Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices 67779 

13 15 U.S.C. 78s(b)(3)(A)(iii). 14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 15 17 CFR 200.30–3(a)(12). 

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)(4). 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change does not make 

any substantive change to Exchange 

General 8 and will not impact 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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)(iii) of the Act 13 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.14

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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

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– 

MRX–2018–40 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MRX–2018–40. 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 the Exchange. 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–MRX–2018–40 and should 

be submitted on or before January 22, 

2019. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28383 Filed 12–28–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84949; File Nos. SR–DTC– 

2018–012; SR–FICC–2018–014; SR–NSCC– 

2018–013] 

Self-Regulatory Organizations; The 

Depository Trust Company; Fixed 

Income Clearing Corporation; National 

Securities Clearing Corporation; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Changes To Revise the Clearing 

Agency Investment Policy 

December 21, 2018. 

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 December 

13, 2018, 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, II and III below, which Items 

have been prepared primarily by the 

Clearing Agencies. The Clearing 

Agencies filed the proposed rule 

changes pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(4) 

thereunder.4 The Commission is 

publishing this notice to solicit 

comments on the proposed rule changes 

from interested persons. 

I. Clearing Agencies’ Statement of the 

Terms of Substance of the Proposed 

Rule Changes 

The proposed rule changes consists of 

amendments to the Clearing Agency 

Investment Policy (‘‘Investment Policy’’) 

of the Clearing Agencies in order to (1) 

update the governance for changes to 

the Investment Policy and provide for 

annual approval of the Investment 

Policy by the Board of Directors of each 

of the Clearing Agencies (collectively, 

‘‘Boards’’); (2) revise the process for 

identifying an applicable external credit 

rating for a potential investment 

counterparty when there are 

discrepancies between available 

external credit ratings for that potential 

counterparty; (3) amend the authority to 

approve (a) the establishment of an 

investment relationship with an 

investment counterparty, (b) investment 

transactions that exceed applicable 

investment limits, and (c) investment 


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5See Securities Exchange Act Release No. 79528 

(December 12, 2016), 81 FR 91232 (December 16, 

2016) (SR–DTC–2016–007, SR–FICC–2016–005, 

SR–NSCC–2016–003). 

6 17 CFR 240.17Ad–22(e)(16). As discussed in 

this filing, the Investment Policy also addresses 

compliance with the requirements of Rule 17Ad– 

22(e)(3). 17 CFR 240.17Ad–22(e)(3). 

7The respective Clearing Funds of NSCC and 

FICC, and the DTC Participants Fund are described 

further in the Rules & Procedures of NSCC (‘‘NSCC 

Rules’’), the DTC Rules, By-laws and Organization 

Certificate (‘‘DTC Rules’’), the Clearing Rules of the 

Mortgage-Backed Securities Division of FICC 

(‘‘MBSD Rules’’) or the Rulebook of the Government 

Securities Division of FICC (‘‘GSD Rules’’), 

respectively, available at http://dtcc.com/legal/ 

rules-and-procedures. See Rule 4 (Clearing Fund) of 

the NSCC Rules, Rule 4 (Participants Fund and 

Participants Investment) of the DTC Rules, Rule 4 

(Clearing Fund and Loss Allocation) of the GSD 

Rules and Rule 4 (Clearing Fund and Loss 

Allocation) of the MBSD Rules. 

8Treasury is a part of the DTCC Finance 

Department and is responsible for the safeguarding, 

investment and disbursement of funds on behalf of 

the Clearing Agencies and in accordance with the 

principles outlined in the Investment Policy. 

9Among other responsibilities, GCRO is generally 

responsible for the systems and processes designed 

to identify and manage credit, market and liquidity 

risks to the Clearing Agencies. 

10 17 CFR 240.19b–4. 

11 15 U.S.C. 78s(b)(3)(A). 

12 Id. 

13 17 CFR 240.19b–4(n). 

transactions in high grade corporate 

debt and U.S. Treasury securities; and 

(4) make technical corrections and 

revisions to clarify and simplify 

statements in the Investment Policy; as 

described in greater detail below. 

II. Clearing Agencies’ Statement 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’ Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Changes 

1. Purpose 

The Clearing Agencies are proposing 

to revise the Investment Policy, which 

was adopted in December 2016 5 and are 

maintained in compliance with Rule 

17Ad–22(e)(16) under the Act.6

Overview of the Investment Policy 

The Investment Policy governs the 

management, custody and investment of 

cash deposited to the respective NSCC 

and FICC Clearing Funds, and the DTC 

Participants Fund,7 the proprietary 

liquid net assets (cash and cash 

equivalents) of the Clearing Agencies, 

and other funds held by the Clearing 

Agencies pursuant to their respective 

rules. 

