procedure XV of
the Rules, supra note 3. Additional details regarding the
calculation of the MLA Charge are set forth in the NSCC's
Methodology Documentation for Quantitative Margin Risk Models
(``Methodology Documentation''). NSCC would revise the Methodology
Documentation to incorporate the changes in the Proposed Rule Change
and included copies of changes to the Methodology Documentation in
Exhibit 3b to the Proposed Rule Change. Pursuant to 17 CFR 240.24b-
2, NSCC requested confidential treatment of Exhibit 3b.
\14\ Id. The market capitalization categorizations currently are
as follows: (i) micro-capitalization equities have a capitalization
of less than $300 million, (ii) small capitalization equities have a
capitalization of equal to or greater than $300 million and less
than $2 billion, (iii) medium capitalization equities have a
capitalization of equal to or greater than $2 billion and less than
$10 billion, and (iv) large capitalization equities have a
capitalization of equal to or greater than $10 billion. NSCC reviews
these categories annually, and any changes that NSCC deems
appropriate are subject to NSCC's model risk management governance
procedures set forth in the Clearing Agency Model Risk Management
Framework (``Model Risk Management Framework''). See Securities
Exchange Act Release Nos. 81485 (Aug. 25, 2017), 82 FR 41433 (Aug.
31, 2017) (File No. SR-NSCC-2017-008); 84458 (Oct. 19, 2018), 83 FR
53925 (Oct. 25, 2018) (File No. SR-NSCC-2018-009); 88911 (May 20,
2020), 85 FR 31828 (May 27, 2020) (File No. SR-NSCC-2020-008); 92381
(July 13, 2021), 86 FR 38163 (July 19, 2021) (SR-NSCC-2021-008); and
94272 (Feb. 17, 2022), 87 FR 10419 (Feb., 24 2022) (SR-NSCC-2022-
001).
\15\ See Sections I(A)(1)(g) and I(A)(2)(f) of Procedure XV of
the Rules, supra note 3.
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III. Description of the Proposed Rule Change
NSCC proposes to refine the MLA Charge calculation to more
accurately calculate the impact costs of liquidating a security/
portfolio by (i) moving all exchange traded products (``ETPs'') (other
than those deemed to be Illiquid Securities) into the equities asset
group and calculating impact cost at the security level rather than at
the subgroup level for the equities asset subgroups, and (ii) improving
the calculations relating to exchange traded funds (``ETFs'') by adding
a calculation for latent liquidity for equity ETFs with in-kind
baskets. In addition, NSCC proposes to amend the description of the MLA
Charge to clarify the description of the calculation with respect to
SFT Positions in connection with Securities Financing Transactions.
A. Moving Liquid ETPs Into Equities Asset Group and Providing Security
Level Market Impact Cost Calculations
NSCC proposes to move all ETPs, including corporate bond ETPs and
municipal bond ETPs, other than ETPs that are deemed to be Illiquid
Securities, into the equities asset group. Currently, corporate bond
ETPs and municipal bond ETPs are included as corporate bonds and
municipal bonds, respectively, for purposes of the MLA Charge
calculation. ETPs are traded on an exchange giving them equity-like
properties, such as trading volume data at the security level apart
from their underlying assets which may not be actively traded.
Therefore, the impact costs of liquidating ETPs can be estimated in the
same manner as other items in the equities asset subgroups, at the
security level, as discussed below. ETPs that are deemed to be Illiquid
Securities would be included in the Illiquid Securities category.\16\
---------------------------------------------------------------------------
\16\ See definition of ``Illiquid Security'' in Rule 1, supra
note 3. For instance, if an ETP is not listed on a specified
securities exchange or has a limited trading history, as defined in
the definition, it would be treated as an Illiquid Security for
purposes of the MLA Charge calculations.
