
[Federal Register Volume 82, Number 78 (Tuesday, April 25, 2017)]
[Notices]
[Pages 19131-19136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08283]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80485; File Nos. SR-DTC-2017-005; SR-FICC-2017-009; SR-
NSCC-2017-006]


Self-Regulatory Organizations; The Depository Trust Company; 
Fixed Income Clearing Corporation; National Securities Clearing 
Corporation; Notice of Filings of Proposed Rule Changes To Adopt the 
Clearing Agency Stress Testing Framework (Market Risk)

April 19, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on April 7, 2017, The Depository Trust Company 
(``DTC''), Fixed Income Clearing Corporation (``FICC''), and National 
Securities Clearing Corporation (``NSCC,'' and together with DTC and 
FICC, the ``Clearing Agencies'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule changes as described in 
Items I and II below, which Items have been prepared primarily by the 
Clearing Agencies. The Commission is publishing this notice to solicit 
comments on the proposed rule changes from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agencies' Statements of the Terms of Substance of the 
Proposed Rule Changes

    The proposed rule changes would adopt the Clearing Agency Stress 
Testing Framework (Market Risk) (``Framework'') of the Clearing 
Agencies, described below. The Framework would apply to both of FICC's 
divisions, the Government Securities Division (``GSD'') and the 
Mortgage-Backed Securities Division (``MBSD''). The Framework would be 
maintained by the Clearing Agencies in compliance with Rule 17Ad-
22(e)(4)(i), (iii) through (vii), under the Act, as described below.\3\
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    \3\ 17 CFR 240.17Ad-22(e)(4)(i), and (iii) through (vii). The 
Commission adopted amendments to Rule 17Ad-22, including the 
addition of new section 17Ad-22(e), on September 28, 2016. See 
Securities Exchange Act Release No. 78961 (September 28, 2016), 81 
FR 70786 (October 13, 2016) (S7-03-14). Each of the Clearing 
Agencies is a ``covered clearing agency'' as defined in Rule 17Ad-
22(a)(5), and must comply with new section (e) of Rule 17Ad-22 by 
April 11, 2017.

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[[Page 19132]]

    Although the Clearing Agencies would consider the Framework to be a 
rule, the proposed rule changes do not require any changes to the 
Rules, By-Laws and Organizational Certificate of DTC (``DTC Rules''), 
the Rulebook of GSD (``GSD Rules''), the Clearing Rules of MBSD (``MBSD 
Rules''), or the Rules & Procedures of NSCC (``NSCC Rules''), as the 
Framework would be a standalone document.\4\
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    \4\ Capitalized terms not defined herein are defined in the DTC 
Rules, GSD Rules, MBSD Rules, or NSCC Rules, as applicable, 
available at http://dtcc.com/legal/rules-and-procedures.
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II. Clearing Agencies' Statements of the Purpose of, and Statutory 
Basis for, the Proposed Rule Changes

    In their filings with the Commission, the Clearing Agencies 
included statements concerning the purpose of and basis for the 
proposed rule changes and discussed any comments they received on the 
proposed rule changes. The text of these statements may be examined at 
the places specified in Item IV below. The Clearing Agencies have 
prepared summaries, set forth in sections A, B, and C below, of the 
most significant aspects of such statements.

(A) Clearing Agencies' Statements of the Purpose of, and Statutory 
Basis for, the Proposed Rule Changes