The Investment Policy identifies the 

guiding principles for investments and 

defines the roles and responsibilities of 

DTCC staff in administering the 

Investment Policy pursuant to those 

principles. The Investment Policy is coowned by DTCC’s Treasury group 

(‘‘Treasury’’) 8 and the Counterparty 

Credit Risk team (‘‘CCR’’) within 

DTCC’s Group Chief Risk Office 

(‘‘GCRO’’).9 Treasury is responsible for 

identifying potential counterparties to 

investment transactions, establishing 

and managing investment relationships 

with approved investment 

counterparties, and making and 

monitoring all investment transactions 

with respect to the Clearing Agencies. 

CCR is responsible for conducting a 

credit review of any potential 

counterparty, updating those reviews on 

a quarterly basis, and establishing an 

investment limit for each counterparty. 

The Investment Policy also identifies 

sources of funds that may be invested, 

and the permitted investments of those 

funds, including the authority required 

to make such investments and the 

parameters of, and limitations on, each 

type of investment. Allowable 

investments include bank deposits, 

reverse repurchase agreements, direct 

obligations of the U.S. government, 

money market mutual funds, high-grade 

corporate debt, and hedge transactions. 

Finally, the Investment Policy defines 

the approval authority required to 

exceed established investment limits. 

Proposed Revisions to the Investment 

Policy 

The Investment Policy is reviewed 

and approved by the Boards annually. 

In connection with the most recent 

annual review of the Investment Policy, 

the Clearing Agencies have decided to 

propose certain revisions and updates. 

These proposed revisions, described in 

greater detail below, are designed to 

update the Investment Policy and help 

ensure that it continues to operate as 

intended. 

1. Investment Policy Change 

Management and Annual Board 

Approval 

The Clearing Agencies are proposing 

revisions to two aspects of governance 

in the Investment Policy: (1) Approving 

changes to the Investment Policy and (2) 

annual approval by the Board, as 

described below. 

a. Governance for Approving Changes to 

Investment Policy 

Currently, the Investment Policy 

includes a statement that ‘‘routine’’ 

changes to the Investment Policy must 

be approved jointly by an officer in 

Treasury and an officer in CCR, and that 

material changes to the Investment 

Policy must be approved by the Boards, 

or such committee as may be delegated 

authority by the Boards from time to 

time. 

The Boards have delegated to the 

General Counsel and the Deputy 

General Counsels of the Clearing 

Agencies the authority to approve 

certain proposed rule changes of the 

Clearing Agencies and the filings with 

respect to such proposed rule changes 

required by Rule 19b–4 under the Act.10

Specifically, the Boards have delegated 

to the General Counsel and Deputy 

General Counsels of the Clearing 

Agencies authority to approve (1) 

proposed rule changes that may be filed 

pursuant to Section 19(b)(3)(A) of the 

Act,11 (2) proposed rule changes that 

constitute clarifications, corrections or 

minor changes in the rules of the 

Clearing Agencies but that will not be 

filed pursuant to Section 19(b)(3)(A) of 

the Act,12 in each case, other than any 

rule change where the aggregate annual 

fees generated as a result of such rule 

change are anticipated to be more than 

$1,000,000 at the time of the filing, and 

(3) all proposed changes that are subject 

to an advance notice as required by Rule 

19b–4(n) under the Act 13 but do not 

constitute a change to the rules of 

Clearing Agencies. 

Therefore, the statement within the 

Investment Policy that ‘‘routine’’ 

changes to the Investment Policy must 

be approved jointly by an officer in 

Treasury and an officer in CCR, and that 

material changes to the Investment 

Policy must be approved by the Boards 

or committees of the Boards is 

inconsistent with these existing 

delegations of approval authority. As 

such, the Clearing Agencies are 

proposing to amend the Investment 

Policy to clarify that changes to the 

Investment Policy may be approved by 

either (1) the Boards, (2) such Board 

committees as may be delegated 

authority by the Boards from time to 

time pursuant to their charters, or (3), 

with respect to certain changes, the 

General Counsel or Deputy General 

Counsels of the Clearing Agencies, 

pursuant to authority delegated by the 


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14 17 CFR 240.17Ad–22(e)(3). 