---------------------------------------------------------------------------
NSCC also proposes to revise the market impact cost calculation for
the equities asset group and subgroups to calculate the impact cost at
the security level. Based on a review of its margin methodologies (and
the ETF Study discussed below), NSCC has determined that equities and
liquid ETPs display a wide disparity of trading volumes (as measured by
average daily volumes) even within subgroups, and the market impact
costs are more dependent on specific securities than the subgroup.\17\
As a result, NSCC is proposing to calculate the market impact costs for
securities in the equities asset group, including liquid ETPs, at the
security level rather than at the subgroup level, which NSCC states has
shown to be a more accurate calculation of market impact costs for
these securities.\18\
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\17\ See Notice of Filing, supra note 4, at 83996.
\18\ Id.
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Currently, the MLA Charge calculation for the equity asset
subgroups includes a measurement of the concentration of the Net
Unsettled Position in the subgroup.\19\ Since the market impact cost
would be calculated at the security level for the equities asset group,
rather than the subgroup level, this measurement would no longer be
necessary and would be removed.
---------------------------------------------------------------------------
\19\ See id. at 83995.
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In addition, for each asset group or subgroup, NSCC currently
compares the calculated market impact cost to a portion of the
volatility charge that is allocated to Net Unsettled Positions in that
asset group or subgroup and compares that ratio to a threshold to
determine if an MLA Charge is applicable to that asset group or
subgroup.\20\ Since the market impact cost would be calculated at the
security level for all assets in the equity asset group, rather than
the subgroup level, this comparison would be at the asset group level
for all asset groups, including the equities asset group, and would no
longer be made at the subgroup level for subgroups within the equities
asset group.
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\20\ Supra note 3. NSCC's margining methodology uses a three-day
assumed period of risk. For purposes of this calculation, NSCC uses
a portion of the applicable volatility charge that is based on one-
day assumed period of risk and calculated by applying a simple
square-root of time scaling, referred to in this proposed rule
change as ``1-day volatility charge.'' Any changes that NSCC deems
appropriate to this assumed period of risk would be subject to
NSCC's model risk management governance procedures set forth in the
Model Risk Management Framework. See supra note 14. See also
Sections I(A)(1)(g) and I(A)(2)(f) of Procedure XV of the Rules,
supra note 3.
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To reflect these changes in the Rules, NSCC would amend Sections
I(A)(1)(g) and I(A)(2)(f) of Procedure XV of the Rules \21\ to move all
ETP categories as subgroups in the equities asset group other than ETPs
that are deemed to be Illiquid Securities, which would be categorized
as Illiquid Securities. A footnote in each of these sections would be
added to the ``all other ETPs'' category to clarify that ETPs with
underlying securities separately categorized in an equities asset
subgroup would be categorized by the asset types and capitalizations of
their underlying securities, and that ETPs that are deemed Illiquid
Securities would be categorized in the Illiquid Securities asset group.
---------------------------------------------------------------------------
\21\ See Sections I(A)(1)(g) and I(A)(2)(f) of Procedure XV of
the Rules, supra note 3.
---------------------------------------------------------------------------
Sections I(A)(1)(g) and I(A)(2)(f) of Procedure XV would be
restructured to reflect that the market impact calculation for
securities in the equities asset group would be calculated at the
security level rather than the subgroup
[[Page 2704]]
level, as discussed above. As a result of this change, the current
component that measures the concentration of each Net Unsettled
Position in a subgroup would be removed from Sections I(A)(1)(g)(i)(4)
and I(A)(2)(f)(i)(4) of Procedure XV. References to subgroup
calculations would also be removed in applicable provisions, including
the provisions relating to comparing the calculated market impact cost
at the subgroup level to the volatility charge applicable to the Net
Unsettled Positions and an applicable MLA Charge at the subgroup level
and a sentence that states that all MLA Charges for each of the
equities subgroups shall be added together to result in one MLA Charge
for the equities subgroup. In addition, references to subgroups with
respect to calculations relating to asset groups other than the
equities asset group currently in Sections I(A)(1)(g)(ii) and
I(A)(2)(f)(ii) (i.e., references to the treasury ETP and other ETP
subgroups) would be removed since those would be calculated as part of
the equities asset group, as discussed above.
