80 FR 51638 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Amendment No. 1 and No Objection to Advance Notice Filing, as Modified by Amendment No. 1, to Establish a Prefunded Liquidity Program As Part of NSCC's Liquidity Risk Management
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 164 (August 25, 2015)
Federal Register Volume 80, Issue 164 (August 25, 2015)
| Page Range | 51638-51641 | |
| FR Document | 2015-20929 |
[Federal Register Volume 80, Number 164 (Tuesday, August 25, 2015)] [Notices] [Pages 51638-51641] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-20929] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75730; File No. SR-NSCC-2015-802] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Amendment No. 1 and No Objection to Advance Notice Filing, as Modified by Amendment No. 1, to Establish a Prefunded Liquidity Program As Part of NSCC's Liquidity Risk Management August 19, 2015. On June 26, 2015, National Securities Clearing Corporation (``NSCC'') filed with the Securities and Exchange Commission (``Commission'') advance notice SR-NSCC-2015-802 (``Advance Notice'') pursuant to Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision Act of 2010 (``Payment, Clearing and Settlement Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) \2\ under the Securities Exchange Act of 1934 (``Exchange Act'') to establish a ``Prefunded Liquidity Program'' through the private placement of unsecured [[Page 51639]] debt. The Advance Notice was published for comment in the Federal Register on August 3, 2015.\3\ NSCC filed Amendment No. 1 to the Advance Notice on July 30, 2015.\4\ The Commission did not receive any comments on the Advance Notice. This publication serves as notice of filing Amendment No. 1 and of no objection to the Advance Notice, as modified by Amendment No. 1. --------------------------------------------------------------------------- \1\ 12 U.S.C. 5465(e)(1). The Financial Stability Oversight Council designated NSCC a systemically important financial market utility on July 18, 2012. See Financial Stability Oversight Council 2012 Annual Report, Appendix A, http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Annual%20Report.pdf. Therefore, NSCC is required to comply with the Clearing Supervision Act and file advance notices with the Commission. See 12 U.S.C. 5465(e). \2\ 17 CFR 240.19b-4(n)(1)(i). \3\ See Securities Exchange Act Release No. 75541 (July 28, 2015), 80 FR 46072 (August 3, 2015) (File No. SR-NSCC-2015-802). \4\ In Amendment No. 1, NSCC further specifies the proposed investment of the proceeds of the Prefunded Liquidity Program, as described below. --------------------------------------------------------------------------- I. Description of the Advance Notice, as Modified by Amendment No. 1 As described by NSCC in its Advance Notice, as modified by Amendment No. 1, NSCC has proposed to establish the Prefunded Liquidity Program to raise prefunded liquidity and diversify its liquidity resources through the private placement of unsecured debt, consisting of a combination of short-term promissory notes (``Commercial Paper Notes'') and extendible-term promissory notes (``Extendible Notes,'' together with the Commercial Paper Notes, ``Notes''), to institutional investors in an aggregate amount not to exceed $5 billion. The proceeds from the Prefunded Liquidity Program will supplement NSCC's existing liquidity resources, which collectively provide NSCC with liquidity to complete end-of-day settlement in the event of the default of an NSCC Member.\5\ --------------------------------------------------------------------------- \5\ Terms not defined herein are defined in NSCC's Rules and Procedures (``Rules'') available at http://dtcc.com/~/media/Files/ Downloads/legal/rules/nscc_rules.pdf. The events that constitute a Member default are specified in NSCC's Rule 46 (Restrictions on Access to Services), which provides that NSCC's Board of Directors may suspend a Member or prohibit or limit a Member's access to NSCC's services in enumerated circumstances; this includes default in delivering funds or securities to NSCC, or a Member's experiencing such financial or operational difficulties that NSCC determines, in its discretion, that restriction on access to services is necessary for its protection and for the protection of its membership. --------------------------------------------------------------------------- Terms of the Prefunded Liquidity Program. NSCC has engaged an issuing and paying agent, as well as certain placement agent dealers, to develop a program to issue the Notes. The Notes will be issued to institutional investors through a private placement and offered in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933.