15 17 CFR 240.17Ad–22(e)(3)(i). 

16 17 CFR 240.17Ad–22(e)(3). 

17 17 CFR 240.17Ad–22(e)(3)(i). 

18 Id. 

19 Id. 

20As described below, the Clearing Agencies are 

proposing to make a technical revision to the 

Investment Policy to update all references to the 

Financial Risk Management group, or ‘‘FRM,’’ to the 

Group Chief Risk Office, or ‘‘GCRO.’’ 

Boards and with the advice and 

direction of Treasury and CCR. 

The proposed change would make the 

Investment Policy consistent with 

existing internal delegations of authority 

and would also facilitate expedited 

review and approval of changes that 

may not require the review and 

approval of the Boards or committees of 

the Boards. 

b. Annual Approval of Investment 

Policy by Boards 

The Investment Policy currently states 

that the Boards or such committees as 

may be delegated authority from time to 

time shall review the Investment Policy 

on an annual basis. 

Rule 17Ad–22(e)(3) under the Act 

requires the Clearing Agencies to 

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.14 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.15 As 

stated above, the Investment Policy 

governs the management, custody and 

investment held by the Clearing 

Agencies, and is maintained in order to 

manage the Clearing Agencies’ 

investment and custody risks, as 

required by Rule 17Ad–22(e)(3) under 

the Act.16 Therefore, the Investment 

Policy must be approved by the Boards 

annually, as required by Rule 17Ad– 

22(e)(3)(i) under the Act.17

The Clearing Agencies are proposing 

to amend the Investment Policy to 

provide that the Investment Policy shall 

be approved annually by the Boards or 

such committees as may be delegated 

authority from time to time.18 The 

proposed change would align the 

governance of the Investment Policy 

with the applicable requirements of 

Rule 17Ad–22(e)(3)(i) under the Act.19

2. Process for Identifying External Credit 

Rating of Potential Investment 

Counterparties 

One of the responsibilities of CCR 

under the Investment Policy is to 

perform credit reviews of potential 

investment counterparties. The credit 

review is used to determine if the 

Clearing Agencies should establish an 

investment relationship with that entity, 

and what, if any, limits should be 

placed on investments with that entity 

as an investment counterparty. These 

credit reviews may include, for 

example, a business description, 

identification of key risks and any 

mitigants to those risks, a general 

financial analysis of the potential 

counterparty, such counterparty’s 

available external credit ratings, and the 

recommended investment limit for such 

counterparty. The Investment Policy 

sets a minimum external credit rating 

for potential investment counterparties 

for specified types of investments. 

External credit ratings may be assigned 

by either S&P Global Ratings, Moody’s 

Investors Service, Inc., or Fitch Ratings 

Inc. 

Currently, the Investment Policy 

states that if there is a single notch 

discrepancy between available external 

credit ratings, CCR shall use the more 

favorable rating available. The 

Investment Policy further states that, if 

there is a multiple notch discrepancy 

between available external credit ratings 

for a potential investment counterparty, 

CCR may use its discretion, based on 

information available to it, in 

determining the applicable credit rating 

for its credit review of that counterparty. 

The Clearing Agencies are proposing 

to amend the Investment Policy to 

remove CCR’s discretion that may be 

used when there is a multiple notch 

discrepancy between the external credit 

ratings, and instead require that CCR 

shall use the rating that is one notch 

above the lowest available external 

credit rating for that counterparty. 

The Clearing Agencies determined 

that this approach would be appropriate 

because credit ratings may be obtained 

from one of the three credit rating 

agencies identified above, so there could 

only be a maximum of three available 

credit ratings for an entity. As such, 

under this proposed approach, the 

middle available rating would be 

applied where there is a multiple notch 

discrepancy between available credit 

ratings. 

The Clearing Agencies believe the 

proposed change would improve the 

process for applying an external credit 

rating in connection with credit reviews 

because it would create a clear and 

objective approach to identifying the 

applicable external credit rating in these 

circumstances by removing CCR’s 

discretion in determining which rating 

to apply. 