1. Purpose
    The Clearing Agencies are proposing to adopt the Framework, which 
would set forth the manner in which each Clearing Agency effectively 
identifies, measures, monitors and manages its credit exposures to 
Members \5\ and those arising from its payment, clearing, and settling 
processes, as applicable. In general, the Framework would describe the 
stress testing practices adopted by the Clearing Agencies that are 
designed to ensure the sufficiency of each Clearing Agency's total 
prefunded financial resources, as described in greater detail below. 
The Framework would describe (i) the sources of each Clearing Agency's 
total prefunded financial resources; (ii) the Clearing Agencies' stress 
testing methodologies; (iii) the Clearing Agencies' stress testing 
governance and execution processes; and (iv) the Clearing Agencies' 
model validation practices. The Framework would address stress testing 
of each Clearing Agency's total prefunded financial resources, and 
would not address assessments for additional contributions or other 
resources that are not prefunded and may be available to the Clearing 
Agencies. The Framework would be owned and managed by the Data and 
Portfolio Analytics group within the Quantitative Risk Management 
department.\6\
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    \5\ FICC and NSCC refer to their participants as ``Members,'' 
while DTC refers to its participants as ``Participants.'' These 
terms are defined in the rules of each of the Clearing Agencies. 
Supra note 4. In this filing ``Members'' refers to both the Members 
of FICC and NSCC and the Participants of DTC.
    \6\ The parent company of the Clearing Agencies is The 
Depository Trust & Clearing Corporation (``DTCC''). DTCC operates on 
a shared services model with respect to the Clearing Agencies. Most 
corporate functions are established and managed on an enterprise-
wide basis pursuant to intercompany agreements under which it is 
generally DTCC that provides a relevant service to a Clearing 
Agency.
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    The Framework would first outline the regulatory requirements that 
apply to each Clearing Agency with respect to credit risk management, 
and then would describe how the Clearing Agencies address those 
requirements. The Framework would describe the credit risk management 
strategy of each of the Clearing Agencies,\7\ which is to maintain 
sufficient prefunded financial resources to cover fully its credit 
exposures to each Member with a high degree of confidence, and further, 
to maintain additional prefunded financial resources at a minimum to 
enable it to cover a wide range of foreseeable stress scenarios that 
include, but are not limited to, the default of the affiliated family 
(``Affiliated Family'') of Members that would potentially cause the 
largest aggregate credit exposure to the Clearing Agency in extreme but 
plausible market conditions (``Cover One Requirement'').\8\ Because the 
credit risks and prefunded financial resources of the Clearing Agencies 
are different in certain respects, the Framework would describe the 
prefunded financial resources and related stress testing methodologies 
of the Clearing Agencies separately, where applicable.
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    \7\ Rule 17Ad-22(e)(4) under the Act refers to these risks as 
``credit risks.'' 17 CFR 240.17Ad-22(e)(4), supra note 3. Because 
the Clearing Agencies refers to these risks as ``market risks,'' the 
Framework would use these terms interchangeably.
    \8\ See 17 CFR 240.17Ad-22(e)(4)(iii). Supra note 3.
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    The Framework would describe the sources of prefunded financial 
resources of the Clearing Agencies for purposes of compliance with Rule 
17Ad-22(e)(4).\9\ With respect to FICC and NSCC, the Framework would 
describe that such prefunded financial resources are their respective 
clearing funds, which contain deposits from their Members pursuant to 
their respective rules consisting of both cash and eligible securities, 
with any eligible securities being subject to a haircut, as provided 
for under those rules.\10\ The Framework would describe that such 
deposits are calculated for each individual Member pursuant to the GSD 
Rules, MBSD Rules, or NSCC Rules, as applicable, and each Member's 
deposits would be referred to in the Framework as its ``Required 
Deposit.'' \11\ With respect to DTC, the Framework would describe that 
its prefunded financial resources are cash deposits to its Participants 
Fund, made by its Members pursuant to the DTC Rules.\12\ The Framework 
would also describe that DTC may use its risk management control, the 
``Collateral Monitor,'' to monitor and assure that the settlement 
obligations of each Member are fully collateralized.\13\
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    \9\ 17 CFR 240.17Ad-22(e)(4). Supra note 3.
    \10\ FICC/GSD Rule 4 (Clearing Fund and Loss Allocation), FICC/
MBSD Rule 4 (Clearing Fund and Loss Allocation), and NSCC Rule 4 
(Clearing Fund). Supra note 4.
    \11\ Id.
    \12\ DTC Rule 4 (Participants Fund and Participants Investment). 
Supra note 4.
    \13\ ``Collateral Monitor'' is defined in DTC Rule 1, Section 1 
(Definitions), and its calculation is further provided for in the 
DTC Settlement Service Guide of the DTC Rules. Supra note 4.
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    The Framework would describe the stress testing methodologies that 
are used by the Clearing Agencies to test the sufficiency of their 
total prefunded financial resources, described above, against potential 
losses, assuming the default of a Member with the largest credit 
exposure to a Clearing Agency and that Member's Affiliated Family under 
extreme but plausible market conditions. The Framework would state that 
the stress testing would be designed to identify potential weaknesses 
in the methodologies used to calculate Members' Required Deposits and 
to determine collateral haircuts.
    The Framework would describe in detail the three key components of 
the development of stress testing methodologies, which include the 
following:

    Risk Identification. The Clearing Agencies identify the 
principal credit risk drivers that are representative and specific 
to each Clearing Agency's clearing and/or collateral portfolio to 
determine risk exposures by analyzing the securities and risk 
exposures in their Members' clearing and/or collateral portfolios to 
identify representative principal market risk drivers and to capture 
the risk sensitivity of the clearing and/or collateral portfolios 
under stressed market conditions.
    Scenario Development. The Clearing Agencies construct 
comprehensive and relevant sets of extreme but plausible historical 
and hypothetical stress scenarios for the identified risk drivers. 
The Framework would describe how the Clearing Agencies develop and 
select both historical and hypothetical scenarios that reflect

[[Page 19133]]

stressed market conditions. Historical scenarios are based on 
stressed market conditions that occurred on specific dates in the 
past. Hypothetical stress scenarios are theoretical market 
conditions that could conceivably occur.
    Risk Measurement and Aggregation. The Clearing Agencies 
calculate the risk metrics of each Clearing Agency's actual 
portfolio to estimate the profits and losses (``P&L'') of close out 
over a suitable stressed period of risk, deficiencies, and coverage 
ratios. The Framework would describe how the Clearing Agencies 
develop P&L estimation methodologies, and how they calculate risk 
metrics that are applicable to such methodologies under the chosen 
stress testing scenarios. Risk metrics may include, without 
limitation, deficiency and coverage ratios. The Clearing Agencies 
may use a number of P&L methodologies for stress testing purposes, 
including risk sensitivity, index mapping, and actual or approximate 
historical shock approaches.

