Notice2023-27267
Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Clearing Agency Risk Management Framework
Primary source
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Published
December 13, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 238 (Wednesday, December 13, 2023)</title>
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[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86430-86432]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27267]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99108; File No. SR-DTC-2023-012]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Clearing Agency Risk Management Framework
December 7, 2023.
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 December 1, 2023, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II and III below, which Items have
been prepared by the clearing agency. DTC filed the proposed rule
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change of The Depository Trust Company (``DTC'')
is provided hereto [sic] as Exhibit 5 and amends the Clearing Agency
Risk Management Framework (``Risk Management Framework'', or
``Framework'') of DTC and its affiliates, Fixed Income Clearing
Corporation (``FICC'') and National Securities Clearing Corporation
(``NSCC,'' and together with FICC and DTC, the ``Clearing
Agencies'').\5\ The proposed rule change would amend the Risk
Management Framework to clarify and revise the descriptions of certain
matters within the Framework, as further described below. The proposed
changes would update and clarify the Risk Management Framework but do
not reflect changes to how the Clearing Agencies comply with the
applicable requirements of Rule 17Ad-22(e), as described in greater
detail below.
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\5\ See Securities Exchange Act Release Nos. 81635 (September
15, 2017), 82 FR 44224 (September 21, 2017) (SR-DTC-2017-013; SR-
FICC-2017-016; SR-NSCC-2017-012) (``Initial Filing'') and Securities
Exchange Act Release Nos. 89271 (July 09, 2020), 85 FR 42933 (July
15, 2020) (SR-NSCC-2020-012); Securities Exchange Act Release No.
89269 (July 09, 2020), 85 FR 42954 (July 15, 2020) (SR-DTC-2020-
009); and Securities Exchange Act Release No. 89270 (July 09, 2020),
85 FR 42927 (July 15, 2020) (SR-FICC-2020-007) (together with the
Initial Filing, the ``Framework Filings'')
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The Clearing Agencies adopted the Risk Management Framework \6\ to
provide an outline for how each of the Clearing Agencies (i) maintains
a well-founded, clear, transparent and enforceable legal basis for each
aspect of its activities; (ii) comprehensively manages legal, credit,
liquidity, operational, general business, investment, custody, and
other risks that arise in or are borne by it; (iii) identifies,
monitors, and manages risks related to links it establishes with one or
more clearing agencies, financial market utilities, or trading markets;
(iv) meets the requirements of its participants and the markets it
serves efficiently and effectively; (v) uses, or at a minimum
accommodates, relevant internationally accepted communication
procedures and standards in order to facilitate efficient payment,
clearing and settlement; and (vi) publicly discloses certain
information, including market data. In this way, the Risk Management
Framework currently supports the Clearing Agencies' compliance with
Rules 17Ad-22(e)(1), (3), (20), (21), (22) and (23) of the
Standards,\7\ as described in the Framework Filings. In addition to
setting forth the way each of the Clearing Agencies addresses these
requirements, the Risk Management Framework also contains a section
titled ``Framework Ownership and Change Management'' that, among other
matters, describes the Framework ownership and the required governance
process for review and approval of changes to the Framework. In
connection with the annual review and approval of the Framework by the
Board of Directors of NSCC, DTC and FICC (each a ``Board'' and
collectively, the ``Boards''), the Clearing Agencies are proposing to
make certain revisions to the Framework.
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\6\ Supra note 5.
\7\ 17 CFR 240.17Ad-22(e)(1), (3), (20), (21), (22) and (23).
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The proposed changes would clarify and enhance the descriptions in
the Risk Management Framework, for example, (i) clarify the cadence of
publication of disclosure frameworks; (ii) clarify the description of
the Clearing Agencies recovery and wind-down processes and procedures;
and (iii) make other non-substantive clarifying and clean-up changes to
the Framework. Each of these categories of changes are discussed in
further detail below.
i. Proposed Amendment To Clarify the Cadence of Publication of
Disclosure Frameworks
Section 4.1 of the Framework describes certain tools provided to
Clearing Agency participants to assist participants in understanding
the Clearing Agencies' products and services and their use. One such
tool is the publication of disclosure frameworks to the DTCC website.
