82 FR 35245 - Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Notice of Filing Amendment No. 1 and Order Instituting Proceedings to Determine Whether to Approve or Disapprove Proposed Rule Changes to Adopt the Clearing Agency Stress Testing Framework (Market Risk)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 144 (July 28, 2017)
Federal Register Volume 82, Issue 144 (July 28, 2017)
| Page Range | 35245-35248 | |
| FR Document | 2017-15905 |
[Federal Register Volume 82, Number 144 (Friday, July 28, 2017)] [Notices] [Pages 35245-35248] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-15905] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81192; File Nos. SR-DTC-2017-005; SR-FICC-2017-009; SR- NSCC-2017-006] Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Notice of Filing Amendment No. 1 and Order Instituting Proceedings to Determine Whether to Approve or Disapprove Proposed Rule Changes to Adopt the Clearing Agency Stress Testing Framework (Market Risk) July 24, 2017. I. Introduction On April 7, 2017, The Depository Trust Company (``DTC''), Fixed Income Clearing Corporation (``FICC''), and National Securities Clearing Corporation (``NSCC,'' each a ``Clearing Agency,'' and collectively, the ``Clearing Agencies''), filed with the Securities and Exchange Commission (``Commission'') proposed rule changes SR-DTC-2017- 005, SR-FICC-2017-009, and SR-NSCC-2017-006, respectively, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed rule changes were published for comment in the Federal Register on April 25, 2017.\3\ The Commission did not receive any comment letters on the proposed rule changes. On June 7, 2017, the Commission designated a longer period for Commission Action on the proposed rule changes.\4\ On July 19, 2017, the Clearing Agencies each filed Amendment No. 1 to their respective proposed rule changes (hereinafter, ``Proposed Rule Change''). Amendments No. 1 would clarify how the Clearing Agencies would use scenarios to estimate the profits and losses (``P&L'') of a member closeout. This order institutes proceedings under Section 19(b)(2)(B) of the Act \5\ to determine whether to approve or disapprove the Proposed Rule Changes. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 80485 (April 19, 2017), 82 FR 19131 (April 25, 2017) (SR-DTC-2017-005; SR-FICC-2017- 009; SR-NSCC-2017-006) (``Notice''). \4\ See Securities Exchange Act Release No. 80876 (June 7, 2017), 82 FR 27091 (June 13, 2017) (SR-DTC-2017-005; SR-FICC-2017- 009; SR-NSCC-2017-006). \5\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- II. Description of the Proposed Rule Changes The Proposed Rule Changes would adopt the Clearing Agency Stress [[Page 35246]] Testing Framework (Market Risk) (``Framework''), which would set the Clearing Agencies' procedures for identifying, measuring, monitoring, and managing their credit exposures to members. Although the Framework would be a rule of each Clearing Agency, the Proposed Rule Changes do not require any changes to the Rules, By-Laws and Organizational Certificate of DTC (``DTC Rules''), the Rulebook of GSD (``GSD Rules''), the Clearing Rules of MBSD (``MBSD Rules''), or the Rules & Procedures of NSCC (``NSCC Rules''), as the Framework would be a standalone document.\6\ --------------------------------------------------------------------------- \6\ Available at http://www.dtcc.com/en/legal/rules-and-procedures. FICC is comprised of two divisions: The Government Securities Division (``GSD'') and the Mortgage-Backed Securities Division (``MBSD''). Each division serves as a central counterparty, becoming the buyer and seller to each of their respective members' securities transactions and guarantying settlement of those transactions, even if a member defaults. GSD provides, among other things, clearance and settlement for trades in U.S. Government debt issues. MBSD provides, among other things, clearance and settlement for trades in mortgage-backed securities. GSD and MBSD maintain separate sets of rules, margin models, and clearing funds. Notice at 19131. --------------------------------------------------------------------------- In general, the Framework would describe the stress-testing practices adopted by the Clearing Agencies. The Clearing Agencies designed their stress testing to ensure the sufficiency of each Clearing Agency's total prefunded-financial resources.\7\ The Framework would describe (i) the sources of each Clearing Agency's total prefunded-financial resources; (ii) the Clearing Agencies' stress- testing methodologies; (iii) the Clearing Agencies' stress-testing governance and execution processes; and (iv) the Clearing Agencies' model-validation practices.