[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