NSCC would add language to clarify that for each Member, all MLA
Charges for each of the asset groups shall be added together to result
in a total MLA Charge.
B. Changes to ETF Calculations
NSCC proposes to amend the impact cost calculations for ETFs to
more accurately account for the market impact of these securities and
in response to regulatory feedback on NSCC's margin methodologies, by
incorporating ``latent'' liquidity to more accurately reflect the
market liquidity of ETFs.\22\ ETFs are securities that are traded on an
exchange and that track underlying securities, indexes or other
financial instruments, including equities, corporate and municipal
bonds and treasury instruments. Unlike mutual funds, ETFs are created
with the assistance of certain financial institutions called authorized
participants (``APs''), often banks, that are given the ability to
create and redeem ETF shares directly from the ETF issuer. To create
ETF shares, an AP can either deliver a pre-specified bundle of
securities underlying the ETFs (i.e., an ``in-kind basket'') in
exchange for ETF shares, or provide cash equal to the value of the cost
of purchasing underlying securities for the ETF shares. To redeem ETF
shares, an AP would do the opposite--deliver ETF shares to the ETF
issuer in exchange for an in-kind basket of underlying securities or
cash equal to the value of the underlying securities.
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\22\ See Notice of Filing, supra note 4, at 83996.
---------------------------------------------------------------------------
Throughout the life of an ETF, APs create and redeem shares
depending on the market and arbitrage opportunities. As a result, ETFs,
particularly those with in-kind creation/redemption mechanisms, tend to
trade close to the value of the underlying securities. For instance, if
the market price of the ETF on the secondary market (discussed below)
is above the value of the securities underlying the ETF, the AP can
purchase underlying securities (at the lower price) and exchange those
securities to create new ETFs. Likewise, if the market price of the ETF
falls below the value of the securities underlying the ETFs, an AP can
buy ETF shares on the secondary market and redeem them with the ETF
issuer in exchange for the underlying securities.
As a result of this structure, ETF market liquidity can be divided
into two markets: the primary market and the secondary market. The
primary market consists of APs creating and redeeming ETF shares
directly with the ETF issuer. The secondary market consists of
investors buying and selling ETFs through exchanges. Often the stocks
underlying an ETF basket have much larger trading volumes than the
trading volume of the ETF itself. Upon the liquidation of a portfolio
with ETFs, the ability of APs to create and redeem ETF shares provides
additional liquidity, also called ``latent liquidity,'' which changes
the market risk profile of ETFs with in-kind basket creation/redemption
processes.
The current impact cost calculation for the MLA Charge does not
include calculations measuring the impact relating to latent liquidity.
NSCC recently commissioned a review of ETFs (``ETF Study'') that
included an ETF market review, risk characteristics, and an independent
simulation of market impact costs associated with sample clearing
portfolios.\23\ Based on the ETF Study, it was observed that most
equity ETFs with an in-kind creation/redemption process trade with very
tight premium/discount to net asset value (``NAV''), or close to the
value of the underlying securities.\24\ Often, however, the stocks
underlying the equity ETF baskets have a much larger trading volume
than the equity ETF itself, which creates latent liquidity.
---------------------------------------------------------------------------
\23\ NSCC included the ETF Study in Exhibit 3c to the Proposed
Rule Change. Pursuant to 17 CFR 240.24b-2, NSCC requested
confidential treatment of Exhibit 3c.
\24\ Id. When an ETF's market price is higher than its NAV, it's
trading at a premium, when it's lower, it's trading at a discount.
The spread between the premium or discount to the NAV represents a
potential cost to close out the paired ETF and its in-kind basket.
