[Federal Register Volume 85, Number 136 (Wednesday, July 15, 2020)]
[Notices]
[Pages 42954-42959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89269; File No. SR-DTC-2020-009]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend the Clearing Agency Risk Management Framework

July 9, 2020.
    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 July 7, 2020, 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)(6) 
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)(6).
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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 the Clearing 
Agency Risk Management Framework (``Risk Management Framework'' or 
``Framework'') of DTC and its affiliates, National Securities Clearing 
Corporation (``NSCC'') and Fixed Income Clearing Corporation (``FICC,'' 
and together with NSCC and DTC, the ``Clearing Agencies''). 
Specifically, the proposed rule change would (1) include a description 
of a set of policies that addresses the Clearing Agencies' compliance 
with Rule 17Ad-22(e)(22) of the Standards for Covered Clearing Agencies 
(``Standards''), under the Act,\5\ (2) update the Risk Management 
Framework to reflect recent changes to certain processes and other 
matters described in the Framework, and changes to the status of 
documents identified in the Framework; and (3) clarify the descriptions 
of certain matters within the Framework to improve comprehensiveness 
and correct errors, as further described below.
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    \5\ 17 CFR 240.17Ad-22(e)(22).
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The Clearing Agencies adopted the Risk Management Framework \6\ to 
provide an outline for how each of the Clearing Agencies (i) maintains 
a well-founded, clear, transparent and enforceable legal basis for each 
aspect of its activities; (ii) comprehensively manages legal, credit, 
liquidity, operational, general business, investment, custody, and 
other risks that arise in or are borne by it; (iii) identifies, 
monitors, and manages risks related to links it establishes with one or 
more clearing agencies, financial market utilities, or trading markets; 
and (iv) meets the requirements of its participants and the markets it 
serves efficiently and effectively. In this way, the Risk Management 
Framework currently supports the Clearing Agencies' compliance with 
Rules 17Ad-22(e)(1), (3), (20) and (21) of the Standards,\7\ as 
described in the Initial Filing. In addition to setting forth the 
manner in which each of the Clearing Agencies addresses these 
requirements, the Risk Management Framework also contains a section 
titled ``Framework Ownership and Change Management'' that, among other 
matters, describes the Framework ownership and the required governance 
process for review and approval of changes to the Framework. In 
connection with the annual review and approval of the Framework by the 
Board of Directors of each of NSCC, DTC and FICC (each a ``Board'' and 
collectively, the ``Boards''), the Clearing Agencies are proposing to 
make certain revisions to the Framework.
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    \6\ See Securities Exchange Act Release No. 81635 (September 15, 
2017), 82 FR 44224 (September 21, 2017) (SR-DTC-2017-013; SR-NSCC-
2017-012; SR-FICC-2017-016) (``Initial Filing'').
    \7\ 17 CFR 240.17Ad-22(e)(1), (3), (20) and (21).
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    The proposed changes would add a new Section 4.4 to describe a 
policy and a communication standard document that support the Clearing 
Agencies' compliance with Rule 17Ad-22(e)(22), which requires the 
Clearing Agencies to establish, implement, maintain and enforce written 
policies and procedures reasonably designed to use, or at a minimum 
accommodate, relevant internationally accepted communication procedures 
and standards in order to facilitate efficient payment, clearing, and 
settlement.\8\
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    \8\ 17 CFR 240.17Ad-22(e)(22).
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    The proposed changes would also update the Risk Management 
Framework to reflect (1) a change to the name of the Vendor Risk 
Management group to the Third Party Risk Management group; (2) a change 
to the format of the Balanced Business Scorecard, which is an internal 
performance management tool used to measure the effectiveness of 
various aspects of the operations of The Depository Trust & Clearing 
Corporation (``DTCC'') and its subsidiaries, including the Clearing 
Agencies; and (3) the filing

[[Page 42955]]

of certain documents identified in the Framework, pursuant to Section 
19(b)(1) of the Act,\9\ and the rules thereunder, and Section 806(e)(1) 
of Title VIII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, entitled the Payment, Clearing, and Settlement 
Supervision Act of 2010,\10\ and the rules thereunder (collectively, 
``Filing Requirements''), as described in greater detail below.
