[Federal Register Volume 87, Number 178 (Thursday, September 15, 2022)]
[Notices]
[Pages 56732-56733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19914]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95724; File No. SR-FICC-2022-004]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change To Amend the Stress Testing Framework 
and Liquidity Risk Management Framework

September 9, 2022.

I. Introduction

    On May 26, 2022, Fixed Income Clearing Corporation (``FICC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change SR-FICC-2022-004 (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 June 15, 2022,\3\ and the 
Commission has received no comments regarding the changes proposed in 
the Proposed Rule Change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 95079 (June 9, 2022), 87 
FR 36182 (June 15, 2022) (File No. SR-FICC-2022-004).
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    On July 14, 2022, pursuant to Section 19(b)(2) of the Act,\4\ 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.\5\ This order institutes 
proceedings, pursuant to Section 19(b)(2)(B) of the Act,\6\ to 
determine whether to approve or disapprove the Proposed Rule Change.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ Securities Exchange Act Release No. 95284 (July 14, 2022), 
87 FR 43364 (July 20, 2022) (SR-FICC-2022-004).
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change

    As described in the Notice, FICC proposes to amend (1) the Clearing 
Agency Stress Testing Framework (Market Risk) (``ST Framework'') and 
the Clearing Agency Liquidity Risk Management Framework (``LRM 
Framework,'' and, together with the ST Framework, the ``Frameworks'') 
of FICC and its affiliates, The Depository Trust Company (``DTC'') and 
National Securities Clearing Corporation (``NSCC,'' and together with 
FICC and DTC, the ``Clearing Agencies''), and (2) the Clearing Rules of 
the Mortgage-Backed Securities Division of FICC (``MBSD'').\7\
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    \7\ The description of the Proposed Rule Change is based on the 
statements prepared by FICC 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/ficc_gov_rules.pdf; https://
www.dtcc.com/~/media/Files/Downloads/legal/rules/
ficc_mbsd_rules.pdf.
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    First, the proposed changes would amend both the ST Framework and 
the LRM Framework to move descriptions of the Clearing Agencies' 
liquidity stress testing activities from the LRM Framework to the ST 
Framework. In connection with this proposed change, the Clearing 
Agencies propose to recategorize the stress scenarios used for 
liquidity risk management, such that all such stress scenarios are 
described as either regulatory or informational scenarios.
    Second, the proposed changes would amend the ST Framework to (1) 
enhance stress testing for the Government Securities Division of FICC 
(``GSD'') to obtain certain data utilized in stress testing from 
external vendors and implement a back-up stress testing calculation 
that would be utilized in the event such data is not supplied by its 
vendors, and amend the ST Framework to reflect these practices for both 
GSD and MBSD; (2) reflect that a stress testing team is primarily 
responsible for the actions described in the ST Framework, and (3) make 
other revisions to update and clarify the statements in the ST 
Framework.
    Third, the proposed changes would amend the LRM Framework to update 
and clarify certain statements in the LRM Framework.
    Finally, the proposed changes would amend the Clearing Rules of 
MBSD (``MBSD Rules'') to remove disclosures regarding the stress 
testing program, which would be described in the ST Framework.

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 \8\ 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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    \8\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\9\ 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,\10\ and the 
rules thereunder, including the following provisions:
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    \9\ Id.
    \10\ 15 U.S.C. 78q-1.
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     Section 17A(b)(3)(F) of the Act,\11\ 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; and
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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     Rule 17Ad-22(e)(4) of the Act,\12\ which requires that a 
covered clearing agency establish, implement, maintain, and enforce 
written policies and procedures reasonably designed to effectively 
identify, measure, monitor, and manage its credit exposures to 
participants and those arising from its payment, clearing, and 
settlement processes.
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    \12\ 17 CFR 240.17Ad-22(e)(4).
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     Rule 17Ad-22(e)(7) of the Act, \13\ which requires a 
covered clearing agency to effectively measure, monitor, and manage the 
liquidity risk that arises in or is borne by the covered clearing 
agency, including measuring, monitoring, and managing its settlement 
and funding flows on an ongoing and timely basis, and its use of 
intraday liquidity.
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    \13\ 17 CFR 240.17Ad-22(e)(7).
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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

[[Page 56733]]

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,\14\ and Rules 17Ad-
22(e)(4) and (e)(7) of the Act,\15\ or any other provision of the Act, 
or the rules and regulations thereunder.
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
    \15\ 17 CFR 240.17Ad-22(e)(4) and (e)(7).
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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 October 6, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
October 20, 2022.
    The Commission asks that commenters address the sufficiency of 
FICC's statements in support of the Proposed Rule Change, which are set 
forth in the Notice,\16\ in addition to any other comments they may 
wish to submit about the Proposed Rule Change.
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    \16\ 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-FICC-2022-004 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-FICC-2022-004. 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 FICC 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-FICC-2022-004 and should be submitted on 
or before October 6, 2022. Rebuttal comments should be submitted by 
October 20, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(31).
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J. Matthew DeLesDernier,
Deputy Secretary,
[FR Doc. 2022-19914 Filed 9-14-22; 8:45 am]
BILLING CODE 8011-01-P