\6\ NSCC will be party to certain transaction documents required to establish the Prefunded Liquidity Program, including an issuing and paying agent agreement and a dealer agreement with each of the placement agent dealers. The dealer agreements each will be based on the standard form of dealer agreement for commercial paper programs, which is published by the Securities Industry and Financial Markets Association. The material terms and conditions of the Prefunded Liquidity Program are summarized below. --------------------------------------------------------------------------- \6\ 15 U.S.C. 77d(a)(2). --------------------------------------------------------------------------- The Prefunded Liquidity Program will be established as a combination of both Commercial Paper Notes, which typically have shorter maturities, and Extendible Notes, which typically have longer maturities. NSCC intends to structure the Prefunded Liquidity Program such that the maturities of the issued Notes are staggered to avoid concentrations of maturing liabilities. The average maturity of the aggregate Notes outstanding issued under the Prefunded Liquidity Program is broadly estimated to range between three and six months. The Commercial Paper Notes and the Extendible Notes will be represented by one or more master notes issued in the name of The Depository Trust Company (``DTC'') or its nominee. The Notes will be issued only through the book-entry system of DTC and will not be certificated. The Commercial Paper Notes either will be interest bearing or sold at a discount from their face amount, and the Extendible Notes will be interest bearing. Interest payable on the Notes will be at market rates customary for such type of debt and reflective of the creditworthiness of NSCC. The Commercial Paper Notes will have a maturity not to exceed 397 calendar days from the date of issue and will not be redeemable by NSCC prior to maturity, nor will they contain any provision for extension, renewal, automatic rollover or voluntary prepayment. The Extendible Notes will have an initial maturity of 397 calendar days from the date of issue. However, each month following the date of issue, the holder of an Extendible Note will be permitted to elect to extend the maturity of all or a portion of the principal amount of such Extendible Note for an additional 30 calendar days. A holder of an Extendible Note will be permitted to continue to extend its Extendible Note up to the final maturity date, which is expected to be a maximum of six years from the date of issue. If a holder of an Extendible Note fails to exercise its right to extend the maturity of all or a portion of the Extendible Note, such portion of the Extendible Note would be deemed to be represented by a new note (``Non-Extended Note''), and NSCC would have the option to redeem any Non-Extended Note in whole, but not in part, at any time prior to the maturity date of that Non- Extended Note, which would be 12 months from the date on which they opted not to extend. NSCC will hold the proceeds from the issuance of the Notes in a cash deposit account at the Federal Reserve Bank of New York (``FRBNY'') \7\ and invest the proceeds in the same manner it invests Clearing Fund deposits in accordance with the DTCC Investment Policy.\8\ Pending the establishment of NSCC's account at the FRBNY, such proceeds will be maintained in accounts with creditworthy financial institutions and invested in the same manner as NSCC invests Clearing Fund deposits in accordance with the DTCC Investment Policy. Acceptable investments for Clearing Fund deposits under DTCC's Investment Policy include reverse repurchase agreements, money market mutual fund investments, bank deposits and commercial paper bank sweep deposits. In all cases, amounts will be available to draw to complete settlement as needed. --------------------------------------------------------------------------- \7\ Pursuant to Section 806(a) under the Payment, Clearing and Settlement Supervision Act, and Section 234.6 of the Federal Reserve Regulation HH promulgated thereunder, NSCC, as a designated systemically important financial market utility under the Payment, Clearing and Settlement Supervision Act, has applied for a cash deposit account at the FRBNY, as well as subscription to ancillary FRBNY services that would facilitate the use of the requested cash deposit account. See 12 U.S.C. 5465(a); 12 CFR 234.6. The application is pending with the FRBNY as of the date of this notice. \8\ NSCC will submit a proposed rule change with the Commission pursuant to Section 19(b)(1) of the Exchange Act, and the rules thereunder, which specify how NSCC will invest the proceeds of the Notes under the DTCC Investment Policy. See 15 U.S.C. 78s(b)(1). --------------------------------------------------------------------------- NSCC Liquidity Risk Management. As described by NSCC, as a central counterparty (``CCP''), NSCC occupies an important role in the securities settlement system by interposing itself between counterparties to financial transactions, thereby reducing the risk faced by its Members and contributing to global financial stability. NSCC's liquidity risk management framework plays an integral part in NSCC's ability to perform this role and is designed to ensure that NSCC maintains sufficient liquid resources to timely meet its payment (principally settlement) obligations with a high degree of confidence. NSCC's liquidity needs are driven by the requirement to complete end-of-day settlement, on an ongoing basis, in the event of Member default. If an NSCC Member defaults, as a CCP for the cash markets, NSCC would need to complete settlement of guaranteed transactions on the failing Member's behalf from the date of default through the remainder of [[Page 51640]] the settlement cycle (currently three days for securities that settle on a regular way basis in the U.S. equities markets). NSCC measures and manages its liquidity risk by performing daily simulations that measure the amount of liquidity NSCC would require in a number of scenarios, including amounts required over the settlement cycle in the event that the Member or Member family to which NSCC has the largest aggregate liquidity exposure defaults. NSCC seeks to maintain qualified liquidity resources in an amount sufficient to meet this requirement. NSCC's existing liquidity resources include: (1) The cash in NSCC's Clearing Fund; (2) the cash that would be obtained by drawing upon NSCC's committed 364-day credit facility with a consortium of banks (``Line of Credit''); and (3) additional cash deposits, known as ``Supplemental Liquidity Deposits,'' designed to cover the heightened liquidity exposure arising around monthly option expiry periods, required from those Members whose activity would pose the largest liquidity exposure to NSCC.