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    \9\ 15 U.S.C. 78s(b)(1).
    \10\ 12 U.S.C. 5465(e)(1).
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    The proposed changes would also clarify and enhance the 
descriptions in the Risk Management Framework to (1) identify the 
requirement of Rule 17Ad-22(e)(3)(i) under the Act that the Framework 
be reviewed and approved by the Boards on an annual basis; \11\ (2) 
identify the role of the DTCC Legal Department in supporting the 
management of legal risks that arise in or are borne by the Clearing 
Agencies; (3) enhance the description of the DTCC Risk Department as 
``Second Line of Defense,'' (4) enhance the description of the DTCC 
Internal Audit Department as ``Third Line of Defense;'' (5) enhance the 
description of a policy relating to the establishment and governance of 
internal management committees; (6) enhance the description of the 
processes designed to maintain comprehensive policies, procedures and 
other documents; (7) clarify that certain activities described in the 
Framework that relate to the public disclosure of material information, 
including market data, address the Clearing Agencies' compliance with 
Rule 17Ad-22(e)(23) under the Act; \12\ (8) enhance the description of 
the management of systemic risks by describing the role of the Systemic 
Risk Council; (9) correct a sentence by removing an unnecessary phrase; 
and (10) enhance the descriptions of certain actions by removing the 
indication that the Clearing Agencies have discretion in engaging in 
those actions.
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    \11\ 17 CFR 240.17Ad-22(e)(3)(i).
    \12\ 17 CFR 240.17Ad-22(e)(23).
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    Finally, the proposed changes would correct an error in the Risk 
Management Framework to identify the Audit Committees of the Boards as 
the committees to which the DTCC Internal Audit Department has a direct 
reporting line. Each of these proposed changes is described below.
i. Proposed Amendments To Describe Policies That Address Compliance 
With Rule 17Ad-22(e)(22)
    First, the proposed changes would add a new Section 4.4 to the 
Framework to describe a policy maintained by the Clearing Agencies to 
use and accommodate relevant internationally accepted communication 
procedures and standards to facilitate efficient payment, clearing, and 
settlement, to support the Clearing Agencies' compliance with Rule 
17Ad-22(e)(22).\13\
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    \13\ 17 CFR 240.17Ad-22(e)(22).
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    The policy describes how the communication standards and data 
formats that are currently used by the Clearing Agencies for payment, 
clearing, and settlement are regarded as accepted industry standards 
for transactions processed through the Clearing Agencies. The policy 
also provides that the Clearing Agencies would accommodate new industry 
standards that are considered internationally accepted communication 
procedures and standards. The new Section 4.4 would also state that the 
Clearing Agencies maintain a communication standard document that 
supports this policy.
    The Clearing Agencies are proposing to amend the Risk Management 
Framework to adopt a new Section 4.4 that would describe these 
documents, which support the Clearing Agencies' compliance with Rule 
17Ad-22(e)(22).\14\
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    \14\ Id.
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ii. Proposed Amendments To Update the Framework
    Second, the proposed changes would update the Risk Management 
Framework to reflect recent developments with respect to certain 
processes and other matters described in the Framework, and changes to 
the status of documents described in the Framework, as described below.
1. Proposed Change To Identify Third Party Risk Management
    Section 4 of the Risk Management Framework outlines ways in which 
each of the Clearing Agencies manages certain risks that arise in or 
are borne by it. Specifically, Section 4.2 describes the management of 
risks related to material interdependencies and external links that may 
be established by the Clearing Agencies. The Clearing Agencies 
represent that management of risks presented by vendors and other 
material service providers is guided by a function within the 
Operational Risk Management group within the Group Chief Risk Office . 
This function was previously referred to as ``Vendor Risk Management.'' 
While the role and responsibilities of this risk management function 
have not changed, its name has recently been changed to ``Third Party 
Risk Management'' to clarify that the function covers any material 
third party service provider that provides a service to a DTCC entity.
