Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Notices 78889 

18 15 U.S.C. 78q–1(b)(3)(F). 

19 17 CFR 240.17Ad–22(e)(7)(i). 

20 17 CFR 240.17Ad–22(e)(7)(i). 

21 15 U.S.C. 78q–1(b)(3)(F). 

22 17 CFR 240.17Ad–22(e)(7)(i). 

23 15 U.S.C. 78s(b)(2). 

24 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

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

25 17 CFR 200.30–3(a)(12). 

liquidity requirements arising from the 

physical settlement of equity American 

options involving a defaulting clearing 

member during any liquidation of such 

clearing member. Such changes should 

enhance LCH SA’s daily LCR 

calculations to determine more accurate 

liquidity levels in the event of the 

assignment and exercise of equity 

American options involving a defaulting 

clearing member prior to expiry. The 

Commission believes the proposed rule 

change should help LCH SA anticipate 

increased liquidity needs and maintain 

appropriate levels of liquidity in a Cover 

2 scenario in which LCH SA would be 

required, pursuant to the Framework, to 

step in and meet a defaulter’s obligation 

in the event of the assignment or 

exercise of equity American options. 

The Commission also believes that, by 

anticipating and ensuring that LCH SA 

meets its liquidity needs in this manner, 

the proposed rule change should 

facilitate LCH SA’s ability to meet its 

obligations as a central counterparty in 

stressed situations, which, in turn, 

should allow LCH SA to continue to 

meet its obligation to promptly and 

accurately clear and settle securities 

transactions in such situations. 

In addition, the proposed rule change 

should help mitigate the funding risk 

that may arise when equity American 

options are exercised before expiry and 

settled during the liquidation period of 

a defaulting clearing member, which in 

turn should help LCH SA safeguard 

securities and funds for which it is 

responsible. 

For the reasons stated above, the 

Commission believes that the proposed 

rule change is consistent with Section 

17A(b)(3)(F) of the Act.18

B. Consistency With Rule 17Ad– 

22(e)(7)(i) 

Rule 17Ad–22(e)(7)(i) requires that, 

among other things, LCH SA establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to, as applicable, 

effectively measure, monitor, and 

manage the liquidity risk that arises in 

or is borne by the covered clearing 

agency, including measuring, 

monitoring, and managing its settlement 

and funding flows on an ongoing and 

timely basis, and its use of intraday 

liquidity by maintaining sufficient 

liquid resources at the minimum in all 

relevant currencies to effect same-day, 

and, where appropriate, intraday and 

multiday settlement of payment 

obligations with a high degree of 

confidence under a wide range of 

foreseeable stress scenarios, that 

includes, but is not limited to, the 

default of the participant family that 

would generate the largest aggregate 

payment obligation for LCH SA in 

extreme but plausible market 

conditions.19

As discussed above, LCH SA is 

proposing specific modifications to the 

Framework that would enable its daily 

LCR calculation to generate an 

enhanced liquidity need in a Cover 2 

scenario involving the physical 

settlement of equity American options. 

By using the daily LCR calculation 

process to determine in advance LCH 

SA’s liquidity needs in the event of the 

assignment and exercise of equity 

American options arising in a Cover 2 

scenario, the Commission believes the 

amended Framework should enhance 

LCH SA’s ability to determine whether 

it has sufficient resources to meet its 

liquidity needs should such a default 

occur, thus requiring LCH SA to step in 

and meet a defaulter’s payment 

obligation. The Commission believes 

that this should, in turn, enable LCH SA 

to avoid any potential disruptions to its 

operations caused by the liquidity needs 

arising from such a default. 

By applying both stressed and nonstressed scenarios to the underlying 

equities, and then selecting the option 

positions that are consistent with the 

two largest clearing members in terms of 

liquidity needs under both scenarios to 

determine the largest liquidity need, 

LCH SA’s daily LCR calculation process 

under the amended Framework should 

help LCH SA determine a more accurate 

amount to add to the current cash equity 

settlement amount in the LCR to cover 

a potential increase in liquidity needs 

arising from the physical settlement of 

equity American options that are 

exercised prior to expiry under stressed 

liquidity conditions. The Commission 

therefore believes that the amended 

Framework should enable LCH SA to 

maintain sufficient liquid resources to 

effect settlement of its payment 

obligations under a wide range of 

foreseeable stress scenarios, including 

the default of the participant family that 

would generate the largest aggregate 

payment obligation for LCH SA in 

extreme but plausible market 

conditions. 