\9\ The proceeds from the Prefunded Liquidity Program will supplement these liquidity resources. Further, NSCC will consider the proceeds from the Prefunded Liquidity Program to be qualifying liquidity resources under NSCC's Rule 4A. --------------------------------------------------------------------------- \9\ Supplemental Liquidity Deposits are described in NSCC Rule 4A. --------------------------------------------------------------------------- NSCC states that by providing NSCC with additional, prefunded, and readily available liquidity resources to be used to complete end-of-day settlement as needed in the event of a Member default, the proposed Prefunded Liquidity Program will provide additional certainty, stability, and safety to NSCC, its Members, and the U.S. equities market that it serves. The Prefunded Liquidity Program also is designed to reduce NSCC's concentration risk with respect to its liquidity resources because it is anticipated that many of the potential institutional investors who would be purchasers of the Notes are not currently providing liquidity resources to NSCC. The Prefunded Liquidity Program was developed in coordination with a standing advisory group, the Clearing Agency Liquidity Council (``CALC''), which includes representatives of NSCC's Members and participants of NSCC's affiliate, the Fixed Income Clearing Corporation. The CALC was established in 2013 to facilitate dialogue between these clearing agencies and their participants regarding liquidity initiatives. II. Discussion and Commission Findings Although the Payment, Clearing and Settlement Supervision Act does not specify a standard of review for an advance notice, the Commission believes that the stated purpose of the Payment, Clearing and Settlement Supervision Act is instructive.\10\ The stated purpose of the Payment, Clearing and Settlement Supervision Act is to mitigate systemic risk in the financial system and promote financial stability by, among other things, promoting uniform risk management standards for systemically important financial market utilities and strengthening the liquidity of systemically important financial market utilities.\11\ --------------------------------------------------------------------------- \10\ See 12 U.S.C. 5461(b). \11\ Id. --------------------------------------------------------------------------- Section 805(a)(2) of the Payment, Clearing and Settlement Supervision Act \12\ authorizes the Commission to prescribe risk management standards for the payment, clearing, and settlement activities of designated clearing entities and financial institutions engaged in designated activities for which it is the supervisory agency or the appropriate financial regulator. Section 805(b) of the Payment, Clearing and Settlement Supervision Act \13\ states that the objectives and principles for the risk management standards prescribed under Section 805(a) shall be to: --------------------------------------------------------------------------- \12\ 12 U.S.C. 5464(a)(2). \13\ 12 U.S.C. 5464(b). ---------------------------------------------------------------------------Promote robust risk management; promote safety and soundness; reduce systemic risks; and support the stability of the broader financial system. The Commission has adopted risk management standards under Section 805(a)(2) of the Payment, Clearing and Settlement Supervision Act (``Clearing Agency Standards'') and the Exchange Act.\14\ The Clearing Agency Standards became effective on January 2, 2013, and require registered clearing agencies to establish, implement, maintain, and enforce written policies and procedures that are reasonably designed to meet certain minimum requirements for their operations and risk management practices on an ongoing basis.\15\ As such, it is appropriate for the Commission to review advance notices against these Clearing Agency Standards, and the objectives and principles of these risk management standards as described in Section 805(b) of the Payment, Clearing and Settlement Supervision Act.