76640 Federal Register / Vol. 85, No. 230 / Monday, November 30, 2020 / Notices 

54See id. (discussing as a relevant factor the 

particular system of supervision and oversight in a 

non-U.S. jurisdiction for purposes of evaluating any 

non-U.S. framework). 

55See supra note 40 and accompanying text. 

56See supra note 41 and accompanying text. 

57See supra note 42 and accompanying text. 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 90203 

(October 15, 2020), 85 FR 67018 (October 21, 2020) 

(SR–DTC–2020–012) (‘‘Notice’’). 

4Capitalized terms not defined herein are defined 

in the Rules, By-Laws and Organization Certificate 

of DTC (‘‘Rules’’) available at http://www.dtcc.com/ 

∼/media/Files/Downloads/legal/rules/dtc_rules.pdf, 

or in the hereby proposed ClaimConnect Service 

Guide, included as Exhibit 5 to this proposed rule 

change filing. 

5Available at http://www.dtcc.com/∼/media/ 

Files/Downloads/legal/service-guides/ 

Settlement.pdf. 

6A covered clearing agency is defined as a 

registered clearing agency that provides the services 

of a central counterparty (‘‘CCP’’) or CSD. See 17 

CFR 240.17Ad–22(a)(5). CSD services means 

services of a clearing agency that is a securities 

depository as described in Section 3(a)(23)(A) of the 

Exchange Act. See 17 CFR 240.17Ad-22(a)(3). 

Specifically, the definition of a clearing agency 

includes, in part, ‘‘any person, such as a securities 

depository that (i) acts as a custodian of securities 

in connection with a system for the central 

handling of securities whereby all securities of a 

particular class or series of any issuer deposited 

within the system are treated as fungible and may 

be transferred, loaned, or pledged by bookkeeping 

entry without physical delivery of securities 

certificates, or (ii) otherwise permits or facilitates 

the settlement of securities transactions or the 

hypothecation or lending of securities without 

physical delivery of securities certificates.’’ 15 

U.S.C. 78c(a)(23)(A). 

7Trading exceptions include, but are not limited 

to, trades outside of the markets’ agreed upon 

settlement cycle, lack of due bill fail tracking, stock 

loan or repo transaction discrepancy, or tax treaty 

differences. See Notice, supra note 3, 85 FR at 

67019. 

8See Notice, supra note 3, 85 FR at 67019. Based 

on discussions with its Participants, DTC estimates 

that ClaimConnect may process approximately 

212,000 claims its first year, increasing to 

approximately 425,000 claims by its fifth year. See 

id. 

9 DTC stated that a fee associated with 

Participants’ use of the ClaimConnect service will 

be the subject of a separate, subsequent rule filing 

with the Commission. See Notice, supra note 3, 85 

FR at 67019. 

10To join ClaimConnect, a Participant needs to 

request to be a ‘‘Claim Participant,’’ and DTC will 

then indicate that the Participant is now a member 

of the service (i.e., a User). See Notice, supra note 

3, 85 FR at 67019. 

context of comparable EMIR 

requirements.54

As discussed in Part II.C.2, LCH SA 

petitioned the SEC to request 

exemptions under the Exchange Act 

from the application of Rule 17a–22 and 

Rules 17Ad–22(c)(2) and (c)(2)(iii), and 

the SEC approved this request based on 

factors similar to those discussed 

above.55 The SEC has also provided 

exemptions to LCH SA with respect to 

application of Section 19(b) of the 

Exchange Act and Rule 19b–4 

thereunder,56 and to LCH SA and ICEEU 

with respect to the application of 

Sections 5 and 6 of the Exchange Act.57

IV. Conclusion 

The SEC has structured its regulatory 

framework for clearing agencies that are 

EU CCPs to achieve an appropriate 

balance between (i) applying the levels 

of oversight and supervision for clearing 

agencies that ensure consistency with 

the Exchange Act and, at the same time, 

(ii) avoiding the application of certain 

SEC requirements that are unnecessary, 

duplicative, or inconsistent relative to 

EMIR requirements that have already 

been applied to the EU CCP in the EU. 

Accordingly, this policy statement and 

guidance is designed to provide 

transparency into the SEC’s processes 

and to describe the processes available 

to EU CCPs that seek to register as 

clearing agencies or request exemptions 

from certain SEC requirements. This 

policy statement and guidance also 

highlight efficient ways that EU CCPs 

can comply with SEC rules and describe 

how an EU CCP can facilitate the 

efficient preparation of its application 

and the SEC’s review of such 

application, potentially resulting in 

shorter application preparation and 

review periods. It also identifies the 

factors that the SEC will consider with 

respect to future requests for 

exemptions, as applicable to a particular 

request. The SEC looks forward to 

continuing its dialogue with the EC 

regarding its consideration of whether to 

find the SEC’s regulatory framework for 

CCPs equivalent to EMIR. 