    The Clearing Agencies are proposing to amend Section 4.2.1 of the 
Risk Management Framework to reflect this name change and to clarify 
that the function covers any material third party service provider that 
provides a service to a DTCC entity by adding ``Third Party'' as a new 
defined term. The Clearing Agencies are also proposing to identify the 
existing policy and procedure that is maintained to manage these risks.
2. Proposed Change to Description of Balanced Business Scorecard
    Section 4.3 of the Risk Management Framework addresses certain 
processes implemented by the Clearing Agencies in order to be efficient 
and effective in meeting the requirements of their respective 
participants and the markets they serve.\15\ One of the methods the 
Clearing Agencies use to meet these requirements is the periodic 
creation of a Balanced Business Scorecard, which provides insight into 
the effectiveness of the Clearing Agencies' operations, information 
technology service levels, financial performance, human capital, and 
their respective participants' experience.
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    \15\ Such processes support the Clearing Agencies' compliance 
with the requirements of Rule 17Ad-22(e)(21) under the Act. 17 CFR 
240.17Ad-22(e)(21).
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    Previously, a Balanced Business Scorecard (referred to as the 
``Core Balance Business Scorecard'') was created for the Clearing 
Agencies, and a separate Balanced Business Scorecard was created for 
the other subsidiaries of DTCC. Recently, these two tools merged, and 
only one Balanced Business Scorecard (now referred to as the ``DTCC 
Balanced Business Scorecard'') is created, which addresses DTCC and 
each of its subsidiaries, including each of the Clearing Agencies. 
While the new, enterprise-wide Balanced Business Scorecard reports its 
conclusions on a less granular, enterprise-wide basis, it is created 
using the same set of metrics as the legacy Clearing Agencies version. 
Therefore, the Balanced Business Scorecard continues to support the 
Clearing Agencies' compliance with the requirements of Rule 17Ad-
22(e)(21) under the Act.\16\ The Balanced Business Scorecard now 
reports those metrics in the context of the DTCC enterprise, at a less 
granular level.
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    \16\ Id.
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    The Clearing Agencies are proposing to amend Section 4.3 of the 
Risk Management Framework to reflect the change in format of the 
Balanced Business Scorecard described above.

[[Page 42956]]

3. Proposed Change to Description of Certain Documents To Reflect 
Filing Pursuant to Filing Requirements
    Following the adoption of the Risk Management Framework, certain 
documents that are identified in the Framework were filed pursuant to 
the Filing Requirements. The Clearing Agencies are proposing to revise 
the descriptions of these documents to reflect this change.
    Section 3.3 of the Framework describes certain frameworks that are 
maintained by the Clearing Agencies and provide an outline for certain 
policies and procedures that address, in whole or in part, the 
management of operational, liquidity, credit, market, collateral, and 
other risks. This section identified five such frameworks, the Clearing 
Agency Operational Risk Management Framework, the Clearing Agency 
Liquidity Risk Management Framework, the Clearing Agency Securities 
Valuation Framework, the Clearing Agency Stress Testing Framework, and 
the Clearing Agency Model Risk Management Framework. Each of these 
frameworks has been filed pursuant to the applicable Filing 
Requirements and adopted by the Clearing Agencies.\17\ The Clearing 
Agencies are proposing to update Section 3.3 to reflect this change.
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    \17\ See Securities Exchange Act Release Nos. 81745 (September 
28, 2017), 82 FR 46332 (October 4, 2017) (SR-DTC-2017-014; SR-NSCC-
2017-013; SR-FICC-2017-017) (Operational Risk Management Framework); 
82377 (December 21, 2017), 82 FR 61617 (December 28, 2017) (SR-DTC-
2017-004; SR-NSCC-2017-005; SR-FICC-2017-008) (Liquidity Risk 
Management Framework); 82006 (November 2, 2017), 82 FR 51892 
(November 8, 2017) (SR-DTC-2017-016; SR-NSCC-2017-016; SR-FICC-2017-
020) (Securities Valuation Framework); 82368 (December 19, 2017), 82 
FR 61082 (December 26, 2017) (SR-DTC-2017-005; SR-FICC-2017-009; SR-
NSCC-2017-006) (Stress Testing Framework); and 81485 (August 25, 
2017), 82 FR 41433 (August 31, 2017) (SR-DTC-2017-008; SR-FICC-2017-
014; SR-NSCC-2017-008) (Model Risk Management Framework).
