83_FR_13026 83 FR 12968 - Self-Regulatory Organizations; National Securities Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Loss Allocation Rules and Make Other Changes

83 FR 12968 - Self-Regulatory Organizations; National Securities Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Loss Allocation Rules and Make Other Changes

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 58 (March 26, 2018)

Page Range12968-12970
FR Document2018-06016

Federal Register, Volume 83 Issue 58 (Monday, March 26, 2018) 
[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)]
[Notices]
[Pages 12968-12970]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-06016]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82910; File No. SR-NSCC-2017-018]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Instituting Proceedings To Determine Whether To 
Approve or Disapprove a Proposed Rule Change To Amend the Loss 
Allocation Rules and Make Other Changes

March 20, 2018.

I. Introduction

    On December 18, 2017, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ 
proposed rule change SR-NSCC-2017-018 to amend the loss allocation 
rules and make other changes (``Proposed Rule Change'').\3\ The 
Proposed Rule Change was published for comment in the Federal Register 
on January 8, 2018.\4\ The Commission did not receive any comments on 
the Proposed Rule Change. On February 8, 2018, pursuant to Section 
19(b)(2)(A)(ii)(I) of the Act,\5\ the Commission designated a longer 
period within which to approve, disapprove, or institute proceedings to 
determine whether to approve or disapprove the Proposed Rule Change.\6\ 
This order institutes proceedings, pursuant to Section 19(b)(2)(B) of 
the Act,\7\ to determine whether to approve or disapprove the Proposed 
Rule Change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On December 18, 2017, NSCC filed this proposal as an advance 
notice (SR-NSCC-2017-806) with the Commission pursuant to Section 
806(e)(1) of the Payment, Clearing, and Settlement Supervision Act 
of 2010 (``Clearing Supervision Act'') and Rule 19b-4(n)(1)(i) of 
the Act (``Advance Notice''). On January 24, 2018, the Commission 
extended the review period of the Advance Notice for an additional 
60 days pursuant to Section 806(e)(1)(H) of the Clearing Supervision 
Act. See 12 U.S.C. 5465(e)(1); 17 CFR 240.19b-4(n)(1)(i); 12 U.S.C. 
5465(e)(1)(H); and Securities Exchange Act Release No. 82584 
(January 24, 2018), 83 FR 4377 (January 30, 2018) (SR-NSCC-2017-
806).
    \4\ Securities Exchange Act Release No. 82428 (January 2, 2018), 
83 FR 897 (January 8, 2018) (SR-NSCC-2017-018) (``Notice'').
    \5\ 15 U.S.C. 78s(b)(2)(A)(ii)(I).
    \6\ Securities Exchange Act Release No. 82670 (February 8, 
2018), 83 FR 6626 (February 14, 2018) (SR-DTC-2017-022; SR-FICC-
2017-022; SR-NSCC-2017-018).
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change 8
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    \8\ The Commission notes that the Summary of the Proposed Rule 
Change section does not describe the Proposed Rule Change in its 
entirety. Other changes include, but are not limited to, the 
clarification of defined terms, various aspects of the Clearing Fund 
application, and detailed procedures of the loss allocation. The 
complete Proposed Rule Change can be found in the Notice. See 
Notice, supra note 4. In addition, the text of the Proposed Rule 
Change is available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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    As described in the Notice,\9\ NSCC proposes to revise its Rules 
and Procedures to primarily change (i) the loss allocation process,\10\ 
(ii) the loss allocation governance for Declared Non-Default Loss 
Events,\11\ and (iii) the retention time for the Actual Deposit of 
former members.\12\
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    \9\ The description of the Proposed Rule Change herein is based 
on the statements prepared by NSCC in the Notice. See Notice, supra 
note 4. Each capitalized term not otherwise defined herein has its 
respective meaning either (i) as set forth in the Rules and 
Procedures of NSCC, available at http://www.dtcc.com/legal/rules-and-procedures.aspx, or (ii) as set forth in the Notice.
    \10\ See Notice, supra note 4, at 898-901.
    \11\ See id. at 901.
    \12\ See id. at 901-02.
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A. Loss Allocation Process