\16\ --------------------------------------------------------------------------- \14\ 17 CFR 240.17Ad-22. \15\ The Clearing Agency Standards are substantially similar to the risk management standards established by the Board of Governors of the Federal Reserve System governing the operations of designated financial market utilities that are not clearing entities and financial institutions engaged in designated activities for which the Commission or the Commodity Futures Trading Commission is the Supervisory Agency. See Financial Market Utilities, 77 FR 45907 (August 2, 2012). \16\ 12 U.S.C. 5464(b). --------------------------------------------------------------------------- The Commission believes the proposal in the Advance Notice is consistent with the objectives and principles described in Section 805(b) of the Payment, Clearing and Settlement Supervision Act,\17\ and the Clearing Agency Standards, in particular, Rule 17Ad-22(b)(3) \18\ under the Exchange Act, as described in detail below. --------------------------------------------------------------------------- \17\ Id. \18\ 17 CFR 240.17Ad-22(b)(3). --------------------------------------------------------------------------- The objectives and principles of Section 805(b) of the Payment, Clearing and Settlement Supervision Act are to promote robust risk management, promote safety and soundness, reduce systemic risks, and support the stability of the broader financial system.\19\ By diversifying the type and source of NSCC's liquidity, the Commission believes that the Prefunded Liquidity Program will reduce NSCC's overall liquidity risk consistent with prudent risk-management practices. Given that NSCC has been designated as a systemically important financial market utility,\20\ NSCC's ability to provide its clearing services upon a member default contributes to safety, soundness, and reduces systemic risks, all of which supports the stability of the broader financial system. Therefore, the Commission believes the proposal is consistent with the objectives and principles described in Section 805(b) of the Payment, Clearing and Settlement Supervision Act. --------------------------------------------------------------------------- \19\ 12 U.S.C. 5464(b). \20\ Financial Stability Oversight Council, 2012 Annual Report, Appendix A, p. 110 and Appendix A, available at http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Appendix%20A%20Designation%20of%20Systemically%20Important%20Market%20Utilities.pdf. --------------------------------------------------------------------------- Rule 17Ad-22(b)(3) \21\ under the Exchange Act requires a CCP, such as NSCC, to ``establish, implement, maintain and enforce written policies and procedures reasonably designed to . . . [m]aintain sufficient financial resources to withstand, at a minimum, a default by the participant family to which it has the largest exposure in extreme but plausible market conditions . . . .'' NSCC's proposal to establish a Prefunded Liquidity Program will diversify NSCC's liquidity resources, further reduce NSCC's overall liquidity [[Page 51641]] risk, and, thus, help it maintain sufficient financial resources to withstand, at a minimum, a default by an NSCC member to which NSCC has the largest exposure. As such, the Commission believes that the proposal is consistent with Rule 17Ad-22(b)(3). --------------------------------------------------------------------------- \21\ 17 CFR 240.17Ad-22(b)(3). --------------------------------------------------------------------------- III. Conclusion It is therefore noticed, pursuant to Section 806(e)(1)(I) of the Payment, Clearing and Settlement Supervision Act,\22\ that the Commission does not object to Advance Notice, as modified by Amendment No. 1, and that NSCC is authorized to implement the proposal. --------------------------------------------------------------------------- \22\ 12 U.S.C. 5465(e)(1)(I). By the Commission. Jill M. Peterson, Assistant Secretary. [FR Doc. 2015-20929 Filed 8-24-15; 8:45 am] BILLING CODE P
![51638 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices
intra-day price information is available C. Self-Regulatory Organization’s available for Web site viewing and
through subscription services, such as Statement on Comments on the printing in the Commission’s Public
Bloomberg and Thomson Reuters, Proposed Rule Change Received From Reference Room, 100 F Street NE.,
which can be accessed by Authorized Members, Participants, or Others Washington, DC 20549, on official
Participants and other investors. Written comments were neither business days between the hours of
The Web site for the Fund will solicited nor received. 10:00 a.m. and 3:00 p.m. Copies of such
include a form of the prospectus for the filing will also be available for
Fund and additional data relating to III. Date of Effectiveness of the inspection and copying at the principal
NAV and other applicable quantitative Proposed Rule Change and Timing for office of the Exchange. All comments
information. Trading in Shares of the Commission Action received will be posted without change;
Fund will be halted if the circuit breaker Within 45 days of the date of the Commission does not edit personal
parameters in Nasdaq Rule 4120(a)(11) publication of this notice in the Federal identifying information from
have been reached or because of market Register or within such longer period submissions. You should submit only
conditions or for reasons that, in the up to 90 days (i) as the Commission may information that you wish to make
view of the Exchange, make trading in designate if it finds such longer period available publicly. All submissions
the Shares inadvisable, and trading in to be appropriate and publishes its should refer to File Number SR–
the Shares will be subject to Nasdaq reasons for so finding or (ii) as to which NASDAQ–2015–095 and should be
Rule 5735(d)(2)(D), which sets forth the self-regulatory organization submitted on or before September 15,
circumstances under which Shares of consents, the Commission will: (a) By 2015.