    The Framework would define ``Member stress deficiency'' for each 
scenario as, with respect to FICC and NSCC, the stress loss exceeding 
the applicable Member's Required Deposits, and for DTC, the shortfall 
of a Member's Collateral Monitor. The Framework would also define 
``Affiliated Family deficiency'' as the aggregate of all Member stress 
deficiencies within the applicable Affiliated Family. Finally, the 
Framework would define ``Cover One Ratio'' as the ratio of Affiliated 
Family deficiency over the total value of the relevant Clearing 
Agency's clearing fund (or, for DTC, the Participants Fund), excluding 
the value of the applicable Affiliated Family's Required Deposits. The 
Framework would state that the Clearing Agencies calculate Member 
stress deficiencies, Affiliated Family deficiencies, and Cover One 
Ratios daily.
    The Framework would state that FICC and NSCC consider other 
coverage ratios as well, such as comparing Member stress deficiencies 
against such Member's known financial resources (e.g., equity capital 
base), to keep abreast of potential financial vulnerabilities facing 
such Member. Additionally, the Framework would state that DTC also 
tests the adequacy of its collateral haircuts by measuring ``Haircut 
Deficiency'' as the amount of stress losses exceeding the haircut 
applied to collateral securities.
    The Framework would state that the Clearing Agencies also apply 
wrong-way risk scenarios to measure both specific and generic wrong-way 
risk for each Clearing Agency's Members and Affiliated Families. Such 
scenarios reflect the default of a Member's Affiliated Family, and the 
potential impacts of that default to all securities in the Affiliated 
Family's clearing or collateral portfolios, as well as the potential 
general market impacts of that default to other securities. The 
Framework would describe the reverse stress testing analyses that are 
performed by FICC and NSCC on at least a semi-annual basis. These 
analyses provide FICC and NSCC, as central counterparties, another 
means for testing the sufficiency of the Clearing Agencies' respective 
prefunded financial resources. In conducting reverse stress testing, 
FICC and NSCC utilize scenarios of multiple defaults, extreme market 
shocks or shocks for other risk factors, which would cause those 
Clearing Agencies, as applicable, to exhaust all of their respective 
prefunded financial resources.
    The Framework would describe the Clearing Agencies' stress testing 
governance and execution processes. Stress testing is conducted daily 
for each of the Clearing Agencies, and stress testing risk metrics are 
also generated each day. Stress testing results of Cover One Ratios and 
Member stress deficiencies of certain Members are monitored against 
pre-established thresholds.\14\ Breaches of these pre-established 
thresholds are initially subject to more detailed studies to identify 
any potential impact to the applicable Clearing Agencies' Cover One 
Requirement. The Framework would describe that, to the extent such 
studies indicate a potential impact to a Clearing Agency's Cover One 
Requirement, the threshold breach would be escalated internally and 
analyzed to determine if either there is a need to adjust the stress 
testing methodology, or if the threshold breach indicates an issue with 
a particular Member. Based on these analyses, the Clearing Agencies 
determine the appropriate course of action, which could include options 
available under their respective rules.
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    \14\ Risk threshold levels are chosen to assist each Clearing 
Agency in achieving a high degree of confidence that its Cover One 
Requirement is met daily.
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    The Framework would describe that the Clearing Agencies conduct 
comprehensive analyses of daily stress testing results, the existing 
scenario sets (including any changes to such scenarios for the period 
since the last review), and the performance of the methodologies along 
with key underlying parameters and assumptions. These analyses are 
performed at least monthly and are conducted to assess whether each 
Clearing Agency's stress testing components are appropriate for 
determining the sufficiency of its prefunded financial resources in 
light of current and evolving market conditions. The Framework would 
state that such analyses may occur more frequently than monthly if, for 
example, the products cleared or markets served by a Clearing Agency 
display high volatility or become less liquid, or when the size or 
concentration of positions held by the applicable Clearing Agency's 
Members increases significantly.
    The Framework would state that the results of these analyses are 
reviewed monthly by the DTCC Enterprise Stress Testing Council. The 
Framework would also state that daily stress testing results are 
summarized and reported monthly to the DTCC Risk Management Committee. 
Finally, the Framework would state that stress testing methodologies 
and related models are subject to independent model validation on at 
least an annual basis.
2. Statutory Basis
    The Clearing Agencies believe that the proposed rule changes are 
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 Framework is 
consistent with Section 17A(b)(3)(F) of the Act,\15\ as well as Rule 
17Ad-22(b)(3),\16\ and the subsections cited below of Rule 17Ad-
22(e)(4),\17\ each promulgated under the Act, for the reasons described 
below.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
    \16\ 17 CFR 240.17Ad-22(b)(3).
    \17\ 17 CFR 240.17Ad-22(e)(4). Supra note 3.
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    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.\18\ As described in greater detail above, the Framework 
would describe how the Clearing Agencies have developed and carry out a 
credit risk management strategy to maintain sufficient prefunded 
financial resources to cover fully its credit exposures to each Member 
with a high degree of confidence, and further, to maintain additional 
prefunded financial resources at a minimum to enable it to cover a wide 
range of foreseeable stress scenarios that include, but are not limited 
to the Cover One Requirement. As such, the credit risk management 
strategy of the Clearing Agencies addresses their credit exposures and

