82 FR 36049 - Self-Regulatory Organizations; The Depository Trust Company; National Securities Clearing Corporation; Fixed Income Clearing Corporation; Notice of Filings of Proposed Rule Changes To Adopt the Clearing Agency Risk Management Framework
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 147 (August 2, 2017)
Federal Register Volume 82, Issue 147 (August 2, 2017)
| Page Range | 36049-36054 | |
| FR Document | 2017-16268 |
[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)] [Notices] [Pages 36049-36054] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-16268] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81248; File Nos. SR-DTC-2017-013; SR-NSCC-2017-012; SR- FICC-2017-016] Self-Regulatory Organizations; The Depository Trust Company; National Securities Clearing Corporation; Fixed Income Clearing Corporation; Notice of Filings of Proposed Rule Changes To Adopt the Clearing Agency Risk Management Framework July 28, 2017. 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 July 14, 2017, The Depository Trust Company (``DTC''), National Securities Clearing Corporation (``NSCC''), and Fixed Income Clearing Corporation (``FICC,'' and together with DTC and NSCC, the ``Clearing Agencies''), filed with the Securities and Exchange Commission (``Commission'') the proposed rule changes as described in Items I, II and III below, which Items have been prepared primarily by the Clearing Agencies. The Commission is publishing this notice to solicit comments on the proposed rule changes from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Clearing Agencies' Statement of the Terms of Substance of the Proposed Rule Changes The proposed rule changes would adopt the Clearing Agency Risk Management Framework (``Framework'') of the Clearing Agencies, described below. The Framework would apply to both of FICC's divisions, the Government Securities Division (``GSD'') and the Mortgage-Backed Securities Division (``MBSD''). The Framework would be maintained by the Clearing Agencies to support their compliance with Rules 17Ad- 22(e)(1), [[Page 36050]] (e)(3), (e)(20), and (e)(21) under the Act, as described below.\3\ --------------------------------------------------------------------------- \3\ 17 CFR 240.17Ad-22(e)(1), (e)(3), (e)(20), and (e)(21). --------------------------------------------------------------------------- Although the Clearing Agencies would consider the Framework to be a rule, the proposed rule changes do not require any changes to the Rules, By-laws and Organization 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.\4\ --------------------------------------------------------------------------- \4\ Capitalized terms not defined herein are defined in the DTC Rules, GSD Rules, MBSD Rules, or NSCC Rules, as applicable, available at http://dtcc.com/legal/rules-and-procedures. --------------------------------------------------------------------------- II. Clearing Agencies' Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Changes In their filings with the Commission, the Clearing Agencies included statements concerning the purpose of and basis for the proposed rule changes and discussed any comments they received on the proposed rule changes. The text of these statements may be examined at the places specified in Item IV below. The Clearing Agencies have prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agencies' Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Changes 1. Purpose The Clearing Agencies are proposing to adopt the Framework, which would describe the manner in which each of the Clearing Agencies (i) comprehensively manages legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by it (``Key Clearing Agency Risks''); (ii) maintains a well- founded, clear, transparent and enforceable legal basis for each aspect of its activities; (iii) identifies, monitors, and manages risks related to links it establishes with one or more clearing agencies, financial market utilities, or trading markets; and (iv) meets the requirements of its participants \5\ and the markets it serves efficiently and effectively. The Framework would be maintained by the General Counsel's Office (``GCO'') of DTCC.\6\ The Framework would provide that GCO, in coordination with all departments responsible for the processes described in the Framework, reviews the Framework at least annually. --------------------------------------------------------------------------- \5\ FICC and NSCC refer to their participants as ``Members,'' while DTC refers to its participants as ``Participants.'' These terms are defined in the Clearing Agencies' Rules. In this filing, as well as in the Framework, ``participant'' or ``participants'' refers to both the Members of FICC and NSCC and the Participants of DTC. \6\ The parent company of the Clearing Agencies is The Depository Trust & Clearing Corporation (``DTCC''). DTCC operates on a shared services model with respect to the Clearing Agencies. Most corporate functions are established and managed on an enterprise- wide basis pursuant to intercompany agreements under which it is generally DTCC that provides a relevant service to a Clearing Agency. --------------------------------------------------------------------------- The processes described in the Framework, and any policies, procedures or other documents created to support those processes, may be owned by other departments within DTCC, on behalf of each Clearing Agency. These processes, and any documents created to support those processes, would support the Clearing Agencies' compliance with the requirements of Rules 17Ad-22(e)(1), (e)(3), (e)(20), and (e)(21), and the Clearing Agencies may develop other processes or adopt other documents that further support these requirements and are not described in the Framework.