the Fund may be halted. In addition, as order approve or disapprove such For the Commission, by the Division of
noted above, investors will have ready proposed rule change; or (b) institute Trading and Markets, pursuant to delegated
access to information regarding the proceedings to determine whether the authority.30
Fund’s holdings, the Intraday Indicative proposed rule change should be Jill M. Peterson,
Value, the Disclosed Portfolio, and disapproved. Assistant Secretary.
quotation and last sale information for [FR Doc. 2015–20937 Filed 8–24–15; 8:45 am]
the Shares. IV. Solicitation of Comments
BILLING CODE 8011–01–P
The proposed rule change is designed Interested persons are invited to
to perfect the mechanism of a free and submit written data, views, and
open market and, in general, to protect arguments concerning the foregoing, SECURITIES AND EXCHANGE
investors and the public interest in that including whether the proposed rule COMMISSION
it will facilitate the listing and trading change is consistent with the Act.
of an additional type of actively- Comments may be submitted by any of [Release No. 34–75730; File No. SR–NSCC–
2015–802]
managed exchange-traded product that the following methods:
will enhance competition among market Self-Regulatory Organizations;
Electronic Comments
participants, to the benefit of investors National Securities Clearing
and the marketplace. As noted above, • Use the Commission’s Internet
Corporation; Notice of Filing of
the Exchange has in place surveillance comment form (http://www.sec.gov/
Amendment No. 1 and No Objection to
procedures relating to trading in the rules/sro.shtml); or
Advance Notice Filing, as Modified by
Shares and may obtain information via • Send an email to rule-comments@
Amendment No. 1, to Establish a
ISG from other exchanges that are sec.gov. Please include File Number SR–
Prefunded Liquidity Program As Part
members of ISG or with which the NASDAQ–2015–095 on the subject line.
of NSCC’s Liquidity Risk Management
Exchange has entered into a Paper Comments
comprehensive surveillance sharing August 19, 2015.
agreement. In addition, as noted above, • Send paper comments in triplicate On June 26, 2015, National Securities
investors will have ready access to to Brent J. Fields, Secretary, Securities Clearing Corporation (‘‘NSCC’’) filed
information regarding the Fund’s and Exchange Commission, 100 F Street with the Securities and Exchange
holdings, the Intraday Indicative Value, NE., Washington, DC 20549–1090. Commission (‘‘Commission’’) advance
the Disclosed Portfolio, and quotation All submissions should refer to File notice SR–NSCC–2015–802 (‘‘Advance
and last sale information for the Shares. Number SR–NASDAQ–2015–095. This Notice’’) pursuant to Section 806(e)(1) of
For the above reasons, Nasdaq file number should be included on the the Payment, Clearing, and Settlement
believes the proposed rule change is subject line if email is used. To help the Supervision Act of 2010 (‘‘Payment,
consistent with the requirements of Commission process and review your Clearing and Settlement Supervision
Section 6(b)(5) of the Act. comments more efficiently, please use Act’’) 1 and Rule 19b–4(n)(1)(i) 2 under
only one method. The Commission will the Securities Exchange Act of 1934
B. Self-Regulatory Organization’s
post all comments on the Commission’s (‘‘Exchange Act’’) to establish a
Statement on Burden on Competition
Internet Web site (http://www.sec.gov/ ‘‘Prefunded Liquidity Program’’ through
The Exchange does not believe that rules/sro.shtml). Copies of the the private placement of unsecured
the proposed rule change will impose submission, all subsequent
any burden on competition that is not amendments, all written statements 30 17 CFR 200.30–3(a)(12).
necessary or appropriate in furtherance with respect to the proposed rule 1 12 U.S.C. 5465(e)(1). The Financial Stability
asabaliauskas on DSK5VPTVN1PROD with NOTICES
of the purposes of the Act. The change that are filed with the Oversight Council designated NSCC a systemically
important financial market utility on July 18, 2012.
Exchange believes that the proposed Commission, and all written See Financial Stability Oversight Council 2012
rule change will facilitate the listing and communications relating to the Annual Report, Appendix A, http://
trading of an additional type of actively- proposed rule change between the www.treasury.gov/initiatives/fsoc/Documents/
managed exchange-traded fund that will Commission and any person, other than 2012%20Annual%20Report.pdf. Therefore, NSCC
is required to comply with the Clearing Supervision
enhance competition among market those that may be withheld from the Act and file advance notices with the Commission.
participants, to the benefit of investors public in accordance with the See 12 U.S.C. 5465(e).
and the marketplace. provisions of 5 U.S.C. 552, will be 2 17 CFR 240.19b–4(n)(1)(i).
