Notice2025-08117
Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Capital Policy and the Capital Replenishment Plan
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Published
May 9, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 89 (Friday, May 9, 2025)</title>
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[Federal Register Volume 90, Number 89 (Friday, May 9, 2025)]
[Notices]
[Pages 19738-19741]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-08117]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102993; File No. SR-DTC-2025-008]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the Capital Policy and the Capital Replenishment Plan
May 5, 2025.
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 April 25, 2025, 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)(3) 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)(3).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to (i) the Clearing
Agency Policy on Capital Requirements (``Capital Policy'' or
``Policy'') of DTC and its affiliates, National Securities
[[Page 19739]]
Clearing Corporation (``NSCC'') and Fixed Income Clearing Corporation
(``FICC,'' and together with DTC and NSCC, the ``Clearing Agencies'');
and (ii) the Clearing Agency Capital Replenishment Plan (``Capital
Replenishment Plan'' or ``Plan'') of the Clearing Agencies. In
particular, the proposed revisions to the Capital Policy and Capital
Replenishment Plan would (1) make technical revisions to update,
simplify, and clarify statements in the Policy and Plan; and (2) update
the Plan to document alternate authorizations in case an authorizing
officer is not available.
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 are proposing to revise the Capital Policy
and Capital Replenishment Plan, which were adopted by the Clearing
Agencies in July 2017 \5\ and are maintained by the Clearing Agencies
in compliance with Rule 17ad-22(e)(15) under the Act \6\
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\5\ See Securities Exchange Act Release No. 81105 (July 7,
2017), 82 FR 32399 (July 13, 2017) (SR-DTC-2017-003, SR-FICC-2017-
007, SR-NSCC-2017-004).
\6\ 17 CFR 240.17ad-22(e)(15).
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Overview of the Capital Policy and Capital Replenishment Plan
The Capital Policy sets forth the manner in which each Clearing
Agency identifies, monitors, and manages its general business risk with
respect to the requirement to hold sufficient liquid net assets
(``LNA'') funded by equity to cover potential general business losses
so the Clearing Agency can continue operations and services as a going
concern if such losses materialize.\7\ The amount of LNA funded by
equity to be held by each of the Clearing Agencies for this purpose is
defined in the Policy as the General Business Risk Capital Requirement.
The Policy provides that the General Business Risk Requirement is
calculated for each Clearing Agency as the greatest of three separate
calculations--(1) an amount based on that Clearing Agency's general
business risk profile (``Risk-Based Capital Requirement''), (2) an
amount based on the time estimated to execute a recovery or orderly
wind-down of the critical operations of that Clearing Agency
(``Recovery/Wind-down Capital Requirement''), and (3) an amount based
on an analysis of that Clearing Agency's estimated operating expenses
for a six-month period (``Operating Expense Capital Requirement''). On
an annual basis, each of these three capital requirements are measured,
and the General Business Risk Capital Requirement for each Clearing
Agency are determined as the greatest of these calculations.
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\7\ Id.
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Currently, the Capital Policy also addresses how each Clearing
Agency maintains a portion of retained earnings as LNA funded by equity
as its Corporate Contribution, as a part of its management of credit
risk \8\ and pursuant to its respective rules.\9\ These resources are
maintained to address losses due to a participant default, and are held
in addition to the LNA funded by equity held by each of the Clearing
Agencies as its General Business Risk Capital Requirement. The Capital
Policy describes how each Clearing Agency's General Business Risk
Capital Requirement and Corporate Contribution fit within the Clearing
Agencies' Capital Framework, where the Total Capital Requirement of
each Clearing Agency is calculated as the sum of its General Business
Risk Capital Requirement and Corporate Contribution.
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\8\ LNA funded by equity held as the Clearing Agencies'
Corporate Contribution is held in addition to resources held by the
Clearing Agencies for credit risk in compliance with Rule 17ad-
22(e)(4) under the Act and in addition to resources held by the
Clearing Agencies for liquidity risk in compliance with Rule 17ad-
22(e)(7). 17 CFR 240.17ad-22(e)(4), (7).
