Notice2026-21136
Self-Regulatory Organizations; CME Securities Clearing Inc.; Order Approving Proposed Rule Change To Amend Rule 410, Rule 101, the Capped Liquidity Facility Procedure, and the Liquidity Risk Management Policy
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 16, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 199 (Friday, October 16, 2026)</title>
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[Federal Register Volume 91, Number 199 (Friday, October 16, 2026)]
[Notices]
[Pages 65821-65827]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21136]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106657; File No. SR-CMESC-2026-008]
Self-Regulatory Organizations; CME Securities Clearing Inc.;
Order Approving Proposed Rule Change To Amend Rule 410, Rule 101, the
Capped Liquidity Facility Procedure, and the Liquidity Risk Management
Policy
October 13, 2026.
On August 21, 2026, CME Securities Clearing Inc. (``CMESC'') filed
with the Securities and Exchange Commission (``Commission'') proposed
rule change CMESC-2026-008, pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4
thereunder.\2\ The proposed rule change was published for public
comment in the Federal Register on September 3, 2026.\3\ The Commission
has received no comments on the changes proposed. For the reasons
discussed below, the Commission is approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 106243 (Aug. 31,
2026), 91 FR 56678 (Sept. 3, 2026) (File No. SR-CMESC-2026-008)
(``Notice of Filing'').
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I. Background
As a registered clearing agency providing central counterparty
services, CMESC is a covered clearing agency subject to clearing agency
standards provided in Section 17A of the Act,\4\ and rules thereunder.
Rule 17ad-22(e)(7) under the Act requires each covered clearing agency
to maintain and hold qualifying liquid resources at a minimum to effect
same-day, intraday and multiday settlement of payment obligations with
a high degree of confidence under a wide range of foreseeable stress
scenarios, including, but not limited to, the default of the
participant family that would generate the largest aggregate payment
obligation for the covered clearing agency in extreme but plausible
market conditions.\5\ CMESC has established several liquidity tools in
its Rules and policies and procedures to meet these requirements,
including the Capped Liquidity Facility (``CLF'') \6\ in Rule 410, the
associated CLF Procedure, and the Liquidity Risk Management Policy
(``LRMP'').\7\ The CLF is designed to provide access to required
liquidity in the event CMESC's other sources of liquidity are
unavailable or insufficient.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
\5\ See Rule 17ad-22(e)(7)(i) and (ii), 17 CFR 240.17ad-
22(e)(7)(i) and (ii).
\6\ Capitalized terms used herein and not defined have the
meanings assigned to such terms in the Rules of CME Securities
Clearing Inc. (``Rules''), as applicable, available at <a href="https://www.cmegroup.com/rulebook/CMESC/CMESC%20Rulebook.pdf">https://www.cmegroup.com/rulebook/CMESC/CMESC%20Rulebook.pdf</a>.
\7\ The LRMP and CLF Procedure were submitted to the Commission
as part of the Application.
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To facilitate the implementation of the CLF in connection with
launching its Clearing Services, the proposed rule change would amend
Rules 410 and 101 regarding the CLF and CLF Master Repurchase Agreement
(``CLF MRA''), the CLF Procedure, and the LRMP, as described below.
II. Description of the Proposed Rule Change
A. Amendments to Rule 410
1. Rules-Based CLF MRA
Under existing Rule 410(a) each Member is required to enter into a
separate CLF MRA with CMESC to purchase Eligible Securities up to the
Member's Allocated CLF Amount if CMESC declares a CLF Event. First, the
proposed rule change would amend Rule 410(a)(i) to provide instead that
each Member is a party to a CLF MRA by operation of Rule 410(a) without
any additional execution steps by CMESC or Members. CMESC states that
it is proposing this rules-based MRA to mitigate administrative burdens
on both CMESC and the Members in preparing and executing separate
agreements and to promote efficiency and consistency.\8\
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\8\ See Notice of Filing, supra note 3, 91 FR at 56679.