\7\ --------------------------------------------------------------------------- \7\ 17 CFR 240.17Ad-22(e)(1), (e)(3), (e)(20), and (e)(21). --------------------------------------------------------------------------- Comprehensive Management of Key Clearing Agency Risks The Framework would state that the Boards have delegated to DTCC management, on behalf of the Clearing Agencies, the responsibility for identifying, assessing, measuring, monitoring, mitigating and reporting risks through a process of developing individual risk tolerance statements for identified risks. The Framework would describe how these risk tolerance statements set out applicable risk controls and other measures used to manage risks, and how residual risks may be identified through this process for either further management or ``acceptance'' (which follows a defined escalation and approval process). The Framework would also state that DTCC management, on behalf of the Clearing Agencies, is responsible for the day-to-day management of those residual risks. Finally, the Framework would describe the governance around maintenance of those risk tolerance statements, which are reviewed and approved by a management committee and by the Risk Committee of the Boards at least annually, and are also provided to the Boards for their review and approval at least annually. The Framework would describe how the Clearing Agencies employ a ``Three Lines of Defense'' approach as a sound risk management framework for comprehensively managing Key Clearing Agency Risks in order to support their compliance with the requirements of Rule 17Ad- 22(e)(3).\8\ The Framework would describe the roles of personnel and business units in this risk management approach, which includes (1) a first line of defense comprised of the various business lines and functional units that support the products and services offered by the Clearing Agencies (collectively, ``Clearing Agency Business/Support Areas''); (2) a second line of defense comprised of control functions that support the Clearing Agencies, including the organization's legal, privacy and compliance areas, as well as the DTCC Risk Department, which is specifically dedicated to risk management concerns (collectively, ``Clearing Agency Control Functions''); and (3) a third line of defense, which is performed by DTCC Internal Audit. --------------------------------------------------------------------------- \8\ 17 CFR 240.17Ad-22(e)(3). --------------------------------------------------------------------------- The Framework would identify the roles of each line of defense. The Framework would state that, as the first line of defense, each Clearing Agency Business/Support Area would, for example, identify Key Clearing Agency Risks applicable to its function, determine the best way to mitigate such risks, self-test internal controls, and create and implement actions plans for risk mitigation. The Framework would state that the role of the second line of defense includes, for example, working with the Clearing Agency Business/Support Areas on efforts to mitigate Key Clearing Agency Risks and providing tools to those groups to enable them to analyze, monitor, and proactively manage those risks. Finally, the Framework would identify the role of DTCC Internal Audit as the third line of defense as including, for example, directing its own resources to review and test key controls that help mitigate significant Key Clearing Agency Risks, then reporting on the results of that testing. In connection with a description of the second and third lines of defense, the Framework would describe how personnel within the DTCC Risk Department and DTCC Internal Audit are provided with sufficient authority, resources, independence from management, and access to the Boards. The Framework would provide that the DTCC Risk Department and DTCC Internal Audit are functionally independent from all other Clearing Agency Business/Support Areas. The Framework would also describe how such personnel have a direct reporting line to, and oversight by, the Risk Committee of the Boards and the Audit Committee of the Boards, respectively, [[Page 36051]] which is supported by the charters of these committees. The Framework would provide that the Clearing Agencies maintain a policy to govern the requirements for establishing, managing, and assessing the performance of internal committees and councils, including a set of senior management committees that provide oversight of the Three Lines of Defense approach to management of Key Clearing Agency Risks, as well as other aspects of the Clearing Agencies' risk management. The Framework would also describe the process by which the Clearing Agencies maintain risk management policies, procedures, Clearing Agencies' Rules, frameworks and other documents designed to identify, measure, monitor and manage Key Clearing Agency Risks. The Framework would describe policies maintained by the Clearing Agencies that (1) govern the steps taken to meet their regulatory requirements related to proposed rule change and advance notice filings pursuant to Section 19(b)(1) of the Act,\9\ and the rules thereunder, and Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, entitled the Payment, Clearing, and Settlement Supervision Act of 2010,\10\ and the rules thereunder (collectively, ``Filing Requirements''); and (2) establish a set of standards and holistic approach for creating and managing risk management policies, procedures, Clearing Agencies' Rules, frameworks and other documents, which include required, periodic reviews as well as the governance for approval of such documents (``Document Standards''). The Framework would provide that, with respect to those documents that address Key Clearing Agency Risks, the Document Standards require annual approval by the Boards. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78s(b)(1). \10\ 12 U.S.C. 5465(e)(1). --------------------------------------------------------------------------- The Framework would describe certain documents that are subject to the respective policies governing the Filing Requirements and the Document Standards, described above. For example, the Framework would describe how the Clearing Agencies maintain the Clearing Agencies' Rules, which support the Clearing Agencies' ability to provide for a well-founded, clear, transparent, and enforceable legal basis for each aspect of their activities in all relevant jurisdictions. Maintenance of the Clearing Agencies' Rules is supported by the policy governing the Filing Requirements and the Document Standards, described above. The Framework would state that the Clearing Agencies' Rules establish the membership onboarding process of the Clearing Agencies, which supports the enforceable legal basis for the Clearing Agencies' Rules. The Framework would also state that the Clearing Agencies may adopt and maintain other risk management frameworks, separate from the Framework, that address, in whole or in part, the management of other Key Clearing Agency Risks, including, for example, the management of operational, liquidity and market risks. Information and Incentives for Participant Management of Risks The Framework would describe how the Clearing Agencies support their compliance with Rule 17Ad-22(e)(3) by providing their respective participants with information and incentives to enable them, and, through them, their customers, to monitor, manage and contain the risks they pose to the respective Clearing Agencies. The Framework would identify some of the sources of the information that is made available to participants, including, for example, (1) materials on the DTCC Web site, such as the Clearing Agencies' Rules, user guides and training courses, and regularly updated disclosures made pursuant to the guidelines published by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions; \11\ and (2) reports provided to Clearing Agency participants regarding their margin and liquidity requirements and their transaction volumes and values, as applicable. --------------------------------------------------------------------------- \11\ See Principles for financial market infrastructures, issued by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions (April 2012), available at http://www.bis.org/publ/cpss101a.pdf. --------------------------------------------------------------------------- The Framework would also describe some of the incentives used by the Clearing Agencies to enable their participants to monitor, manage and contain risks they pose to the Clearing Agencies, including, for example, (1) daily margin requirements, pursuant to the Clearing Agencies' Rules, which are calculated in close correlation to the risk each participant poses to the relevant Clearing Agency; and (2) other tools within the Clearing Agencies' Rules that enable the Clearing Agencies to enforce their and their participants' respective rights and obligations under those rules. Management of Risks Related to Material Interdependencies and External Links The Framework would describe some of the ways in which the Clearing Agencies regularly review the material risks they bear from and pose to other entities as a result of external links and material interdependencies. The Framework would identify some of the Clearing Agencies' external links that create material interdependencies between the Clearing Agencies and other entities party to such link, which may include, for example, links with their participants, settling banks, investment counterparties and liquidity providers, and links with vendors and other service providers. With respect to these links, the Framework would describe how the Clearing Agencies review and monitor any resulting risks, which is driven by the nature of the relationship. For example, risks related to the Clearing Agencies' link to their respective participants and settling banks, as applicable, are addressed through tools found within the Clearing Agencies' Rules, as these entities are bound by the Rules. Additionally, risks arising from links to vendors are identified, assessed, controlled, and monitored through a comprehensive review and vetting process. The Framework would describe how a risk-based approach is employed to assess the need and level of due diligence activities associated with the evaluation of new vendors before a contractual relationship is established and with the re-evaluation of existing vendors. The Framework would state that this process involves the review of certain information related to a proposed vendor relationship, which should focus on confidentiality, integrity, availability and recoverability related to that relationship. The Framework would also describe how risk related to existing vendor relationships is reviewed periodically, throughout the lifecycle of the relationship. The management of vendor relationships through the process that would be described in the Framework would also support the Clearing Agencies' maintenance of clear, understandable contracts that are consistent with relevant laws and regulations. The Framework would describe the Clearing Agencies' management and monitoring of systemic risks, and how the Clearing Agencies utilize a series of comprehensive reviews that include input from a cross- functional group to identify, monitor and manage risks [[Page 36052]] related to all Clearing Agency external links, in addition to links that create material interdependencies. Scope of Services Responsive to Market Needs The Framework would describe some of the ways in which the Clearing Agencies are efficient and effective in meeting the requirements of their participants and the markets they serve. The Framework would describe the Clearing Agencies' structured approach for the implementation of new initiatives, which includes conducting a comprehensive risk assessment of new initiatives that are in scope of this approach. These reviews address, among other matters, compliance with applicable laws, regulations and standards, and, in this way, support the Clearing Agencies' ability to demonstrate a well-founded legal basis for the activities to be conducted in connection with new initiatives. The Framework would also describe the Clearing Agencies' role in industry-wide strategic initiatives through participation on industry working groups and through the development and publication of concept papers. The Framework would describe how the Clearing Agencies use periodic surveys and employ product-aligned customer service representatives to ensure clients receive the right level of responsiveness in order to support their needs. The Framework would describe how the Clearing Agencies have established a process for escalating and responding to certain customer complaints. The Framework would also describe the Clearing Agencies' Core Balanced Business Scorecard, which is used by the Clearing Agencies to review and track the effectiveness of their operations, information technology service levels, financial performance, human capital as well as their participants' experience. Recovery and Orderly Wind-Down The Framework would provide that the Clearing Agencies maintain policies and procedures to govern the development of plans for recovery or orderly wind-down. Such documents would define the roles and responsibilities of relevant business units in the development and documentation of the plans and would outline the general content of the plans. 