3. Approval Authority for Investments 

Relationships, Exceeding Investment 

Limits and Certain Investment 

Transactions 

The Investment Policy identifies the 

groups of individuals who have the 

authority to approve (1) the 

establishment of an investment 

relationship with an investment 

counterparty, (2) investment 

transactions that exceed applicable 

investment limits, and (3) investment 

transactions in high grade corporate 

debt and U.S. Treasury securities. The 

Clearing Agencies are proposing to 

revise the approval authority in the 

Investments Policy, as described below. 

a. Focus the Approval Authority for 

Investments Relationships and 

Exceeding Investment Limits to 

Managing Director in CCR 

The Clearing Agencies are proposing 

to amend the authority for approving 

the establishment of investment 

relationships and investment 

transactions that exceed investment 

limits to restrict one of the individuals 

authorized to provide such approvals to 

a Managing Director in CCR, rather than 

any Managing Director in GCRO, for the 

reasons described below. 

First, with respect to the authority to 

establish an investment relationship 

with an investment counterparty, the 

Investment Policy currently identifies 

two groups of authorized individuals— 

‘‘Group A’’ and ‘‘Group B’’—and 

provides that an investment relationship 

may be approved by either two 

individuals from Group A acting jointly, 

or by one individual from Group A and 

one individual from Group B acting 

jointly. Currently, Group A includes the 

Group Chief Risk Officer or a Managing 

Director in the Financial Risk 

Management group (the former name of 

the GCRO).20

Second, with respect to approving 

investment transactions that exceed 

applicable investment limits, the 

Investment Policy currently identifies 

three groups of individuals—‘‘Group 

A,’’ ‘‘Group B,’’ and ‘‘Group C’’—and 

provides that an investment transaction 

that exceeds applicable investment 

limits may be approved by either one 

individual in Group A and one 

individual from Group B acting jointly; 

or one individual in Group A or one 

individual in Group B, and one 

individual in Group C, acting jointly. 

Currently, Group B includes both a 


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Managing Director in GCRO and the 

Group Chief Risk Officer. 

The Clearing Agencies are proposing 

to limit the Managing Director in GCRO 

who is authorized to provide these 

approvals to a Managing Director in the 

CCR group within GCRO. As described 

above, CCR is responsible for 

conducting the credit reviews of 

potential investment counterparties, and 

for setting investment limits for 

investment counterparties. Therefore, a 

Managing Director in CCR is more 

closely involved in conducting credit 

reviews of potential investment 

counterparties and setting investment 

limits that are appropriate based on 

those reviews, where other Managing 

Directors within GCRO do not have a 

role in the administration of the 

Investment Policy. Therefore, the 

Clearing Agencies believe this proposed 

change is appropriate because it would 

focus the authorization to an individual 

who may be more capable of providing 

an informed authorization when 

necessary. 

The Clearing Agencies are also 

proposing to provide that a Managing 

Director in CCR may assign a delegate 

within CCR with the title of Executive 

Director or higher, to jointly approve 

investment transactions that exceed 

applicable limits in the event a CCR 

Managing Director is unavailable. The 

approval of these transactions may be 

required in a short timeframe. 

Therefore, the proposed change would 

allow the Clearing Agencies to obtain 

these joint approvals from an officer 

within CCR, when necessary, without 

unnecessary delay in the event a 

Managing Director in CCR is not 

available to provide the requested 

authorization. 

b. Revising Approval Authority for 

Certain Investment Transactions 

The Clearing Agencies are proposing 

to make two revisions to the approval 

authority for investment transactions in 

high grade corporate debt and U.S. 

Treasury securities, as described below. 

Currently, the Investment Policy 

provides that investment transactions in 

high grade corporate debt and U.S. 

Treasury securities where the remaining 

time to maturity is two years or less 

must be approved by two individuals, 

acting jointly, who are identified in a 

group of individuals that includes both 

senior level executives and lower level 

officers. The value of investments that 

mature on a longer timeframe are 

subject to greater uncertainty over that 

period and such investments are 

generally viewed as posing greater risk. 

Therefore, the Investment Policy 

provides that investment transactions in 

high grade corporate debt and U.S. 

Treasury securities where the remaining 

time to maturity is more than two years 

must be approved by two individuals, 

acting jointly, from the same group of 

individuals who are authorized to 

approve such investments that mature 

on a shorter timeframe, so long as at 

least one of those individuals is a senior 

level executive. 

First, the Clearing Agencies are 

proposing to revise the scope of 

investments that the two groups of 

individuals are authorized to approve. 