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    Section 5 of the Risk Management Framework describes the plans that 
are maintained by each of the Clearing Agencies for their recovery or 
orderly wind-down (``R&W Plans''). The R&W Plans were still in 
development when the Framework was adopted, but have since been 
finalized, approved by the Boards, filed pursuant to the Filing 
Requirements, and adopted by the Clearing Agencies.\18\ Therefore, the 
Clearing Agencies are proposing to update Section 5 to reflect these 
developments, and to describe the ongoing governance of the R&W Plans.
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    \18\ See Securities Exchange Act Release Nos. 83972 (August 28, 
2018), 83 FR 44964 (September 4, 2018) (SR-DTC-2017-021); 83953 
(August 27, 2018), 83 FR 44381 (August 30, 2018) (SR-DTC-2017-803); 
83974 (August 28, 2018), 83 FR 44988 (September 4, 2018) (SR-NSCC-
2017-017); 83955 (August 27, 2018), 83 FR 44340 (August 30, 2018) 
(SR-NSCC-2017-805); 83973 (August 28, 2018), 83 FR 44942 (September 
4, 2018) (SR-FICC-2017-021); 83954 (August 27, 2018), 83 FR 44361 
(August 30, 2018) (SR-FICC-2017-805).
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iii. Proposed Amendments To Clarify, Enhance, and Correct Descriptions 
in the Framework
    Finally, the proposed changes would enhance the descriptions of 
certain matters within the Risk Management Framework to improve its 
clarity and comprehensiveness and correct an error, as described below.
1. Proposed Change To Correct Annual Approval of Framework by Boards
    Section 2 of the Risk Management Framework addresses the 
Framework's ownership and change management. This section currently 
states that the Framework should be reviewed by the document owner no 
less frequently than annually but does not specifically identify the 
requirement that the Framework also be approved by the Boards on an 
annual basis. The Clearing Agencies are proposing to correct the 
Framework to include the requirement that the Framework be approved by 
the Boards, or a duly authorized committee of the Boards, annually.
    Rule 17Ad-22(e)(3) under the Act requires that the Clearing 
Agencies maintain a sound risk management framework for comprehensively 
managing the risks that arise in or are borne by the Clearing Agencies, 
including investment and custody risks.\19\ Rule 17Ad-22(e)(3)(i) under 
the Act requires that the risk management policies, procedures, and 
systems that are maintained in compliance with Rule 17Ad-22(e)(3) be 
subject to review on a specified periodic basis and be approved by the 
Boards annually.\20\ As stated above, the Framework provides an outline 
for how each of the Clearing Agencies comprehensively manages legal, 
credit, liquidity, operational, general business, investment, custody, 
and other risks that arise in or are borne by it, as required by Rule 
17Ad-22(e)(3) under the Act.\21\ Therefore, the Risk Management 
Framework is reviewed and approved by the Boards annually, as required 
by Rule 17Ad-22(e)(3)(i) under the Act.\22\
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    \19\ 17 CFR 240.17Ad-22(e)(3).
    \20\ 17 CFR 240.17Ad-22(e)(3)(i).
    \21\ 17 CFR 240.17Ad-22(e)(3).
    \22\ 17 CFR 240.17Ad-22(e)(3)(i).
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    The Clearing Agencies are proposing to amend Section 2 of the 
Framework to state that the Framework shall be approved by the Boards, 
or a duly authorized committee of the Boards, annually. The proposed 
change would correct the Framework to include this requirement, which 
is aligned with the applicable requirements of Rule 17Ad-22(e)(3)(i) 
under the Act.\23\
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    \23\ Id.