For the above reasons, the 

Commission therefore finds that the 

proposed rule change is consistent with 

Rule 17Ad–22(e)(7)(i).20

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(b)(3)(F) of the Act 21 and 

Rule 17Ad–22(e)(7)(i) thereunder.22

It is therefore ordered pursuant to 

Section 19(b)(2) of the Act 23 that the 

proposed rule change (SR–LCH SA– 

2020–006) be, and hereby is, 

approved.24

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26783 Filed 12–4–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meetings 

TIME AND DATE: 2:00 p.m. on Wednesday, 

December 9, 2020. PLACE: The meeting 

will be held via remote means and/or at 

the Commission’s headquarters, 100 F 

Street NE, Washington, DC 20549. 

STATUS: This meeting will be closed to 

the public. 

MATTERS TO BE CONSIDERED: 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the closed meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

In the event that the time, date, or 

location of this meeting changes, an 

announcement of the change, along with 

the new time, date, and/or place of the 

meeting will be posted on the 

Commission’s website at https://

www.sec.gov. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) 

and (10) and 17 CFR 200.402(a)(3), 

(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and 

(a)(10), permit consideration of the 

scheduled matters at the closed meeting. 

The subject matter of the closed 

meeting will consist of the following 

topic: 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings; 


khammond on DSKJM1Z7X2PROD with NOTICES
78890 Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Notices 

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

2 17 CFR 240.19b–4. 

3The term ‘‘Proxy Portfolio Shares’’ means ‘‘a 

security that: (A) Represents an interest in an 

investment company registered under the 

Investment Company Act of 1940 (‘‘Investment 

Company’’) organized as an open- end management 

investment company, that invests in a portfolio of 

securities selected by the Investment Company’s 

investment adviser consistent with the Investment 

Company’s investment objectives and policies; (B) 

is issued in a specified aggregate minimum number 

in return for a deposit of a specified Proxy Basket 

and/or a cash amount with a value equal to the next 

determined net asset value; (C) when aggregated in 

the same specified minimum number, may be 

redeemed at a holder’s request, which holder will 

be paid specified Proxy Basket and/or a cash 

amount with a value equal to the next determined 

net asset value; and (D) the portfolio holdings for 

which are disclosed within at least 60 days 

following the end of every fiscal quarter.’’ 

4See Securities and Exchange Act Release No. 

34–89110 (June 22, 2020), 85 FR 38461 (June 26, 

2020) (SR–NASDAQ–2020–032) (the ‘‘Rule 

Proposal’’). The Rule Proposal was effective upon 

filing pursuant to Section 19(b)(3)(A)(iii) of the Act 

and Rule 19b–4(f)(6) thereunder and became 

operative 30 calendar days following the filing date 

of June 11, 2020. 

5See Nasdaq Rule 5605(b) (Independent 

Directors); Nasdaq Rule 5605(d) (Compensation 

Committee); Nasdaq Rule 5605(e) (Independent 

Director Oversight of Director Nominations); and 

Nasdaq Rule 5610 (Codes of Conduct). 

6Nasdaq Rule 5615(a)(6)(B) states: ‘‘For the 

purposes of this Rule 5600 Series only, the term 

‘‘Derivative Securities’’ is defined as the following: 

Exchange Traded Fund Shares (Rule 5704), 

Portfolio Depository Receipts and Index Fund 

Shares (Rule 5705); Equity Index-Linked Securities 

(Rule 5710(k)(i)), Commodity-Linked Securities 

(Rule 5710(k)(ii)), Fixed Income Index-Linked 

Securities (5710(k)(iii)), Futures-Linked Securities 

(5710(k)(iv)), Multifactor Index-Linked Securities 

(5710(k)(v)), Index-Linked Exchangeable Notes 

(Rule 5711(a)), Equity Gold Shares (Rule 5711(b)), 

Trust Certificates (Rule 5711(c)), Commodity-Based 

Trust Shares (Rule 5711(d)), Currency Trust Shares 

(Rule 5711(e)), Commodity Index Trust Shares 

(Rule 5711(f)), Commodity Futures Trust Shares 

(Rule 5711(g)), Partnership Units (Rule 5711(h)), 

Managed Trust Securities (Rule 5711(j)), SEEDS 

(Rule 5715), Trust Issued Receipts (Rule 5720), 

Managed Fund Shares (Rule 5735), and NextShares 

(Rule 5745). Derivative Securities are subject to 

certain exemptions to the Rule 5600 Series as 

described in Rule 5615(a)(6).’’ 