The proposed change would provide the 

first group of individuals with authority 

to approve investments, with two of 

them acting jointly, for a time to 

maturity of one year or less, and would 

provide the second group of individuals 

with authority to approve investments 

with a time to maturity of greater than 

one year, and up to a maximum of ten 

years for investments in U.S. Treasury 

securities and up to a maximum of five 

years for investments in high grade 

corporate debt. This proposed change 

would provide for a more conservative 

approach to approving these 

investments by limiting the investments 

that may be approved by the first group 

of authorized individuals to only those 

that mature on a shorter timeframe, and 

pose less risk. 

Second, the Clearing Agencies are 

proposing to include an Executive 

Director in Finance in the first group of 

individuals, who are authorized to act 

jointly to approve investment 

transactions with a remaining time to 

maturity of one year or less. This 

proposed change would provide the 

Clearing Agencies with more flexibility 

to authorize investment transactions 

where the time to maturity is one year 

or less by authorizing an additional 

officer to approve this revised set of 

investments. The Investment Policy 

would continue to require that at least 

one of the individuals who approve 

investments that have a longer time to 

maturity be a senior level executive. 

4. Technical Revisions 

The Clearing Agencies are proposing 

to reorganize and reorder certain 

sections of the Investment Policy, and 

make other updates, corrections and 

clarifications, as described below. 

a. Reordering and Reorganizing Certain 

Sections of the Investment Policy 

First, the Clearing Agencies are 

proposing to remove Section 1.1, titled 

‘‘Document Control Information,’’ from 

the Investment Policy. The information 

under this heading would be 

incorporated into the Overview in 

Section 1, and this proposed change 

would simplify the organization of this 

Section. 

Second, the Clearing Agencies are 

proposing to move the information 

currently in Section 7 to other sections 

in the Investment Policy and eliminate 

Section 7. Currently, Section 7.1 

describes the authorizations for 

establishing investment relationships, 

and Section 7.2 describes the 

authorizations for entering into 

investment transactions. The 

information currently in Section 7.1 

would be moved to a new Section 4.3. 

This proposed change would revise the 

Investment Policy so the authorizations 

for establishing investment 

relationships appears directly after the 

description of credit reviews of 

potential investment counterparties 

performed by CCR in Section 4.2. 

The information currently in Section 

7.2 would be moved to Section 6.2. This 

proposed change would revise the 

Investment Policy so the authorizations 

for investment transactions appear in 

the same Section as the description of 

the applicable investment type. As such, 

Sections 6.2.1, 6.2.2, and 6.2.4, which 

describe investments in bank deposits, 

reverse repurchase agreements, and 

money market mutual funds, 

respectively, would include a statement 

that investment transactions in these 

investment types are authorized 

pursuant to Section 4.1 of the 

Investment Policy and no separate 

approvals for such investment 

transactions are required. Sections 6.2.3 

and 6.2.5, which describe investments 

in U.S. treasury securities and highgrade corporate debt, respectively, 

would include a table of the required 

authorizations for investment 

transactions in these investment types. 

The authorizations described in these 

tables would be amended as described 

above. The Investment Policy would 

also be updated to make conforming 

changes to update internal crossreferences to these reorganized Sections. 

Third, the Clearing Agencies are 

proposing to revise Section 6.2.6, which 

describes hedge transactions. The 

proposed change would move a 

statement regarding factors that may be 

considered when authorizing a hedge 

transaction to appear above the table of 

authorizations of those transactions. 

This proposed change would align 

Section 6.2.6 to be organized similarly 

to other subsections within Section 6.2, 

such that the information regarding 

authorizations of those transactions 

appears at the end of the subsection. 

The Clearing Agencies believe each of 

the proposed changes are appropriate. 

By reorganization the Investment Policy 

such that sections regarding similar 


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21 15 U.S.C. 78q–1(b)(3)(F). 

22 17 CFR 240.17Ad–22(e)(3)(i) and (16). 

23 15 U.S.C. 78q–1(b)(3)(F). 24 Id. 

matters appear together, the proposed 

changes would improve the clarity of 

the Investment Policy. 

b. Other Updates and Technical 

Revisions 

The Clearing Agencies are also 

proposing to make other updates and 

technical revisions to the Investment 

Policy. These technical revisions would, 

for example, correct internal crossreferences, revise the use of defined 

terms, and clarify descriptions within 

the Investment Policy, without changing 

the substantive statements being 

revised. 

For example, Section 6.2.1 would be 

revised to include term deposits in a list 

of types of bank deposit investment 

transactions that may be executed 

pursuant to the Investment Policy. 