The proposed change would enhance the description in the third bullet
of Section 4.1, to add that although each of the Clearing Agencies
publish to the DTCC website disclosure frameworks that are updated on a
biennial basis, such frameworks are also updated more frequently for
material changes.
ii. Proposed Amendment To Clarify the Description of Recovery and Wind-
Down
Section 5 of the Framework describes the Clearing Agencies
identification of scenarios that may potentially prevent them from
being able to provide critical operations and services, and assessment
of options for recovery and orderly wind-down, and maintenance of
appropriate plans for recovery and orderly wind-down. The proposed
changes to Section 5 are primarily rephrasing and grammatical choices
that clarify the Framework and conform the language in the Framework to
the Clearing Agencies' stand-alone Recovery and Wind-Down Plans.
[[Page 86431]]
iii. Proposed Amendment To Make Other Non-Substantive Clarifying
Changes
These proposed changes consist of rephrasing for clarity and
removal of unnecessary language in the Framework. These changes
include: (i) changes to Section 1 to simplify the description of other
documentation of the Clearing Agencies that support the activities
described in the Framework by removing statements regarding the
maintenance of those documents that are not relevant to the operation
of this Framework and removing redundant sentences; (ii) add ``and''
for grammatical purposes in the second sentence of the last paragraph
of Section 3.2 as well as the words ``when required'' as clarifying
language; (3) remove the words ``Market Risk'' from the heading
``Clearing Agency Stress Testing Framework'' in Section 3.3.3 and add
``liquidity resources'' to align with other documentation of the
Clearing Agencies; (4) deletion of the word ``all'' in various
sentences in Section 4.2.2, as unnecessary.
2. Statutory Basis
The Clearing Agencies believe that the proposed changes are
consistent with section 17A(b)(3)(F) of the Act \8\ for the reasons
described below. 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.\9\ The proposed changes would clarify the
descriptions of certain matters within the Framework to improve
comprehensiveness and align with other documentation of the Clearing
Agencies, as described above. By creating clearer, updated
descriptions, the Clearing Agencies believe that the proposed changes
would make the Risk Management Framework more effective in providing an
overview of the important risk management activities of the Clearing
Agencies, as described therein.
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ Id.
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As described in the Framework Filings, the risk management
functions described in the Risk Management Framework allow the Clearing
Agencies to continue to promote the prompt and accurate clearance and
settlement of securities transactions and continue to assure the
safeguarding of securities and funds which are in their custody or
control or for which they are responsible notwithstanding the default
of a member of an affiliated family. The proposed changes to improve
the clarity and accuracy of the descriptions of risk management
functions within the Framework would assist the Clearing Agencies in
carrying out these risk management functions. Therefore, the Clearing
Agencies believe these proposed changes are consistent with the
requirements of section 17A(b)(3)(F) of the Act.\10\
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\10\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
The Clearing Agencies do not believe that the proposed changes to
the Framework described above would have any impact, or impose any
burden, on competition. As described above, the proposed rule changes
would improve the comprehensiveness of the Framework by creating
clearer, updated descriptions, thereby making the Risk Management
Framework more effective in providing an overview of the important risk
management activities of the Clearing Agencies. As such, the Clearing
Agencies do not believe that the proposed rule changes would have any
impact on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
DTC has not received or solicited any written comments relating to
this proposal. If any written comments are received, they will be
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at <a href="https://www.sec.gov/regulatory-actions/how-to-submitcomments">https://www.sec.gov/regulatory-actions/how-to-submitcomments</a>. General questions
regarding the rule filing process or logistical questions regarding
this filing should be directed to the Main Office of the Commission's
Division of Trading and Markets at <a href="/cdn-cgi/l/email-protection#77030516131e19101619131a16051c1203043704121459101801"><span class="__cf_email__" data-cfemail="acd8decdc8c5c2cbcdc2c8c1cddec7c9d8dfecdfc9cf82cbc3da">[email protected]</span></a> or 202-
551-5777.
DTC reserves the right not to respond to any comments received.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A) \11\ of the Act and paragraph (f) \12\ of Rule 19b-4
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#e99b9c858cc48a8684848c879d9aa99a8c8ac78e869f"><span class="__cf_email__" data-cfemail="394b4c555c145a5654545c574d4a794a5c5a175e564f">[email protected]</span></a>. Please include
file number SR-DTC-2023-012 on the subject line.
Paper Comments
<bullet> 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-2023-012. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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
[[Page 86432]]
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549 on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of DTC and on DTCC's
website (<a href="https://dtcc.com/legal/sec-rule-filings.aspx">https://dtcc.com/legal/sec-rule-filings.aspx</a>). Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-DTC-2023-012 and should be submitted on
or before January 3, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27267 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P
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