\8\ --------------------------------------------------------------------------- \7\ Notice, 82 at 19132. \8\ Id. --------------------------------------------------------------------------- A. Sources of Prefunded-Financial Resources The Framework would outline the prefunded-financial resources and related stress-testing methodologies of the Clearing Agencies. The Framework would begin by describing the applicable regulatory requirements, with respect to credit risk management, of each Clearing Agency and how the Clearing Agencies address those requirements.\9\ The Framework would address these requirements by describing how the Clearing Agencies maintain what each deems to be sufficient prefunded- financial resources to cover fully their credit exposures to each of their respective members with a high degree of confidence.\10\ The Framework would also describe how the Clearing Agencies maintain additional prefunded-financial resources that, at a minimum, would enable them to cover a wide range of foreseeable stress scenarios that include, but are not limited to, the default of the affiliated family of members (``Affiliated Family'') that would potentially cause the largest aggregate credit exposure to the Clearing Agency in extreme but plausible market conditions (``Cover One Requirement'').\11\ Because the credit risks and prefunded-financial resources of each Clearing Agency differ, the Framework would describe the prefunded-financial resources and related stress-testing methodologies of the Clearing Agencies separately.\12\ --------------------------------------------------------------------------- \9\ Id. \10\ Id. \11\ See 17 CFR 240.17Ad-22(e)(4)(iii). \12\ Notice, 82 at 19132. --------------------------------------------------------------------------- With respect to FICC and NSCC, the Framework would describe that such prefunded-financial resources are their respective clearing funds, containing deposits from their members of both cash and eligible securities.\13\ The Framework would describe that such deposits are calculated for each individual member pursuant to the GSD Rules, MBSD Rules, or NSCC Rules, as applicable, and each member's deposits would be referred to in the Framework as its ``Required Deposit.'' \14\ --------------------------------------------------------------------------- \13\ Id. Any eligible security is subject to a haircut. GSD Rule 4 (Clearing Fund and Loss Allocation), MBSD Rule 4 (Clearing Fund and Loss Allocation), and NSCC Rule 4 (Clearing Fund), supra note 4. \14\ Id. --------------------------------------------------------------------------- With respect to DTC, the Framework would describe that its prefunded financial resources are cash deposits to its ``Participants Fund.'' \15\ The Framework would also describe that DTC may use its risk management control, the ``Collateral Monitor,'' to monitor and assure that the settlement obligations of each member are fully collateralized.\16\ --------------------------------------------------------------------------- \15\ Id. DTC Rule 4 (Participants Fund and Participants Investment). Supra note 4. \16\ Notice, 82 at 19132. ``Collateral Monitor'' is defined in DTC Rule 1, Section 1 (Definitions), and its calculation is further provided for in the DTC Settlement Service Guide of the DTC Rules. Supra note 4. --------------------------------------------------------------------------- B. Stress-Testing Methodology The Framework would describe the stress-testing methodologies that the Clearing Agencies use to test the sufficiency of their total prefunded-financial resources against Cover One Requirements. The Framework would state that the stress testing would be designed to identify potential weaknesses in the methodologies used to calculate members' Required Deposits and to determine collateral haircuts.\17\ --------------------------------------------------------------------------- \17\ Id. --------------------------------------------------------------------------- The Framework would describe in detail the three key components of the development of stress-testing methodologies: 1. Risk Identification. The Clearing Agencies would identify the principal credit-risk drivers that are representative and specific to each Clearing Agency's clearing and/or collateral portfolio under stressed market conditions.\18\ --------------------------------------------------------------------------- \18\ Id. --------------------------------------------------------------------------- 2. Scenario Development. The Clearing Agencies would construct comprehensive and relevant sets of extreme but plausible historical and hypothetical stress scenarios for the identified risk drivers.\19\ The Framework would describe how the Clearing Agencies would develop and select both historical and hypothetical scenarios that reflect stressed market conditions.\20\ Historical scenarios would be based on stressed market conditions that occurred on specific dates in the past.