---------------------------------------------------------------------------
As a result, NSCC is proposing to include, as part of its impact
calculation, a measure of the latent liquidity for equity ETFs with in-
kind basket creation/redemption processes and a measure of the costs
associated with primary market activity to more accurately assess the
impact costs relating to liquidating portfolios containing equity ETFs.
The proposed calculation would take into account liquidity in the
primary and secondary market for liquid equity ETFs with in-kind
creation/redemption processes, by comparing the market impact cost of
such equity ETFs based on a hypothetical liquidation in the primary
market and in the secondary market.
To determine the impact costs of a liquidation of equity ETFs with
in-kind baskets, NSCC would run the proposed MLA Charge calculations
described above in two scenarios for portfolios that contain such ETFs
and compare the two calculations to determine the impact cost. NSCC
would run a baseline calculation (``Baseline Calculation'') to simulate
all the ETF positions being liquidated in the secondary market and the
impact cost calculation would be at the security level (i.e., the ETF
shares) as liquid equities (as discussed above). NSCC would also run an
alternative calculation (``Create/Redeem Calculation'') to simulate the
ETF positions being liquidated in the primary market using the
creation/redemption process.
The Create/Redeem Calculation would be calculated as follows:
First, the liquid equity ETFs eligible for in-kind create/
redeem process would be fully decomposed into (a) the corresponding
underlying baskets of the liquid equity ETFs and (b) pairs of such ETFs
and their corresponding underlying baskets;
Second, the decomposed underlying baskets and the residual
securities in the portfolio (i.e., the securities in the original
portfolio that are not ETFs eligible for in-kind create/redeem process)
would be netted at the security level;
Third, the impact cost on the portfolio from the second
step would be calculated assuming all the securities would be
liquidated in the secondary market, and the impact costs would be
calculated as described above as if such securities are liquid
equities;
Fourth, the impact cost calculated in the third step would
be adjusted by an amount to account for the portfolio
[[Page 2705]]
risk difference \25\ from the netted securities resulting from the
second step, as compared to the original portfolio;
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\25\ The original portfolio used in the Baseline Calculation and
the decomposed portfolio from step two would have different
portfolio risks. As a result, because such portfolios would contain
different positions, they would have different VaR Charges if
calculated separately. The VaR Charge of the original portfolio is a
component of the MLA Charge calculation for the portfolio from step
two. Step four would adjust for those differences as part of the
impact cost.
---------------------------------------------------------------------------
Fifth, the impact cost for paired ETFs and their
corresponding underlying baskets would be calculated by multiplying the
gross market amount of the ETFs by a haircut representing the premium/
discount; \26\ and
---------------------------------------------------------------------------
\26\ The haircut is calculated as an estimate of the cost of
closing out the ETFs and underlying pairs using the create/redeem
process. The haircut is a model parameter and will be reviewed at
least monthly in accordance with the model risk management
governance procedures set forth in the model Risk Management
Framework. See supra note 14.
---------------------------------------------------------------------------
Lastly, the impact costs from step four and step five
would be added together.
NSCC would then use the smaller calculated impact costs of either
the Baseline Calculation or the Create/Redeem Calculation for purposes
of calculating the MLA Charge.
To reflect these changes in the Rules, NSCC would add language in
Sections I(A)(1)(g) and I(A)(2)(f) of Procedure XV stating that the
impact cost for ETFs with in-kind baskets would include calculations
comparing impact costs in the secondary market and the primary market
for such equity ETFs, as discussed above. NSCC would indicate that it
would calculate impact costs in two scenarios: (1) a baseline
calculation to simulate such ETFs being liquidated in the secondary
market where the impact costs would be calculated at the security level
(i.e., the ETF shares) utilizing the equities asset subgroup security
level and (2) a create/redeem calculation to simulate an authorized
participant using the primary market to liquidate such ETFs using the
creation/redemption process. The proposed language would include a
description of the how the impact costs for the create/redeem
calculation would be calculated by decomposing the ETFs into their
underlying securities and calculating impact costs of such underlying
securities utilizing the equity asset subgroup calculations (as
discussed above). The proposed language would also state that an
adjustment would be made in the create/redeem calculation to reflect
the different portfolio risks of the original portfolio used in the
baseline calculation and the decomposed portfolio used in the create/
redeem calculation. The proposed language would provide that NSCC would
then use the smaller calculated impact costs of the scenarios for
purposes of the MLA Charge for such ETFs.