2. Statutory Basis The Clearing Agencies believe that the proposed rule changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, the Clearing Agencies believe that the Framework is consistent with Section 17A(b)(3)(F) of the Act \12\ and the subsections cited below of Rules 17Ad-22(e)(1), (e)(3), (e)(20), and (e)(21),\13\ each promulgated under the Act, for the reasons described below. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78q-1(b)(3)(F). \13\ 17 CFR 240.17Ad-22(e)(1), (e)(3), (e)(20), and (e)(21). --------------------------------------------------------------------------- Section 17A(b)(3)(F) of the Act 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, and to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible.\14\ As described above, the Framework would describe some of the ways the Clearing Agencies comprehensively manage Key Clearing Agency Risks, which include legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the Clearing Agencies. For example, the Framework would describe how the Clearing Agencies utilize a Three Lines of Defense approach to assessing, measuring, monitoring, mitigating, and reporting those risks, and would identify the roles and responsibilities of each line of defense within that approach. The Framework would also describe other risk management activities, including, for example the establishment and maintenance of certain management committees that would provide oversight to the Clearing Agencies' businesses and related risk management. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- By describing some of the ways the Clearing Agencies manage their Key Clearing Agency Risks, the Framework would serve as a basis for the processes, policies, procedures and other documents that the Clearing Agencies may develop to facilitate those risk management activities. The activities that would be described within the Framework, and the policies, procedures or other documents that would be reasonably and fairly implied, thereby collectively allow the Clearing Agencies to continue the prompt and accurate clearance and settlement of securities and assure the safeguarding of securities and funds which are in their custody or control or for which they are responsible notwithstanding the risks that arise in or are borne by the Clearing Agencies. Therefore, the Clearing Agencies believe the Framework is consistent with the requirements of Section 17A(b)(3)(F) of the Act.\15\ --------------------------------------------------------------------------- \15\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(1) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to, provide for a well-founded, clear, transparent, and enforceable legal basis for each aspect of its activities in all relevant jurisdictions.\16\ The Framework would describe how the Clearing Agencies maintain the Clearing Agencies' Rules, which are the key legal basis for each of the Clearing Agencies' respective activities described therein. The Clearing Agencies' Rules are incorporated by reference into participants' membership agreements, and, therefore, constitute an enforceable contract governing the rights and obligations of the Clearing Agencies and those participants. The Framework would describe how the Clearing Agencies' Rules are published on the DTCC Web site, and how the Clearing Agencies adhere to the Filing Requirements, which provide a clear, transparent and enforceable legal framework under which the Clearing Agencies' Rules are adopted and enforced. Through their compliance with the Filing Requirements, as would be described in the Framework, the Clearing Agencies articulate the legal basis for proposed changes to their activities, as described in the Clearing Agencies' Rules, in a clear and understandable way. --------------------------------------------------------------------------- \16\ 17 CFR 240.17Ad-22(e)(1). --------------------------------------------------------------------------- The Framework would also describe how the Clearing Agencies review and assess risk related to their contractual arrangements with vendors, service providers and other external parties with which the Clearing Agencies may establish links. The Framework would also describe the process by which the Clearing Agencies review new initiatives prior to implementation, which include a review of the legal risks that may be posed by those initiatives. For these reasons, the processes described in the Framework allow the Clearing Agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for a well-founded, clear, transparent, and enforceable legal basis for each aspect of its activities in all relevant jurisdictions. Therefore, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad- 22(e)(1).\17\ --------------------------------------------------------------------------- \17\ Id. --------------------------------------------------------------------------- The Clearing Agencies believe that the Framework is consistent with the [[Page 36053]] requirements of the following subsections of Rule 17Ad-22(e)(3), cited below, for the reasons described below.