By the Commission. 

Dated: November 23, 2020. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2020–26285 Filed 11–27–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90481; File No. SR–DTC– 

2020–012] 

Self-Regulatory Organizations; The 

Depository Trust Company; Order 

Approving a Proposed Rule Change To 

Establish the ClaimConnectTM Service 

and Update the Settlement Service 

Guide 

November 23, 2020. 

I. Introduction 

On October 8, 2020, The Depository 

Trust Company (‘‘DTC’’) 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 proposed rule change SR– 

DTC–2020–012. The proposed rule 

change was published for comment in 

the Federal Register on October 21, 

2020.3 The Commission did not receive 

any comment letters on the proposed 

rule change. For the reasons discussed 

below, the Commission is approving the 

proposed rule change. 

II. Description of the Proposed Rule 

Change 

The proposed rule change 4 will (i) 

adopt a new DTC service guide to 

establish the ClaimConnect service at 

DTC (‘‘ClaimConnect Service Guide’’), 

and (ii) update the existing DTC 

Settlement Service Guide 5 (‘‘Settlement 

Guide’’) to (A) make conforming 

changes to the Settlement Guide to 

reflect the ClaimConnect service, and 

(B) update certain address and contact 

information in the Copyright section of 

the Settlement Guide. 

A. Background 

DTC is the central securities 

depository (‘‘CSD’’) for substantially all 

corporate and municipal debt and 

equity securities available for trading in 

the United States. As a covered clearing 

agency that provides CSD services,6

DTC provides a central location in 

which securities may be immobilized, 

and interests in those securities are 

reflected in accounts maintained for its 

Participants, which are financial 

institutions such as brokers or banks. 

DTC’s CSD services include cash 

claims or cash claim transactions, which 

are cash entitlements (i.e., a request for 

cash) from one Participant to another 

Participant. Currently, cash claims arise 

as a result of trading exceptions from a 

Corporate Action event,7 where a cash 

entitlement needs to be delivered from 

one holder to another. Today, such 

claims are settled away from DTC, 

except for some stock loan and 

repurchase (‘‘repo’’) substitution 

payments, which can be settled via 

DTC’s Adjustment Payment Orders 

(‘‘APOs’’). DTC stated that it developed 

the ClaimConnect service so 

Participants can settle cash claims in 

one centralized location, using the DTC 

system.8

B. Proposed ClaimConnect Service 

The proposed ClaimConnect service 

will be an optional service available to 

all DTC Participants.9 The service will 

enable DTC Participants to bilaterally 

match and settle cash claim transactions 

at DTC.10

ClaimConnect will be a validation and 

matching engine that continually 


TKELLEY on DSKBCP9HB2PROD with NOTICES
Federal Register / Vol. 85, No. 230 / Monday, November 30, 2020 / Notices 76641 

11Once submitted, claims can exist in several 

different ‘‘states’’ depending upon the actions taken 

by the parties to the claim. The applicable rules will 

describe the different states that a claim could take. 

See Notice, supra note 3, 85 FR at 67019. 

12 15 U.S.C. 78s(b)(2)(C). 

13 15 U.S.C. 78q–1(b)(3)(F). 

14 Id. 

15 Id. 

16 15 U.S.C. 78q–1. 

17 15 U.S.C. 78s(b)(2). 

18 In approving the proposed rule change, the 

Commission considered the proposals’ impact on 

Continued 

monitors claims throughout their 

lifecycle in order to settle and close 

claims through DTC’s settlement 

process. This continuous processing 

will allow for both the manual matching 

of claims (i.e., Affirmation) by 

ClaimConnect users (‘‘Users’’) and the 

systematic matching of two like claims 

by ClaimConnect based on the 

alignment of certain data elements (i.e., 

Auto-matching). 

ClaimConnect will offer various claim 

processing functions, including end-ofday settlement of cash claims through 

systematic Securities Payment Orders 

(‘‘SPOs’’) generated and submitted by 

ClaimConnect at set times intraday 

(‘‘settlement time’’) on a settlement date. 

If overpaid or underpaid a cash 

entitlement due to a trading exception, 

a User will be able to create a claim 

against a claim counterparty through 

ClaimConnect. To create a claim, the 

ClaimConnect system will require the 

inclusion of certain data elements, 

while other data elements will be 

optional.11

Validation, the process of confirming 

claim data elements, will happen in two 

ways, as described below: (i) When a 

claim is Affirmed, as described below, 

or (ii) when ClaimConnect Automatches two claims. Users can also 

modify or Cancel claims. However, not 

all data elements can be modified after 

submission. 

