Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Clearing Agency Liquidity Risk Management Framework and the Clearing Agency Stress Testing Framework, 20735-20739 [2024-06163]
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
Section 19(b)(2) of the Act 8 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of filing
of the proposed rule change. The
Commission may extend the period for
issuing an order approving or
disapproving the proposed rule change,
however, by not more than 60 days if
the Commission determines that a
longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for comment in
the Federal Register on October 3,
2023.9 The 180th day after publication
of the proposed rule change is March
31, 2024. The Commission is extending
the time period for approving or
disapproving the proposed rule change
for an additional 60 days.
The Commission finds that it is
appropriate to designate a longer period
within which to issue an order
approving or disapproving the proposed
rule change so that it has sufficient time
to consider the proposed rule change
and the issues raised therein.
Accordingly, the Commission, pursuant
to section 19(b)(2) of the Act,10
designates May 30, 2024, as the date by
which the Commission shall either
approve or disapprove the proposed
rule change (File No. SR–NASDAQ–
2023–035).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06169 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99766; File No. SR–
CboeEDGX–2024–007]
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Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Amend Rule 11.6(n)(4)
and Rule 11.10(a)(4)(D) To Permit the
Use of the Post Only Order Instruction
at Prices Below $1.00
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend Rule
11.6(n)(4) and Rule 11.10(a)(4)(D) to
permit the use of the Post Only order
instruction at prices below $1.00. The
proposed rule change was published for
comment in the Federal Register on
February 7, 2024.3 The Commission has
received no comment letters on the
proposed rule change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission will either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is March 23, 2024.
The Commission is extending this 45day time period.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change,
so that it has sufficient time to consider
the proposed rule change. Accordingly,
the Commission, pursuant to Section
19(b)(2) of the Act,5 designates May 7,
2024, as the date by which the
Commission shall either approve or
disapprove the proposed rule change
(File No. SR–CboeEDGX–2024–007).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06164 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
On January 19, 2024, Cboe EDGX
Exchange, Inc. (the ‘‘Exchange’’ or
‘‘EDGX’’) filed with the Securities and
8 15
U.S.C. 78s(b)(2).
supra note 3 and accompanying text.
10 15 U.S.C. 78s(b)(2).
11 17 CFR 200.30–3(a)(57).
9 See
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99774; File No. SR–FICC–
2024–004]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Clearing Agency Liquidity Risk
Management Framework and the
Clearing Agency Stress Testing
Framework
March 19, 2024.
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 March 11,
2024, Fixed Income Clearing
Corporation (‘‘FICC’’) 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. FICC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(6) 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 consists of
amendments to Clearing Agency
Liquidity Risk Management Framework
(‘‘LRM Framework’’) and the Clearing
Agency Stress Testing Framework
(Market Risk) (‘‘ST Framework’’ and,
together with the LRM Framework, the
‘‘Frameworks’’) of FICC and its
affiliates, The Depository Trust
Company (‘‘DTC’’) and National
Securities Clearing Corporation
(‘‘NSCC,’’ and together with FICC and
DTC, the ‘‘Clearing Agencies’’), as
described below. FICC is filing the
proposed rule change for immediate
effectiveness pursuant to Section
19(b)(3)(A) of the Act 5 and Rule 19b–
4(f)(6) thereunder,6 as described in
greater detail below.7
1 15
March 19, 2024.
Jkt 262001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 15 U.S.C. 78s(b)(3)(A).
6 17 CFR 240.19b–4(f)(6).
7 Capitalized terms not defined herein shall have
the meaning assigned to such terms in each of the
Clearing Agencies’ respective Rules, available at
www.dtcc.com/legal/rules-and-procedures.
2 17
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 99459
(February 1, 2024), 89 FR 8473 (February 7, 2024)
(SR–CboeEDGX–2024–007).
4 15 U.S.C. 78s(b)(2).
5 15 U.S.C. 78s(b)(2).
6 17 CFR 200.30–3(a)(31).
2 17
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
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1. Purpose
Background
Rules 17Ad–22(e)(4) and (7) under the
Act require the Clearing Agencies to
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to manage their
credit and liquidity risks.8 The Clearing
Agencies adopted the LRM Framework
to set forth the manner in which they
measure, monitor and manage the
liquidity risks that arise in or are borne
by each of the Clearing Agencies by, for
example, (1) maintaining sufficient
liquid resources to effect same-day
settlement of payment obligations with
a high degree of confidence under a
wide range of foreseeable stress
scenarios that include, but are not
limited to, the default of the participant
family that would generate the largest
aggregate payment obligation for the
Clearing Agency in extreme but
plausible market conditions, and (2)
determining the amount and regularly
testing the sufficiency of qualifying
liquid resources by conducting stress
testing of those resources.9 In this way,
the LRM Framework describes the
liquidity risk management activities of
each of the Clearing Agencies and how
the Clearing Agencies meet the
applicable requirements of Rule 17Ad–
22(e)(7).10
The Clearing Agencies adopted the ST
Framework to set forth the manner in
which they identify, measure, monitor,
and manage their respective credit
exposures to participants and those
arising from their respective payment,
clearing, and settlement processes by,
for example, maintaining sufficient
8 See
17 CFR 240.17Ad–22(e)(4) and (7).
9 See Securities Exchange Act Release No. 82377
(Dec. 21, 2017), 82 FR 61617 (Dec. 28, 2017) (File
Nos. SR–DTC–2017–004; SR–FICC–2017–008; SR–
NSCC–2017–005).