\21\ Contrastingly, hypothetical stress scenarios would be theoretical market conditions.\22\ --------------------------------------------------------------------------- \19\ Id. \20\ Id. \21\ Notice, 82 at 19133. \22\ Id. --------------------------------------------------------------------------- 3. Risk Measurement and Aggregation. The Clearing Agencies would calculate the risk metrics of each Clearing Agency's actual portfolio to estimate the P&L of a close out over a suitable stressed period of risk, deficiencies, and coverage ratios.\23\ The Framework would describe how the Clearing Agencies would develop P&L estimation methodologies, and how they would calculate risk metrics that are applicable to such methodologies under the chosen stress-testing scenarios.\24\ The Clearing Agencies could use a number of P&L methodologies for stress-testing purposes, including risk sensitivity, index mapping, and actual or approximate historical shock approaches.\25\ --------------------------------------------------------------------------- \23\ Id. \24\ Id. \25\ Id. --------------------------------------------------------------------------- The Framework would further describe the stress-testing methodology by stating that the Clearing Agencies would calculate member stress deficiencies,\26\ Affiliated Family [[Page 35247]] deficiencies,\27\ and Cover One Ratios daily.\28\ --------------------------------------------------------------------------- \26\ The Framework would define ``member stress deficiency'' for each scenario as, with respect to FICC and NSCC, the stress loss exceeding the applicable member's Required Deposits. The Framework would define ``member stress deficiency'' for each scenario at DTC as the shortfall of a member's Collateral Monitor. Id. \27\ The Framework would define ``Affiliated Family deficiency'' as the aggregate of all member stress deficiencies within the applicable Affiliated Family. Id. \28\ The Framework would define ``Cover One Ratio'' as the ratio of Affiliated Family deficiency over the total value of the relevant Clearing Agency's clearing fund (or, for DTC, the Participants Fund), excluding the value of the applicable Affiliated Family's Required Deposits. Id. --------------------------------------------------------------------------- The Framework would further state that FICC and NSCC would consider non-Cover-One Ratio coverages, such as comparing member stress deficiencies against such member's known financial resources (e.g., equity capital base), to keep abreast of potential financial vulnerabilities facing such member.\29\ Additionally, the Framework would state that DTC would also test the adequacy of its collateral haircuts by measuring ``Haircut Deficiency'' as the amount of stress losses exceeding the haircut applied to collateral securities.\30\ --------------------------------------------------------------------------- \29\ Id. \30\ Id. --------------------------------------------------------------------------- Moreover, the Framework would state that the Clearing Agencies measure both specific and generic wrong way risk for each Clearing Agency's members and Affiliated Families.\31\ To measure specific wrong way risk, for each given Member and its Affiliated Family and each given scenario, the securities issued by the Affiliated Family would be subject to shocks that reflect the default of a Member's Affiliated Family. To measure general wrong way risk, the Framework would apply historical scenarios during the 2008 financial crisis to securities issued by the Affiliated Family as well as securities issued by the non-Affiliated Family. --------------------------------------------------------------------------- \31\ Id. --------------------------------------------------------------------------- The Framework would also describe the reverse stress-testing analyses that are performed by FICC and NSCC on at least a semi-annual basis.\32\ These analyses provide FICC and NSCC, as central counterparties, another means for testing the sufficiency of the Clearing Agencies' respective prefunded financial resources.\33\ In conducting reverse stress-testing, FICC and NSCC would utilize scenarios of multiple defaults, extreme market shocks, or shocks for other risk factors, which would cause those Clearing Agencies, as applicable, to exhaust all of their respective prefunded financial resources.\34\ --------------------------------------------------------------------------- \32\ Id. \33\ Id. \34\ Id. --------------------------------------------------------------------------- C. Stress-Testing Governance and Execution Process The Framework would describe the Clearing Agencies' stress-testing governance and execution processes. Stress testing would be conducted daily for each of the Clearing Agencies, and stress-testing risk metrics also would be generated each day.