\18\ --------------------------------------------------------------------------- \18\ 17 CFR 240.17Ad-22(e)(3). --------------------------------------------------------------------------- Rule 17Ad-22(e)(3)(i) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes risk management policies, procedures, and systems designed to identify, measure, monitor, and manage the range of risks that arise in or are borne by the covered clearing agency, that are subject to review on a specified periodic basis and approved by the board of directors annually.\19\ The Framework would describe how the Clearing Agencies maintain comprehensive policies, procedures and other documents, including, for example, the Framework and certain other risk management frameworks, separate and apart from the Framework, which are designed to identify, measure, monitor and manage Key Clearing Agency Risks. The Framework would state that the Framework is reviewed least annually. The Document Standards, which would be described in the Framework, set a timeframe for the periodic review of these documents, and would, with respect to those documents that address Key Clearing Agency Risks, require annual approval by the Boards. By describing the process for the establishment, implementation, maintenance and enforcement of these risk management documents, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad- 22(e)(3)(i).\20\ --------------------------------------------------------------------------- \19\ 17 CFR 240.17Ad-22(e)(3)(i). \20\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(3)(ii) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.\21\ The Framework would describe how the Clearing Agencies maintain policies and procedures that govern the development of plans for the recovery and orderly wind-down of the Clearing Agencies, and would provide that these policies and procedures would define the roles and responsibilities of relevant business units in the development and documentation of those plans. Therefore, by describing the policies and procedures maintained by the Clearing Agencies in order to prepare appropriate plans for the recovery and orderly wind-down of the Clearing Agencies, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad-22(e)(3)(ii).\22\ --------------------------------------------------------------------------- \21\ 17 CFR 240.17Ad-22(e)(3)(ii). \22\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(3)(iii) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which provides risk management and internal audit personnel with sufficient authority, resources, independence from management, and access to the board of directors.\23\ Rule 17Ad-22(e)(3)(iv) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which provides risk management and internal audit personnel with a direct reporting line to, and oversight by, a risk management committee and an independent audit committee of the board of directors, respectively.\24\ --------------------------------------------------------------------------- \23\ 17 CFR 240.17Ad-22(e)(3)(iii). \24\ 17 CFR 240.17Ad-22(e)(3)(iv). --------------------------------------------------------------------------- The Framework would describe how the Clearing Agencies use a Three Lines of Defense approach to the management of Key Clearing Agency Risks. In connection with this approach, the Framework would describe the roles of risk management and internal audit personnel as the second and third lines of defense. The Framework would describe how both the DTCC Risk Department and DTCC Internal Audit are functionally independent from all other Clearing Agency Business/Support Areas. The Framework would also describe how the senior management within both groups report directly to appropriate committees of the Boards, and how, through this reporting line, the groups have access to the Boards, as necessary. Therefore, through this description of the DTCC Risk Department's and DTCC Internal Audit's roles and functions, in connection with the Three Lines of Defense approach to risk management, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad-22(e)(3)(iii) and (e)(3)(iv).\25\ --------------------------------------------------------------------------- \25\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(20) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to identify, monitor, and manage risks related to any link the covered clearing agency establishes with one or more other clearing agencies, financial market utilities, or trading markets.\26\ The Framework would describe how the Clearing Agencies review both proposed and existing links with other entities, including those links that may result in material interdependencies. For example, the Framework would describe some of the ways the Clearing Agencies manage risks related to their links with, as applicable, participants, settling banks, investment counterparties and liquidity providers, vendors and service providers, and would also describe how the Clearing Agencies identify and address risks that have the potential of creating systemic impact. With respect to links with vendors and service providers, the Framework would describe how the Clearing Agencies, through the establishment, implementation, maintenance and enforcement of written policies and procedures, apply a comprehensive vendor review and vetting process that includes reviews of credit, operational, legal and other risks that may arise from that relationship. Therefore, by describing the various ways the Clearing Agencies identify and address risks related to links with other entities, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad- 22(e)(20).\27\ --------------------------------------------------------------------------- \26\ 17 CFR 240.17Ad-22(e)(20). \27\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(21) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to [[Page 36054]] be efficient and effective in meeting the requirements of its participants and the markets it serves, and have the covered clearing agency's management regularly review the efficiency and effectiveness of its (i) clearing and settlement arrangements; (ii) operating structure, including risk management policies, procedures, and systems; (iii) scope of products cleared or settled; and (iv) use of technology and communication procedures.