10 17 CFR 240.17Ad–22(e)(7).
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prefunded financial resources to cover
its credit exposures to each participant
fully with a high degree of confidence
and testing the sufficiency of those
prefunded financial resources through
stress testing.11 In this way, the ST
Framework describes the stress testing
activities of each of the Clearing
Agencies and how the Clearing
Agencies meet the applicable
requirements of Rule 17Ad–22(e)(4)
under the Act.12
Proposed Changes
The Clearing Agencies propose to
make clarifying and organizational
changes to the LRM Framework and ST
Framework designed to improve the
accuracy and clarity of the documents.
Specifically, the proposed changes
would (i) clarify in the LRM Framework
the resources currently available to FICC
and NSCC to meet settlement
obligations and foreseeable liquidity
shortfalls; (ii) clarify in the LRM
Framework the Clearing Agencies’
practices for reporting and escalating
liquidity risk tolerance threshold
breaches; (iii) relocate the governance
and escalation requirements related to
certain liquidity risk management
processes from the ST Framework to the
LRM Framework; and (iv) make other
non-substantive clarifying,
organizational, and cleanup changes to
the LRM Framework. The proposed
changes are described in detail below.
Proposed Clarifications to Description of
FICC and NSCC Liquidity Resources
The LRM Framework describes how
the Clearing Agencies would address
foreseeable liquidity shortfalls that
would not be covered by their existing
liquid resources. In the case of FICC, the
LRM Framework provides, among other
things, that the FICC Government
Securities Division (‘‘GSD’’) and
Mortgage-Backed Securities Division
(‘‘MBSD’’) would look for additional
repo counterparties beyond their
respective existing master repurchase
agreements and that MBSD may seek
Members to provide additional repo
capacity beyond their Capped
Contingency Liquidity Facility
(‘‘CCLF’’) requirements.13 With respect
to NSCC, the LRM Framework provides
that NSCC may look to utilize, among
other things, certain uncommitted
repurchase arrangements (e.g., stock
loans or equity repos) or other
11 See Securities Exchange Act Release No. 82368
(Dec. 19, 2017), 82 FR 61082 (Dec. 26, 2017) (SR–
DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
2017–006).
12 17 CFR 240.17Ad–22(e)(4).
13 See FICC GSD Rule 22A, Section 2a and FICC
MBSD Rule 17, Section 2a, supra note 7.
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uncommitted credit facilities to address
foreseeable liquidity shortfalls. The
Clearing Agencies propose to revise
these statements and replace them with
more accurate summaries of the types of
liquidity resources available to FICC
and NSCC.
The Clearing Agencies would modify
the LRM Framework to state that FICC
may use Clearing Fund deposits to meet
its settlement obligations, as permitted
under GSD Rule 4 and MBSD Rule 4,14
either through direct use of cash
deposits to the Clearing Funds or
through the pledge or rehypothecation
of pledged eligible Clearing Fund
securities. The LRM Framework would
also be revised to clarify that FICC could
also address a liquidity shortfall by
accessing a short-term financial
commercial arrangement, such as
uncommitted Master Repurchase
Agreements maintained by FICC and
which do not constitute qualifying
liquid resources, or by utilizing its
general corporate funds to the extent
such funds exceed amounts needed to
meet FICC’s regulatory capital
requirements. In addition, the Clearing
Agencies would further clarify that FICC
could also address a liquidity shortfall
by accessing its existing repo
counterparties, even if such funds may
not be available to meet same-day
settlement obligations. The Clearing
Agencies would also delete a footnote
containing a cross-reference to a
previously deleted footnote.
The Clearing Agencies also propose to
revise the LRM Framework to remove
references to certain specific
uncommitted resources of NSCC, such
as stock loans, equity repos, and other
uncommitted credit facilities, which are
no longer available to NSCC and for
which NSCC no longer maintains the
necessary agreements. This would be
replaced with a more general
clarification that all of the Clearing
Agencies may seek to address
unforeseen liquidity shortfalls in excess
of qualifying liquid resources through
uncommitted arrangements. The
Clearing Agencies would also update
the LRM Framework to use more
accurate terminology and descriptions
of NSCC’s senior note issuance program.
These proposed changes are not
intended to reflect actual substantive
changes to the senior note issuance
program.
The Clearing Agencies believe the
proposed changes would enhance the
LRM Framework by more precisely
describing the existing tools and
resources that FICC and NSCC may
utilize to address foreseeable liquidity
14 See
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shortfalls in compliance with Rule
17Ad–22(e)(7)(viii) under the Act.15
Proposed Clarifications to Liquidity
Risk Tolerances
The LRM Framework describes the
manner in which the liquidity risks of
the Clearing Agencies are assessed and
escalated through liquidity risk
management controls that include a
statement of risk tolerances that are
specific to liquidity risk (‘‘Liquidity
Risk Tolerance Statement’’). The
Clearing Agencies propose to revise the
LRM Framework to provide additional
clarity and accuracy around their
existing processes for reporting and
escalating liquidity risk tolerances.