    NSCC states that it would retain the current core loss allocation 
process.\13\ However, NSCC proposes to revise certain elements and 
introduce certain new loss allocation concepts, by making five key 
changes to its loss allocation process.
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    \13\ Id. at 898.
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    First, NSCC proposes to replace the calculation of its corporate 
contribution from no less than 25 percent of its retained earnings or 
such higher amount as the Board of Directors shall determine to a 
defined Corporate Contribution.\14\ The proposed Corporate Contribution 
would be defined as an amount equal to 50 percent of NSCC's General 
Business Risk Capital Requirement.\15\ NSCC's General Business Risk 
Capital Requirement is, at a minimum, equal to the regulatory capital 
that NSCC is required to maintain in compliance with Rule 17Ad-
22(e)(15) under the Act.\16\ In addition, NSCC proposes to mandatorily 
apply Corporate Contribution (i) prior to a loss allocation among 
Members, and (ii) to losses arising from both Defaulting Member Events 
and Declared Non-Default Loss Events.\17\
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    \14\ Id.
    \15\ Id.
    \16\ Id.; 17 CFR 240.17Ad-22(e)(15).
    \17\ Notice, supra note 4, at 898.
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    Second, NSCC proposes to introduce an Event Period to address the 
allocation of losses and liabilities that may arise from or relate to 
multiple

[[Page 12969]]

Defaulting Member Events, Declared Non-Default Loss Events, or both 
that arise in quick succession.\18\ The proposal would group together 
Defaulting Member Events and Declared Non-Default Loss Events occurring 
in a period of 10 business days for purposes of allocating losses to 
Members in one or more rounds, subject to the limitations of loss 
allocation in the Proposed Rule Change.\19\
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    \18\ Id. at 899.
    \19\ Id.
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    Third, NSCC proposes to introduce a loss allocation ``round,'' 
which would mean ``a series of loss allocations relating to an Event 
Period, the aggregate amount of which is limited by the sum of the Loss 
Allocation Caps of affected Members.'' \20\ NSCC would notify Members 
subject to a loss allocation of the amounts being allocated to 
them.\21\ Each Member would have five business days from the issuance 
of such first Loss Allocation Notice for the round to notify NSCC of 
its election to withdraw from membership with NSCC, and thereby benefit 
from its Loss Allocation Cap.\22\
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    \20\ Id.
    \21\ Id.
    \22\ Id.
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    Fourth, NSCC proposes to implement a ``look-back'' period to 
calculate a Member's loss allocation pro rata share and its Loss 
Allocation Cap.\23\ NSCC proposes to calculate each Member's pro rata 
share of losses and liabilities in any round to be equal to (i) the 
average of a Member's Required Fund Deposit for 70 business days prior 
to the first day of the applicable Event Period (``Average RFD'') 
divided by (ii) the sum of Average RFD amounts for all Members that are 
subject to a loss allocation in such round.\24\ Additionally, NSCC 
proposes that each Member's Loss Allocation Cap would be equal to the 
greater of (i) its Required Fund Deposit on the first day of the 
applicable Event Period or (ii) its Average RFD.\25\
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    \23\ Id. at 900.
    \24\ Id.
    \25\ Id.
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    Fifth, NSCC proposes to revise the cap on a loss allocation and the 
withdrawal process followed by the loss allocation. As proposed, if a 
Member provides notice of its withdrawal from membership, the Member's 
maximum amount of losses with respect to any loss allocation round 
would be its Loss Allocation Cap.\26\ NSCC further proposes that 
Members would have two business days after NSCC issues a first round 
Loss Allocation Notice to pay the amount specified in such notice.\27\ 
Members would have five business days from the issuance of the first 
Loss Allocation Notice in any round to decide whether to terminate its 
membership, provided that the Member complies with the requirements of 
the proposed withdrawal process.\28\
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    \26\ Id.
    \27\ Id. at 900 and 905.
    \28\ Id. at 900.
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B. Loss Allocation Governance for Declared Non-Default Loss Events