\28\ The Framework would describe some of the ways in which the Clearing Agencies review the efficiency and effectiveness of their businesses and operations. For example, the Framework would describe how the Clearing Agencies employ a structured approach to the pre-implementation reviews of new initiatives, including initiatives related to their clearing and settlement arrangements, scope of products cleared or settled, and use of technology and communication procedures. The Framework would also describe the Clearing Agencies' Core Balanced Business Scorecard, which is used to review the effectiveness of the Clearing Agencies' operations, information technology services levels, financial performance and other aspects of their business, including their respective participants' experiences. The Framework would also describe some of the steps the Clearing Agencies take in order to be efficient and effective in meeting the requirements of their participants and the markets they serve, including, for example, through the establishment, implementation, maintenance and enforcement of a written policy to address escalation, tracking and resolution of certain customer complaints. Therefore, by describing some of the ways in which the Clearing Agencies review the efficiency and effectiveness of their businesses and operations, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad-22(e)(21).\29\ --------------------------------------------------------------------------- \28\ 17 CFR 240.17Ad-22(e)(21). \29\ Id. --------------------------------------------------------------------------- (B) Clearing Agencies' Statement on Burden on Competition None of the Clearing Agencies believe that the Framework would have any impact, or impose any burden, on competition because the proposed rule changes reflect some of the existing methods by which the Clearing Agencies manage Key Clearing Agency Risks, and would not effectuate any changes to the Clearing Agencies' processes described therein as they currently apply to their respective participants. (C) Clearing Agencies' Statement on Comments on the Proposed Rule Changes Received From Members, Participants, or Others The Clearing Agencies have not solicited or received any written comments relating to this proposal. The Clearing Agencies will notify the Commission of any written comments received by the Clearing Agencies. III. Date of Effectiveness of the Proposed Rule Changes, and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the clearing agency consents, the Commission will: (A) By order approve or disapprove such proposed rule changes, or (B) institute proceedings to determine whether the proposed rule changes should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule changes are consistent with the Act. 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-DTC-2017-013, SR-NSCC-2017-012, or SR-FICC-2017-016 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR-DTC-2017-013, SR-NSCC- 2017-012, or SR-FICC-2017-016. One of these file numbers 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 changes 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 the filing 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 Number SR-DTC-2017-013, SR-NSCC-2017- 012, or SR-FICC-2017-016, and should be submitted on or before August 23, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\30\ --------------------------------------------------------------------------- \30\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-16268 Filed 8-1-17; 8:45 am] BILLING CODE 8011-01-P
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III. Date of Effectiveness of the Commission takes such action, the 2017–034, and should be submitted on
Proposed Rule Change and Timing for Commission shall institute proceedings or before August 23, 2017.
Commission Action under Section 19(b)(2)(B) 20 of the Act to For the Commission, by the Division of
The Exchange has designated this rule determine whether the proposed rule Trading and Markets, pursuant to delegated
filing as non-controversial under change should be approved or authority.21
Section 19(b)(3)(A) 13 of the Act and disapproved.
Eduardo A. Aleman,
Rule 19b–4(f)(6) 14 thereunder. Because IV. Solicitation of Comments Assistant Secretary.
the proposed rule change does not: (i)
Significantly affect the protection of Interested persons are invited to [FR Doc. 2017–16271 Filed 8–1–17; 8:45 am]
investors or the public interest; (ii) submit written data, views, and BILLING CODE 8011–01–P
impose any significant burden on arguments concerning the foregoing,
competition; and (iii) become operative including whether the proposed rule
for 30 days from the date on which it change is consistent with the Act. SECURITIES AND EXCHANGE
was filed, or such shorter time as the Comments may be submitted by any of COMMISSION
Commission may designate if consistent the following methods:
with the protection of investors and the Electronic Comments [Release No. 34–81248; File Nos. SR–DTC–
public interest, it has become effective 2017–013; SR–NSCC–2017–012; SR–FICC–
pursuant to Section 19(b)(3)(A) of the • Use the Commission’s Internet 2017–016]
Act and Rule 19b–4(f)(6) thereunder.15 comment form (http://www.sec.gov/
A proposed rule change filed under rules/sro.shtml); or Self-Regulatory Organizations; The
Rule 19b–4(f)(6) 16 normally does not • Send an email to rule-comments@ Depository Trust Company; National
become operative prior to 30 days after sec.gov. Please include File Number SR– Securities Clearing Corporation; Fixed
the date of the filing. However, pursuant BX–2017–034 on the subject line. Income Clearing Corporation; Notice of
to Rule 19b–4(f)(6)(iii),17 the Paper Comments Filings of Proposed Rule Changes To
Commission may designate a shorter Adopt the Clearing Agency Risk
time if such action is consistent with the • Send paper comments in triplicate Management Framework
protection of investors and the public to Secretary, Securities and Exchange
interest. The Exchange has asked the Commission, 100 F Street NE., July 28, 2017.
Commission to waive the 30-day Washington, DC 20549–1090.