C. Changes Concerning SFT Positions
Rule 56 describes the SFT Clearing Service and contains a
description of how the Clearing Fund formula is calculated with respect
to SFT Positions, including how such positions are calculated with
respect to the MLA Charge.\27\ The Proposed Rule Change would update
the language in Rule 56 relating to the MLA Charge to clarify how NSCC
would calculate the MLA Charge with respect to SFT Positions for
transparency and to reflect the proposed MLA Charge refinements, but it
would not change how NSCC would calculate the MLA Charge with respect
to SFT positions. NSCC would clarify how SFT Positions would be
categorized for purposes of the MLA Charge by replacing language
stating that SFT Positions are ``aggregated with'' Net Unsettled
Positions in the same asset group or subgroup with language that
clarifies that SFT Positions would be categorized in the same asset
groups or subgroups as the underlying SFT Securities in such SFT
Positions. NSCC would also clarify language discussing an added
calculation relating to the MLA Charge in the event a Member's
portfolio contains both (i) SFT Positions and (ii) Net Unsettled
Positions or Net Balance Order Unsettled Positions. The language in
Rule 56 relating to the added calculation for SFT positions does not
reference Net Balance Order Unsettled Positions which are treated in
the same manner as Net Unsettled Positions for purposes of the added
calculation when a portfolio contains both (i) SFT Positions and (ii)
Net Unsettled Positions or Net Balance Order Unsettled Positions. The
proposed language would add a reference to Net Balance Order Unsettled
Positions.
---------------------------------------------------------------------------
\27\ See Rule 56 (Securities Financing Transaction Clearing
Service) of the Rules, supra note 3.
---------------------------------------------------------------------------
NSCC is also proposing to add a sentence in Sections I(A)(1)(g) and
I(A)(2)(f) of Procedure XV of the Rules clarifying that if a Member's
portfolio contains both (i) SFT Positions and (ii) Net Unsettled
Positions or Net Balance Order Unsettled Positions, the MLA Charge
shall be calculated as set forth in Rule 56.
IV. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \28\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such organization. After carefully considering the
proposed rule change, the Commission finds that the Proposed Rule
Change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to NSCC. In particular, the
Commission finds that the Proposed Rule Change is consistent with
Section 17A(b)(3)(F) \29\ of the Act and Rules 17Ad-22(e)(4)(i), and
(e)(6)(i) thereunder.\30\
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\28\ 15 U.S.C. 78s(b)(2)(C).
\29\ 15 U.S.C. 78q-1(b)(3)(F).
\30\ 17 CFR 240.17Ad-22(e)(4)(i) and(e)(6)(i).
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A. Consistency With Section 17A(b)(3)(F) of the Act
1. Prompt and Accurate Clearance and Settlement
Section 17A(b)(3)(F) of the Act \31\ requires that the rules of a
clearing agency, such as NSCC, be designed to, among other things,
promote the prompt and accurate clearance and settlement of securities
transactions and assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible.\32\ The Commission believes that the Proposed Rule Change
is consistent with Section 17A(b)(3)(F) of the Act for the reasons
stated below.
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\31\ 15 U.S.C. 78q-1(b)(3)(F).
\32\ Id.
