[Federal Register Volume 87, Number 31 (Tuesday, February 15, 2022)]
[Notices]
[Page 8624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03141]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94203; File No. SR-NSCC-2021-803]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Extension of Review Period of Advance Notice To 
Establish the Securities Financing Transaction Clearing Service and 
Make Other Changes

February 9, 2022.
    On July 22, 2021, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') advance notice SR-NSCC-2021-803 (``Advance Notice''), 
pursuant to 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 (``Clearing 
Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) under the Securities 
Exchange Act of 1934 (``Exchange Act'').\2\ The Advance Notice was 
published for comment in the Federal Register on August 12, 2021.\3\
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ Securities Exchange Act Release No. 92568 (August 5, 2021), 
86 FR 44530 (August 12, 2021) (SR-NSCC-2021-803).
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    Sections 806(e)(1)(E)(ii) and (G)(ii) of the Clearing Supervision 
Act \4\ provide that if the Commission requests additional information, 
the Commission's period of review of the Advance Notice is tolled, and 
an additional 60-day review period begins on the date any further 
information requested for consideration is received. On August 30, 
2021, the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority,\5\ requested additional information from NSCC 
under Section 806(e)(1)(D) of the Clearing Supervision Act.\6\ On 
December 13, 2021, the Commission received NSCC's response to the 
Commission's request for additional information. Accordingly, pursuant 
to Sections 806(e)(1)(E)(ii) and (G)(ii),\7\ the Commission shall 
notify NSCC of any objection regarding the Advance Notice no later than 
February 11, 2022.
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    \4\ See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii).
    \5\ 17 CFR 200.30-3(a)(93).
    \6\ 12 U.S.C. 5465(e)(1)(D).
    \7\ See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii).
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    Section 806(e)(1)(H) of the Clearing Supervision Act \8\ provides 
that the Commission may extend the review period of an advance notice 
for an additional 60 days, if the changes proposed in the advance 
notice raise novel or complex issues, subject to the Commission 
providing the clearing agency with prompt written notice of the 
extension. Here, the Commission is extending the review period of the 
Advance Notice for an additional 60 days pursuant to that authority 
because the Commission finds that the Advance Notice raises both novel 
and complex issues, as discussed further below.
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    \8\ 12 U.S.C. 5465(e)(1)(H).
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    Specifically, the proposed changes described in the Advance Notice 
would establish new membership categories and requirements, and 
establish a new central clearing service for equity securities 
financing transactions (``SFTs''). NSCC described SFTs as, broadly 
speaking, securities lending transactions where parties exchange equity 
securities against cash and simultaneously agree to exchange the same 
securities and cash, plus or minus a rate payment, on a future date. In 
particular, the Advance Notice would expand central clearing at NSCC to 
include SFTs with a one business day term (i.e., overnight SFTs) in 
eligible equity securities that are entered into either by Members, 
institutional firms that are sponsored into NSCC by a sponsoring 
member, or agent clearing members on behalf of Customers. Currently, 
such SFTs are not centrally cleared at NSCC and, instead, are settled 
bilaterally.
    The establishment of a central clearing service for SFTs requires a 
number of changes to the NSCC Rules & Procedures to effectuate and 
manage the risks arising from this new service. For example, the 
proposed changes would encompass new membership categories, including 
agent clearing and sponsored clearing models that do not currently 
exist at NSCC. In addition, the proposed changes would establish new 
risk management features to allow NSCC to measure and monitor the risk 
arising from the SFT transactions, including a methodology to provide 
mark-to-market payments and to close out a defaulted member's 
portfolio. NSCC would institute rules governing buy-in, recall, and 
accelerated settlement, which are generally designed to be consistent 
with how SFTs operate when settled bilaterally. Taken together, the 
rules that NSCC would establish to administer this new central clearing 
service for SFTs raise novel and complex issues for NSCC.
    Accordingly, pursuant to 806(e)(1)(H) of the Clearing Supervision 
Act,\9\ the Commission is extending the review period of the Advance 
Notice for an additional 60 days so that the Commission shall have 
until April 12, 2022 to issue an objection or non-objection to the 
Advance Notice, unless the Commission requests further information for 
consideration of the Advance Notice (SR-NSCC-2021-803).
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    \9\ Id.
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    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(94).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03141 Filed 2-14-22; 8:45 am]
BILLING CODE 8011-01-P