While the existing list was intended to 

be non-exhaustive, the proposed change 

would clarify that term bank deposits 

are also permitted. As another example, 

the Investment Policy would be revised 

to reflect a change to the name of the 

DTCC’s Financial Risk Management 

group, or ‘‘FRM,’’ to the GCRO. 

The Clearing Agencies believe the 

proposed updates and technical 

revisions would improve the clarity and 

accuracy of the Investment Policy and, 

therefore, would facilitate the execution 

of the Investment Policy. 

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 proposed 

modifications to the Investment Policy 

are consistent with Section 17A(b)(3)(F) 

of the Act 21 and Rules 17Ad–22(e)(3)(i) 

and (16) under the Act,22 for the reasons 

described below. 

Section 17A(b)(3)(F) of the Act 

requires, in part, that the rules of each 

of the Clearing Agencies be designed to 

assure the safeguarding of securities and 

funds which are in the custody or 

control of each of the Clearing Agencies 

or for which they are responsible.23 The 

investment guidelines and governance 

procedures set forth in the Investment 

Policy are designed to safeguard funds 

which are in the custody or control of 

the Clearing Agencies or for which they 

are responsible. Such protections 

include, for example, following a 

prudent and conservative investment 

philosophy that places the highest 

priority on maximizing liquidity and 

risk avoidance. The Clearing Agencies 

believe each of these proposed changes 

would help facilitate the effective 

execution of the Investment Policy 

pursuant to the guiding principle set 

forth therein. Therefore, the Clearing 

Agencies believe the proposed changes 

would allow the Clearing Agencies to 

continue to operate the Investment 

Policy pursuant to a prudent and 

conservative investment philosophy 

that assures the safeguarding of 

securities and funds which are in their 

custody and control, or for which they 

are responsible. 

First, the Clearing Agencies believe 

the proposed changes to the Investment 

Policy governance would improve the 

processes for maintaining the 

Investment Policy and ensuring it 

continues to operate as intended. The 

proposed changes to reflect the existing 

delegation of authority to the General 

Counsel and Deputy General Counsels 

of the Clearing Agencies to approve 

certain changes to the Investment Policy 

would align this process to existing 

governance and delegations of authority 

within the Clearing Agencies. This 

proposed change would permit an 

expedited review and approval of 

changes that do not require action by 

the Boards or Board committees. In this 

way, the Clearing Agencies believe the 

proposed change would simplify the 

steps necessary for the Clearing 

Agencies to make certain non-material 

changes to the Investment Policy, 

subject to required regulatory review 

and approval of such changes. 

Meanwhile, the Clearing Agencies 

believe that the proposed change to 

require annual approval of the 

Investment Policy would provide for 

stronger Board oversight and create an 

important control over the Investment 

Policy’s effectiveness. 

Second, the Clearing Agencies believe 

the proposed change to the process for 

identifying an applicable external credit 

rating for potential investment 

counterparties when there is a multiple 

notch discrepancy between available 

ratings would improve the credit 

reviews of those entities. The proposed 

change would improve credit reviews 

by creating a more objective approach to 

this aspect of those reviews and creating 

more consistency in the evaluation of 

these entities. Understanding the risks 

that may be presented by an investment 

counterparty is an important aspect of 

the Investment Policy’s guidelines and 

governance procedures that are 

designed to safeguard funds which are 

in the custody or control of the Clearing 

Agencies or for which they are 

responsible. 

Third, the Clearing Agencies believe 

the proposed change to certain approval 

authority within the Investment Policy 

would both enable the Clearing 

Agencies to authorize those individuals 

who are involved with the matters that 

they may be asked to approve, and 

would facilitate those approvals by 

authorizing additional individuals to 

approve lower risk matters. The 

proposed change to the approval 

authority for establishing investment 

relationships and entering investment 

transactions that exceed applicable 

limits to include only Managing 

Directors in CCR would refine this 

approval authority to individuals who 

are involved in these matters, and may 

be better able to provide an informed 

approval. The proposed change to the 

approval authority for investment 

transactions with maturity time would 

shift that authority to senior executives 

for investments that pose greater risk, 

creating a more conservative approach 

to those approvals. The proposed 

change to authorize Executive Directors 

in Finance to approve investment 

transactions with remaining time to 

maturity of less than one year would 

facilitate the approval of these 

transactions that pose less risk to the 

Clearing Agencies. 