The Clearing Agencies would revise
the LRM Framework to remove certain
statements regarding the reporting of
risk tolerances and instead clarify that
liquidity risk tolerance thresholds are
communicated to relevant personnel
and the management risk committee as
prescribed by the Liquidity Risk
Tolerance Statement of the Clearing
Agencies’ Corporate Risk Management
Policy, with necessary escalation and
analyses performed in accordance with
a newly proposed section of the LRM
Framework concerning liquidity risk
governance and escalations (described
in further detail below). This would
include the removal of an outdated
statement concerning potential
responses to risk tolerance threshold
reporting (e.g., responses such as risk
avoidance, risk mitigation, risk
acceptance), and instead focus on the
required escalations set forth in the
Liquidity Risk Tolerance Statements to
be more consistent with the process as
described in the Corporate Risk
Management Policy. The Clearing
Agencies would also remove specific
references to the Stress Testing Team in
communicating liquidity risk tolerance
thresholds because this task may be
performed by staff within the overall
Liquidity Risk and Stress Testing
function of DTCC. In addition, the LRM
Framework would be revised to clarify
that the liquidity risk profile prepared
by the Operational Risk Management
department (‘‘ORM’’) is reviewed with
senior management in the Group Chief
Risk Office (and not just within the
Liquidity Risk Management team) and
to update the name of the risk profile
used by ORM to monitor liquidity risk
management. The Clearing Agencies
believe the proposed changes would
enhance the LRM Framework by
improving the accuracy and clarity of
the document as it relates to liquidity
risk tolerance reporting.
15 17
CFR 240.17Ad–22(e)(7)(viii).
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Proposed Clarifications to Liquidity
Risk Governance and Escalation
On November 17, 2022, the
Commission approved a proposed rule
change by the Clearing Agencies to
amend the ST Framework and LRM
Framework to, among other things,
relocate certain descriptions of the
Clearing Agencies’ liquidity stress
testing activities from the LRM
Framework to the ST Framework.16 This
included certain requirements related to
liquidity risk escalations, and in
particular, the process for escalating
liquidity shortfalls. The Clearing
Agencies now propose to add a new
section to the LRM Framework to
relocate requirements related to
liquidity risk governance and the
escalation of liquidity shortfalls back
into the LRM Framework because these
activities and processes are primarily
driven the Clearing Agencies’ Liquidity
Risk Management team.
The Clearing Agencies propose to add
a new Liquidity Risk Governance subsection to the LRM Framework, which
would contain the same information as
the Stress Test Governance section of
the ST Framework but with
modifications to refer to liquidity risk
policies, procedures and risk tolerance
statements rather than stress testing
policies, procedures and risk tolerance
statements. Additionally, the Clearing
Agencies would relocate the Escalation
of Liquidity Shortfalls section of the ST
Framework to the LRM Framework with
certain modifications and drafting
clarifications. Specifically, the Clearing
Agencies would revise and clarify the
manner in which liquidity risk tolerance
threshold breaches and liquidity
shortfalls are identified, reported and
escalated by stating that liquidity risk
tolerance threshold breaches and
liquidity shortfalls identified through
the daily liquidity studies are reported
and escalated in accordance with the
Clearing Agencies’ Liquidity Risk
Tolerance Statement. The Clearing
Agencies would also clarify that the
Liquidity Risk Management team
performs the daily analysis of any
calculated liquidity shortfalls. In
addition, the Clearing Agencies would
clarify that the management risk
committee does not directly evaluate the
adequacy of liquidity resources as a first
line function but rather reviews
management evaluations and
recommendations related to the
adequacy of such resources, which may
include adjusting the CCP’s liquidity
16 See Securities Exchange Act Release No. 96345
(Nov. 17, 2022), 87 FR 71714 (Nov. 23, 2022) (File
Nos. SR–DTC–2022–006; SR–FICC–2022–004; SR–
NSCC–2022–006).
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20737
risk management methodology, model
parameters, and any other relevant
aspect of its liquidity risk management
framework, or otherwise supplementing
liquid resources. The ST Framework
would also be revised to state that
liquidity risk tolerance and liquidity
shortfall reporting and escalations are
governed by the LRM Framework.
Other Clarifying, Cleanup and
Organizational Changes
Finally, the Clearing Agencies
propose other clarifying, cleanup and
organizational changes to the LRM
Framework to improve the accuracy and
clarity of the document. The Clearing
Agencies would relocate the definition
of ‘‘qualifying liquid resources’’ from
Section 5 of the LRM Framework to the
Glossary of Key Terms in Section 2,
with minor modifications to associated
footnotes and citations, so that this term
is clearly defined before its first usage
within the LRM Framework. The
Clearing Agencies would also update
the Glossary of Key Terms to refer to the
DTCC Treasury ‘‘department’’ rather
than DTCC Treasury ‘‘group’’ to align
with other references to the DTCC
Treasury department throughout the
LRM Framework and remove the
defined term ‘‘Stress Testing Team’’
because specific responsibilities of this
team would no longer be described in
LRM Framework as they are covered in
the ST Framework.
In addition, Clearing Agencies would
make several cleanup changes in the
Liquidity Risk Measurement section of
the LRM Framework to remove an
outdated reference to previously
removed sections of the LRM
Framework, refer to the new Liquidity
Risk Governance and Escalation
Procedures section of the LRM
Framework, and remove a specific
reference to the Stress Test Team (the
responsibilities of which are addressed
in the ST Framework).