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Second, the proposed rule change would modify the first sentence of
Rule 410(a)(i) to make clear that the CLF MRA will be on terms set out
at the end of Rule 410 and move existing Rule 410(a)(ii)(A)-(F) that
contains the terms of CLF MRA to the end of Rule 410 with certain
adjustments, as described below:
<bullet> The proposed CLF MRA set out at the end of Rule 410 will
include new language to provide that the CLF MRA is entered into
between CMESC and each Member by operation of Rule 410 and that
capitalized terms used but not defined in the CLF MRA have the meanings
set forth in the Rules;
<bullet> As a rules-based agreement, the proposed CLF MRA will
incorporate by reference the SIFMA Master Repurchase Agreement
September 1996 version (``SIFMA MRA'') (without the referenced annexes
therein), rather than being established as a separate agreement in a
form based on the SIFMA Master Repurchase Agreement as provided in
existing Rule 410(a)(ii), and will provide that each CLF Transaction is
subject to the terms of the SIFMA MRA and Rule 410(a);
<bullet> In addition to incorporating the SIFMA MRA, the proposed
CLF MRA will provide that, notwithstanding anything else in the SIFMA
MRA, certain terms will apply to CLF Event Transactions between CMESC
and the Member. These terms are listed as paragraphs (a)-(g) in the
proposed CLF MRA and are described below:
[ssquf] Existing Rule 410(a)(ii)(A) will become new paragraph (a)
in the proposed CLF MRA except that the reference to ``this Rule 410''
will be changed to ``Rule 410'';
[ssquf] Existing Rule 410(a)(ii)(B) will become new paragraph (b)
of the proposed CLF MRA and the proposed rule change would create a new
defined term ``Liquidating Trade'' to refer to a trade liquidating the
financed securities in clause (x) of this new paragraph (b);
[ssquf] Existing Rule 410(a)(ii)(C) will become new paragraph (c)
of the proposed CLF MRA and a new sentence would be added from existing
Rule 410(g) to new paragraph (c), which will provide that ``[e]ach CLF
Event Transaction will be entered into on an overnight basis, unless
otherwise specified by the Corporation''; the text of ``trade
liquidating the financed
[[Page 65822]]
securities'' in clause (x) of this new paragraph (c) would be replaced
with ``Liquidating Trade'' as a result of the creation of the new
defined term described above; the text ``upon expiration of the term of
a CLF Event Transaction'' would be added to the end of clause (z) of
this new paragraph (c) to clarify that each CLF Event Transaction will
remain open until the occurrence of the CLF Event Transaction
Termination Date upon expiration of the term of a CLF Event
Transaction;
[ssquf] Existing Rule 410(a)(ii)(D) will become new paragraph (d)
of the proposed CLF MRA with minor adjustments and will state that
``[i]t shall be an ``Event of Default'' (for purposes of this CLF MRA)
with respect to the buyer under a CLF MRA if the Corporation ceases to
act for the Member pursuant to Rule 901 or 902'';
[ssquf] Existing Rule 410(a)(ii)(E) will become new paragraph (e)
of the proposed CLF MRA with minor adjustments and will state that
``[t]here shall be no ``Event of Default'' (for purposes of this CLF
MRA) with respect to the Corporation as the seller other than a
Corporation Default within the meaning of Rule 714'';
[ssquf] Existing Rule 410(a)(ii)(F) will become new paragraph (f)
of the proposed CLF MRA without any changes;
[ssquf] Finally, the proposed rule change would add a new paragraph
(g) in the proposed CLF MRA to deal with any potential conflicts
between the CLF MRA and SIFMA MRA, which states that in the event of
any inconsistency between the terms of the SIFMA MRA and the CLF MRA,
the terms of the CLF MRA will govern.
[ssquf] After moving existing Rule 410(a)(ii) to the proposed CLF
MRA at the end of Rule 410, existing Rule 410(a)(i) would be renumbered
as Rule 410(a).
Finally, the proposed rule change would make additional clean-up
changes to Rule 410(a). First, the proposed rule change would remove a
sentence in existing Rule 410(a)(i) regarding the categories of
securities CMESC may include as Eligible Securities in the context of a
CLF Event Transaction. This sentence repeats the same provision in
existing Rule 410(e) (to be renumbered as Rule 410(c) as described
below) and its deletion will remove redundancy. Second, the phrase
``pursuant to Rule 410(b) below'' would be added to the last sentence
of Rule 410(a)(i) to clarify that CMESC's declaration of a CLF Event
and the ensuing actions taken by CMESC will be pursuant to Rule 410(b).
2. CLF Size and Allocated CLF Amount
Existing Rule 410(i) (to be renumbered as Rule 410(e)) would be
amended to provide additional detail regarding the calculations of the
CLF size and the Allocated CLF Amount. CMESC states that these
amendments do not change the existing methodology and formulae used to
size the CLF and calculate each Member's allocation.\9\
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\9\ Id.
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a. Sizing the CLF
The proposed rule change would clarify the first sentence of Rule
410(i)(i) regarding the assessment CMESC conducts at least quarterly by
specifying that CMESC shall conduct an assessment at least every
quarter, or more frequently as CMESC deems appropriate, ``to determine
the required size of the CLF and each Member's Allocated CLF Amount.''