\35\ The Cover One Ratios and member stress deficiencies would be monitored against pre-established thresholds.\36\ Breaches of these pre-established thresholds would initially be subject to more detailed studies to identify any potential impact to the applicable Clearing Agencies' Cover One Requirement.\37\ The Framework would describe that, to the extent such studies indicate a potential impact to a Clearing Agency's Cover One Requirement, the threshold breach would be escalated internally and analyzed to determine if (i) there is a need to adjust the stress-testing methodology, or (ii) the threshold breach indicates an issue with a particular member.\38\ Based on these analyses, the Clearing Agencies would determine the appropriate course of action.\39\ --------------------------------------------------------------------------- \35\ Id. \36\ According to the Clearing Agencies, risk-threshold levels are chosen to assist each Clearing Agency in achieving a high degree of confidence that its Cover One Requirement is met daily. Id. \37\ Id. \38\ Id. \39\ Id. --------------------------------------------------------------------------- D. Model Validation The Framework would describe the process the Clearing Agencies would use to validate their stress-testing procedures. The Clearing Agencies would conduct comprehensive analyses of daily stress-testing results, the existing scenario sets (including any changes to such scenarios for the period since the last review), and the performance of the stress-testing methodologies along with key underlying parameters and assumptions.\40\ These analyses would be performed at least monthly and would be conducted to assess whether each Clearing Agency's stress- testing components appropriately determine the sufficiency of the Clearing Agency's prefunded-financial resources.\41\ The Framework would state that such analyses may occur more frequently than monthly if, for example, (i) the products cleared or markets served by a Clearing Agency display high volatility or become less liquid, or (ii) the size or concentration of positions held by the applicable Clearing Agency's members increases significantly.\42\ --------------------------------------------------------------------------- \40\ Id. \41\ Id. \42\ Id. --------------------------------------------------------------------------- The Framework would state that the results of these analyses are reviewed monthly by the DTCC Enterprise Stress Testing Council.\43\ The Framework would also state that daily stress-testing results are summarized and reported monthly to the DTCC Risk Management Committee.\44\ Finally, the Framework would state that stress-testing methodologies and related models are subject to independent model validation on at least an annual basis.\45\ --------------------------------------------------------------------------- \43\ Id. \44\ Id. \45\ Id. --------------------------------------------------------------------------- E. Notice of Filing of Amendment No. 1 As originally proposed, the Framework stated that it would use scenarios to measure specific and generic wrong way risk. The Clearing Agencies filed Amendment No. 1 to clarify that to capture specific wrong way risk, for each given Member and its Affiliated Family and each given scenario, the securities issued by the Affiliated Family would be subject to shocks that reflect the default of a Member's Affiliated Family. To capture general wrong way risk, the Framework would apply historical scenarios during the 2008 financial crisis to securities issued by the Affiliated Family as well as securities issued by the non-Affiliated Family. III. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Changes and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act \46\ to determine whether the Proposed Rule Changes should be approved or disapproved. Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the Proposed Rule Changes. As noted above, institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to comment on the Proposed Rule Changes, and provide arguments to support the Commission's analysis as to whether to approve or disapprove the Proposed Rule Changes. --------------------------------------------------------------------------- \46\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- Pursuant to Section 19(b)(2)(B) of the Act,\47\ the Commission is providing notice of the grounds for disapproval under consideration. The Commission is [[Page 35248]] instituting proceedings to allow for additional analysis of the Proposed Rule Changes' consistency with the Act and the rules thereunder. Specifically, the Commission believes that the Proposed Rule Changes raise questions as to whether they are consistent with (i) Section 17A(b)(3)(F) of the Act,\48\ which requires, in part, that clearing agency rules be designed to assure the safeguarding of securities in the custody or control of the clearing agency and, in general, protect investors and the public interest, and (ii) Rule 17Ad- 22(e)(4) under the Act, which requires, in general, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to, among other things, effectively identify, measure, monitor, and manage their credit exposures to participants and those arising from its payment, clearing, and settlement processes.