\9\ The Rules, By-laws and Organization Certificate of DTC
(``DTC Rules''), the Rulebook of the Government Securities Division
of FICC (``GSD Rules''), the Clearing Rules of the Mortgage-Backed
Securities Division of FICC (``MBSD Rules''), or the Rules &
Procedures of NSCC (``NSCC Rules,'' and together with the DTC Rules,
GSD Rules and MBSD Rules, the ``Clearing Agencies' Rules''),
available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
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The Policy also provides a plan for the replenishment of capital
through the Capital Replenishment Plan. The Capital Replenishment Plan
was adopted by the Clearing Agencies as a plan for the replenishment of
capital by each Clearing Agency should its equity fall close to or
below the amount being held as its Total Capital Requirement pursuant
to the Capital Policy. The Capital Replenishment Plan identifies the
circumstances that would trigger implementation of the Plan; the roles,
responsibilities, and guiding principles for implementation of the
Plan; and an overview and description of each of the tools that may be
used to replenish capital.
Proposed Revisions to the Capital Policy and Capital Replenishment Plan
As described in greater detail herein, the Clearing Agencies are
proposing to make certain revisions to the Capital Policy and Capital
Replenishment Plan. First, the proposal would make technical revisions
to update, simplify, and clarify statements in the Policy and Plan.
Second, the proposed revisions would update the Plan to document
alternate authorizations in case an authorizing officer is not
available. These proposed revisions are designed to enhance the clarity
of the Policy and Plan and help ensure that they continue to operate as
intended.
1. Technical Revisions
The Clearing Agencies are proposing technical revisions to the
descriptions within the Capital Policy and Capital Replenishment Plan
that would update, simplify, and clarify statements, including, for
example, removing in the Policy the unnecessary reference to the Plan
as an Addendum to the Policy, rephrasing certain sentences for clarity
without changing the meaning, and relocating language from one sentence
or section to another.
Such revisions would also update the documents. For example, in the
Policy, the proposed changes would more accurately refer to the Policy
as a policy instead of a framework, and refer to the senior most
management committee, which reflects the term now used by the Clearing
Agencies to refer to the highest-level committee of the Clearing
Agencies. In the Plan, these revisions would include removing
references to credit risk from the risk scenarios that may trigger the
Plan to reflect the Clearing Agencies' current rules and procedures
allowing the Corporate Contribution to be used for both participant
default as well as non-participant default losses.
2. Alternate Authorizations
Section 3.2 of the Plan describes the role and responsibilities of
the Treasury group (``Treasury'') in the implementation of the Plan in
the event the Plan is triggered pursuant to the Policy. This section
lists the steps to be taken by Treasury in implementing the plan as
well as the relevant internal
[[Page 19740]]
parties within Treasury tasked with providing any required
authorizations. The proposed changes would provide alternate
stakeholders that may provide any required authorizations in the
absence of those already outlined in the steps referenced above. This
change would allow for business continuity and timely implementation of
the plan in the absence of any specific authorizing party.
2. Statutory Basis
The Clearing Agencies believe that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a registered clearing agency. In
particular, the Clearing Agencies believe that the proposed changes to
the Capital Policy and Capital Replenishment Plan are both consistent
with Section 17A(b)(3)(F) of the Act \10\ and Rule 17ad-22(e)(15) under
the Act,\11\ for the reasons described below.
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
\11\ 17 CFR 240.17ad-22(e)(15).