Finally, the Clearing Agencies would
make a minor clarification in the LRM
Framework regarding the annual testing
of certain uncommitted liquidity
providers, which are non-qualifying
liquid resources of FICC.
2. Statutory Basis
The Clearing Agencies believe that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a registered clearing
agency. In particular, the Clearing
Agencies believe that the proposed
changes are consistent with Section
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
17A(b)(3)(F) of the Act 17 and Rule
17Ad–22(e)(7) under the Act 18 for the
reasons set forth below.
Section 17A(b)(3)(F) of the Act 19
requires, in part, that the rules of a
registered clearing agency be designed
to promote the prompt and accurate
clearance and settlement of securities
transactions. The proposed changes
would improve the accuracy and clarity
of the Frameworks, and specifically the
LRM Framework, by (i) clarifying in the
LRM Framework the resources currently
available to FICC and NSCC to meet
settlement obligations and liquidity
shortfalls; (ii) clarifying in the LRM
Framework the Clearing Agencies’
practices for reporting and escalating
liquidity risk tolerance thresholds; (iii)
relocating the governance and escalation
requirements related to certain liquidity
risk management processes from the ST
Framework to the LRM Framework; and
(iv) making other non-substantive
clarifying, organizational and cleanup
changes to the LRM Framework. The
LRM Framework and the policies and
procedures that support the LRM
Framework help assure that each
Clearing Agency can effectively
measure, monitor, and manage their
liquidity risks to promote the timely
settlement of securities transactions.
The proposed changes would enhance
the LRM Framework by improving the
accuracy and clarity of the descriptions
of key aspects of the Clearing Agencies’
liquidity risk management processes,
thereby facilitating the Clearing
Agencies’ ability to continue the prompt
and accurate clearance and settlement of
securities transactions as required by
Section 17A(b)(3)(F) of the Act.
Rule 17Ad–22(e)(7) under the Act
requires that a covered clearing agency
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to effectively
measure, monitor, and manage the
liquidity risk that arises in or is borne
by the covered clearing agency,
including measuring, monitoring, and
managing its settlement and funding
flows on an ongoing and timely basis,
and its use of intraday liquidity.20 As
discussed above, the LRM Framework
and the policies and procedures that
support the LRM Framework help
assure that each Clearing Agency can
effectively measure, monitor, and
manage their liquidity risks. The
Clearing Agencies believe that by
improving the accuracy and clarity of
the descriptions of key aspects of the
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(7).
19 15 U.S.C. 78q–1(b)(3)(F).
20 See 17 CFR 240.17Ad–22(e)(7).
Clearing Agencies’ liquidity risk
management processes, the proposed
changes would facilitate the
maintenance of written policies and
procedures reasonably designed to
effectively measure, monitor, and
manage liquidity risks as required by
Rule 17Ad–22(e)(7) under the Act.
In addition, Rule 17Ad–22(e)(7)(viii)
under the Act specifically requires a
covered clearing agency to establish,
implement, maintain, and enforce
written policies and procedures
reasonably designed to address
foreseeable liquidity shortfalls that
would not be covered by the covered
clearing agency’s liquid resources and
seek to avoid unwinding, revoking, or
delaying the same-day settlement of
payment obligations.21 The Clearing
Agencies believe that including
additional clarity and specificity in the
LRM Framework concerning the types
of liquidity resources available to FICC
and NSCC to address foreseeable
liquidity shortfalls would further
promote compliance with Rule 17Ad–
22(e)(7)(viii) under the Act.
For these reasons, the Clearing
Agencies believe the proposed rule
change is consistent with the
requirements of Section 17A(b)(3)(F) of
the Act 22 and Rule 17Ad–22(e)(7)
thereunder.23
(B) Clearing Agency’s Statement on
Burden on Competition
The proposed changes would enhance
the Frameworks, and specifically the
LRM Framework, by providing
additional clarity and accuracy
concerning the Clearing Agencies’
existing liquidity risk management
processes. The Frameworks, and the
proposed rule changes described herein,
would not advantage or disadvantage
any particular participant or user of the
Clearing Agencies’ services or unfairly
inhibit access to the Clearing Agencies’
services. The Clearing Agencies
therefore do not believe that the
proposed rule change would 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
The Clearing Agencies have not
received or solicited any written
comments relating to this proposal. If
any written comments are received, they
will be publicly filed as an Exhibit 2 to
17 15
18 17
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18:08 Mar 22, 2024
17 CFR 240.17Ad–22(e)(7)(viii).
U.S.C. 78q–1(b)(3)(F).
23 17 CFR 240.17Ad–22(e)(7).
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
www.sec.gov/regulatory-actions/how-tosubmit-comments. General questions
regarding the rule filing process or
logistical questions regarding this filing
should be directed to the Main Office of
the SEC’s Division of Trading and
Markets at tradingandmarkets@sec.gov
or 202–551–5777.
The Clearing Agencies reserve the
right to not respond to any comments
received.
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
(i) significantly affect the protection of
investors or the public interest;
(ii) impose any significant burden on
competition; and
(iii) become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 24 and Rule 19b–4(f)(6)
thereunder.25
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:
21 See
22 15
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24 15
25 17
E:\FR\FM\25MRN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
25MRN1
Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FICC–2024–004 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
khammond on DSKJM1Z7X2PROD with NOTICES
All submissions should refer to File
Number SR–FICC–2024–004. 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 FICC 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–FICC–2024–004 and should
be submitted on or before April 15,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06163 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
26 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:08 Mar 22, 2024
Jkt 262001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99770; File No. SR–PHLX–
2024–14]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 4
March 19, 2024.