---------------------------------------------------------------------------
As described above in Sections III.A and B, NSCC proposes to refine
the MLA Charge calculation to more accurately calculate the impact
costs of liquidating a security/portfolio by moving all ETPs (except
for Illiquid Securities) into the equities asset group and calculating
impact cost at the security level rather than at the subgroup level for
the equities asset subgroups, and by adding a calculation for latent
liquidity for equity ETFs. As a result, the proposal would better align
the MLA Charge with the risks arising from position concentrations in
portfolios containing ETPs and ETFs. The Commission believes that a
closer alignment between the MLA Charge and the risks presented by the
concentration of securities Member portfolios would help facilitate
NSCC's ability to set margins that more accurately reflect the risks
posed by such portfolios. Setting
[[Page 2706]]
margins that accurately reflect the risks posed by its members'
portfolios could reduce the likelihood that NSCC would not have
collected sufficient margin to address losses arising out of a member
default. Reducing the likelihood that NSCC holds insufficient margin to
address default losses would, in turn, further assure that NSCC's
operation of its critical clearance and settlement services would not
be disrupted because of insufficient financial resources.
As part of the Proposed Rule Change, NSCC filed Exhibit 3a--Summary
of Impact Study (``Impact Study''), which provided the actual MLA
Charges at the member-level, account-level, and CCP-level, from January
3, 2022 through June 30, 2023, as compared to the MLA Charges that NSCC
would have assessed if the proposed amendments had been in place during
that time period.\33\ The Commission reviewed and analyzed the Impact
Study, which showed, among other things, that had the proposed
amendments been in place during that period, it would have resulted in
an average daily increase of $62 million in the aggregate MLA Charge.
Therefore, the Commission believes that the Impact Study demonstrates
that the proposed MLA Charge calculation would enable NSCC to set more
precise margin coverage levels than those using the current
calculation, providing further assurance that NSCC's operation of its
critical clearance and settlement services would not be disrupted
because of insufficient financial resources.
---------------------------------------------------------------------------
\33\ NSCC has requested confidential treatment of Exhibit 3a,
pursuant to 17 CFR 240.24b-2.
---------------------------------------------------------------------------
As described above in Section III.C, NSCC proposes to provide
transparency to the Rules by updating the language relating to how the
MLA Charge is calculated with respect to SFT Positions. Enhancing the
clarity of the NSCC Rules would enable members to more efficiently and
effectively understand and conduct their business in accordance with
the NSCC Rules.
Accordingly, for the reasons above, the Commission finds that the
Proposed Rule Change should help NSCC to continue providing prompt and
accurate clearance and settlement of securities transactions,
consistent with Section 17A(b)(3)(F) of the Act.\34\
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
2. Safeguarding Securities and Funds
In the event that a defaulted member's own margin be insufficient
to satisfy losses to NSCC caused by the liquidation of that member's
portfolio, NSCC would access the mutualized Clearing Fund. As discussed
above in Section IV.A.1, NSCC's proposed enhancements to the MLA Charge
calculation discussed in Sections III.A and B should help facilitate
NSCC's ability to promptly respond to changing risk profiles of its
members' portfolios, and thereby set margins that more accurately
reflect the risks posed by such portfolios. As a result, the proposal
would better align the MLA Charge with the risks arising from position
concentrations in portfolios containing ETPs and ETFs should help
ensure that NSCC collects sufficient margin from its members.
Accordingly, the Proposed Rule Change should help minimize the
likelihood that NSCC would have to access the Clearing Fund, thereby
limiting non-defaulting members' exposure to mutualized losses.
The Commission believes that by helping to limit the exposure of
NSCC's non-defaulting members to mutualized losses, the Proposed Rule
Change would help NSCC assure the safeguarding of securities and funds
which are in its custody or control, consistent with Section
17A(b)(3)(F) of the Act.\35\
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\35\ Id.
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B. Consistency With Rule 17Ad-22(e)(4)(i) Under the Act
Rule 17Ad-22(e)(4)(i) under the Act requires that each covered
clearing agency that provides central counterparty services, such as
NSCC, establish, implement, maintain and enforce written policies and
procedures reasonably designed to effectively identify, measure,
monitor, and manage its credit exposures to participants and those
arising from its payment, clearing, and settlement processes, including
by maintaining sufficient financial resources to cover its credit
exposure to each participant fully with a high degree of
confidence.\36\ The Commission believes that the proposal is consistent
with Rule 17Ad-22(e)(4)(i) under the Act for the reasons stated below.