[[Page 19134]]

allows them to continue the prompt and accurate clearance and 
settlement of securities and can continue to assure the safeguarding of 
securities and funds which are in their custody or control or for which 
they are responsible notwithstanding those risks. Therefore, the 
Clearing Agencies believe the Framework, which describes how the 
Clearing Agencies carry out this strategy, is consistent with the 
requirements of Section 17A(b)(3)(F) of the Act.\19\
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
    \19\ Id.
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    Rule 17Ad-22(b)(3) under the Act requires, in part, that a 
registered clearing agency that performs central counterparty services 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, among other things, maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the participant family to which it has the largest exposure in extreme 
but plausible market conditions.\20\ As described above, the Framework 
would describe how both FICC and NSCC have developed and carry out a 
credit risk management strategy to maintain sufficient prefunded 
financial resources to cover fully its credit exposures to each Member 
with a high degree of confidence, and further, to maintain additional 
prefunded financial resources at a minimum to enable it to cover a wide 
range of foreseeable stress scenarios that include, but are not limited 
to the Cover One Requirement. By carrying out their credit risk 
management strategy and conducting this daily stress testing to test 
the sufficiency of their prefunded financial resources, FICC and NSCC 
believe the Framework is consistent with Rule 17Ad-22(b)(3).\21\
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    \20\ 17 CFR 240.17Ad-22(b)(3).
    \21\ Id.
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    The proposed rule changes are also designed to be consistent with 
Rule 17Ad-22(e)(4) under the Act, which requires, in part, that each 
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.\22\ The Clearing Agencies believe the Framework 
is designed to meet the requirements of the following subsections of 
Rule 17Ad-22(e)(4),\23\ cited below, for the reasons described below.
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    \22\ 17 CFR 240.17Ad-22(e)(4)(i), and (iii) through (vii). Supra 
note 3.
    \23\ 17 CFR 240.17Ad-22(e)(4). Supra note 3.
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    Rule 17Ad-22(e)(4)(i) under the Act requires that a covered 
clearing agency maintain sufficient financial resources to cover its 
credit exposure to each participant fully with a high degree of 
confidence.\24\ Rule 17Ad-22(e)(4)(iii) under the Act requires that, to 
the extent not already maintained pursuant to Rule 17Ad-22(e)(4)(i) 
under the Act, for a covered clearing agency not subject to Rule 17Ad-
22(e)(4)(ii) under the Act, a covered clearing agency maintain 
additional financial resources at the minimum to enable it to cover a 
wide range of foreseeable stress scenarios that include, but are not 
limited to, the default of the participant family that would 
potentially cause the largest aggregate credit exposure for the covered 
clearing agency in extreme but plausible market conditions.\25\ The 
Framework would describe how the Clearing Agencies have developed and 
carry out a credit risk management strategy to maintain sufficient 
prefunded financial resources to cover fully its credit exposures to 
each Member with a high degree of confidence, and further, to maintain 
additional prefunded financial resources at a minimum to enable it to 
cover a wide range of foreseeable stress scenarios that include, but 
are not limited to the Cover One Requirement. The Framework would also 
describe how each Clearing Agency tests the sufficiency of its 
prefunded resources daily to support compliance with this requirement. 