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2. Proposed Change To Identify DTCC Legal Department's Role in 
Management of Clearing Agencies' Legal Risks
    Section 3.1 of the Risk Management Framework describes the ``three 
lines of defense'' approach adopted by each of the Clearing Agencies 
for identifying, assessing, measuring, monitoring, mitigating, and 
reporting the risks that arise in or are borne by it. Currently, this 
section outlines the role of each line of defense, and specifically 
describes the roles of the DTCC Risk Department (``Risk Department'') 
and DTCC Internal Audit Department (``Internal Audit'') within this 
risk management approach. The DTCC Legal Department (``Legal 
Department'') also plays a particular role in the three lines of 
defense approach by supporting each line of defense in the management 
of legal risks.
    While the Legal Department is currently identified as part of the 
control functions that form the second line of defense in Section 
3.1.2, its particular role is not separately described. Therefore, the 
Clearing Agencies are proposing to update the introduction of Section 
3.1 to state that the Legal Department supports each line of defense in 
the management of legal risks. This proposed change would more clearly 
describe the particular role of the Legal Department in this risk 
management approach.
3. Proposed Change To Enhance Description of DTCC's Risk Department as 
``Second Line of Defense'' in Risk Management
    As stated above, Section 3.1 of the Risk Management Framework 
describes the ``three lines of defense'' approach to risk management 
adopted by the Clearing Agencies. Section 3.1.2 describes the 
particular role of the Risk Department as the second line of defense 
within this risk management approach. The Clearing Agencies are 
proposing to amend this Section 3.1.2 to enhance the description of the 
Risk Department's role, including by providing details relating to the 
role of the Operational Risk Management group within the Risk 
Department. The proposed amendments would describe how the Operational 
Risk Management group addresses and escalates incidents based on a risk 
rating of those incidents. In addition, the proposed change would

[[Page 42957]]

clarify the description relating to the procedures, processes, tools, 
mechanisms, analyses, and testing controls employed by the Risk 
Department and indicate that such procedures, etc. are subject to the 
parameters set forth in Section 3.3, which discusses the Filing 
Requirements and document standards relating to policies, procedures, 
frameworks and certain related documents. In addition, the Clearing 
Agencies are proposing to add a defined term in Section 3.1 to reflect 
that the Risk Department refers to the Risk Department of DTCC. The 
proposed changes would more clearly describe the particular role of the 
Risk Department in this risk management approach.
4. Proposed Change To Enhance Description of DTCC's Internal Audit 
Department as ``Third Line of Defense'' in Risk Management
    Section 3.1.3 of the Risk Management Framework describes the 
particular role of Internal Audit as the third line of defense within 
the risk management approach. The Clearing Agencies are proposing to 
amend this Section 3.1.3 to enhance the description of Internal Audit's 
role, including by providing a clearer description of the 
responsibilities of Internal Audit, making grammatical changes to 
certain descriptions to improve readability, and removing references to 
Internal Audit as providing an advisory role to the Clearing Agencies. 
By removing references to advisory services, the proposed changes would 
conform the Risk Management Framework to the charter of the Audit 
Committees of the Boards, where similar changes have been made to 
reinforce the group's role as the third line of defense in risk 
management and its independence and objectivity in the performance of 
assurance services. In addition, the Clearing Agencies are proposing to 
add a defined term in Section 3.1 to clarify that Internal Audit refers 
to the Internal Audit Department of DTCC.
5. Proposed Change To Enhance Description of Policy Regarding 
Management Committees and Oversight
    Section 3.2 of the Risk Management Framework states that a set of 
senior management committees provides oversight of various aspects of 
the Clearing Agencies' activities, including risk management, and 
describes the policy that sets forth the requirements for establishing 
and governing these committees. The Clearing Agencies are proposing to 
amend Section 3.2 by including a reference to the described document 
and providing a clearer and more complete description of the contents 
of this policy and the ongoing governance requirements of senior 
management committees. The proposed changes would not make any 
substantive changes to this description.