---------------------------------------------------------------------------
\36\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------
As discussed above in Section IV.A, NSCC's proposed enhancements to
the MLA Charge calculation would apportion a higher MLA Charge to those
members' accounts that present greater potential risk to NSCC due to
large Net Unsettled Positions in a particular group of securities with
a similar risk profile or asset types that may be more difficult to
liquidate in the market in the event the member defaults. As a result,
the proposal would better align the MLA Charge with the risks arising
from position concentration in such portfolios. The Commission has
reviewed and analyzed the filing materials, including the Impact
Study,\37\ and agrees that the proposed enhancements to the MLA Charge
calculation should better enable NSCC to collect margin amounts that
are sufficient to mitigate NSCC's credit exposures to its members'
portfolios, as compared to the current methodology.
---------------------------------------------------------------------------
\37\ See supra note 33.
---------------------------------------------------------------------------
Accordingly, the Commission finds the Proposed Rule Change is
consistent with Rule 17Ad-22(e)(4)(i) under the Act because it is
designed to assist NSCC in managing its credit exposures to its members
by maintaining sufficient financial resources to cover its credit
exposure to the portfolios of members with ETP and equity ETF positions
in their respective portfolios.\38\
---------------------------------------------------------------------------
\38\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------
C. Consistency With Rule 17Ad-22(e)(6)(i) Under the Act
Rule 17Ad-22(e)(6)(i) under the Act requires that each covered
clearing agency that provides central counterparty services, such as
NSCC, establish, implement, maintain and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that, at a
minimum, considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market.\39\ The Commission believes that the proposal is consistent
with Rule 17Ad-22(e)(6)(i) under the Act for the reasons stated below.
---------------------------------------------------------------------------
\39\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------
As discussed above in Section IV.A, NSCC's proposed enhancements to
the MLA Charge calculation would apportion a higher MLA Charge to those
member accounts that present greater potential risk to NSCC due to
large Net Unsettled Positions in a particular group of securities with
a similar risk profile or asset types that may be more difficult to
liquidate in the market in the event the member defaults. As a result,
the proposal would better align the MLA Charge with the risks arising
from position concentration in such member portfolios. The Commission
has reviewed and analyzed the filing materials, including the Impact
Study,\40\ and agrees that the proposed enhancements to the MLA Charge
calculation would enable NSCC to set margins that more accurately
reflect the risks posed by such portfolios than the current
methodology. As a result, implementing the Proposed Rule Change would
better enable NSCC to set and collect margin at levels
[[Page 2707]]
commensurate with the risks associated with the portfolios of its
members.
---------------------------------------------------------------------------
\40\ See supra note 33.
---------------------------------------------------------------------------
Accordingly, the Commission finds the Proposed Rule Change is
consistent with Rule 17Ad-22(e)(6)(i) under the Act because it is
designed to assist NSCC in maintaining a risk-based margin system that
considers, and produces margin levels commensurate with, the risks and
particular attributes of members' portfolios.\41\
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\41\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------
VII. Conclusion
On the basis of the foregoing, the Commission finds that the
Proposed Rule Change is consistent with the requirements of the Act and
in particular with the requirements of Section 17A of the Act \42\ and
the rules and regulations promulgated thereunder.
---------------------------------------------------------------------------
\42\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\43\ that Proposed Rule Change SR-NSCC-2023-011, be, and hereby is,
approved.\44\
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\43\ 15 U.S.C. 78s(b)(2).
\44\ In approving the Proposed Rule Change, the Commission
considered its impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
---------------------------------------------------------------------------
\45\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00630 Filed 1-12-24; 8:45 am]
BILLING CODE 8011-01-P