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![51640 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices
the settlement cycle (currently three their participants regarding liquidity such, it is appropriate for the
days for securities that settle on a initiatives. Commission to review advance notices
regular way basis in the U.S. equities against these Clearing Agency
II. Discussion and Commission
markets). Standards, and the objectives and
Findings
NSCC measures and manages its principles of these risk management
liquidity risk by performing daily Although the Payment, Clearing and standards as described in Section 805(b)
simulations that measure the amount of Settlement Supervision Act does not of the Payment, Clearing and Settlement
liquidity NSCC would require in a specify a standard of review for an Supervision Act.16
number of scenarios, including amounts advance notice, the Commission The Commission believes the
required over the settlement cycle in the believes that the stated purpose of the proposal in the Advance Notice is
event that the Member or Member Payment, Clearing and Settlement consistent with the objectives and
family to which NSCC has the largest Supervision Act is instructive.10 The principles described in Section 805(b) of
aggregate liquidity exposure defaults. stated purpose of the Payment, Clearing the Payment, Clearing and Settlement
NSCC seeks to maintain qualified and Settlement Supervision Act is to Supervision Act,17 and the Clearing
liquidity resources in an amount mitigate systemic risk in the financial Agency Standards, in particular, Rule
sufficient to meet this requirement. system and promote financial stability 17Ad–22(b)(3) 18 under the Exchange
NSCC’s existing liquidity resources by, among other things, promoting Act, as described in detail below.
include: (1) The cash in NSCC’s uniform risk management standards for The objectives and principles of
Clearing Fund; (2) the cash that would systemically important financial market Section 805(b) of the Payment, Clearing
be obtained by drawing upon NSCC’s utilities and strengthening the liquidity and Settlement Supervision Act are to
committed 364-day credit facility with a of systemically important financial promote robust risk management,
consortium of banks (‘‘Line of Credit’’); market utilities.11 promote safety and soundness, reduce
Section 805(a)(2) of the Payment, systemic risks, and support the stability
and (3) additional cash deposits, known
Clearing and Settlement Supervision of the broader financial system.19 By
as ‘‘Supplemental Liquidity Deposits,’’
Act 12 authorizes the Commission to diversifying the type and source of
designed to cover the heightened
prescribe risk management standards for NSCC’s liquidity, the Commission
liquidity exposure arising around
the payment, clearing, and settlement believes that the Prefunded Liquidity
monthly option expiry periods, required
activities of designated clearing entities Program will reduce NSCC’s overall
from those Members whose activity
and financial institutions engaged in liquidity risk consistent with prudent
would pose the largest liquidity
designated activities for which it is the risk-management practices. Given that
exposure to NSCC.9 The proceeds from
supervisory agency or the appropriate NSCC has been designated as a
the Prefunded Liquidity Program will
financial regulator. Section 805(b) of the systemically important financial market
supplement these liquidity resources. utility,20 NSCC’s ability to provide its
Further, NSCC will consider the Payment, Clearing and Settlement
Supervision Act 13 states that the clearing services upon a member default
proceeds from the Prefunded Liquidity contributes to safety, soundness, and
Program to be qualifying liquidity objectives and principles for the risk
management standards prescribed under reduces systemic risks, all of which
resources under NSCC’s Rule 4A. supports the stability of the broader
NSCC states that by providing NSCC Section 805(a) shall be to:
• Promote robust risk management; financial system. Therefore, the
with additional, prefunded, and readily • promote safety and soundness; Commission believes the proposal is
available liquidity resources to be used • reduce systemic risks; and consistent with the objectives and
to complete end-of-day settlement as • support the stability of the broader principles described in Section 805(b) of
needed in the event of a Member financial system. the Payment, Clearing and Settlement
default, the proposed Prefunded The Commission has adopted risk Supervision Act.
Liquidity Program will provide management standards under Section Rule 17Ad–22(b)(3) 21 under the
additional certainty, stability, and safety 805(a)(2) of the Payment, Clearing and Exchange Act requires a CCP, such as
to NSCC, its Members, and the U.S. Settlement Supervision Act (‘‘Clearing NSCC, to ‘‘establish, implement,
equities market that it serves. The Agency Standards’’) and the Exchange maintain and enforce written policies
Prefunded Liquidity Program also is Act.14 The Clearing Agency Standards and procedures reasonably designed to
designed to reduce NSCC’s became effective on January 2, 2013, . . . [m]aintain sufficient financial
concentration risk with respect to its and require registered clearing agencies resources to withstand, at a minimum,
liquidity resources because it is to establish, implement, maintain, and a default by the participant family to
anticipated that many of the potential enforce written policies and procedures which it has the largest exposure in
institutional investors who would be that are reasonably designed to meet extreme but plausible market conditions
purchasers of the Notes are not certain minimum requirements for their . . . .’’ NSCC’s proposal to establish a
currently providing liquidity resources operations and risk management Prefunded Liquidity Program will
to NSCC. practices on an ongoing basis.15 As diversify NSCC’s liquidity resources,
The Prefunded Liquidity Program was further reduce NSCC’s overall liquidity
developed in coordination with a 10 See 12 U.S.C. 5461(b).