    NSCC proposes to enhance the governance around Declared Non-Default 
Loss Events that would trigger a loss allocation by specifying that the 
Board of Directors would have to determine that there is a non-default 
loss that (i) may present a significant and substantial loss or 
liability, so as to materially impair the ability of NSCC to provide 
clearance and settlement services in an orderly manner, and (ii) will 
potentially generate losses to be mutualized among Members in order to 
ensure that NSCC may continue to offer clearance and settlement 
services in an orderly manner.\29\ NSCC would then be required to 
promptly notify Members of this determination.\30\
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    \29\ Id. at 901.
    \30\ Id.
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C. Retention Time for the Actual Deposit of a Former Participant

    NSCC proposes that if a Member gives notice to NSCC of its election 
to withdraw from membership, NSCC would return the Member's Actual 
Deposit in the form of cash or securities within 30 calendar days and 
Eligible Letters of Credit within 90 calendar days.\31\ The return 
would be made after all of the Member's transactions have settled, and 
all matured and contingent obligations to NSCC for which the Member was 
responsible while a Member have been satisfied, except NSCC may retain 
for up to two years the Actual Deposits from Members who have sponsored 
Accounts at DTC.\32\ This proposed rule would reduce the period in 
which NSCC may retain a Member's Actual Deposit pursuant to the current 
rule.\33\
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    \31\ Id. at 901-902.
    \32\ Id.
    \33\ Id. at 907.
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III. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \34\ to determine whether the Proposed Rule 
Change 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 Change. 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 Change, 
and provide the Commission with arguments to support the Commission's 
analysis as to whether to approve or disapprove the Proposed Rule 
Change.
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    \34\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\35\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the Proposed 
Rule Change's consistency with Section 17A of the Act,\36\ and the 
rules thereunder, including the following provisions:
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    \35\ Id.
    \36\ 15 U.S.C. 78q-1.
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     Section 17A(b)(3)(F) of the Act,\37\ which requires, among 
other things, that the rules of a clearing agency, such as NSCC, must 
be designed to promote the prompt and accurate clearance and settlement 
of securities transactions, 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, and to protect investors and the public 
interest;
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    \37\ 15 U.S.C. 78q-1(b)(3)(F).
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     Rule 17Ad-22(e)(13) under the Act,\38\ which requires, in 
general, a covered clearing agency, such as NSCC, to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to ensure the covered clearing agency has the 
authority and operational capacity to take timely action to contain 
losses and liquidity demands and continue to meet its obligations.
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    \38\ 17 CFR 240.17Ad-22(e)(13).
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     Rule 17Ad-22(e)(23)(i) under the Act,\39\ which requires a 
covered clearing agency, such as NSCC, to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to publicly disclose all relevant rules and material 
procedures, including key aspects of its default rules and procedures.
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    \39\ 17 CFR 240.17Ad-22(e)(23)(i).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and

[[Page 12970]]

arguments with respect to the issues identified above, as well as any 
other concerns they may have with the Proposed Rule Change. In 
particular, the Commission invites the written views of interested 
persons concerning whether the Proposed Rule Change is consistent with 
Section 17A(b)(3)(F) of the Act,\40\ Rule 17Ad-22(e)(13) under the 
Act,\41\ Rule 17Ad-22(e)(23)(i) under the Act,\42\ or any other 
provision of the Act, or the rules and regulations thereunder. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4(g) under the Act,\43\ any request for an opportunity to make an 
oral presentation.\44\
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    \40\ 15 U.S.C. 78q-1(b)(3)(F).
    \41\ 17 CFR 240.17Ad-22(e)(13).
    \42\ 17 CFR 240.17Ad-22(e)(23)(i).
    \43\ 17 CFR 240.19b-4(g).
    \44\ Section 19(b)(2) of the Act grants to the Commission 
flexibility to determine what type of proceeding--either oral or 
notice and opportunity for written comments--is appropriate for 
consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the Proposed Rule Change should be approved 
or disapproved by April 16, 2018. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
April 30, 2018.
    The Commission asks that commenters address the sufficiency of 
NSCC's statements in support of the Proposed Rule Change, which are set 
forth in the Notice,\45\ in addition to any other comments they may 
wish to submit about the Proposed Rule Change.
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    \45\ See Notice, supra note 4.
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    Comments may be submitted by any of the following methods:

Electronic Comments

     Use 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-NSCC-2017-018 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 Number SR-NSCC-2017-018. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the Proposed Rule Change that are filed with 
the Commission, and all written communications relating to the Proposed 
Rule Change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of NSCC and on The Depository Trust 
& Clearing Corporation's website (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSCC-2017-018 and should be 
submitted on or before April 16, 2018. Rebuttal comments should be 
submitted by April 30, 2018.
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    \46\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-06016 Filed 3-23-18; 8:45 am]
 BILLING CODE 8011-01-P

12968 Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices For the reasons discussed above, the SECURITIES AND EXCHANGE II. Summary of the Proposed Rule Commission finds that ISE’s proposal is COMMISSION Change 8 consistent with the Act, including As described in the Notice,9 NSCC Section 6(b)(5) thereof, in that it is [Release No. 34–82910; File No. SR–NSCC– proposes to revise its Rules and designed to remove impediments to and 2017–018] Procedures to primarily change (i) the perfect the mechanism of a free and loss allocation process,10 (ii) the loss open market, and, in general, to protect Self-Regulatory Organizations; allocation governance for Declared Non- investors and the public interest. In National Securities Clearing Default Loss Events,11 and (iii) the light of the enhanced closing procedures Corporation; Order Instituting retention time for the Actual Deposit of at the underlying markets and the Proceedings To Determine Whether To former members.12 potential benefits to investors discussed Approve or Disapprove a Proposed A. Loss Allocation Process by the Exchange in the Notice,19 the Rule Change To Amend the Loss Commission finds that it is appropriate Allocation Rules and Make Other NSCC states that it would retain the current core loss allocation process.13 and consistent with the Act to approve Changes However, NSCC proposes to revise ISE’s proposal on a pilot basis. The March 20, 2018. certain elements and introduce certain collection of data during the Pilot new loss allocation concepts, by making Program and ISE’s active monitoring of I. Introduction five key changes to its loss allocation any effects of NQX options on the process. markets will help ISE and the On December 18, 2017, National First, NSCC proposes to replace the Commission assess any impact of P.M. Securities Clearing Corporation calculation of its corporate contribution settlement in today’s market. (‘‘NSCC’’) filed with the Securities and from no less than 25 percent of its Exchange Commission (‘‘Commission’’), retained earnings or such higher amount IV. Conclusion pursuant to Section 19(b)(1) of the as the Board of Directors shall It is therefore ordered, pursuant to Securities Exchange Act of 1934 determine to a defined Corporate Section 19(b)(2) of the Act,20 that the (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 Contribution.14 The proposed Corporate proposed rule change SR–NSCC–2017– Contribution would be defined as an proposed rule change (SR–ISE–2017– 018 to amend the loss allocation rules amount equal to 50 percent of NSCC’s 106), as modified by Amendment No. 1, and make other changes (‘‘Proposed General Business Risk Capital be, and hereby is, approved, subject to Rule Change’’).3 The Proposed Rule Requirement.15 NSCC’s General a pilot period set to expire on the earlier Change was published for comment in Business Risk Capital Requirement is, at of: (1) Twelve months following the date a minimum, equal to the regulatory the Federal Register on January 8, of the first listing of the options; or (2) capital that NSCC is required to 2018.4 