Pursuant to Section 19(b)(1) of the
operative delay because this proposal All submissions should refer to File Securities Exchange Act of 1934
permits listing IVV options in a manner Number SR–BX–2017–034. This file (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
permitted by the Chicago Board Options number should be included on the notice is hereby given that on July 14,
Exchange, Incorporated,18 and will subject line if email is used. To help the 2017, The Depository Trust Company
provide investors with an alternative Commission process and review your (‘‘DTC’’), National Securities Clearing
venue for trading IVV options. The comments more efficiently, please use
Commission believes that waiver of the Corporation (‘‘NSCC’’), and Fixed
only one method. The Commission will Income Clearing Corporation (‘‘FICC,’’
operative delay is consistent with the post all comments on the Commission’s
protection of investors and the public and together with DTC and NSCC, the
Internet Web site (http://www.sec.gov/
interest. Therefore, the Commission ‘‘Clearing Agencies’’), filed with the
rules/sro.shtml). Copies of the
hereby waives the operative delay and Securities and Exchange Commission
submission, all subsequent
designates the proposed rule change (‘‘Commission’’) the proposed rule
amendments, all written statements
operative upon filing.19 changes as described in Items I, II and
with respect to the proposed rule
At any time within 60 days of the III below, which Items have been
change that are filed with the
filing of the proposed rule change, the Commission, and all written prepared primarily by the Clearing
Commission summarily may communications relating to the Agencies. The Commission is
temporarily suspend such rule change if proposed rule change between the publishing this notice to solicit
it appears to the Commission that such Commission and any person, other than comments on the proposed rule changes
action is necessary or appropriate in the those that may be withheld from the from interested persons.
public interest, for the protection of public in accordance with the
investors, or otherwise in furtherance of I. Clearing Agencies’ Statement of the
provisions of 5 U.S.C. 552, will be Terms of Substance of the Proposed
the purposes of the Act. If the available for Web site viewing and Rule Changes
13 15
printing in the Commission’s Public
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
Reference Room, 100 F Street NE., The proposed rule changes would
15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– Washington, DC 20549 on official adopt the Clearing Agency Risk
4(f)(6) requires a self-regulatory organization to give business days between the hours of Management Framework (‘‘Framework’’)
the Commission written notice of its intent to file 10:00 a.m. and 3:00 p.m. Copies of such of the Clearing Agencies, described
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
filing also will be available for below. The Framework would apply to
change, or such shorter time as designated by the inspection and copying at the principal both of FICC’s divisions, the
Commission. The Exchange has satisfied this office of the Exchange. All comments Government Securities Division
requirement. received will be posted without change; (‘‘GSD’’) and the Mortgage-Backed
16 17 CFR 240.19b–4(f)(6).
the Commission does not edit personal
sradovich on DSKBCFCHB2PROD with NOTICES
17 17 CFR 240.19b–4(f)(6)(iii).
Securities Division (‘‘MBSD’’). The
18 See Securities Exchange Act Release No. 80913
identifying information from Framework would be maintained by the
(June 13, 2017), 82 FR 27907 (June 19, 2017) (SR– submissions. You should submit only Clearing Agencies to support their
CBOE–2017–048). information that you wish to make compliance with Rules 17Ad–22(e)(1),
19 For purposes only of waiving the 30-day
available publicly. All submissions
operative delay, the Commission has also should refer to File Number SR–BX– 21 17 CFR 200.30–3(a)(12).
considered the proposed rule’s impact on
1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). 20 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4.
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![36054 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices
be efficient and effective in meeting the (C) Clearing Agencies’ Statement on communications relating to the
requirements of its participants and the Comments on the Proposed Rule proposed rule changes between the
markets it serves, and have the covered Changes Received From Members, Commission and any person, other than
clearing agency’s management regularly Participants, or Others those that may be withheld from the
review the efficiency and effectiveness The Clearing Agencies have not public in accordance with the
of its (i) clearing and settlement solicited or received any written provisions of 5 U.S.C. 552, will be
arrangements; (ii) operating structure, available for Web site viewing and
comments relating to this proposal. The
including risk management policies, printing in the Commission’s Public
Clearing Agencies will notify the
procedures, and systems; (iii) scope of Reference Room, 100 F Street NE.,
Commission of any written comments
products cleared or settled; and (iv) use Washington, DC 20549 on official
received by the Clearing Agencies.