7 17 CFR 240.10A–3. 

8 15 U.S.C. 80a–31. 

Resolution of litigation claims; and 

Other matters relating to enforcement 

proceedings; and 

Disclosure of non-public information. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting agenda items that 

may consist of adjudicatory, 

examination, litigation, or regulatory 

matters. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information; please contact 

Vanessa A. Countryman from the Office 

of the Secretary at (202) 551–5400. 

Dated: December 2, 2020. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2020–26892 Filed 12–3–20; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90542; File No. SR– 

NASDAQ–2020–078] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Exempt 

Proxy Portfolio Shares From Certain 

Governance Requirements and Include 

Proxy Portfolio Shares to the List of 

Products Covered Under Nasdaq Rule 

4120 (Limit Up-Limit Down Plan and 

Trading Halts) 

December 1, 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 November 

19, 2020, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) 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 Exchange proposes to provide an 

exemption from certain governance 

requirements, as well as to include 

Proxy Portfolio Shares (listed on the 

Exchange pursuant to Nasdaq Rule 

5750) to the list of products covered 

under Nasdaq Rule 4120 (Limit UpLimit Down Plan and Trading Halts). 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, at the principal 

office of the Exchange, 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 recently adopted 

Nasdaq Rule 5750, which relates to the 

listing and trading of Proxy Portfolio 

Shares 3 on the Exchange.4 Nasdaq 

proposes to amend the definition of 

‘‘Derivative Securities’’ under Nasdaq 

Rule 5615(a)(6)(B) as well as certain 

portions of Nasdaq Rule 4120 to include 

and apply to a series of Proxy Portfolio 

Shares listed on the Exchange pursuant 

to Nasdaq Rule 5750. 

Nasdaq notes that the proposed rule 

change, as discussed below, results from 

the Exchange proposing to make 

conforming changes to its corporate 

governance requirements in order to 

accommodate the listing of Proxy 

Portfolio Shares. This will subject Proxy 

Portfolio Shares to the same corporate 

governance requirements as other 

exchange-traded products listed on the 

Exchange. 

Currently, Nasdaq Rule 5615(a)(5) 

provides management investment 

companies exemptions to certain 

corporate governance requirements.5

Nasdaq Rule 5615(a)(5) also provides 

that management investment companies 

that are Derivative Securities (as defined 

in Nasdaq Rule 5615(a)(6)(B)) 6 are also 

exempt from the additional 

requirements of Nasdaq Rule 5600 as 

outlined in Nasdaq Rule 5615(a)(6)(A). 

In addition to the exemptions found in 

Nasdaq Rule 5615(a)(5), Nasdaq Rule 

5615(a)(6)(A) also includes exemptions 

from the audit committee requirements 

in Nasdaq Rule 5605(c), except for the 

applicable requirements of SEC Rule 

10A–3.7

Index Fund Shares, Managed Fund 

Shares and Exchange Traded Fund 

Shares are all considered Derivative 

Securities and, therefore, exempt from 

the audit committee requirements set 

forth in Nasdaq Rule 5605(c). They are 

exempted from such requirements 

because they are otherwise subject to 

the accounting and auditing 

requirements of the Investment 

Company Act of 1940 (the ‘‘1940 Act’’), 

including Section 32(a).8

Proxy Portfolio Shares are also subject 

to the accounting and auditing 

requirements under the 1940 Act and 

are so similarly situated as Index Fund 

Shares, Managed Fund Shares and 

Exchange Traded Fund Shares, that the 

Exchange believes Proxy Portfolio 

Shares should be subject to, and exempt 

from, the same corporate governance 


khammond on DSKJM1Z7X2PROD with NOTICES