6. Proposed Change To Enhance Description of Management of Policies, 
Procedures, and Other Documents
    Section 3.3.1 of the Risk Management Framework states that the 
Clearing Agencies maintain comprehensive policies and procedures 
designed to identify, measure, monitor and manage the risks that arise 
in or are borne by the Clearing Agencies, and describes a set of 
standards the Clearing Agencies have established for creating and 
managing these documents. The Clearing Agencies are proposing to amend 
the description of these standards. The proposed amendments to Section 
3.3.1 would re-word the descriptions of these standards by, for 
example, more clearly describing the governance of these documents, how 
these standards provide guidance on reviews of these documents by 
document owners, and the role of the document owners in adhering to 
these standards. The proposed changes would not make any substantive 
changes to this description.
7. Proposed Change To Clarify Regulatory Basis of Certain Public 
Disclosures
    Section 4.1 of the Risk Management Framework states that the 
Clearing Agencies provide their respective participants with 
information and incentives to enable them, and, through them, their 
customers, to understand, monitor, manage, and contain the risks they 
pose to the respective Clearing Agencies, and identifies some of the 
tools the Clearing Agencies provide to their participants to facilitate 
this understanding. The Clearing Agencies are proposing to amend 
Section 4.1 to make clarifying edits.
    First, the proposed amendments would clarify that the tools and 
activities described in Section 4.1 support the Clearing Agencies' 
compliance with Rule 17Ad-22(e)(23) under the Act.\24\ Rule 17Ad-
22(e)(23) requires, in part, that the Clearing Agencies establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to provide for publicly disclosing relevant basic 
data on transaction volume and values, and a comprehensive public 
disclosure that describes their material rules, policies, and 
procedures regarding their legal, governance, risk management, and 
operating framework, accurate in all material respects at the time of 
publication.\25\ Certain matters described in Section 4.1 of the 
Framework, including the publication of disclosure frameworks and 
quantitative disclosures (described below), support the Clearing 
Agencies' compliance with the requirements of Rule 17Ad-22(e)(23).\26\ 
Therefore, the Clearing Agencies would update the introduction to 
Section 4.1, and make a conforming change to Section 1 of the 
Framework, to refer to Rule 17Ad-22(e)(23).\27\
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    \24\ 17 CFR 240.17Ad-22(e)(23).
    \25\ Id.
    \26\ Id.
    \27\ Id.
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    Second, the proposed amendments would correct a statement in 
Section 4.1 of the Framework regarding the disclosure frameworks posted 
to the DTCC website for each of the Clearing Agencies on a biennial 
basis, which provide a comprehensive description of how the businesses 
and operations of the Clearing Agencies reflect the Principles for 
financial market infrastructures, issued by the Committee on Payment 
and Settlement Systems (``CPSS'') and the Technical Committee of the 
International Organization of Securities Commissions (``IOSCO'').\28\ 
These disclosure frameworks also address how the businesses and 
operations of the Clearing Agencies reflect the Standards. Therefore, 
the Clearing Agencies would correct this statement in Section 4.1 
regarding the scope of the disclosure frameworks by also referring to 
the Standards.
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    \28\ CPSS and the Technical Committee of IOSCO, Principles for 
financial market infrastructures (April 16, 2012), available at 
http://www.bis.org/cpmi/publ/d101a.pdf. In 2014, CPSS became the 
Committee on Payments and Market Infrastructures (``CPMI'').
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    Finally, the proposed amendments would correct a statement in 
Section 4.1 of the Framework regarding the quantitative disclosures 
that are posted to the DTCC website on a quarterly basis, which 
disclose certain quantitative data and other information as set out in 
the Public quantitative disclosure standards for central counterparties 
published by CPMI and IOSCO.\29\ Currently, Section 4.1 states that 
these disclosures relate to the Clearing Agencies. However, these 
disclosures are only required for central counterparties and, as such, 
only relate to NSCC and FICC, and not DTC. The Clearing Agencies would 
correct this error by replacing ``Clearing Agencies''

[[Page 42958]]

with ``NSCC and FICC, as central counterparties'' in Section 4.1 of the 
Framework.
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    \29\ CPMI and the Board of IOSCO, Public quantitative disclosure 
standards for central counterparties (February 26, 2015), available 
at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD475.pdf.