The Commission did not receive June 30, 2019. maintain in compliance with Rule any comments on the Proposed Rule For the Commission, by the Division of Change. On February 8, 2018, pursuant 17Ad–22(e)(15) under the Act.16 In Trading and Markets, pursuant to delegated to Section 19(b)(2)(A)(ii)(I) of the Act,5 addition, NSCC proposes to mandatorily authority.21 the Commission designated a longer apply Corporate Contribution (i) prior to Eduardo A. Aleman, period within which to approve, a loss allocation among Members, and Assistant Secretary. disapprove, or institute proceedings to (ii) to losses arising from both determine whether to approve or Defaulting Member Events and Declared [FR Doc. 2018–06017 Filed 3–23–18; 8:45 am] Non-Default Loss Events.17 disapprove the Proposed Rule Change.6 BILLING CODE 8011–01–P Second, NSCC proposes to introduce This order institutes proceedings, an Event Period to address the pursuant to Section 19(b)(2)(B) of the allocation of losses and liabilities that Act,7 to determine whether to approve may arise from or relate to multiple or disapprove the Proposed Rule Change. 8 The Commission notes that the Summary of the Proposed Rule Change section does not describe the 1 15 U.S.C. 78s(b)(1). Proposed Rule Change in its entirety. Other changes 2 17 include, but are not limited to, the clarification of CFR 240.19b–4. 3 On December 18, 2017, NSCC filed this proposal defined terms, various aspects of the Clearing Fund application, and detailed procedures of the loss as an advance notice (SR–NSCC–2017–806) with allocation. The complete Proposed Rule Change can the Commission pursuant to Section 806(e)(1) of the be found in the Notice. See Notice, supra note 4. Payment, Clearing, and Settlement Supervision Act In addition, the text of the Proposed Rule Change of 2010 (‘‘Clearing Supervision Act’’) and Rule 19b– is available at http://www.dtcc.com/legal/rules-and- 4(n)(1)(i) of the Act (‘‘Advance Notice’’). On January procedures.aspx. 24, 2018, the Commission extended the review 9 The description of the Proposed Rule Change period of the Advance Notice for an additional 60 herein is based on the statements prepared by NSCC days pursuant to Section 806(e)(1)(H) of the to information through its membership in the in the Notice. See Notice, supra note 4. Each Clearing Supervision Act. See 12 U.S.C. 5465(e)(1); capitalized term not otherwise defined herein has Intermarket Surveillance Group with respect to the 17 CFR 240.19b–4(n)(1)(i); 12 U.S.C. 5465(e)(1)(H); its respective meaning either (i) as set forth in the trading of the securities underlying the NQX, as and Securities Exchange Act Release No. 82584 Rules and Procedures of NSCC, available at http:// well as tools such as large options positions reports (January 24, 2018), 83 FR 4377 (January 30, 2018) www.dtcc.com/legal/rules-and-procedures.aspx, or to assist its surveillance of NQX options. In (SR–NSCC–2017–806). (ii) as set forth in the Notice. sradovich on DSK3GMQ082PROD with NOTICES 4 Securities Exchange Act Release No. 82428 approving the proposed rule change, the 10 See Notice, supra note 4, at 898–901. Commission also has relied upon the Exchange’s (January 2, 2018), 83 FR 897 (January 8, 2018) (SR– 11 See id. at 901. NSCC–2017–018) (‘‘Notice’’). representation that it has the necessary systems 5 15 U.S.C. 78s(b)(2)(A)(ii)(I). 12 See id. at 901–02. capacity to support new options series that will 6 Securities Exchange Act Release No. 82670 13 Id. at 898. result from this proposal. See id. 14 Id. (February 8, 2018), 83 FR 6626 (February 14, 2018) 19 See id. 15 Id. (SR–DTC–2017–022; SR–FICC–2017–022; SR– 20 15 U.S.C. 78s(b)(2). NSCC–2017–018). 16 Id.; 17 CFR 240.17Ad–22(e)(15). 21 17 CFR 200.30–3(a)(12). 7 15 U.S.C. 78s(b)(2)(B). 17 Notice, supra note 4, at 898. VerDate Sep<11>2014 16:38 Mar 23, 2018 Jkt 244001 PO 00000 Frm 00031 Fmt 4703 Sfmt 4703 E:\FR\FM\26MRN1.SGM 26MRN1

Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices 12969 Defaulting Member Events, Declared amount specified in such notice.27 should be approved or disapproved. Non-Default Loss Events, or both that Members would have five business days Institution of proceedings is appropriate arise in quick succession.18 The from the issuance of the first Loss at this time in view of the legal and proposal would group together Allocation Notice in any round to policy issues raised by the Proposed Defaulting Member Events and Declared decide whether to terminate its Rule Change. Institution of proceedings Non-Default Loss Events occurring in a membership, provided that the Member does not indicate that the Commission period of 10 business days for purposes complies with the requirements of the has reached any conclusions with of allocating losses to Members in one proposed withdrawal process.28 respect to any of the issues involved. or more rounds, subject to the B. Loss Allocation Governance for Rather, the Commission seeks and limitations of loss allocation in the Declared Non-Default Loss Events encourages interested persons to Proposed Rule Change.19 comment on the Proposed Rule Change, Third, NSCC proposes to introduce a NSCC proposes to enhance the and provide the Commission with loss allocation ‘‘round,’’ which would governance around Declared Non- arguments to support the Commission’s mean ‘‘a series of loss allocations Default Loss Events that would trigger a analysis as to whether to approve or relating to an Event Period, the loss allocation by specifying that the disapprove the Proposed Rule Change. aggregate amount of which is limited by Board of Directors would have to Pursuant to Section 19(b)(2)(B) of the the sum of the Loss Allocation Caps of determine that there is a non-default Act,35 the Commission is providing affected Members.’’ 20 NSCC would loss that (i) may present a significant notice of the grounds for disapproval notify Members subject to a loss and substantial loss or liability, so as to under consideration. The Commission is allocation of the amounts being materially impair the ability of NSCC to instituting proceedings to allow for allocated to them.21 Each Member provide clearance and settlement additional analysis of, and input from would have five business days from the services in an orderly manner, and (ii) commenters with respect to, the issuance of such first Loss Allocation will potentially generate losses to be Proposed Rule Change’s consistency Notice for the round to notify NSCC of mutualized among Members in order to with Section 17A of the Act,36 and the its election to withdraw from ensure that NSCC may continue to offer rules thereunder, including the membership with NSCC, and thereby clearance and settlement services in an following provisions: benefit from its Loss Allocation Cap.22 orderly manner.29 NSCC would then be • Section 17A(b)(3)(F) of the Act,37 Fourth, NSCC proposes to implement required to promptly notify Members of which requires, among other things, that a ‘‘look-back’’ period to calculate a this determination.30 the rules of a clearing agency, such as Member’s loss allocation pro rata share C. Retention Time for the Actual Deposit NSCC, must be designed to promote the and its Loss Allocation Cap.23 NSCC of a Former Participant prompt and accurate clearance and proposes to calculate each Member’s pro NSCC proposes that if a Member gives settlement of securities transactions, to rata share of losses and liabilities in any notice to NSCC of its election to assure the safeguarding of securities and round to be equal to (i) the average of withdraw from membership, NSCC funds which are in the custody or a Member’s Required Fund Deposit for would return the Member’s Actual control of the clearing agency or for 70 business days prior to the first day Deposit in the form of cash or securities which it is responsible, and to protect of the applicable Event Period within 30 calendar days and Eligible investors and the public interest; (‘‘Average RFD’’) divided by (ii) the sum Letters of Credit within 90 calendar • Rule 17Ad–22(e)(13) under the of Average RFD amounts for all days. The return would be made after 31 Act, 38 which requires, in general, a Members that are subject to a loss all of the Member’s transactions have covered clearing agency, such as NSCC, allocation in such round.24 settled, and all matured and contingent to establish, implement, maintain and Additionally, NSCC proposes that each obligations to NSCC for which the enforce written policies and procedures Member’s Loss Allocation Cap would be Member was responsible while a reasonably designed to ensure the equal to the greater of (i) its Required Member have been satisfied, except covered clearing agency has the Fund Deposit on the first day of the NSCC may retain for up to two years the authority and operational capacity to applicable Event Period or (ii) its Actual Deposits from Members who take timely action to contain losses and Average RFD.25 have sponsored Accounts at DTC. This liquidity demands and continue to meet 32 Fifth, NSCC proposes to revise the cap proposed rule would reduce the period its obligations. on a loss allocation and the withdrawal in which NSCC may retain a Member’s • Rule 17Ad–22(e)(23)(i) under the process followed by the loss allocation. Actual Deposit pursuant to the current Act,39 which requires a covered clearing As proposed, if a Member provides rule.33 agency, such as NSCC, to establish, notice of its withdrawal from implement, maintain and enforce membership, the Member’s maximum III. Proceedings To Determine Whether written policies and procedures amount of losses with respect to any To Approve or Disapprove the reasonably designed to publicly disclose loss allocation round would be its Loss Proposed Rule Change and Grounds for all relevant rules and material Allocation Cap.26 NSCC further Disapproval Under Consideration procedures, including key aspects of its proposes that Members would have two The Commission is instituting default rules and procedures. business days after NSCC issues a first proceedings pursuant to Section IV. Procedure: Request for Written round Loss Allocation Notice to pay the 19(b)(2)(B) of the Act 34 to determine Comments whether the Proposed Rule Change 18 Id. at 899. The Commission requests that sradovich on DSK3GMQ082PROD with NOTICES 19 Id. 27 Id. at 900 and 905. interested persons provide written 20 Id. 28 Id. at 900. submissions of their views, data, and 21 Id. 29 Id. at 901. 22 Id. 30 Id. 35 Id. 23 Id. at 900. 31 Id. at 901–902. 36 15 U.S.C. 78q–1. 24 Id. 32 Id. 37 15 U.S.C. 78q–1(b)(3)(F). 25 Id. 33 Id. at 907. 38 17 CFR 240.17Ad–22(e)(13). 26 Id. 34 15 U.S.C. 78s(b)(2)(B). 39 17 CFR 240.17Ad–22(e)(23)(i). VerDate Sep<11>2014 16:38 Mar 23, 2018 Jkt 244001 PO 00000 Frm 00032 Fmt 4703 Sfmt 4703 E:\FR\FM\26MRN1.SGM 26MRN1

