[Federal Register Volume 87, Number 61 (Wednesday, March 30, 2022)]
[Notices]
[Pages 18444-18446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06512]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94494; File No. SR-NSCC-2021-016]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Instituting Proceedings To Determine Whether To 
Approve or Disapprove a Proposed Rule Change To Enhance Capital 
Requirements and Make Other Changes

March 23, 2022.

I. Introduction

    On December 13, 2021, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') proposed rule change SR-NSCC-2021-016 (the ``Proposed 
Rule Change'') pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The Proposed 
Rule Change was published for comment in the Federal Register on 
December 29, 2021,\3\ and the Commission has received comments 
regarding the changes proposed in the Proposed Rule Change.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 93856 (December 22, 
2021), 86 FR 74185 (December 29, 2021) (SR-NSCC-2021-016) 
(``Notice'').
    \4\ Comments are available at https://www.sec.gov/comments/sr-nscc-2021-016/srnscc2021016.htm.
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    On January 26, 2022, pursuant to Section 19(b)(2) 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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    \5\ 15 U.S.C. 78s(b)(2).
    \6\ Securities Exchange Act Release No. 94068 (January 26, 
2022), 87 FR 5544 (February 1, 2022) (SR-NSCC-2021-016).
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change

    As described in the Notice, NSCC proposes to amend the Rules and 
Procedures (``Rules'') in order to (1) revise its capital requirements 
for Members and Limited Members (collectively, ``members''), (2) 
streamline its two credit risk monitoring systems, Watch List and 
enhanced surveillance list, and (3) make certain other clarifying, 
technical, and

[[Page 18445]]

supplementary changes to implement items (1) and (2).\8\
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    \8\ The description of the Proposed Rule Change is based on the 
statements prepared by NSCC in the Notice. See Notice, supra note 3. 
Capitalized terms used herein and not otherwise defined herein are 
defined in the Rules, available at https://www.dtcc.com/-/media/Files/Downloads/legal/rules/nscc_rules.pdf.
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    First, NSCC proposes to revise various aspects of its capital 
requirements for several types of members. NSCC proposes to increase 
minimum capital requirements for certain members. For example, for U.S. 
broker-dealers, the capital requirements would be determined using a 
tiered system based generally on the volatility component of a member's 
margin (referred to as the value-at-risk tier). NSCC also proposes to 
revise how it measures certain members' capital by incorporating common 
equity tier 1 capital, and the standards established in the capital 
adequacy rules and regulations of the Federal Deposit Insurance 
Corporation. NSCC would revise the reporting requirements concerning 
the capital requirements for certain members. In addition, for certain 
types of members who currently do not have specific amounts for their 
minimum capital requirements, the proposal would establish such a 
requirement.
    Second, NSCC proposes to revise its Watch List and enhanced 
surveillance list, which are both currently used for credit risk 
monitoring. NSCC proposes to revise its Watch List and delete its 
enhanced surveillance list. NSCC also proposes to clarify that members 
on the Watch List are reported to NSCC's management committees and 
regularly reviewed by NSCC's senior management.
    Third, NSCC proposes to (1) revise or add headings and sub-headings 
as appropriate, (2) revise defined terms and add appropriate defined 
terms to facilitate the proposed changes, (3) rearrange and consolidate 
paragraphs to promote readability, (4) fix typographical and other 
errors, and (5) other changes in order to improve clarity and the 
accessibility and transparency of the Rules.

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 \9\ 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, 
providing 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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    \9\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\10\ 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,\11\ and the 
rules thereunder, including the following provisions:
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    \10\ Id.
    \11\ 15 U.S.C. 78q-1.
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     Section 17A(b)(3)(F) of the Act,\12\ which requires, among 
other things, that the rules of a clearing agency 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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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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     Section 17A(b)(3)(I) of the Act,\13\ which requires that 
the rules of a clearing agency do not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act;
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    \13\ 15 U.S.C. 78q-1(b)(3)(I).
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     Rule 17Ad-22(e)(18) under the Act,\14\ which requires that 
a covered clearing agency establish, implement, maintain, and enforce 
written policies and procedures reasonably designed to establish 
objective, risk-based, and publicly disclosed criteria for 
participation, which permit fair and open access by direct and, where 
relevant, indirect participants and other financial market utilities, 
require participants to have sufficient financial resources and robust 
operational capacity to meet obligations arising from participation in 
the clearing agency, and monitor compliance with such participation 
requirements on an ongoing basis.
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    \14\ 17 CFR 240.17Ad-22(e)(18).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and 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,\15\ 
Section 17A(b)(3)(I) of the Act,\16\ Rule 17Ad-22(e)(18) under the 
Act,\17\ or any other provision of the Act, or the rules and 
regulations thereunder.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
    \16\ 15 U.S.C. 78q-1(b)(3)(I).
    \17\ 17 CFR 240.17Ad-22(e)(18).
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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 20, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
May 4, 2022.
    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,\18\ in addition to any other comments they may 
wish to submit about the Proposed Rule Change.
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    \18\ See Notice, supra note 3.
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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-2021-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSCC-2021-016. 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

[[Page 18446]]

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 DTCC'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-2021-016 
and should be submitted on or before April 20, 2022. Rebuttal comments 
should be submitted by May 4, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(31).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06512 Filed 3-29-22; 8:45 am]
BILLING CODE 8011-01-P