of technology and communication business days between the hours of
procedures.28 The Framework would III. Date of Effectiveness of the 10:00 a.m. and 3:00 p.m. Copies of the
describe some of the ways in which the Proposed Rule Changes, and Timing for filing also will be available for
Clearing Agencies review the efficiency Commission Action inspection and copying at the principal
and effectiveness of their businesses and Within 45 days of the date of office of the Clearing Agencies, and on
operations. For example, the Framework publication of this notice in the Federal DTCC’s Web site (http://dtcc.com/legal/
would describe how the Clearing sec-rule-filings.aspx). All comments
Register or within such longer period
Agencies employ a structured approach received will be posted without change;
up to 90 days (i) as the Commission may
to the pre-implementation reviews of the Commission does not edit personal
designate if it finds such longer period
new initiatives, including initiatives identifying information from
to be appropriate and publishes its
related to their clearing and settlement submissions. You should submit only
reasons for so finding or (ii) as to which
arrangements, scope of products cleared information that you wish to make
the clearing agency consents, the
or settled, and use of technology and available publicly. All submissions
Commission will:
communication procedures. The should refer to File Number SR–DTC–
(A) By order approve or disapprove
Framework would also describe the 2017–013, SR–NSCC–2017–012, or SR–
such proposed rule changes, or
Clearing Agencies’ Core Balanced FICC–2017–016, and should be
Business Scorecard, which is used to (B) institute proceedings to determine
whether the proposed rule changes submitted on or before August 23, 2017.
review the effectiveness of the Clearing
Agencies’ operations, information should be disapproved. For the Commission, by the Division of
Trading and Markets, pursuant to delegated
technology services levels, financial IV. Solicitation of Comments authority.30
performance and other aspects of their
Interested persons are invited to Eduardo A. Aleman,
business, including their respective
submit written data, views and Assistant Secretary.
participants’ experiences. The
arguments concerning the foregoing, [FR Doc. 2017–16268 Filed 8–1–17; 8:45 am]
Framework would also describe some of
including whether the proposed rule
the steps the Clearing Agencies take in BILLING CODE 8011–01–P
changes are consistent with the Act.
order to be efficient and effective in
meeting the requirements of their Comments may be submitted by any of
participants and the markets they serve, the following methods: SECURITIES AND EXCHANGE
including, for example, through the Electronic Comments COMMISSION
establishment, implementation,
• Use the Commission’s Internet [Release No. 34–81226; File No. SR–NYSE–
maintenance and enforcement of a 2017–08]
comment form (http://www.sec.gov/
written policy to address escalation,
rules/sro.shtml); or
tracking and resolution of certain Self-Regulatory Organizations; New
• Send an email to rule-comments@
customer complaints. Therefore, by York Stock Exchange LLC; Notice of
sec.gov. Please include File Number SR–
describing some of the ways in which Filing of Amendment No. 1 and Order
DTC–2017–013, SR–NSCC–2017–012, or
the Clearing Agencies review the Granting Accelerated Approval of
SR–FICC–2017–016 on the subject line.
efficiency and effectiveness of their Proposed Rule Change, as Modified by
businesses and operations, the Clearing Paper Comments Amendment No. 1, To Amend Its
Agencies believe the Framework is • Send paper comments in triplicate Listing Standards for Closed-End
consistent with the requirements of Rule to Secretary, Securities and Exchange Funds
17Ad–22(e)(21).29 Commission, 100 F Street NE., July 27, 2017.
(B) Clearing Agencies’ Statement on Washington, DC 20549.
Burden on Competition All submissions should refer to File I. Introduction
None of the Clearing Agencies believe Number SR–DTC–2017–013, SR–NSCC– On May 24, 2017, New York Stock
that the Framework would have any 2017–012, or SR–FICC–2017–016. One Exchange LLC (‘‘NYSE’’ or the
impact, or impose any burden, on of these file numbers should be ‘‘Exchange’’) filed with the Securities
competition because the proposed rule included on the subject line if email is and Exchange Commission
changes reflect some of the existing used. To help the Commission process (‘‘Commission’’), pursuant to Section
methods by which the Clearing and review your comments more 19(b)(1) of the Securities Exchange Act
Agencies manage Key Clearing Agency efficiently, please use only one method. of 1934 (‘‘Act’’) 1 and Rule 19b–4
The Commission will post all comments
sradovich on DSKBCFCHB2PROD with NOTICES
Risks, and would not effectuate any thereunder,2 a proposed rule change to
changes to the Clearing Agencies’ on the Commission’s Internet Web site amend its listing standards for closed-
processes described therein as they (http://www.sec.gov/rules/sro.shtml). end funds. The proposed rule change
currently apply to their respective Copies of the submission, all subsequent was published for comment in the
participants. amendments, all written statements
with respect to the proposed rule 30 17 CFR 200.30–3(a)(12).
28 17 CFR 240.17Ad–22(e)(21). changes that are filed with the 1 15 U.S.C. 78s(b)(1).
29 Id. Commission, and all written 2 17 CFR 240.19b–4.
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Document Created: 2017-08-02 07:09:40
Document Modified: 2017-08-02 07:09:40
| 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 36049 |
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