\49\ --------------------------------------------------------------------------- \47\ Id. \48\ 15 U.S.C. 78q-1(b)(3)(F). \49\ 17 CFR 240.17Ad-22(e)(4). --------------------------------------------------------------------------- As discussed above, pursuant to the Proposed Rule Changes, Clearing Agencies would adopt the Framework, which would procedures for identifying, measuring, monitoring, and managing their credit exposures to members. The Commission solicits comment on whether the Proposed Rule Changes are consistent with Section 17A(b)(3)(F) of the Act \50\ and Rule 17Ad-22(e)(4) under the Act.\51\ --------------------------------------------------------------------------- \50\ 15 U.S.C. 78q-1(b)(3)(F). \51\ 17 CFR 240.17Ad-22(e)(4). --------------------------------------------------------------------------- IV. Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to issues raised by the Proposed Rule Changes. In particular, the Commission invites the written views of interested persons concerning whether the Proposed Rule Changes are consistent with Sections 17A(b)(3)(F) of the Act and Rules 17Ad-22(e)(4) under the Act, cited above, or any other provision of the Act, or the rules and regulations thereunder. Interested persons are invited to submit written data, views, and arguments on or before August 14, 2017. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal on or before August 18, 2017. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-FICC-2017-002 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Numbers SR-DTC-2017-005, SR-FICC- 2017-009, or SR-NSCC-2017-006. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the Proposed Rule Changes 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 Web site 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 such filings also will be available for inspection and copying at the principal office of the Clearing Agencies and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Numbers SR-DTC-2017-005, SR-FICC-2017-009, or SR- NSCC-2017-006 and should be submitted on or before August 14, 2017. If comments are received, any rebuttal comments should be submitted on or before August 18, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\52\ --------------------------------------------------------------------------- \52\ 17 CFR 200.30-3(a)(57). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-15905 Filed 7-27-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices 35245
in regulating, clearing, settling, Exchange notes, Rule 13.2 currently SECURITIES AND EXCHANGE
processing information with respect to, does not authorize the compensation of COMMISSION
and facilitating transactions in securities successors, representatives, or [Release No. 34–81192; File Nos. SR–DTC–
and, in general, to protect investors and customers of ETP Holders because the 2017–005; SR–FICC–2017–009; SR–NSCC–
the public interest, and not be designed rule does not currently reference 2017–006]
to permit unfair discrimination between them.18 The Commission also believes
customers, issuers, brokers, or dealers. that the replacement of the words Self-Regulatory Organizations; The
The Commission believes that the ‘‘acknowledged receipt of’’ with the Depository Trust Company; Fixed
proposal to eliminate the daily liability Income Clearing Corporation; National
word ‘‘received’’ in Rule 13.2(b) would
caps in Rules 13.2(b)(1) and (2) could Securities Clearing Corporation;
provide transparency regarding the
result in more ETP Holders receiving Notice of Filing Amendment No. 1 and
fuller compensations on their claims.11 scope of the rule.19 Finally, the
Commission believes that the addition Order Instituting Proceedings to
The proposal could also reduce the risk Determine Whether to Approve or
that losses suffered by an ETP Holder of paragraph (d) to Rule 13.2 would
Disapprove Proposed Rule Changes to
would be treated differently depending clarify that all claims for compensation
Adopt the Clearing Agency Stress
on whether other ETP Holders suffered must be submitted in writing, and Testing Framework (Market Risk)
losses on the same day.12 In addition, would provide ETP Holders additional
the Commission notes that, under the time to evaluate losses that may have July 24, 2017.