CMESC states that this additional detail clarifies the purpose of the
quarterly assessment (or more frequently as determined appropriate by
CMESC) that will determine the size and allocation of the CLF.\10\
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\10\ Id. at 56680.
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Second, the proposed rule change would provide additional details
regarding its calculation of the size of the CLF. CMESC states that
these changes are designed to provide clarity and transparency in how
CMESC calculates the size of the CLF and that they do not change the
existing methodology to size the CLF.\11\ Currently, Rule 410(i)(i)
provides that CMESC will determine the size of the CLF through the
assessment to evaluate its hypothetical liquidity need in the event of
a default of a Participant Family (defined as the ``Stress Potential
Payment Obligation'' or ``SPPO'') to which CMESC would be obligated to
make the largest cash payment. The proposed rule change would modify
the second sentence of Rule 410(i)(i) to make clear that CMESC would
calculate the SPPO of each Participant Family by evaluating the
hypothetical cash settlement obligation that CMESC may experience in
the event of a Default of such Participant Family in extreme but
plausible market conditions, using a lookback period deemed appropriate
by CMESC. The proposed rule change would also add a new sentence to
Rule 410(i)(i) to explain that CMESC will use the largest SPPO across
all Participant Families (defined as ``Cover 1 SPPO'') over the
designated lookback period as the starting point for determining the
required size of the CLF.
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\11\ Id.
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Finally, the proposed rule change includes non-substantive changes
to the last sentence of Rule 410(i)(i) (renumbered as Rule 410(e)(i)).
Specifically, the proposed rule change would add certain text to
specify that CMESC may ``also'' consider other factors it deems
relevant ``in sizing the CLF'' to make clear that in addition to
assessing the SPPO of each Participant Family over the designated
lookback period and to determine the Cover 1 SPPO over the lookback
period as the starting point in determining the size of the CLF, CMESC
may also consider other factors it deems relevant in its calculation of
the size of the CLF. As a result of these proposed revisions, the
proposed rule change would eliminate a redundant phrase ``in
determining the required size of the CLF (e.g., aggregated Allocated
Capped CLF Amounts of all Members)'' from the end of this sentence and
add ``as deemed relevant by the Corporation'' to the end of this
sentence as a clarifying change.
b. Calculation of the Allocated CLF Amount
The proposed rule change would also include amendments to Rule
410(i)(ii) (renumbered as Rule 410(e)(ii)). CMESC states that these
changes are designed to enhance the description of the calculation of
the Allocated CLF Amount for added clarity and transparency and would
not change the calculation or methodology used to determine each
Member's Allocated CLF Amount, as described in the Application
materials.\12\
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\12\ Id.
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First, existing Rule 410(i)(ii) provides that CMESC shall calculate
each Member's Allocated CLF Amount at the time CMESC performs its
assessment referred to in clause (i) of Rule 410(i). The proposed rule
change would amend this sentence to clarify that CMESC will calculate
each Member's Allocated CLF Amount at the time ``as'' it performs its
assessment and change the reference to ``clause (i)'' in this sentence
to Rule 410(e)(i) due to renumbering Rule 410(i) to Rule 410(e).
Second, the second sentence of current Rule 410(i)(ii) states that,
each Member's Allocated CLF Amount will be calculated on a pro rata
basis, based on the size of each Member's ``SPPO'' relative to the
total aggregate SPPO across all Members. The proposed rule change would
add a new defined term ``Maximum SPPO'', as described in the paragraph
below, and would specify that the Maximum SPPO is determined using ``a
designated lookback period'' in the second sentence of Rule 410(i)(ii).
[[Page 65823]]
As such, the proposed rule change would modify the second sentence of
Rule 410(i)(ii) to provide that ``[e]ach Member's Allocated CLF Amount
will be calculated on a pro rata basis, based on the size of each
Member's Maximum SPPO during the designated lookback period relative to
the total aggregate Maximum SPPOs across all Members during the same
period.'' The proposed rule change would also define the pro rata ratio
described in this sentence as the ``Obligation Ratio.''
Third, the proposed rule change would amend the third sentence of
existing Rule 410(i)(ii) by replacing the first reference to each
Member's ``SPPO'' with the ``Maximum SPPO for purposes of calculating
the Member's Obligation Ratio.'' In addition, the proposed rule change
would clarify that a Member's Maximum SPPO is calculated by taking the
sum of the Member's largest SPPO plus the two largest SPPOs among the
Users it authorizes, if applicable, over the designated lookback
period. The word ``two'' would be inserted before the term ``largest
SPPO'', while pluralizing the latter reference in the existing text. In
the same sentence, ``of the two'' would be deleted and replaced with
``among the.'' Parallel changes would be included in the subsequent
sentence. CMESC states that this formulation is intended to result in a
clearer, more precise description of CMESC's process for incorporating
User SPPOs in the calculation of a Member's Maximum SPPO and aligns
with the way the process is described in the CLF Procedure.\13\ CMESC
states that the process itself is unchanged; only the language in the
Rulebook and the CLF Procedure used to describe the calculation process
is being updated for additional clarity.\14\
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\13\ Id.