12970 Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices arguments with respect to the issues subject line if email is used. To help the SR–DTC–2018–001, pursuant to Section identified above, as well as any other Commission process and review your 19(b)(1) of the Securities Exchange Act concerns they may have with the comments more efficiently, please use of 1934 (‘‘Act’’) 1 and Rule 19b–4 Proposed Rule Change. In particular, the only one method. The Commission will thereunder.2 The proposed rule change Commission invites the written views of post all comments on the Commission’s was published for comment in the interested persons concerning whether internet website (http://www.sec.gov/ Federal Register on February 14, 2018.3 the Proposed Rule Change is consistent rules/sro.shtml). Copies of the The Commission did not receive any with Section 17A(b)(3)(F) of the Act,40 submission, all subsequent comment letters on the proposed rule Rule 17Ad–22(e)(13) under the Act,41 amendments, all written statements change. For the reasons discussed Rule 17Ad–22(e)(23)(i) under the Act,42 with respect to the Proposed Rule below, the Commission approves the or any other provision of the Act, or the Change that are filed with the proposed rule change. rules and regulations thereunder. Commission, and all written I. Description of the Proposed Rule Although there do not appear to be any communications relating to the Change issues relevant to approval or Proposed Rule Change between the disapproval that would be facilitated by Commission and any person, other than The proposed rule change would an oral presentation of views, data, and those that may be withheld from the amend the DTC By-Laws (‘‘By-Laws’’) 4 arguments, the Commission will public in accordance with the to (1) revise DTC’s governance consider, pursuant to Rule 19b–4(g) provisions of 5 U.S.C. 552, will be procedures, (2) change certain DTC under the Act,43 any request for an available for website viewing and Board of Directors (‘‘Board’’) titles, opportunity to make an oral printing in the Commission’s Public officer titles, and offices (and their presentation.44 Reference Room, 100 F Street NE, respective powers and duties), (3) Interested persons are invited to Washington, DC 20549 on official update the compensation section for submit written data, views, and business days between the hours of officers, and (4) make technical changes arguments regarding whether the 10:00 a.m. and 3:00 p.m. Copies of the and corrections, each discussed more Proposed Rule Change should be filing also will be available for fully below. approved or disapproved by April 16, inspection and copying at the principal A. Changes to DTC’s Governance 2018. Any person who wishes to file a office of NSCC and on The Depository Procedures rebuttal to any other person’s Trust & Clearing Corporation’s website Under the proposed rule change, DTC submission must file that rebuttal by (http://dtcc.com/legal/sec-rule- would revise certain governance April 30, 2018. filings.aspx). All comments received The Commission asks that procedures of the By-Laws. Specifically, will be posted without change. Persons DTC proposes to (1) change the required commenters address the sufficiency of submitting comments are cautioned that NSCC’s statements in support of the frequency of the Board’s and the we do not redact or edit personal Executive Committee’s meetings, (2) Proposed Rule Change, which are set identifying information from comment remove the word ‘‘monthly’’ from the forth in the Notice,45 in addition to any submissions. You should submit only phrase ‘‘regular monthly