proposal, the maximum amount of occurred on the prior trading day, I. Introduction
compensation would continue to be particularly if an issue occurred later in
proportionally allocated if claims the day.20 On April 7, 2017, The Depository
arising during a single calendar month Trust Company (‘‘DTC’’), Fixed Income
Based on the foregoing, the Clearing Corporation (‘‘FICC’’), and
exceed the monthly liability cap.13 Commission believes that the proposed
With respect to the Exchange’s National Securities Clearing Corporation
rule change is consistent with the Act. (‘‘NSCC,’’ each a ‘‘Clearing Agency,’’
proposal to retroactively apply the
elimination of the daily liability caps, IV. Conclusion and collectively, the ‘‘Clearing
the Commission notes that approval of Agencies’’), filed with the Securities and
the proposal would make additional It is therefore ordered, pursuant to Exchange Commission (‘‘Commission’’)
funds available to compensate ETP Section 19(b)(2) of the Act,21 that the proposed rule changes SR–DTC–2017–
Holders affected by the system issue on proposed rule change (SR–NYSEArca- 005, SR–FICC–2017–009, and SR–
March 20, 2017. Also, as the Exchange 2017–46), be, and hereby is, approved. NSCC–2017–006, respectively, pursuant
notes, the proposal would promote to Section 19(b)(1) of the Securities
For the Commission, by the Division of Exchange Act of 1934 (‘‘Act’’) 1 and Rule
equal treatment between ETP Holders Trading and Markets, pursuant to delegated
who suffered a loss on March 20, 2017 19b–4 thereunder.2 The proposed rule
authority.22 changes were published for comment in
and ETP Holders who suffered a loss on
Eduardo A. Aleman, the Federal Register on April 25, 2017.3
a different day.14 Specifically, according
to the Exchange, the proposal would Assistant Secretary. The Commission did not receive any
enable it to fully compensate ETP [FR Doc. 2017–15910 Filed 7–27–17; 8:45 am] comment letters on the proposed rule
Holders for claims arising from the BILLING CODE 8011–01–P
changes. On June 7, 2017, the
system issue on March 20, 2017.15 Commission designated a longer period
Moreover, according to the Exchange, for Commission Action on the proposed
prior to March 20, 2017, it has never rule changes.4 On July 19, 2017, the
received a claim that exceeded the Clearing Agencies each filed
liability limits, and thus it was never Amendment No. 1 to their respective
prevented from fully compensating an proposed rule changes (hereinafter,
ETP Holder.16 ‘‘Proposed Rule Change’’). Amendments
The Commission further believes that No. 1 would clarify how the Clearing
the other proposed changes are Agencies would use scenarios to
consistent with the Act. Specifically, the estimate the profits and losses (‘‘P&L’’)
Commission believes that the addition of a member closeout. This order
of the text ‘‘successors, representatives institutes proceedings under Section
or customers thereof’’ to Rule 13.2(a) 19(b)(2)(B) of the Act 5 to determine
would clarify the scope of the limitation whether to approve or disapprove the
of liability in that provision.17 As the Proposed Rule Changes.
11 The Commission notes that the rules of certain
II. Description of the Proposed Rule
other national securities exchanges also only
Changes
include monthly liability caps, and no daily The Proposed Rule Changes would
liability caps. See, e.g., Nasdaq Stock Market LLC securities exchanges. See, e.g., Bats BZX Exchange,
(‘‘Nasdaq’’) Rule 4626. Inc. Rule 11.16(a). adopt the Clearing Agency Stress
12 See Notice, supra note 3, at 26968. 18 See Notice, supra note 3, at 26967.
13 See proposed changes to Rule 13.2(c). As 19 The Commission notes that this change is 1 15 U.S.C. 78s(b)(1).
asabaliauskas on DSKBBXCHB2PROD with NOTICES
2 17 CFR 240.19b–4.
described above, the Exchange also proposes to consistent with the rules of certain other national
make conforming changes in Rule 13.2(c) to securities exchanges. See, e.g., New York Stock 3 See Securities Exchange Act Release No. 80485
eliminate the reference to allocation among claims Exchange LLC Rule 18(b). (April 19, 2017), 82 FR 19131 (April 25, 2017) (SR–
arising ‘‘on a single trading day.’’ See supra notes 20 The Commission notes that this change is DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
5–6. 2017–006) (‘‘Notice’’).