\14\ Id.
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Fourth, ``SPPO'' would be replaced with ``Maximum SPPO'' in the
fourth sentence of existing Rule 410(i)(ii) to conform to the defined
term and to add ``Obligation Ratio and'' in front of Allocated CLF
Amount to make clear that CMESC, at its sole discretion, can add a
multiplier to a particular Member's Maximum SPPO as part of determining
that Member's Obligation Ratio and Allocated CLF Amount.
Fifth, the proposed rule change would add a sentence between the
fourth sentence and fifth sentence in existing Rule 410(i)(ii) to
enhance the description of the allocation of the CLF, which provides
that each Member's Allocated CLF Amount is calculated as the product of
the Member's Obligation Ratio and the required CLF size determined in
accordance with Rule 410(e)(i), which provides for at least quarterly
resizing (or more frequently as the Corporation deems appropriate).
Although this calculation is implied in the second sentence of existing
Rule 410(i)(ii) regarding each Member's Allocated CLF Amount calculated
on a pro rata basis, CMESC states that by explicitly establishing how a
Member's Allocated CLF Amount is calculated, the proposed change will
provide clarity and transparency with respect to each Member's CLF
obligation.\15\
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\15\ Id. at 56681.
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With respect to informing each Member of its individual Allocated
CLF Amount, the proposed rule change would clarify that CMESC will
provide each Member with its individual Allocated CLF Amount following
each re-sizing of the CLF. Therefore, references to the ``periodic
report'' from the fifth sentence would be deleted and ``following each
resizing of the CLF'' would be added to the same sentence.
Finally, the proposed rule change would combine and restate the
last two sentences of existing Rule 410(i)(ii). The changes consist of
restating CMESC's obligation to notify each Member of its Allocated CLF
Amount following each resizing, and to remove a redundancy regarding
Members' obligations to enter into CLF Event Transactions upon CMESC's
declaration of a CLF Event, which is already provided for in greater
detail in Rule 410(b)(i)(B).
c. Member Information To Facilitate CLF Calculations
In addition to the proposed changes described above, which are
designed to enhance the description of the CLF allocation, CMESC also
proposes modifications to Rule 410(i)(ii) (renumbered as Rule
410(e)(ii)) to provide a new requirement for a Member, in order to
commence clearance and settlement of Eligible Securities Transactions,
to provide information to CMESC to support CMESC's determination of
such Member's Allocated CLF Amount. Specifically, the proposed rule
change would insert in Rule 410(i)(ii) a provision that requires a
Member to provide certain information, including, without limitation,
the projected volumes and sizes of Eligible Securities Transactions to
be submitted for clearance and settlement by the Member and its
authorized Users, if any, over a period deemed relevant by CMESC, which
will be incorporated as an input into the sizing and allocation
calculations for the CLF. CMESC states that this information is
intended to facilitate CMESC's assessment of the Cover 1 SPPO as well
as a Member's Maximum SPPO for purposes of calculating the Member's
Allocated CLF Amount during an initial ramp-up phase.\16\ CMESC states
that its Cover 1 SPPO calculations and Maximum SPPO calculations for
new Members will leverage this projected data and blend it with data
from the Member's actual cleared activity on a going-forward basis,
until the appropriate lookback period has lapsed.\17\ For avoidance of
doubt, the information required under the proposed changes to Rule
410(i)(ii), renumbered as Rule 410(e)(ii), serves as an input to
existing methodologies for calculating the size and allocation of the
CLF, which are unchanged by the proposed modifications.
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\16\ Id.
\17\ Id.
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3. Other Clarifying and Technical Amendments to Rule 410
CMESC further proposes several non-substantive, clarifying changes
to Rule 410 to improve readability and remove redundancies. The table
below lists each Rule 410 subsection which CMESC is proposing changes,
describing the proposed changes, and indicating the types of changes,
i.e., whether the changes are in the nature of clarification,
technical, or incorporation of proposed changes to Rule 410.