First, if a counterparty receives a 

claim and agrees with its details (i.e., 

the data elements), then the 

counterparty could Affirm the claim. 

Affirming a claim will be a confirmation 

of the claim’s data elements and would 

move the claim into a Matched state. 

Affirmation will usually occur only 

when one side of a claim is submitted 

because it affords the counterparty 

enough time to Affirm the claim. Once 

Affirmed, the claim will be settled on 

the date the parties agree to. Second, if 

both parties to a claim submit their 

respective sides to the claim (i.e., a debit 

claim and a credit claim), the two sides 

of the claim are Auto-matched. 

The SPO will credit the payee 

Participant and debit the payor 

Participant the claim amount and will 

then be incorporated into DTC’s end-ofday settlement process. ClaimConnect 

SPOs will be subject to DTC’s Risk 

Controls (i.e., Collateral Monitor and 

Net Debit Cap) and will ‘‘recycle’’ (i.e., 

pend) if the SPO cannot satisfy those 

controls. 

To assist Users with the management 

of their claims, ClaimConnect will offer 

an Approval feature. The Approval 

feature will require certain actions on a 

claim to be approved by a separate User 

employee, if the claim amount meets or 

exceeds a predetermined dollar 

threshold set by the User, before that 

action can be completed. This feature is 

designed to enable Users to better 

monitor and manage certain cash debits 

that are leaving their account to satisfy 

claims. Users can activate the Approval 

feature by updating their ClaimConnect 

client profile. When doing so, the User 

must then set the dollar threshold that 

will trigger the Approval process. 

C. Updates to the DTC Settlement Guide 

DTC has an existing DTC Settlement 

Guide, which describes its existing 

services related to settlement. DTC will 

update the existing Settlement Guide to 

(A) make conforming changes to the 

Settlement Guide to reflect the 

establishment of the ClaimConnect 

service (specifically, to clarify that the 

RAD process would not apply to cash 

claims as they would go through 

ClaimConnect), and (B) update certain 

address and contact information in the 

Copyright section of the Settlement 

Guide. 

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 12

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Act and 

rules and regulations thereunder 

applicable to such organization. After 

carefully considering the proposed rule 

change, the Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to DTC. In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

17A(b)(3)(F) of the Act,13 for the reasons 

described below. 

A. Consistency With Section 

17A(b)(3)(F) 

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

requires, in part, that the rules of a 

clearing agency, such as DTC, be 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions, and foster 

cooperation and coordination with 

persons engaged in the clearance and 

settlement of securities transactions.14

The Commission believes that the 

Proposed Rule Change is consistent 

with Section 17A(b)(3)(F) of the Act.15

First, DTC proposes to introduce a 

new ClaimConnect service. As noted 

above, the ClaimConnect service will be 

an optional service, and DTC stated that 

it developed the service based on 

discussions with Participants. 

ClaimConnect would enable 

Participants to bilaterally match and 

settle cash claim transactions at DTC. 

While settlement of cash claims occurs 

today, it does so away from DTC, in a 

dispersed fashion. ClaimConnect would 

establish a centralized and coordinated 

location for Participants to settle such 

claims. By offering a centralized and 

coordinated location for Participants to 

settle cash claims, with various 

functionality available, the Commission 

believes that the ClaimConnect service 

is designed to foster cooperation and 

coordination with persons engaged in 

the clearance and settlement of 

securities transactions. 

Second, DTC will update the existing 

Settlement Guide to (A) make 

conforming changes to the Settlement 

Guide to reflect the ClaimConnect 

service, and (B) update certain address 

and contact information in the 

Copyright section of the Settlement 

Guide. By making conforming changes 

and updating the Settlement Guide with 

more current information about where 

Participants and others may direct 

inquiries about the DTC service guides, 

the Settlement Guide will provide the 

most up-to-date information and should 

help Participants to submit questions or 

comments about the service guides. 

Accordingly, the Commission believes 

that the updates to the Settlement Guide 

are designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and, in 

particular, with the requirements of 

Section 17A of the Act 16 and the rules 

and regulations promulgated 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 17 that 

proposed rule change SR–DTC–2020– 

012, be, and hereby is, approved.18


TKELLEY on DSKBCP9HB2PROD with NOTICES
76642 Federal Register / Vol. 85, No. 230 / Monday, November 30, 2020 / Notices 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange notes that after volatility and 

unusual market conditions beginning at the end of 

2019 and continuously increasing through 2020 as 

a result of the impact of COVID19 and related 

factors, some market participants may have 

experienced significant trading losses, resulting in 

their limiting their trading behavior and risk 

exposure. The Exchange understands that firms, not 

otherwise highly active in the electronic markets, 

may have executed electronically in order to close 

positions, reduce exposure, and otherwise mitigate 

losses and reduce risk in light of market conditions 

experienced at various points throughout the year. 