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 March 15,
2024, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. 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
Phlx’s Pricing Schedule at Options 7,
Section 4.3
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, 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
In its filing with the Commission, the
Exchange 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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing change on February 29, 2024 to be operative
on March 1, 2024 (SR–Phlx–2024–07). On March
12, 2024, the Exchange withdrew SR–Phlx–2024–07
and submitted SR–Phlx–2024–11. On March 15,
2024, the Exchange withdrew SR–Phlx–2024–11
and submitted this filing.
2 17
PO 00000
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Sfmt 4703
20739
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Phlx proposes to amend its Pricing
Schedule within Options 7, Section 4,
‘‘Multiply Listed Options Fees (Includes
options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed)
(Excludes SPY and broad-based index
options symbols listed within Options
7, Section 5.A).’’ Specifically, Phlx
proposes to: (1) lower the Professional 4
Floor 5 Options Transaction Charges 6 in
Multiply Listed Penny and Non-Penny
Symbols; 7 (2) increase the Lead Market
Maker 8 and Market Maker 9 Floor
Options Transaction Charges in
Multiply Listed Penny and Non-Penny
Symbols; and (3) increase the Monthly
Firm Fee Cap. Each change will be
described below.
Floor Options Transaction Charges
Today, the Exchange assesses Options
Transaction Charges in Multiply Listed
options, including options overlying
equities, ETFs, ETNs and indexes and
excluding options in SPY 10 and broad4 The term ‘‘Professional’’ applies to transactions
for the accounts of Professionals, as defined in
Options 1, Section 1(b)(45) means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Phlx’s Pricing
Schedule at Options 7, Section 1(c).
5 The term ‘‘floor transaction’’ is a transaction that
is effected in open outcry on the Exchange’s
Trading Floor. See Phlx’s Pricing Schedule at
Options 7, Section 1(c).
6 Options Transaction Charges are per contract.
Floor transaction fees apply to any ‘‘as of’’ or
‘‘reversal’’ adjustments for manually processed
trades originally submitted electronically or
through FBMS. See Phlx’s Pricing Schedule at
Options 7, Section 4, footnote 8.
7 For consistency, the Exchange proposes to
capitalize the term ‘‘non-Penny’’ in the table in
Options 7, Section 4 of the Pricing Schedule.
8 The term ‘‘Floor Lead Market Maker’’ is a
member who is registered as an options Lead
Market Maker pursuant to Options 2, Section 12(a)
and has a physical presence on the Exchange’s
Trading Floor. See Phlx’s Pricing Schedule at
Options 7, Section 1(c).
9 The term ‘‘Floor Market Maker’’ is a Market
Maker who is neither an SQT or an RSQT. A Floor
Market Maker may provide a quote in open outcry.
See Phlx’s Pricing Schedule at Options 7, Section
1(c).
10 Transactions in SPY originating on the
Exchange floor are subject to the Multiply Listed
Options Fees (see Multiply Listed Options Fees in
Options 7, Section 4). However, if one side of the
transaction originates on the Exchange floor and
any other side of the trade was the result of an
electronically submitted order or a quote, then these
fees will apply to the transactions which originated
on the Exchange floor and contracts that are
executed electronically on all sides of the
transaction. The one side of the transaction which
originates on the Exchange floor will count toward
E:\FR\FM\25MRN1.SGM
Continued
25MRN1
Agencies
[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Notices]
[Pages 20735-20739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06163]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99774; File No. SR-FICC-2024-004]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Clearing Agency Liquidity Risk Management Framework and the
Clearing Agency Stress Testing Framework
March 19, 2024.
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 March 11, 2024, Fixed Income Clearing Corporation (``FICC'') 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. FICC filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) 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)(6).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to Clearing Agency
Liquidity Risk Management Framework (``LRM Framework'') and the
Clearing Agency Stress Testing Framework (Market Risk) (``ST
Framework'' and, together with the LRM Framework, the ``Frameworks'')
of FICC and its affiliates, The Depository Trust Company (``DTC'') and
National Securities Clearing Corporation (``NSCC,'' and together with
FICC and DTC, the ``Clearing Agencies''), as described below. FICC is
filing the proposed rule change for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) thereunder,\6\
as described in greater detail below.\7\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f)(6).
\7\ Capitalized terms not defined herein shall have the meaning
assigned to such terms in each of the Clearing Agencies' respective
Rules, available at www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------
[[Page 20736]]
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
Background
Rules 17Ad-22(e)(4) and (7) under the Act require the Clearing
Agencies to establish, implement, maintain and enforce written policies
and procedures reasonably designed to manage their credit and liquidity
risks.\8\ The Clearing Agencies adopted the LRM Framework to set forth
the manner in which they measure, monitor and manage the liquidity
risks that arise in or are borne by each of the Clearing Agencies by,
for example, (1) maintaining sufficient liquid resources to effect
same-day settlement of payment obligations with a high degree of
confidence under a wide range of foreseeable stress scenarios that
include, but are not limited to, the default of the participant family
that would generate the largest aggregate payment obligation for the
Clearing Agency in extreme but plausible market conditions, and (2)
determining the amount and regularly testing the sufficiency of
qualifying liquid resources by conducting stress testing of those
resources.\9\ In this way, the LRM Framework describes the liquidity
risk management activities of each of the Clearing Agencies and how the
Clearing Agencies meet the applicable requirements of Rule 17Ad-
22(e)(7).\10\
---------------------------------------------------------------------------
\8\ See 17 CFR 240.17Ad-22(e)(4) and (7).