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Rule Proposed change Purpose
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Rule 410(b)(i)(A)................. To facilitate readability, added the sentence Clarification; consolidated
``the Corporation has sole discretion as to existing Rule 410(c) into
the non-Defaulting Members with whom it will Rule 410(b)(i)(A).
enter into CLF Event Transactions upon
declaration of a CLF Event and the terms of
each such transaction;'' from existing Rule
410(c).
[[Page 65824]]
Rule 410(b)(i)(B)................. Added ``selected to participate in CLF Event Clarification; consolidated
Transactions'' to refer more precisely to the existing Rule 410(d) into
Member that is selected by CMESC to Rule 410(b)(i)(B).
participate in CLF Event Transactions.
Added ``and any additional pertinent
information; Upon notice from the Corporation,
such Member must enter into the CLF Event
Transaction(s) with the Corporation at an
aggregate purchase price up to the maximum
amount allocated to such Member (`Allocated
CLF Amount') as calculated by the
Corporation'' from existing Rule 410(d).
Created the defined term ``Allocated CLF
Amount'' to replace existing ``Allocated
Capped CLF Amount'' throughout Rule 410.
Rule 410(b)(i)(C)................. Replaced ``an aggregate purchase price up to Clarification; removed
the maximum amount allocated to such Member redundancy that overlaps
(`Allocated Capped CLF Amount')'' with ``the with 410(b)(i)(B).
aggregate purchase price determined by the
Corporation, in its sole discretion.''.
Rule 410(b)(i)(D)................. Deleted existing Rule 410(b)(i)(D) in its Removed redundancy that
entirety (i.e., ``Pursuant to the terms of the overlaps with paragraph
CLF MRA, each CLF Event Transaction will (c) of CLF MRA.
remain open until the earlier of (x) such time
that the Corporation has executed a trade
liquidating the financed securities
(`Liquidating Trade'), (y) such time that the
Corporation has obtained liquidity through its
other available liquid resources and closes
the CLF Event Transactions or (z) the CLF
Event Transaction Termination Date'').
Added ``Each CLF Event Transaction will remain
open pursuant to and in accordance with the
terms of the CLF MRA set forth at the end of
this Rule 410'' to set out the sequence of
events and the timeline of a CLF Event
Transaction.
Rule 410(b)(i)(E)................. Added ``that is a'' to refer to each Member Technical and
``that is a'' party to a CLF Event Transaction. Clarification.
Added ``exchange for cash in'' to the part that
states ``each such Member to deliver the
related Eligible Securities to the Corporation
in exchange for cash in order to enable the
Corporation to complete settlement. . . .''.
Rule 410(c)....................... Deleted........................................ Technical; consolidated
into Rule 410(b)(i)(A).
Rule 410(d)....................... Deleted........................................ Technical; consolidated
into Rule 410(b)(i)(B).
Rule 410(e)....................... Renumbered as Rule 410(c)...................... Technical.
Rule 410(f)....................... Renumbered as Rule 410(d)...................... Technical.
Rule 410(g)....................... Deleted........................................ Technical; consolidated
into CLF MRA paragraph
(c).
Rule 410(h)....................... Deleted........................................ Technical; removed to
reduce redundancy due to
overlap with Rule
410(b)(i)(E).
Rule 410(j)....................... Renumbered as Rule 410(f)...................... Technical.
Replaced ``Allocated Capped CLF Amount'' with
``Allocated CLF Amount'' for consistency with
the new proposed defined term.
Rule 410(k)....................... Renumbered as Rule 410(g)...................... Technical.
Rule 410(l)....................... Renumbered as Rule 410(h)...................... Technical.
Rule 410.......................... Added ``to'' in the legacy text relocated to Technical.
CLF MRA paragraph (d) for grammatical accuracy.
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B. Amendments to Rule 101
As a result of the proposed changes to Rule 410(a) described above
to create a rules-based CLF MRA, the definition of ``CLF MRA'' in Rule
101 would be amended to conform to the proposed changes to Rule 410(a).
The proposed rule change would add more detail to the definition of
``CLF MRA'' in Rule 101 to prescribe that ``CLF MRA means a Capped
Liquidity Facility Master Repurchase Agreement formed between a Member
and the Corporation by operation of Rule 410(a), which governs any CLF
Event Transaction between the Member and the Corporation, as defined
and further prescribed in Rule 410.'' This new definition clarifies
that the CLF MRA is a rules-based agreement between a Member and CMESC
by operation of Rule 410(a) and that CLF MRA governs CLF Event
Transactions between the Member and CMESC as further prescribed in Rule
410.