These firms may have also reduced open outcry 

activity as part of the same risk-reducing strategy, 

resulting in a coincidental change in the mix of 

electronic versus open outcry volume for such 

generally floor-based Market-Makers. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26282 Filed 11–27–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90482; File No. SR–CBOE– 

2020–110] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing of a 

Proposed Rule Change Amending Rule 

5.52(d) in Connection With a MarketMaker’s Electronic Volume Transacted 

on the Exchange 

November 23, 2020. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

13, 2020, Cboe Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe Options’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III 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 

Cboe Exchange, Inc. (the ‘‘Exchange’’ 

or ‘‘Cboe Options’’) proposes to amend 

Rule 5.52(d) in connection with a 

Market-Maker’s electronic volume 

transacted on the Exchange. The text of 

the proposed rule change is provided in 

Exhibit 5. 

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 

The Exchange proposes to amend 

Rule 5.52(d) in connection with a 

Market-Maker’s electronic volume 

transacted on the Exchange. Current 

Rule 5.52(d)(1) provides that if a 

Market-Maker never trades more than 

20% of the Market-Maker’s contract 

volume electronically in an appointed 

class during any calendar quarter, a 

Market-Maker will not be obligated to 

quote electronically in any designated 

percentage of series within that class 

pursuant to subparagraph (d)(2) (which 

governs the continuous electronic 

quoting requirements for Market-Makers 

in their appointed classes). That is, once 

a Market-Maker surpasses the 20% 

electronic volume threshold in an 

appointed class, the Market-Maker is 

required to provide continuous 

electronic quotes in that appointed 

classes going forward. Neither Rule 

5.52(d)(1) nor (d)(2) permit a MarketMaker to reduce its electronic volume 

after surpassing the 20% threshold in 

order to reset the electronic volume 

trigger or otherwise undo the resulting 

obligation to stream electronic quotes 

once the 20% threshold is triggered in 

an appointed class. 

Market-Makers accustomed to 

executing volume on the trading floor 

have sophisticated and complicated risk 

modeling associated with their floor 

trading activity, including quoting, 

monitoring, and responding to the 

trading crowd. However, the Exchange 

understands that while such MarketMakers do have separate systems or 

third-party platforms for quoting, 

monitoring and responding to electronic 

markets, because these Market-Makers 

are almost exclusively floor-based, their 

technology or other platforms enabling 

them to quote electronically do not 

achieve the level of sophistication or 

complexity as the systems used by 

Market-Makers accustomed to quoting 

electronically. Indeed, to satisfy the 

continuous electronic quoting 

requirements, a Market-Maker must 

provide continuous bids and offers for 

90% of the time the Market-Maker is 

required to provide electronic quotes in 

an appointed option class on a given 

trading day and must provide 

continuous quotes in 60% of the series 

of the Market-Maker’s appointed 

classes. The Exchange determines 

compliance by a Market-Maker with this 

quoting obligation on a monthly basis. 

In addition to this, a Market-Makers 

must, among other things, compete with 

other Market-Makers in its appointed 

classes, update quotations in response 

to changed market conditions in its 

appointed classes, maintain active 

markets in its appointed classes, and, 

overall, engage in a course of dealings 

reasonably calculated to contribute to 

the maintenance of a fair and orderly 

market. Market-Makers that are 

predominantly floor-based generally do 

not have the technology or electronic 

trading sophistication to fully satisfy the 

continuous electronic quoting 

obligations, as well as other heightened 

standards required of a Market-Maker in 

its appointed classes electronically, 

once the 20% electronic volume 

threshold is triggered. 

The Exchange has observed that in the 

past year, particularly given the 

significant increase in market volatility 

and unpredictability of market 

conditions in the months leading up to 

and during the COVID–19 pandemic,3

Market-Makers that almost exclusively 

execute their volume in open outcry and 

had not prior triggered an electronic 

quoting obligation pursuant to Rule 

5.52(d)(2), incidentally breached the 

20% electronic volume threshold in 

certain appointed classes during a single 

quarter and were thereby obliged to 

provide continuous electronic quotes in 

those classes going forward. As stated 

above, once a Market-Maker surpasses 

the electronic volume threshold in an 

appointed class, and the electronic 

quoting obligation is triggered, Rules 

5.52(d)(1) and (d)(2) do not permit a 

Market-Maker to reset the trigger — a 

Market-Maker is required to stream 

electronic quotes in that appointed class 

beginning the next calendar quarter and 

from there on out. As such, once the 


TKELLEY on DSKBCP9HB2PROD with NOTICES