\9\ See Securities Exchange Act Release No. 82377 (Dec. 21,
2017), 82 FR 61617 (Dec. 28, 2017) (File Nos. SR-DTC-2017-004; SR-
FICC-2017-008; SR-NSCC-2017-005).
\10\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
The Clearing Agencies adopted the ST Framework to set forth the
manner in which they identify, measure, monitor, and manage their
respective credit exposures to participants and those arising from
their respective payment, clearing, and settlement processes by, for
example, maintaining sufficient prefunded financial resources to cover
its credit exposures to each participant fully with a high degree of
confidence and testing the sufficiency of those prefunded financial
resources through stress testing.\11\ In this way, the ST Framework
describes the stress testing activities of each of the Clearing
Agencies and how the Clearing Agencies meet the applicable requirements
of Rule 17Ad-22(e)(4) under the Act.\12\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 82368 (Dec. 19,
2017), 82 FR 61082 (Dec. 26, 2017) (SR-DTC-2017-005; SR-FICC-2017-
009; SR-NSCC-2017-006).
\12\ 17 CFR 240.17Ad-22(e)(4).
---------------------------------------------------------------------------
Proposed Changes
The Clearing Agencies propose to make clarifying and organizational
changes to the LRM Framework and ST Framework designed to improve the
accuracy and clarity of the documents. Specifically, the proposed
changes would (i) clarify in the LRM Framework the resources currently
available to FICC and NSCC to meet settlement obligations and
foreseeable liquidity shortfalls; (ii) clarify in the LRM Framework the
Clearing Agencies' practices for reporting and escalating liquidity
risk tolerance threshold breaches; (iii) relocate the governance and
escalation requirements related to certain liquidity risk management
processes from the ST Framework to the LRM Framework; and (iv) make
other non-substantive clarifying, organizational, and cleanup changes
to the LRM Framework. The proposed changes are described in detail
below.
Proposed Clarifications to Description of FICC and NSCC Liquidity
Resources
The LRM Framework describes how the Clearing Agencies would address
foreseeable liquidity shortfalls that would not be covered by their
existing liquid resources. In the case of FICC, the LRM Framework
provides, among other things, that the FICC Government Securities
Division (``GSD'') and Mortgage-Backed Securities Division (``MBSD'')
would look for additional repo counterparties beyond their respective
existing master repurchase agreements and that MBSD may seek Members to
provide additional repo capacity beyond their Capped Contingency
Liquidity Facility (``CCLF'') requirements.\13\ With respect to NSCC,
the LRM Framework provides that NSCC may look to utilize, among other
things, certain uncommitted repurchase arrangements (e.g., stock loans
or equity repos) or other uncommitted credit facilities to address
foreseeable liquidity shortfalls. The Clearing Agencies propose to
revise these statements and replace them with more accurate summaries
of the types of liquidity resources available to FICC and NSCC.
---------------------------------------------------------------------------
\13\ See FICC GSD Rule 22A, Section 2a and FICC MBSD Rule 17,
Section 2a, supra note 7.
---------------------------------------------------------------------------
The Clearing Agencies would modify the LRM Framework to state that
FICC may use Clearing Fund deposits to meet its settlement obligations,
as permitted under GSD Rule 4 and MBSD Rule 4,\14\ either through
direct use of cash deposits to the Clearing Funds or through the pledge
or rehypothecation of pledged eligible Clearing Fund securities. The
LRM Framework would also be revised to clarify that FICC could also
address a liquidity shortfall by accessing a short-term financial
commercial arrangement, such as uncommitted Master Repurchase
Agreements maintained by FICC and which do not constitute qualifying
liquid resources, or by utilizing its general corporate funds to the
extent such funds exceed amounts needed to meet FICC's regulatory
capital requirements. In addition, the Clearing Agencies would further
clarify that FICC could also address a liquidity shortfall by accessing
its existing repo counterparties, even if such funds may not be
available to meet same-day settlement obligations. The Clearing
Agencies would also delete a footnote containing a cross-reference to a
previously deleted footnote.
---------------------------------------------------------------------------
\14\ See supra note 7.
---------------------------------------------------------------------------
The Clearing Agencies also propose to revise the LRM Framework to
remove references to certain specific uncommitted resources of NSCC,
such as stock loans, equity repos, and other uncommitted credit
facilities, which are no longer available to NSCC and for which NSCC no
longer maintains the necessary agreements. This would be replaced with
a more general clarification that all of the Clearing Agencies may seek
to address unforeseen liquidity shortfalls in excess of qualifying
liquid resources through uncommitted arrangements. The Clearing
Agencies would also update the LRM Framework to use more accurate
terminology and descriptions of NSCC's senior note issuance program.
These proposed changes are not intended to reflect actual substantive
changes to the senior note issuance program.