C. Amendments to CLF Procedure
The CLF Procedure establishes a framework for the governance,
execution and testing of CMESC's CLF, covering areas such as
calculation of the size and apportioning of CLF among Members,
administration of CLF Event Transactions, notification to Members,
Member attestation, and operational testing. As a result of the
proposed amendments to Rule 410 described above, CMESC states that
similar changes would be made to the CLF Procedure that are consistent
with the proposed amendments to Rule 410, as described below, for the
purpose of aligning provisions of the CLF Procedure with Rule 410.\18\
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\18\ Id. at 56682.
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1. Rules-Based CLF MRA
The proposed rule change would amend the Governance section of the
CLF Procedure to add that CLF Event Transactions are governed by a CLF
MRA, as set out in the Rules. This proposed addition is to align with
and acknowledge the proposed amendment to Rule 410 to state that each
Member is a party to a CLF MRA pursuant to and by operation of Rule
410(a), without additional steps taken by CMESC or Members to execute
an agreement. The proposed rule change would also update the internal
governance committee identified in the Governance section that is
responsible for reviewing and
[[Page 65825]]
approving the CLF Procedure on at least an annual basis.
2. Sizing the CLF
The proposed rule change would amend the Sizing of the Facility
section of the CLF Procedure to add that CMESC may consider additional
factors in addition to the Cover 1 SPPO amount, including but not
limited to information requested from Members. These proposed additions
are to align with and acknowledge similar proposed amendments to Rule
410 as described above.
More specifically, the proposed rule change would modify the Sizing
of the Facility section of the CLF Procedure to clarify that the
objective of its CLF sizing methodology is to use the Cover 1 SPPO as
the starting point for estimating CMESC's hypothetical liquidity needs
under extreme but plausible market conditions. The proposed rule change
would add language to this section to mirror and align with the
language at Rule 410(i)(i) (to be renumbered as Rule 410(e)(i)), which
provides consideration of these historical and relevant factors in
sizing the CLF.
CMESC also proposes that the CLF Procedure expressly state that
with respect to a Member approved by CMESC to commence clearance and
settlement of Eligible Securities Transactions, a Member's SPPO may be
based on information provided by the Member, in accordance with
abovementioned amendments to the Rules. This addition would account for
circumstances where CMESC does not already have historical trade
submission data from the Member to determine that Member's SPPO (e.g.,
a new Member) and CMESC seeks to request from and rely on appropriate
information supplied by a Member in order for CMESC to determine a
Member's SPPO. This addition also would bring the CLF Procedure into
alignment with Rule 410, as proposed to be amended.
3. Apportioning the CLF
The proposed rule change would amend the Apportioning section of
the CLF Procedure to similarly add that CMESC may request information
from Members to facilitate CMESC's calculation of each Member's
Allocated CLF Amount and to remove the description of how CMESC would
otherwise calculate the CLF obligation of a Member that had no
transactions during the relevant lookback period. The proposed
additions are to align with and acknowledge the proposed amendments to
Rule 410(i)(ii).
Consistent with proposed changes to Rule 410(i)(ii) (renumbered as
Rule 410(e)(ii)), the CLF Procedure would provide that a Member's
Maximum SPPO may be based on information requested by CMESC, including
the Member's projected volumes and sizes of transactions to be cleared,
to be calculated using a minimum lookback period as defined in the CLF
Procedure. The proposed change is designed to establish a method for
CMESC to compute each Member's Allocated CLF Amount in accordance with
CMESC Rules.
4. Notification and Attestation
The proposed rule change would modify the Notification and
Attestation sections of the CLF Procedure to clarify that on at least a
quarterly basis and upon any resizing of the CLF, each Member will be
informed of its individual Allocated CLF Amount, as well as the
effective date of any amended Allocated CLF Amount. An authorized
representative must acknowledge and affirm the Member's potential CLF
obligations on at least an annual basis, as well as make other
acknowledgments as required to ensure Members are aware of and prepared
to meet their relevant obligations.
These proposed changes regarding notice would be consistent with
changes proposed for Rule 410. CMESC states that these proposed
amendments would enhance clarity on the operation of the CLF and that
they are reasonably designed to ensure that CMESC and its Members will
engage in meaningful and helpful information exchange in support of
assuring that Members meet their obligations under the CMESC Rules,
thereby facilitating CMESC meeting its obligations under the Act and
the rules thereunder.\19\
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\19\ Id. at 56683.