meetings’’ other comments they may wish to information that you wish to make when describing Board meetings, and submit about the Proposed Rule Change. available publicly. All submissions Comments may be submitted by any (3) permit the Board to act by should refer to File Number SR–NSCC– unanimous written consent.5 of the following methods: 2017–018 and should be submitted on DTC proposes to reduce the required Electronic Comments or before April 16, 2018. Rebuttal frequency of its Board meetings and comments should be submitted by April Executive Committee meetings, as • Use the Commission’s internet 30, 2018. provided for in Section 2.6 (Meetings) of comment form (http://www.sec.gov/ rules/sro.shtml); or For the Commission, by the Division of the By-Laws,6 to better align the • Send an email to rule-comments@ Trading and Markets, pursuant to delegated frequency of the Board meetings with sec.gov. Please include File Number SR– authority.46 those of the Fixed Income Clearing NSCC–2017–018 on the subject line. Eduardo A. Aleman, Corporation (‘‘FICC’’) and the National Assistant Secretary. Securities Clearing Corporation Paper Comments (‘‘NSCC’’).7 Specifically, the proposal [FR Doc. 2018–06016 Filed 3–23–18; 8:45 am] • Send paper comments in triplicate BILLING CODE 8011–01–P would reduce the minimum required to Secretary, Securities and Exchange number of Board meetings from ten Commission, 100 F Street NE, meetings per year (with at least two Washington, DC 20549–1090. SECURITIES AND EXCHANGE 1 15 U.S.C. 78s(b)(1). All submissions should refer to File COMMISSION 2 17 CFR 240.19b–4. Number SR–NSCC–2017–018. This file [Release No. 34–82915; File No. SR–DTC– 3 Securities Exchange Act Release No. 82671 number should be included on the 2018–001] (February 8, 2018), 83 FR 6639 (February 14, 2018) (SR–DTC–2018–001) (‘‘Notice’’). 40 15 U.S.C. 78q–1(b)(3)(F). Self-Regulatory Organizations; The 4 The By-Laws are included in the Rules, By-Laws 41 17 CFR 240.17Ad–22(e)(13). Depository Trust Company; Order and Organization Certificate of DTC (‘‘Rules’’), 42 17 CFR 240.17Ad–22(e)(23)(i). available at http://www.dtcc.com/legal/rules-and- 43 17 CFR 240.19b–4(g). Approving Proposed Rule Change To procedures. 44 Section 19(b)(2) of the Act grants to the Amend the By-Laws 5 Notice, 83 FR at 6640. sradovich on DSK3GMQ082PROD with NOTICES Commission flexibility to determine what type of 6 Hereinafter, section references will always be to proceeding—either oral or notice and opportunity March 20, 2018. the By-Laws unless otherwise stated. for written comments—is appropriate for On February 2, 2018, The Depository 7 Notice, 83 FR at 6640. DTC, FICC, and NSCC are consideration of a particular proposal by a self- Trust Company (‘‘DTC’’) filed with the subsidiaries of the Depository Trust and Clearing regulatory organization. See Securities Act Corporation (‘‘DTCC’’), each having the same Board Amendments of 1975, Senate Comm. on Banking, Securities and Exchange Commission of Directors as DTCC. See Securities Exchange Act Housing & Urban Affairs, S. Rep. No. 75, 94th (‘‘Commission’’) proposed rule change Release No. 74142 (January 27, 2015), 80 FR 5188 Cong., 1st Sess. 30 (1975). (January 30, 2015) (SR–FICC–2014–810, SR–NSCC– 45 See Notice, supra note 4. 46 17 CFR 200.30–3(a)(57). 2014–811, SR–DTC–2014–812). VerDate Sep<11>2014 18:36 Mar 23, 2018 Jkt 244001 PO 00000 Frm 00033 Fmt 4703 Sfmt 4703 E:\FR\FM\26MRN1.SGM 26MRN1


Document Created: 2018-03-24 01:00:02
Document Modified: 2018-03-24 01:00:02
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 12968 
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