Finally, the Clearing Agencies believe 

the proposed changes to reorganize 

certain sections within the Investment 

Policy and the proposed updates and 

technical revisions to the Investment 

Policy would improve the clarity and 

accuracy of the Investment Policy. By 

creating clearer descriptions, the 

Clearing Agencies believe these 

proposed changes would make the 

Investment Policy more effective in 

governing the management, custody, 

and investment of funds of and held by 

the Clearing Agencies. 

For the reasons described above, the 

Clearing Agencies believe the proposed 

changes would improve the 

effectiveness of the Investment Policy 

and allow the Investment Policy to 

continue to be administered in 

alignment with the investment 

guidelines and governance procedures 

set forth therein. Given that such 

guidelines and governance procedures 

are designed to safeguard funds which 

are in the custody or control of the 

Clearing Agencies or for which they are 

responsible, the Clearing Agencies 

believe the proposed changes are 

consistent with the requirements of 

Section 17A(b)(3)(F) of the Act.24

Rule 17Ad–22(e)(3)(i) requires, in 

part, that the Clearing Agencies 

establish, implement, maintain and 


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67784 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices 

25 17 CFR 240.17Ad–22(e)(3)(i). 

26 Id. 

27 17 CFR 240.17Ad–22(e)(16). 

28 Id. 

29 Id. 

30 15 U.S.C. 78s(b)(3)(A). 

31 17 CFR 240.19b–4(f). 

enforce written policies and procedures 

reasonably designed to maintain a 

sound risk management framework for 

comprehensively managing investment 

and custody risks that arise in or are 

borne by the Clearing Agencies, which 

includes risk management policies, 

procedures, and systems designed to 

identify, measure, monitor, and manage 

the range of risks that arise in or are 

borne by the Clearing Agencies, that are 

subject to review on a specified periodic 

basis and approved by the board of 

directors annually.25 The Clearing 

Agencies are proposing to revise the 

Investment Policy to require that it be 

reviewed and approved by the Boards, 

or an authorized Board Committee, at 

least annually. The Boards, or an 

authorized Board Committee, will be 

provided with a copy of the Investment 

Policy at a regularly scheduled meeting, 

along with a memorandum describing 

any changes that had been made to the 

Investment Policy since its last annual 

approval. This proposed change would 

provide for important oversight of the 

operation of the Investment Policy and 

its continued effectiveness in governing 

the management, custody and 

investment of funds held by the 

Clearing Agencies. The proposed change 

is also designed to align the governance 

of the Investment Policy with the 

applicable requirements of Rule 17Ad– 

22(e)(3)(i) under the Act.26

Rule 17Ad–22(e)(16) under the Act 

requires the Clearing Agencies to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to safeguard the 

Clearing Agencies’ own and their 

participants’ assets, minimize the risk of 

loss and delay in access to these assets, 

and invest such assets in instruments 

with minimal credit, market, and 

liquidity risks.27

The Clearing Agencies believe that the 

Investment Policy follows a prudent and 

conservative investment philosophy, 

placing the highest priority on 

maximizing liquidity and avoiding risk 

of loss, by requiring the segregation of 

funds of each Clearing Agency and of 

types of funds of each Clearing Agency, 

using external credit ratings in the 

evaluation of counterparties, and 

establishing investment limits by 

counterparty as well as investment type. 

As originally implemented, the 

Investment Policy was designed to meet 

the requirements of Rule 17Ad– 

22(e)(16) under the Act.28

For the reasons stated above, the 

Clearing Agencies believe that each of 

the proposed revisions would improve 

the administration of the Investment 

Policy and would make the Investment 

Policy more effective in governing the 

management, custody, and investment 

of funds of and held by the Clearing 

Agencies. In this way, the proposed 

changes would better allow the Clearing 

Agencies to maintain these documents 

in a way that is designed to meet the 

requirements of Rule 17Ad–22(e)(16). 

Therefore, the Clearing Agencies believe 

the proposed revisions would be 

consistent with the requirements of Rule 

17Ad–22(e)(16) under the Act.29

(B) Clearing Agencies’ Statement on 

Burden on Competition 

Each of the Clearing Agencies believes 

that none of the proposed revisions to 

the Investment Policy would have any 

impact, or impose any burden, on 

competition. The Investment Policy 

applies equally to the Clearing Fund 

and Participants Fund deposits, as 

applicable, of each member of the 

Clearing Agencies, and establishes a 

uniform policy at the Clearing Agencies. 

The proposed changes to the Investment 

Policy would not affect any changes on 

the fundamental purpose or operation of 

this document and, as such, would also 

not have any impact, or impose any 

burden, on competition. 