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5. Other Clarification and Clean-Up Changes
Finally, the proposed rule change would include other clarifying,
clean-up changes throughout the CLF Procedure. CMESC's proposed
clarifying, clean-up changes fall within the following categories: (1)
use capitalized terms for consistency with the CMESC Rules and, where
indicated, the LRMP and the CLF Procedure; \20\ (2) use precise
terminology consistently across the CMESC Rules, the LRMP, and the CLF
Procedure; \21\ (3) correct minor grammatical or typographical errors;
and (4) make clarifying changes to improve the readability of the CLF
Procedure. CMESC states that these changes do not change the substance
of the proposed rule change.\22\
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\20\ As examples, the proposed rule change would use capitalized
terms as defined in CMESC's Rules, including ``CLF Event
Transaction(s);'' ``Corporation;'' ``Allocated CLF Amount,''
consistently throughout Sections 3 through 10 of the CLF Procedure.
\21\ As examples, Section 3.2 of the CLF Procedure would be
revised to replace phrases like ``financial obligations'' with
``liquidity needs'' and ``funding'' to ``liquidity'' to be
consistent with the terminology used in the CMESC Rules.
\22\ See Notice of Filing, supra note 3, 91 FR at 56683.
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D. Proposed Amendments to LRMP
The proposed rule change includes several corresponding
modifications to the LRMP to align with proposed changes to Rule 410 as
discussed above. The LRMP contains CMESC's policies and procedures to
monitor, measure, and manage potential liquidity events and resources
available to satisfy liquidity obligations in extreme but plausible
market conditions. Specifically, the proposed rule change would amend
Section 5.5.3.2. provisions on the declaration of a CLF Event to
clarify that CMESC will notify Members of their CLF Event Transactions
and also the cash amount required to be obtained (in total across
Members and per Member), the type and volume of securities to be
utilized, and the initial tenor of the CLF Event Transactions, and
declare an end to the CLF Event once it has determined that the CLF
Event Transactions entered into pursuant to the CLF are no longer
necessary. Additionally, conforming changes to Sections 6.1.1.4.2. and
6.1.1.4.3. would clarify that CLF sizing is based primarily on Cover 1
SPPO, and apportioning is based primarily on the Member's maximum SPPO
and the maximum SPPOs across all Members within a defined lookback
period, consistent with proposed changes to Rule 410. The proposed rule
change would include additional changes to Section 6.1.1.4.2. to align
the description of frequency for determining the size of the CLF at
least quarterly, or more frequently if CMESC determines appropriate,
with that in Rule 410(e)(i). Finally, CMESC states that other non-
substantive clarifying, organizational and cleanup changes to the LRMP
would be designed to fully align the LRMP with the proposed changes in
Rule 410.\23\
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\23\ Id.
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[[Page 65826]]
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \24\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and rules and regulations thereunder applicable
to such organization. After careful review of the proposed rule change,
the Commission finds that the proposed rule change is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to CMESC. More specifically, for the reasons given below,
the Commission finds that the proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act \25\ and Rules 17ad-22(e)(1) and (e)(7)
thereunder.\26\
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\24\ 15 U.S.C. 78s(b)(2)(C).
\25\ 15 U.S.C. 78q-1(b)(3)(F).
\26\ 17 CFR 240.17ad-22(e)(1) and (e)(7).
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A. Consistency With Section 17A(b)(3)(F)
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, in general, to
protect investors and the public interest.\27\
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\27\ 15 U.S.C. 78q-1(b)(3)(F).
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As described above in Section II.A.1., the proposed rule change
would establish a rules-based CLF MRA under which each Member is bound
by a unified, standardized agreement by operation of Rule 410(a),
without the need for CMESC and each Member to negotiate and execute
separate bilateral agreements. This approach should avoid the
administrative burden and delay associated with preparing and executing
numerous separate agreements, fosters consistency by ensuring all
Members are subject to a unified set of terms, and provides legal
certainty regarding the rights and obligations of CMESC and its Members
in a CLF Event. By facilitating the prompt implementation of the CLF,
the proposed rule change helps ensure that CMESC has sufficient
qualifying liquid resources to meet its settlement obligations in the
event of a Member default. As a result, the proposed rule change
promotes the prompt and accurate clearance and settlement of securities
transactions and the protection of investors and the public interest,
consistent with Section 17A(b)(3)(F) of the Act.
Further, as described above in Section II.A.2, the amendments to
Rules 410(i)(i) and (ii) (renumbered as Rules 410(e)(i) and (ii)), and
the conforming changes to the CLF Procedure and LRMP, which include
additional details regarding CMESC's calculation of the Cover 1 SPPO
used to size the CLF and each Member's Maximum SPPO, Obligation Ratio,
and Allocated CLF Amount, should support Members' ability to understand
and plan for their potential CLF obligations. Moreover, the new
information requirement for Members to commence clearing Eligible
Securities Transactions should enable CMESC to receive the information
it deems relevant to size and allocate the CLF appropriately and
continue to meet its liquidity needs. These changes should reduce the
risk of settlement failure by helping ensure that CMESC has sufficient
liquid resources to meet its settlement obligations in the event of a
Member default, thereby protecting investors and the public interest,
consistent with Section 17A(b)(3)(F) of the Act.