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8. Proposed Change To Enhance Description of Governance of Systemic 
Risk Management
    The proposed change would enhance the description of the governance 
of systemic risk management in Section 4.2.1 by including a description 
of the Systemic Risk Council, the frequency of this Council's meetings, 
and stating that matters discussed at these meetings may be escalated 
to the Management Risk Committee or the Board Risk Committee when 
appropriate. The proposed changes would improve the descriptions in the 
Framework by providing additional details regarding the governance of 
systemic risk management.
9. Proposed Change To Enhance Description of Management of Risk Related 
to Other External Links
    The proposed change would enhance the description of the management 
of risks related to external links in Section 4.2.2 by identifying a 
policy and a procedure that are maintained by the Clearing Agencies to 
govern this process. The proposed change would improve the disclosures 
in the Framework by providing a clear reference to these documents.
10. Proposed Change To Remove Unnecessary Phrase
    The proposed change would remove an unnecessary phrase ``, is set 
forth in'' that is incorrectly at the end of a sentence in Section 1 of 
the Framework.
11. Proposed Change To Rephrase Sentences That Incorrectly Indicate 
Discretion in Taking Certain Actions
    The proposed change would rephrase four sentences in the Framework 
that currently indicate the action described is discretionary. First, 
the proposed change would rephrase a statement in Section 4.2.1 to 
remove the indication that the Clearing Agencies have discretion to not 
manage risks related to participants and settlement banks. Second, the 
proposed change would rephrase a statement in Section 4.2.1 to remove 
the indication that the Clearing Agencies have discretion to not 
maintain policies, procedures or templates relating to the management 
of third-party risks. Third, the proposed change would rephrase a 
statement in Section 4.2.2 to remove the indication that the General 
Counsel's Office has discretion in reviewing certain key link 
arrangements. Finally, the proposed change would rephrase a statement 
in Section 5 to remove the indication that the Clearing Agencies have 
discretion to not maintain policies and procedures governing the 
development and maintenance of R&W Plans.
12. Proposed Change To Correct Error Regarding Reporting Line of DTCC 
Internal Audit Department
    The Clearing Agencies are proposing a change to the Framework to 
correct an error in Section 3.1.3, which currently states Internal 
Audit has a direct reporting line to the Risk Committees of the Boards. 
This statement is incorrect, as Internal Audit has a direct reporting 
line to the Audit Committees of the Boards. The Clearing Agencies would 
correct this error by making a minor revision to Section 3.1.3 of the 
Framework. In addition, the Clearing Agencies are proposing to change 
references of ``Audit Committee'' to ``Audit Committees'' to reflect 
that each of the Boards has an audit committee.
2. Statutory Basis
    The Clearing Agencies believe that the proposed changes are 
consistent with Section 17A(b)(3)(F) of the Act \30\ and Rules 17Ad-
22(e)(22) and (e)(23) promulgated under the Act,\31\ for the reasons 
described below.
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    \30\ 15 U.S.C. 78q-1(b)(3)(F).
    \31\ 17 CFR 240.17Ad-22(e)(22) and (e)(23).
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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.\32\ The proposed changes would (1) add a description of 
how the Clearing Agencies address compliance with Rule 17Ad-22(e)(22), 
(2) update the descriptions of certain matters in the Risk Management 
Framework, and (3) clarify and correct other statements within the 
Framework, as described above. By addressing the Clearing Agencies' 
compliance with Rule 17Ad-22(e)(22), creating clearer, updated 
descriptions and correcting errors, the Clearing Agencies believe that 
the proposed changes would make the Risk Management Framework more 
effective in providing an overview of the important risk management 
activities of the Clearing Agencies, as described therein.
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    \32\ 15 U.S.C. 78q-1(b)(3)(F).