(C) Clearing Agencies’ Statement 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 

The foregoing rule changes have 

become effective pursuant to Section 

19(b)(3)(A) of the Act 30 and paragraph 

(f) of Rule 19b–4 thereunder.31 At any 

time within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule changes 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 

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–2018–012, SR–FICC–2018–014, or 

SR–NSCC–2018–013 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–2018–012, SR–FICC– 

2018–014, or SR–NSCC–2018–013. 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 website 

(http://www.sec.gov/rules/sro.shtml). 

Copies of the submissions, 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 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 

filings also will be available for 

inspection and copying at the principal 

office of the Clearing Agencies 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–2018–012, SR–FICC– 

2018–014, or SR–NSCC–2018–013 and 

should be submitted on or before 

January 22, 2019. 


khammond on DSK30JT082PROD with NOTICES
Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices 67785 

32 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 83594 

(July 5, 2018), 83 FR 32158. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 83919, 

83 FR 44083 (August 29, 2018). 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 84378, 

83 FR 51745 (October 12, 2018). 

8See letter from Kyle Murray, Assistant General 

Counsel, Cboe Global Markets, Inc. to Brent J. 

Fields, Secretary, Commission, dated November 16, 

2018. 

9 15 U.S.C. 78s(b)(2). 

10 Id. 

11 17 CFR 200.30–3(a)(57). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28378 Filed 12–28–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84948; File No. SRCboeBZX–2018–044] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of 

Designation of a Longer Period for 

Commission Action on Proceedings To 

Determine Whether To Approve or 

Disapprove a Proposed Rule Change, 

as Modified by Amendment No. 1, To 

Amend BZX Rule 14.11(c) (Index Fund 

Shares) 

December 21, 2018. 

On June 21, 2018, Cboe BZX 

Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend BZX Rule 14.11(c) to 

permit either the portfolio holdings of a 

series of Index Fund Shares or the index 

underlying a series of Index Fund 

Shares to satisfy the listing standards 

under BZX Rules 14.11(c)(3), (4), and 

(5). The proposed rule change was 

published for comment in the Federal 

Register on July 11, 2018.3 On August 

23, 2018, pursuant to Section 19(b)(2) of 

the Act,4 the Commission designated a 

longer period within which to approve 

the proposed rule change, disapprove 

the proposed rule change, or institute 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change.5 On September 28, 2018, 

the Exchange filed Amendment No. 1 to 

the proposed rule change, which 

amended and replaced the proposed 

rule change as originally filed. On 

October 5, 2018, the Commission 

published notice of Amendment No. 1 

and instituted proceedings pursuant to 

Section 19(b)(2)(B) of the Act 6 to 

determine whether to approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1.7 The 

Commission has received one comment 

letter on the proposed rule change.8

Section 19(b)(2) of the Act 9 provides 

that, after initiating disapproval 

proceedings, the Commission shall issue 

an order approving or disapproving the 

proposed rule change not later than 180 

days after the date of publication of 

notice of filing of the proposed rule 

change. The Commission may extend 

the period for issuing an order 

approving or disapproving the proposed 

rule change, however, by not more than 

60 days if the Commission determines 

that a longer period is appropriate and 

publishes the reasons for such 

determination. The proposed rule 

change was published for notice and 

comment in the Federal Register on July 

11, 2018. January 7, 2019 is 180 days 

from that date, and March 8, 2019 is 240 

days from that date. 

The Commission finds it appropriate 

to designate a longer period within 

which to issue an order approving or 

disapproving the proposed rule change 

so that it has sufficient time to consider 

the proposed rule change, as modified 

by Amendment No. 1. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,10 designates March 

8, 2019 as the date by which the 

Commission shall either approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1 (File No. 

SR–CboeBZX–2018–044). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28379 Filed 12–28–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84929; File No. SR– 

CboeEDGX–2018–060] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change Relating To 

Discontinue Bulk Order Functionality 

and Implement Bulk Message 

Functionality, and Make Other 

Nonsubstantive Changes 

December 21, 2018. 

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 December 

13, 2018, Cboe EDGX Exchange, Inc. 

(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegalRegulatory

Home.aspx), at the Exchange’s Office of 

the Secretary, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange 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 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In 2016, the Exchange’s parent 

company, Cboe Global Markets, Inc. 

(‘‘Cboe Global’’), which is the parent 


khammond on DSK30JT082PROD with NOTICES