Finally, the clarifying and technical amendments to Rule 410, the
CLF Procedure, and the LRMP, which remove redundancies and align
terminology across CMESC's Rules, the CLF Procedure, and the LRMP,
support CMESC's ability to administer the CLF consistently and without
ambiguity, which in turn supports CMESC's ability to meet its
settlement obligations, thereby promoting the prompt and accurate
clearance and settlement of securities transactions, consistent with
Section 17A(b)(3)(F) of the Act.
For these reasons, the Commission finds that the proposed rule
change promotes the prompt and accurate clearance and settlement of
securities transactions and protects investors and the public interest,
consistent with Section 17A(b)(3)(F) of the Act.
B. Consistency With Rule 17ad-22(e)(1)
Rule 17ad-22(e)(1) under the Act requires that a covered clearing
agency establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for a well-founded, clear,
transparent, and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions.\28\
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\28\ 17 CFR 240.17ad-22(e)(1).
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As described above, the proposed rule change establishes a rules-
based CLF MRA in Rule 410, with a conforming definitional change in
Rule 101, and makes conforming, clarifying, and technical changes to
Rule 410, the CLF Procedure, and the LRMP to ensure consistent use of
defined terms and precise terminology throughout. These changes should
improve the readability, clarity, and transparency of CMESC's Rules by
ensuring that defined terms and precise terminology are used
consistently throughout. Further, by incorporating the SIFMA MRA by
reference and providing that the CLF MRA governs in the event of an
inconsistency with the SIFMA MRA, the proposed rule change should
provide a clear, transparent, and enforceable legal basis for CMESC and
its Members' rights and obligations in a CLF Event. Accordingly, the
proposed rule changes are consistent with Rule 17ad-22(e)(1).
C. Consistency With Rule 17ad-22(e)(7)
Rule 17ad-22(e)(7) under the Act requires, in part, that a covered
clearing agency establish, implement, maintain and enforce written
policies and procedures reasonably designed 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.\29\
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\29\ Rule 17ad-22(e)(7).
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Specifically, Rule 17ad-22(e)(7)(i) under the Act requires policies
and procedures for maintaining sufficient qualifying liquid resources
to effect same-day settlement of payment obligations with a high degree
of confidence under a wide range of foreseeable stress scenarios,
including the default of the participant family that would generate the
largest aggregate payment obligation in extreme but plausible market
conditions.\30\
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\30\ Rule 17ad-22(e)(7)(i), 17 CFR 240.17ad-22(e)(7)(i).
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As described above, the proposed changes to Rules 410 and 101, the
CLF Procedure, and LRMP facilitate CMESC's implementation of the CLF by
creating a rules-based CLF MRA designed to provide CMESC with a
liquidity resource in the event that CMESC's other liquidity resources
prove insufficient during a Member default, enhancing the descriptions
of the calculation of the CLF and each Member's Allocated CLF Amount,
adding the information requirement imposed on Members to allow CMESC to
receive information deemed relevant by CMESC to assess the size of the
CLF and determine a new Member's Allocated CLF Amount, and making
conforming, clarifying and technical changes to reduce redundancy and
promote clarity. These changes should support CMESC's ability to
effectively assess and determine the CLF sizing and allocation and
support Members' ability to understand and plan for their
[[Page 65827]]
potential CLF obligations, which should strengthen CMESC's measurement,
monitoring, and management of liquidity risk and help CMESC maintain
and hold sufficient liquid resources to effect same-day settlement of
payment obligations in the event of a default of the participant family
that would generate the largest aggregate payment obligation in extreme
but plausible market conditions. In particular, because the CLF is
sized starting from the Cover 1 SPPO, and it serves as a backstop when
CMESC's other sources of liquidity are unavailable or insufficient,
clarifying the sizing and allocation process and ensuring that CMESC
has the Member information needed to compute it should help CMESC
maintain an appropriately sized and allocated facility, consistent with
Rule 17ad-22(e)(7).
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular with the requirements of Section 17A of the Act \31\ and
the rules and regulations promulgated thereunder.
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\31\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\32\ that proposed rule change SR-CMESC-2026-008 be, and hereby is,
APPROVED.\33\
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\32\ 15 U.S.C. 78s(b)(2).
\33\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-21136 Filed 10-15-26; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on October 16, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.