As such, the Clearing Agencies believe the Framework is designed to 
meet the requirements of Rule 17Ad-22(e)(4)(i) and (iii) under the 
Act.\26\
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    \24\ 17 CFR 240.17Ad-22(e)(4)(i). Supra note 3.
    \25\ 17 CFR 240.17Ad-22(e)(4)(iii). Supra note 3.
    \26\ 17 CFR 240.17Ad-22(e)(4)(i) and (iii). Supra note 3.
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    Rule 17Ad-22(e)(4)(iv) under the Act requires that a covered 
clearing agency include prefunded financial resources, exclusive of 
assessments for additional guaranty fund contributions or other 
resources that are not prefunded, when calculating financial resources 
available to meet the standards under Rule 17Ad-22(e)(4)(i) through 
(iii) under the Act, as applicable.\27\ The Framework would identify 
the sources of prefunded resources of each Clearing Agency for purposes 
of meeting its requirements under Rule 17Ad-22(e)(4)(iii), and further 
would state that the stress testing used to test the sufficiency of 
those resources do not test other resources that are not prefunded. 
Therefore, the Clearing Agencies believe the Framework is consistent 
with Rule 17Ad-22(e)(4)(iv) under the Act.\28\
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    \27\ 17 CFR 240.17Ad-22(e)(4)(iv). Supra note 3.
    \28\ Id.
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    Rule 17Ad-22(e)(4)(v) under the Act requires that a covered 
clearing agency maintain the financial resources under Rule 17Ad-
22(e)(4)(ii) and (iii) under the Act, in combined or separately 
maintained clearing or guaranty funds.\29\ The Framework would identify 
the sources of prefunded resources of each Clearing Agency for purposes 
of meeting its requirements under Rule 17Ad-22(e)(4)(iii) as their 
Members' deposits to, with respect to NSCC and FICC, their respective 
clearing funds, and, with respect to DTC, deposits to its Participants 
Fund. Therefore, the Clearing Agencies believe the Framework is 
consistent with Rule 17Ad-22(e)(v) under the Act.\30\
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    \29\ 17 CFR 240.17Ad-22(e)(4)(v). Supra note 3.
    \30\ Id.
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    Rule 17Ad-22(e)(4)(vi)(A) under the Act requires that a covered 
clearing agency conduct stress testing of its total financial resources 
once each day using standard predetermined parameters and 
assumptions.\31\ The Framework would describe how the Clearing Agencies 
conduct stress tests on a daily basis, and would describe how the 
Clearing Agencies develop the stress testing methodologies for these 
tests. Specifically, the Framework would describe how the stress 
testing methodologies are developed through risk identification, 
scenario development, and risk measurement and aggregation. The 
Framework would also state that the stress testing methodologies are 
reviewed and analyzed monthly to determine if the components continue 
to be appropriate for determining sufficiency of the Clearing Agencies' 
prefunded financial resources. Therefore, the Clearing Agencies believe 
the Framework is consistent with Rule 17Ad-22(e)(4)(vi)(A) under the 
Act.\32\
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    \31\ 17 CFR 240.17Ad-22(e)(4)(vi)(A). Supra note 3.
    \32\ Id.
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    Rule 17Ad-22(e)(4)(vi)(B) under the Act requires that a covered 
clearing agency conduct a comprehensive analysis on at least a monthly 
basis of the existing stress testing scenarios, models, and underlying 
parameters and assumptions, and consider modifications to ensure they 
are appropriate for determining the covered clearing agency's required 
level of default protection in light of current and evolving market 
conditions.\33\ Rule 17Ad-22(e)(4)(vi)(C) under the Act requires that a 
covered clearing agency