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    As described in the Initial Filing, the risk management functions 
described in the Risk Management Framework allow the Clearing Agencies 
to continue to promote the prompt and accurate clearance and settlement 
of securities transactions, and continue to assure the safeguarding of 
securities and funds which are in their custody or control or for which 
they are responsible notwithstanding the default of a member of an 
affiliated family. The proposed changes to describe policies that 
address to the Clearing Agencies' communication standards and improve 
the clarity and accuracy of the descriptions of risk management 
functions within the Framework would assist the Clearing Agencies in 
carrying out these risk management functions. Therefore, the Clearing 
Agencies believe these proposed changes are consistent with the 
requirements of Section 17A(b)(3)(F) of the Act.\33\
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    \33\ Id.
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    Rule 17Ad-22(e)(22) under the Act requires that each covered 
clearing agency establish, implement, maintain and enforce written 
policies and procedures reasonably designed to use, or at a minimum 
accommodate, relevant internationally accepted communication procedures 
and standards in order to facilitate efficient payment, clearing, and 
settlement.\34\ The Framework would describe a policy maintained by the 
Clearing Agencies that (1) identifies the communication standards and 
data forms used by the Clearing Agencies for payment, clearing and 
settlement that are regarded as accepted industry standards for 
transactions processed through the Clearing Agencies, and (2) provides 
that the Clearing Agencies would accommodate relevant internationally 
accepted communication procedures and standards when new industry 
standards are introduced. By describing the Clearing Agencies' use of 
accepted industry communication standards and their policy of 
supporting new industry standards when introduced, this policy, and a 
supporting communication standards document, both support the Clearing 
Agencies' compliance with Rule 17Ad-22(e)(22).\35\ Therefore, the 
Clearing Agencies believe that the proposed rule change to include this 
policy in the Risk Management Framework is consistent with Rule 17Ad-
22(e)(22).\36\
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    \34\ 17 CFR 240.17Ad-22(e)(22).
    \35\ Id.
    \36\ Id.
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    Rule 17Ad-22(e)(23) under the Act requires, in part, that the 
Clearing Agencies establish, implement, maintain and enforce written 
policies and procedures reasonably designed to provide for publicly 
disclosing relevant basic data on transaction volume and values, and a 
comprehensive public

[[Page 42959]]

disclosure that describes their material rules, policies, and 
procedures regarding their legal, governance, risk management, and 
operating framework, accurate in all material respects at the time of 
publication.\37\ Section 4.1 of the Framework currently describes how 
the Clearing Agencies provide their respective participants with 
information and incentives to enable them, and, through them, their 
customers, to understand, monitor, manage and contain the risks they 
pose to the respective Clearing Agencies, and identifies some of the 
tools the Clearing Agencies provide to their participants to facilitate 
this understanding. The proposed rule change would revise Section 4.1 
of the Framework to state that those tools and activities support the 
Clearing Agencies' compliance with Rule 17Ad-22(e)(23) under the 
Act.\38\ By describing these actions, including the publication of 
disclosure frameworks and quantitative disclosures, the Clearing 
Agencies believe that the proposed change to the Risk Management 
Framework is consistent with Rule 17Ad-22(e)(23).\39\
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    \37\ 17 CFR 240.17Ad-22(e)(23).
    \38\ Id.
    \39\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    The Clearing Agencies do not believe that the proposed changes to 
the Framework described above would have any impact, or impose any 
burden, on competition. As described above, the proposed rule changes 
would improve the comprehensiveness of the Framework by including a 
description of the Clearing Agencies' compliance with Rule 17Ad-
22(e)(22) under the Act and would also improve the clarity and accuracy 
of the descriptions of certain matters within the Framework. Therefore, 
the proposed changes are technical and non-material in nature, relating 
mostly to the operation of the Framework rather than the risk 
management functions described therein. As such, the Clearing Agencies 
do not believe that the proposed rule changes would have any impact on 
competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    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 Change, and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \40\ and 
Rule 19b-4(f)(6) thereunder.\41\
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    \40\ 15 U.S.C. 78s(b)(3)(A).
    \41\ 17 CFR 240.19b-4(f)(6).
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    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.

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

     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-2020-009 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-2020-009. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of DTC and on DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2020-009 and should be submitted on 
or before August 5, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15206 Filed 7-14-20; 8:45 am]
BILLING CODE 8011-01-P