standing advisory group, the Clearing 11 Id. See Financial Market Utilities, 77 FR 45907 (August
Agency Liquidity Council (‘‘CALC’’), 12 12 U.S.C. 5464(a)(2). 2, 2012).
13 12 U.S.C. 5464(b). 16 12 U.S.C. 5464(b).
asabaliauskas on DSK5VPTVN1PROD with NOTICES
which includes representatives of 14 17 CFR 240.17Ad–22. 17 Id.
NSCC’s Members and participants of 15 The Clearing Agency Standards are 18 17 CFR 240.17Ad–22(b)(3).
NSCC’s affiliate, the Fixed Income substantially similar to the risk management 19 12 U.S.C. 5464(b).
Clearing Corporation. The CALC was standards established by the Board of Governors of 20 Financial Stability Oversight Council, 2012
established in 2013 to facilitate dialogue the Federal Reserve System governing the Annual Report, Appendix A, p. 110 and Appendix
operations of designated financial market utilities A, available at http://www.treasury.gov/initiatives/
between these clearing agencies and fsoc/Documents/2012%20Appendix%20A%20
that are not clearing entities and financial
institutions engaged in designated activities for Designation%20of%20Systemically%20Important
9 Supplemental Liquidity Deposits are described which the Commission or the Commodity Futures %20Market%20Utilities.pdf.
in NSCC Rule 4A. Trading Commission is the Supervisory Agency. 21 17 CFR 240.17Ad–22(b)(3).
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![Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices 51641
risk, and, thus, help it maintain The text of the proposed rule change per port fee to users of the FIX Drop
sufficient financial resources to is available on the Exchange’s Web site Copy Ports.
withstand, at a minimum, a default by at http://www.miaxoptions.com/filter/ MIAX currently assesses fees for
an NSCC member to which NSCC has wotitle/rule_filing, at MIAX’s principal Exchange connectivity and services
the largest exposure. As such, the office, and at the Commission’s Public used by Members. Such Exchange
Commission believes that the proposal Reference Room. connectivity is gained through various
is consistent with Rule 17Ad–22(b)(3). II. Self-Regulatory Organization’s ports. MIAX currently assesses monthly
Statement of the Purpose of, and per port fees for FIX Ports. Similarly, the
III. Conclusion
Statutory Basis for, the Proposed Rule Exchange is proposing to establish a
It is therefore noticed, pursuant to monthly per port fee for the use of the
Change
Section 806(e)(1)(I) of the Payment, FIX Drop Copy Port.
Clearing and Settlement Supervision In its filing with the Commission, the The FIX Drop Copy Port provides the
Act,22 that the Commission does not Exchange included statements user with a copy of real-time trade
object to Advance Notice, as modified concerning the purpose of and basis for execution updates. The updates contain
by Amendment No. 1, and that NSCC is the proposed rule change and discussed a copy of trade execution messages on
authorized to implement the proposal. any comments it received on the a low latency, real-time basis. A FIX
proposed rule change. The text of these Drop Copy Port can be configured to
By the Commission.
statements may be examined at the monitor any number of FIX Ports used
Jill M. Peterson, places specified in Item IV below. The
Assistant Secretary.
by that EEM and a FIX Port user can
Exchange has prepared summaries, set have any number of FIX Drop Copy
[FR Doc. 2015–20929 Filed 8–24–15; 8:45 am] forth in sections A, B, and C below, of Ports. The FIX Drop Copy Port will send
BILLING CODE P the most significant aspects of such messages containing reports of order
statements. executions to the user based upon the
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s group of FIX Ports that it is configured
COMMISSION Statement of the Purpose of, and to monitor. Other order related messages
Statutory Basis for, the Proposed Rule will not be sent via the FIX Drop Copy
[Release No. 34–75735; File No. SR–MIAX– Change port.
2015–52] MIAX will assess a FIX Drop Copy
1. Purpose
Port fee of $500 per port per month.