[[Page 19135]]

conduct a comprehensive analysis of stress testing scenarios, models, 
and underlying parameters and assumptions more frequently than monthly 
when the products cleared or markets served display high volatility or 
become less liquid, or when the size or concentration of positions held 
by the covered clearing agency's participants increases 
significantly.\34\ The Framework would describe that the Clearing 
Agencies conduct comprehensive analyses of daily stress testing 
results, the existing scenario sets, and the performance of the 
methodology along with key underlying parameters and assumptions. The 
Framework would also state that these analyses are performed at least 
monthly, and may occur more frequently than monthly if, for example, 
the products cleared or markets served by a Clearing Agency display 
high volatility or become less liquid, or when the size or 
concentration of positions held by the applicable Clearing Agency's 
Members increases significantly. The Framework would state that these 
analyses are designed to assess whether each Clearing Agency's stress 
testing components are appropriate for determining the sufficiency of 
its prefunded financial resources in light of current and evolving 
market conditions. As such, the Clearing Agencies believe the Framework 
is consistent with Rule 17Ad-22(e)(4)(vi)(B) and (C) under the Act.\35\
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    \33\ 17 CFR 240.17Ad-22(e)(4)(vi)(B). Supra note 3.
    \34\ 17 CFR 240.17Ad-22(e)(4)(vi)(C). Supra note 3.
    \35\ 17 CFR 240.17Ad-22(e)(4)(vi)(B) and (C). Supra note 3.
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    Rule 17Ad-22(e)(4)(vi)(D) under the Act requires that a covered 
clearing agency report the results of its analyses under Rule 17Ad-
22(e)(4)(vi)(B) and (C) to appropriate decision makers at the covered 
clearing agency, including but not limited to, its risk management 
committee or board of directors, and use these results to evaluate the 
adequacy of and adjust its margin methodology, model parameters, models 
used to generate clearing or guaranty fund requirements, and any other 
relevant aspects of its credit risk management framework, in supporting 
compliance with the minimum financial resources requirements set forth 
in Rule 17Ad-22(e)(4)(i) through (iii) under the Act.\36\ The Framework 
would provide that the results of the analyses described above are 
reviewed monthly by the DTCC Enterprise Stress Testing Council. The 
Framework would also state that this group would consider these results 
to evaluate the adequacy of the stress testing methodologies and would 
determine if adjustments to the stress testing methodologies are 
appropriate to support the Clearing Agencies' compliance with the 
minimum financial resources requirements set forth in Rule 17Ad-
22(e)(4)(i) through (iii) under the Act. Additionally, the Framework 
would state that daily stress testing results are summarized and 
reported monthly to the DTCC Risk Management Committee. Based on their 
review of the information provided, this committee may determine to 
inform or further escalate any concerns to the Risk Committees of the 
Boards, as they deem necessary. Therefore, the Clearing Agencies 
believe that the Framework is consistent with Rule 17Ad-22(e)(vi)(D) 
under the Act.\37\
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    \36\ 17 CFR 240.17Ad-22(e)(4)(vi)(D). Supra note 3.
    \37\ Id.
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    Rule 17Ad-22(e)(4)(vii) under the Act requires a covered clearing 
agency to perform a model validation for its credit risk models not 
less than annually or more frequently as may be contemplated by the 
covered clearing agency's risk management framework established 
pursuant to Rule 17Ad-22(e)(3) under the Act.\38\ The Framework would 
provide that the Clearing Agencies' stress testing methodologies and 
models are subject to independent model validation on at least an 
annual basis thereafter. Therefore, the Clearing Agencies believe that 
the Framework supports compliance with Rule 17Ad-22(e)(4)(vii) under 
the Act.\39\
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    \38\ 17 CFR 240.17Ad-22(e)(4)(vii). Supra note 3.
    \39\ Id.
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(B) Clearing Agencies' Statements on Burden on Competition

    None of the Clearing Agencies believes that the Framework would 
have any impact, or impose any burden, on competition because the 
proposed rule changes reflect the existing framework that each of the 
Clearing Agencies employ to manage its market risk, and would not 
effectuate changes to the Clearing Agencies' stress testing 
methodologies, or to the remedial action the Clearing Agencies may take 
in response to the results thereof, as they currently apply to Members.

(C) Clearing Agencies' Statements on Comments on the Proposed Rule 
Changes Received From Members, Participants, or Others

    The Clearing Agencies have not solicited or received any written 
comments relating to this proposal. The Clearing Agencies will notify 
the Commission of any written comments received by the Clearing 
Agencies.

III. Date of Effectiveness of the Proposed Rule Changes, and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the clearing agency consents, the Commission will:
    (A) by order approve or disapprove such proposed rule changes, or
    (B) institute proceedings to determine whether the proposed rule 
changes should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
changes are consistent with the Act. 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 rule-comments@sec.gov. Please include 
File Number SR-DTC-2017-005, SR-FICC-2017-009, or SR-NSCC-2017-006 on 
the subject line.

Paper Comments

     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-2017-005, SR-FICC-
2017-009, or SR-NSCC-2017-006. One of these file numbers 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule changes that are filed with the 
Commission, and all written communications relating to the proposed 
rule changes 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 Web site 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

[[Page 19136]]

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 the Clearing 
Agencies and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-DTC-
2017-005, SR-FICC-2017-009, or SR-NSCC-2017-006 and should be submitted 
on or before May 16, 2017.
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    \40\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08283 Filed 4-24-17; 8:45 am]
 BILLING CODE 8011-01-P