The Clearing Agencies believe the proposed changes would enhance
the LRM Framework by more precisely describing the existing tools and
resources that FICC and NSCC may utilize to address foreseeable
liquidity
[[Page 20737]]
shortfalls in compliance with Rule 17Ad-22(e)(7)(viii) under the
Act.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 240.17Ad-22(e)(7)(viii).
---------------------------------------------------------------------------
Proposed Clarifications to Liquidity Risk Tolerances
The LRM Framework describes the manner in which the liquidity risks
of the Clearing Agencies are assessed and escalated through liquidity
risk management controls that include a statement of risk tolerances
that are specific to liquidity risk (``Liquidity Risk Tolerance
Statement''). The Clearing Agencies propose to revise the LRM Framework
to provide additional clarity and accuracy around their existing
processes for reporting and escalating liquidity risk tolerances.
The Clearing Agencies would revise the LRM Framework to remove
certain statements regarding the reporting of risk tolerances and
instead clarify that liquidity risk tolerance thresholds are
communicated to relevant personnel and the management risk committee as
prescribed by the Liquidity Risk Tolerance Statement of the Clearing
Agencies' Corporate Risk Management Policy, with necessary escalation
and analyses performed in accordance with a newly proposed section of
the LRM Framework concerning liquidity risk governance and escalations
(described in further detail below). This would include the removal of
an outdated statement concerning potential responses to risk tolerance
threshold reporting (e.g., responses such as risk avoidance, risk
mitigation, risk acceptance), and instead focus on the required
escalations set forth in the Liquidity Risk Tolerance Statements to be
more consistent with the process as described in the Corporate Risk
Management Policy. The Clearing Agencies would also remove specific
references to the Stress Testing Team in communicating liquidity risk
tolerance thresholds because this task may be performed by staff within
the overall Liquidity Risk and Stress Testing function of DTCC. In
addition, the LRM Framework would be revised to clarify that the
liquidity risk profile prepared by the Operational Risk Management
department (``ORM'') is reviewed with senior management in the Group
Chief Risk Office (and not just within the Liquidity Risk Management
team) and to update the name of the risk profile used by ORM to monitor
liquidity risk management. The Clearing Agencies believe the proposed
changes would enhance the LRM Framework by improving the accuracy and
clarity of the document as it relates to liquidity risk tolerance
reporting.
Proposed Clarifications to Liquidity Risk Governance and Escalation
On November 17, 2022, the Commission approved a proposed rule
change by the Clearing Agencies to amend the ST Framework and LRM
Framework to, among other things, relocate certain descriptions of the
Clearing Agencies' liquidity stress testing activities from the LRM
Framework to the ST Framework.\16\ This included certain requirements
related to liquidity risk escalations, and in particular, the process
for escalating liquidity shortfalls. The Clearing Agencies now propose
to add a new section to the LRM Framework to relocate requirements
related to liquidity risk governance and the escalation of liquidity
shortfalls back into the LRM Framework because these activities and
processes are primarily driven the Clearing Agencies' Liquidity Risk
Management team.
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 96345 (Nov. 17,
2022), 87 FR 71714 (Nov. 23, 2022) (File Nos. SR-DTC-2022-006; SR-
FICC-2022-004; SR-NSCC-2022-006).
---------------------------------------------------------------------------
The Clearing Agencies propose to add a new Liquidity Risk
Governance sub-section to the LRM Framework, which would contain the
same information as the Stress Test Governance section of the ST
Framework but with modifications to refer to liquidity risk policies,
procedures and risk tolerance statements rather than stress testing
policies, procedures and risk tolerance statements. Additionally, the
Clearing Agencies would relocate the Escalation of Liquidity Shortfalls
section of the ST Framework to the LRM Framework with certain
modifications and drafting clarifications. Specifically, the Clearing
Agencies would revise and clarify the manner in which liquidity risk
tolerance threshold breaches and liquidity shortfalls are identified,
reported and escalated by stating that liquidity risk tolerance
threshold breaches and liquidity shortfalls identified through the
daily liquidity studies are reported and escalated in accordance with
the Clearing Agencies' Liquidity Risk Tolerance Statement. The Clearing
Agencies would also clarify that the Liquidity Risk Management team
performs the daily analysis of any calculated liquidity shortfalls. In
addition, the Clearing Agencies would clarify that the management risk
committee does not directly evaluate the adequacy of liquidity
resources as a first line function but rather reviews management
evaluations and recommendations related to the adequacy of such
resources, which may include adjusting the CCP's liquidity risk
management methodology, model parameters, and any other relevant aspect
of its liquidity risk management framework, or otherwise supplementing
liquid resources. The ST Framework would also be revised to state that
liquidity risk tolerance and liquidity shortfall reporting and
escalations are governed by the LRM Framework.
Other Clarifying, Cleanup and Organizational Changes
Finally, the Clearing Agencies propose other clarifying, cleanup
and organizational changes to the LRM Framework to improve the accuracy
and clarity of the document. The Clearing Agencies would relocate the
definition of ``qualifying liquid resources'' from Section 5 of the LRM
Framework to the Glossary of Key Terms in Section 2, with minor
modifications to associated footnotes and citations, so that this term
is clearly defined before its first usage within the LRM Framework. The
Clearing Agencies would also update the Glossary of Key Terms to refer
to the DTCC Treasury ``department'' rather than DTCC Treasury ``group''
to align with other references to the DTCC Treasury department
throughout the LRM Framework and remove the defined term ``Stress
Testing Team'' because specific responsibilities of this team would no
longer be described in LRM Framework as they are covered in the ST
Framework.