Self-Regulatory Organizations; Miami The purpose of the proposed rule Similar to the FIX Port Fees, the FIX
International Securities Exchange LLC; change is to establish a monthly port fee Drop Copy Port Fee will be based on the
Notice of Filing and Immediate of $500 per port for the use of the new number of FIX Drop Copy Ports to
Effectiveness of a Proposed Rule MIAX FIX Drop Copy Port. which a user subscribes and the fee
Change To Amend Its Fee Schedule Currently, the Exchange assesses fees includes connectivity to the Exchange’s
for the use of its FIX Ports. A FIX Port primary, secondary and disaster
August 19, 2015. is an interface with MIAX systems that
Pursuant to the provisions of Section recovery data centers at no additional
enables the Port user (typically an cost. The Exchange intends to assess the
19(b)(1) of the Securities Exchange Act Electronic Exchange Member (‘‘EEM’’) 3
of 1934 (‘‘Act’’),1 and Rule 19b–4 fee on a per port basis for the data and
or a Market Maker 4) to submit orders information used in trading options
thereunder,2 notice is hereby given that electronically to MIAX.
on August 11, 2015, Miami International contracts and ongoing entitlement
The proposed FIX Drop Copy Port is management and configuration. The
Securities Exchange LLC (‘‘MIAX’’ or a messaging interface that will provide
‘‘Exchange’’) filed with the Securities Exchange believes that this should
a copy of real-time trade execution enable it to remain competitive with
and Exchange Commission information to FIX Drop Copy Port users
(‘‘Commission’’) a proposed rule change other exchanges with respect to fees
who subscribe to the service. FIX Drop charged for similar ports.5
as described in Items I and II below, Copy Port users are those users who are
which Items have been prepared by the The Exchange is also proposing to
designated by an EEM to receive the amend the Fee Schedule’s Table of
Exchange. The Commission is information and the information is
publishing this notice to solicit Contents to reflect the addition of the
restricted for use by the EEM only. The
comments on the proposed rule change FIX Drop Copy Port Fee in new Section
Exchange proposes to assess a monthly
from interested persons. (5)(d)(iv).
I. Self-Regulatory Organization’s
3 The term ‘‘Electronic Exchange Member’’ means 2. Statutory Basis
the holder of a Trading Permit who is not a Market
Statement of the Terms of Substance of Maker. Electronic Exchange Members are deemed The Exchange believes that its
the Proposed Rule Change ‘‘members’’ under the Exchange Act. See Exchange proposal to amend its Fee Schedule is
Rule 100. consistent with Section 6(b) of the Act 6
The Exchange is filing a proposal to 4 The term ‘‘Market Makers’’ refers to ‘‘Lead
amend the MIAX Options Fee Schedule Market Makers,’’ ‘‘Primary Lead Market Makers’’
in general, and furthers the objectives of
(the ‘‘Fee Schedule’’) to establish fees and ‘‘Registered Market Makers’’ collectively. A Section 6(b)(4) of the Act 7 in particular,
for the MIAX Financial Information Lead Market Maker is a Member registered with the in that it is an equitable allocation of
Exchange for the purpose of making markets in reasonable fees and other charges.
Exchange (‘‘FIX’’) Drop Copy Port. securities traded on the Exchange and that is vested
asabaliauskas on DSK5VPTVN1PROD with NOTICES
While changes to the Fee Schedule with the rights and responsibilities specified in
5 See NYSE Arca Options Fees and Charges, p. 12
pursuant to this proposal are effective Chapter VI of these Rules with respect to Lead
Market Makers. A Primary Lead Market Maker is a [sic]; NYSE Amex Options Fee Schedule, p. 24.
upon filing, the Exchange has Lead Market Maker appointed by the Exchange to Both NYSE Arca Options and NYSE Amex Options
designated these changes to be operative act as the Primary Lead Market Maker for the charge $500 per port per month for a drop copy port
on September 1, 2015. purpose of making markets in securities traded on and do not charge for a drop copy port which is
the Exchange. A Registered Market Maker is a connected to their respective backup datacenters if
Member registered with the Exchange for the it is configured such that it is duplicative of other
22 12 U.S.C. 5465(e)(1)(I). drop copy ports.
purpose of making markets in securities traded on
1 15 U.S.C. 78s(b)(1). 6 15 U.S.C. 78f(b).
the Exchange, who is not a Lead Market Maker. See
2 17 CFR 240.19b–4. Exchange Rule 100. 7 15 U.S.C. 78f(b)(4).
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Document Created: 2018-02-23 11:03:10
Document Modified: 2018-02-23 11:03:10
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 51638 |
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