14 See Notice, supra note 3, at 26968. consistent with the rules of certain other national 4 See Securities Exchange Act Release No. 80876
15 See id. at 26969. securities exchanges. See, e.g., Nasdaq Rule (June 7, 2017), 82 FR 27091 (June 13, 2017) (SR–
16 See id. 4626(b)(6). DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
21 15 U.S.C. 78s(b)(2).
17 The Commission notes that this change is 2017–006).
consistent with the rules of certain other national 22 17 CFR 200.30–3(a)(12). 5 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014 18:50 Jul 27, 2017 Jkt 241001 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 E:\FR\FM\28JYN1.SGM 28JYN1](https://thefederalregister.org/doc/82_FR_35389/page/1.svg)
![35248 Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices
instituting proceedings to allow for • Send an email to rule-comments@ SECURITIES AND EXCHANGE
additional analysis of the Proposed Rule sec.gov. Please include File Number SR– COMMISSION
Changes’ consistency with the Act and FICC–2017–002 on the subject line.
the rules thereunder. Specifically, the [Release No. 34–81196; File No. SR–FINRA–
Commission believes that the Proposed Paper Comments
2017–025]
Rule Changes raise questions as to • Send paper comments in triplicate
whether they are consistent with (i) to Secretary, Securities and Exchange Self-Regulatory Organizations;
Section 17A(b)(3)(F) of the Act,48 which Financial Industry Regulatory
Commission, 100 F Street NE.,
requires, in part, that clearing agency Authority, Inc.; Notice of Filing of a
Washington, DC 20549–1090.
rules be designed to assure the Proposed Rule Change Relating to the
safeguarding of securities in the custody All submissions should refer to File Definition of Non-Public Arbitrator
or control of the clearing agency and, in Numbers SR–DTC–2017–005, SR–FICC–
general, protect investors and the public July 24, 2017.
2017–009, or SR–NSCC–2017–006. This
interest, and (ii) Rule 17Ad–22(e)(4) file number should be included on the Pursuant to Section 19(b)(1) of the
under the Act, which requires, in subject line if email is used. To help the Securities Exchange Act of 1934
general, that each covered clearing Commission process and review your (‘‘Act’’)1 and Rule 19b–4 thereunder,2
agency establish, implement, maintain comments more efficiently, please use notice is hereby given that on July 10,
and enforce written policies and only one method. The Commission will 2017, Financial Industry Regulatory
procedures reasonably designed to, post all comments on the Commission’s Authority, Inc. (‘‘FINRA’’) filed with the
among other things, effectively identify, Securities and Exchange Commission
Internet Web site (http://www.sec.gov/
measure, monitor, and manage their (‘‘SEC’’ or ‘‘Commission’’) the proposed
rules/sro.shtml). Copies of the
credit exposures to participants and rule change as described in Items I, II,
submission, all subsequent and III below, which Items have been
those arising from its payment, clearing,
amendments, all written statements prepared by FINRA. The Commission is
and settlement processes.49
with respect to the Proposed Rule publishing this notice to solicit
As discussed above, pursuant to the Changes that are filed with the
Proposed Rule Changes, Clearing comments on the proposed rule change
Commission, and all written from interested persons.