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Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of the Clearing Agencies 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.\12\
Together, the Capital Policy and Capital Replenishment Plan are
designed to ensure that each of the Clearing Agencies hold sufficient
LNA funded by equity to cover potential general business losses so that
it can continue the prompt and accurate clearance and settlement of
securities transactions, and can continue to assure the safeguarding of
securities and funds which are in its custody or control or for which
it is responsible if those losses materialize. By making technical
revisions to update, simplify, and clarify statements in the Policy and
Plan, and updating the Plan to document alternate authorizing parties,
the proposed revisions would allow the Clearing Agencies to maintain
these documents to operate in the way they were intended. Therefore,
such proposed revisions would be consistent with the requirements of
Section 17A(b)(3)(F) of the Act.\13\
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ Id.
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Rule 17ad-22(e)(15) under the Act requires, in part, that the
Clearing Agencies establish, implement, maintain and enforce written
policies and procedures reasonably designed to identify, monitor, and
manage their respective general business risk and hold sufficient
liquid net assets funded by equity to cover potential general business
losses so that the Clearing Agencies can continue operations and
services as a going concern if those losses materialize.\14\ As
originally implemented, the Capital Policy and Capital Replenishment
Plan were designed to meet the requirements of Rule 17ad-22(e)(15).\15\
As stated above, the proposal would make technical revisions to update,
simplify, and clarify statements in the Policy and Plan, and would
update the Plan to document alternate authorizing parties. In this way,
the proposed changes would allow the Clearing Agencies to maintain
these documents in a way that meets these requirements. Therefore, such
proposed revisions would be consistent with the requirements of Rule
17ad-22(e)(15) under the Act.\16\
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\14\ 17 CFR 240.17ad-22(e)(15).
\15\ See supra note 5.
\16\ 17 CFR 240.17ad-22(e)(15).
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(B) Clearing Agency's Statement on Burden on Competition
The Clearing Agencies believe that the proposed revisions to the
Capital Policy and the Capital Replenishment Plan would not have any
impact, or impose any burden, on competition. The Policy and the Plan
are maintained by the Clearing Agencies in order to satisfy their
regulatory requirements and generally reflect internal tools and
procedures. Tools and procedures that have a direct impact on the
rights, responsibilities or obligations of members or participants of
the Clearing Agencies are reflected in the Clearing Agencies' Rules.
Accordingly, the Capital Policy and Capital Replenishment Plan
themselves are documents that enhance the Clearing Agencies' regulatory
compliance and internal management and do not have any impact, or
impose any burden, on competition.
The proposed revisions to update the Capital Policy and Capital
Replenishment Plan would not effect any changes on the fundamental
purpose or operation of these documents and, as such, would also not
have any impact, or impose any burden, on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
The Clearing Agencies have not received or solicited any written
comments relating to this proposed rule change. If any written comments
are received, the Clearing Agencies will amend their respective filings
to publicly file such comments as an Exhibit 2 to the filing, as
required by Form 19b-4 and the General Instructions thereto.
Persons submitting written 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="http://www.sec.gov/regulatory-actions/how-to-submit-comments">www.sec.gov/regulatory-actions/how-to-submit-comments</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#ea9e988b8e83848d8b848e878b98818f9e99aa998f89c48d859c"><span class="__cf_email__" data-cfemail="8bfff9eaefe2e5eceae5efe6eaf9e0eefff8cbf8eee8a5ece4fd">[email protected]</span></a> or 202-551-5777.
The Clearing Agencies reserve the right to not 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) \17\ of the Act and paragraph (f) \18\ 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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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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
[[Page 19741]]
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c7b5b2aba2eaa4a8aaaaa2a9b3b487b4a2a4e9a0a8b1"><span class="__cf_email__" data-cfemail="4230372e276f212d2f2f272c3631023127216c252d34">[email protected]</span></a>. Please include
File Number SR-DTC-2025-008 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-2025-008. 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
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="http://www.dtcc.com/legal/sec-rule-filings">www.dtcc.com/legal/sec-rule-filings</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-2025-008 and should be submitted on or
before May 30, 2025.
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)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-08117 Filed 5-8-25; 8:45 am]
BILLING CODE 8011-01-P
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