In addition, Clearing Agencies would make several cleanup changes
in the Liquidity Risk Measurement section of the LRM Framework to
remove an outdated reference to previously removed sections of the LRM
Framework, refer to the new Liquidity Risk Governance and Escalation
Procedures section of the LRM Framework, and remove a specific
reference to the Stress Test Team (the responsibilities of which are
addressed in the ST Framework).
Finally, the Clearing Agencies would make a minor clarification in
the LRM Framework regarding the annual testing of certain uncommitted
liquidity providers, which are non-qualifying liquid resources of FICC.
2. Statutory Basis
The Clearing Agencies believe that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a registered clearing agency. In
particular, the Clearing Agencies believe that the proposed changes are
consistent with Section
[[Page 20738]]
17A(b)(3)(F) of the Act \17\ and Rule 17Ad-22(e)(7) under the Act \18\
for the reasons set forth below.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78q-1(b)(3)(F).
\18\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act \19\ requires, in part, that the
rules of a registered clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions. The
proposed changes would improve the accuracy and clarity of the
Frameworks, and specifically the LRM Framework, by (i) clarifying in
the LRM Framework the resources currently available to FICC and NSCC to
meet settlement obligations and liquidity shortfalls; (ii) clarifying
in the LRM Framework the Clearing Agencies' practices for reporting and
escalating liquidity risk tolerance thresholds; (iii) relocating the
governance and escalation requirements related to certain liquidity
risk management processes from the ST Framework to the LRM Framework;
and (iv) making other non-substantive clarifying, organizational and
cleanup changes to the LRM Framework. The LRM Framework and the
policies and procedures that support the LRM Framework help assure that
each Clearing Agency can effectively measure, monitor, and manage their
liquidity risks to promote the timely settlement of securities
transactions. The proposed changes would enhance the LRM Framework by
improving the accuracy and clarity of the descriptions of key aspects
of the Clearing Agencies' liquidity risk management processes, thereby
facilitating the Clearing Agencies' ability to continue the prompt and
accurate clearance and settlement of securities transactions as
required by Section 17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(7) under the Act requires that a covered clearing
agency establish, implement, maintain, and enforce written policies and
procedures reasonably designed to effectively measure, monitor, and
manage the liquidity risk that arises in or is borne by the covered
clearing agency, including measuring, monitoring, and managing its
settlement and funding flows on an ongoing and timely basis, and its
use of intraday liquidity.\20\ As discussed above, the LRM Framework
and the policies and procedures that support the LRM Framework help
assure that each Clearing Agency can effectively measure, monitor, and
manage their liquidity risks. The Clearing Agencies believe that by
improving the accuracy and clarity of the descriptions of key aspects
of the Clearing Agencies' liquidity risk management processes, the
proposed changes would facilitate the maintenance of written policies
and procedures reasonably designed to effectively measure, monitor, and
manage liquidity risks as required by Rule 17Ad-22(e)(7) under the Act.
---------------------------------------------------------------------------
\20\ See 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
In addition, Rule 17Ad-22(e)(7)(viii) under the Act specifically
requires a covered clearing agency to establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
address foreseeable liquidity shortfalls that would not be covered by
the covered clearing agency's liquid resources and seek to avoid
unwinding, revoking, or delaying the same-day settlement of payment
obligations.\21\ The Clearing Agencies believe that including
additional clarity and specificity in the LRM Framework concerning the
types of liquidity resources available to FICC and NSCC to address
foreseeable liquidity shortfalls would further promote compliance with
Rule 17Ad-22(e)(7)(viii) under the Act.
---------------------------------------------------------------------------
\21\ See 17 CFR 240.17Ad-22(e)(7)(viii).
---------------------------------------------------------------------------
For these reasons, the Clearing Agencies believe the proposed rule
change is consistent with the requirements of Section 17A(b)(3)(F) of
the Act \22\ and Rule 17Ad-22(e)(7) thereunder.\23\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78q-1(b)(3)(F).
\23\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
The proposed changes would enhance the Frameworks, and specifically
the LRM Framework, by providing additional clarity and accuracy
concerning the Clearing Agencies' existing liquidity risk management
processes. The Frameworks, and the proposed rule changes described
herein, would not advantage or disadvantage any particular participant
or user of the Clearing Agencies' services or unfairly inhibit access
to the Clearing Agencies' services. The Clearing Agencies therefore do
not believe that the proposed rule change would 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
The Clearing Agencies have not received or solicited any written
comments relating to this proposal. If any written comments are
received, they will be publicly filed as an Exhibit 2 to this filing,
as required by Form 19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at www.sec.gov/regulatory-actions/how-to-submit-comments. General questions regarding
the rule filing process or logistical questions regarding this filing
should be directed to the Main Office of the SEC's Division of Trading
and Markets at [email protected] or 202-551-5777.
The Clearing Agencies reserve the right to not respond to any
comments received.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
Because the foregoing proposed rule change does not:
(i) significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \24\ and
Rule 19b-4(f)(6) thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6).
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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:
[[Page 20739]]
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-FICC-2024-004 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-FICC-2024-004. 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 FICC 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-FICC-2024-004 and should be
submitted on or before April 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06163 Filed 3-22-24; 8:45 am]
BILLING CODE 8011-01-P