Agencies would adopt the Framework,
communications relating to the
which would procedures for identifying, I. Self-Regulatory Organization’s
Proposed Rule Change between the
measuring, monitoring, and managing Statement of the Terms of Substance of
Commission and any person, other than
their credit exposures to members. The the Proposed Rule Change
Commission solicits comment on those that may be withheld from the
whether the Proposed Rule Changes are public in accordance with the FINRA is proposing to amend FINRA
consistent with Section 17A(b)(3)(F) of provisions of 5 U.S.C. 552, will be Rule 12100 of the Code of Arbitration
the Act 50 and Rule 17Ad–22(e)(4) under available for Web site viewing and Procedure for Customer Disputes
the Act.51 printing in the Commission’s Public (‘‘Customer Code’’) and FINRA Rule
Reference Room, 100 F Street NE., 13100 of the Code of Arbitration
IV. Request for Written Comments Washington, DC 20549, on official Procedure for Industry Disputes
The Commission requests that business days between the hours of (‘‘Industry Code’’ and together,
interested persons provide written 10:00 a.m. and 3:00 p.m. Copies of such ‘‘Codes’’), to define a non-public
submissions of their views, data, and filings also will be available for arbitrator to mean a person who is
arguments with respect to issues raised inspection and copying at the principal otherwise qualified to serve as an
by the Proposed Rule Changes. In office of the Clearing Agencies and on arbitrator, and is disqualified from
particular, the Commission invites the DTCC’s Web site (http://dtcc.com/legal/ service as a public arbitrator under the
written views of interested persons sec-rule-filings.aspx). All comments Codes.
concerning whether the Proposed Rule received will be posted without change; The text of the proposed rule change
Changes are consistent with Sections the Commission does not edit personal is available on FINRA’s Web site at
17A(b)(3)(F) of the Act and Rules 17Ad– identifying information from http://www.finra.org, at the principal
22(e)(4) under the Act, cited above, or submissions. You should submit only office of FINRA and at the
any other provision of the Act, or the information that you wish to make Commission’s Public Reference Room.
rules and regulations thereunder. available publicly. All submissions II. Self-Regulatory Organization’s
Interested persons are invited to submit should refer to File Numbers SR–DTC– Statement of the Purpose of, and
written data, views, and arguments on 2017–005, SR–FICC–2017–009, or SR– Statutory Basis for, the Proposed Rule
or before August 14, 2017. Any person NSCC–2017–006 and should be Change
who wishes to file a rebuttal to any submitted on or before August 14, 2017.
other person’s submission must file that In its filing with the Commission,
If comments are received, any rebuttal FINRA included statements concerning
rebuttal on or before August 18, 2017.
comments should be submitted on or the purpose of and basis for the
Comments may be submitted by any of
before August 18, 2017. proposed rule change and discussed any
the following methods:
For the Commission, by the Division of comments it received on the proposed
Electronic Comments
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Trading and Markets, pursuant to delegated rule change. The text of these statements
• Use the Commission’s Internet authority.52 may be examined at the places specified
comment form (http://www.sec.gov/ Eduardo A. Aleman, in Item IV below. FINRA has prepared
rules/sro.shtml); or Assistant Secretary. summaries, set forth in sections A, B,
[FR Doc. 2017–15905 Filed 7–27–17; 8:45 am]
and C below, of the most significant
48 15 U.S.C. 78q–1(b)(3)(F). aspects of such statements.
BILLING CODE 8011–01–P
49 17 CFR 240.17Ad–22(e)(4).
50 15 U.S.C. 78q–1(b)(3)(F). 1 15 U.S.C. 78s(b)(1).
51 17 CFR 240.17Ad–22(e)(4). 52 17 CFR 200.30–3(a)(57). 2 17 CFR 240.19b–4.
VerDate Sep<11>2014 18:50 Jul 27, 2017 Jkt 241001 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 E:\FR\FM\28JYN1.SGM 28JYN1](https://thefederalregister.org/doc/82_FR_35389/page/4.svg)
Document Created: 2017-07-28 03:10:25
Document Modified: 2017-07-28 03:10:25
| 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 | 82 FR 35245 |
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