Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Notices 9557 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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–ICEEU–2021–003. 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 such 

filings will also be available for 

inspection and copying at the principal 

office of ICE Clear Europe and on ICE 

Clear Europe’s website at https://

www.theice.com/clear-europe/ 

regulation. 

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–ICEEU–2021–003 

and should be submitted on or before 

March 9, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

J. Mathew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02995 Filed 2–12–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91090; File No. SR–ICC– 

2021–004] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change Relating to the 

ICC Governance Playbook 

February 9, 2021. 

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 January 

29, 2021, ICE Clear Credit LLC (‘‘ICC’’) 

filed with the Securities and Exchange 

Commission the proposed rule change 

as described in Items I, II and III below, 

which Items have been prepared 

primarily by ICC. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The principal purpose of the 

proposed rule change is to update and 

formalize the ICC Governance Playbook. 

These revisions do not require any 

changes to the ICC Clearing Rules (the 

‘‘Rules’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, ICC 

included statements concerning the 

purpose of and basis for the proposed 

rule change, security-based swap 

submission, or advance notice and 

discussed any comments it received on 

the proposed rule change, securitybased swap submission, or advance 

notice. The text of these statements may 

be examined at the places specified in 

Item IV below. ICC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(a) Purpose 

ICC proposes to update and formalize 

the Governance Playbook. ICC believes 

such changes will facilitate the prompt 

and accurate clearance and settlement of 

securities transactions and derivative 

agreements, contracts, and transactions 

for which it is responsible. ICC proposes 

to update and formalize the Governance 

Playbook following Commission 

approval of the proposed rule change. 

The proposed rule change is described 

in detail as follows. 

The Governance Playbook 

consolidates governance arrangements 

set forth in ICC’s Rules, operating 

agreement, and other ICC policies and 

procedures. The Governance Playbook 

contains information regarding the 

governance structure at ICC, which 

includes the Board, committees, and 

management. The document is divided 

in six parts and sets out (i) the purpose 

of the document, (ii) an introduction to 

the ICC governance structure, (iii) 

information on the ICC Board of 

Managers (the ‘‘Board’’; each member a 

‘‘Manager’’); (iv) descriptions of the 

committees at ICC, (v) descriptions of 

the special purpose committees at ICC, 

and (vi) a revision history and 

appendix. 

The Board has sole responsibility for 

the control and management of ICC’s 

operations, subject only to prior 

consultation rights of the ICC Risk 

Committee and the ICC Risk 

Management Subcommittee as 

described in Chapter 5 of the ICC Rules. 

The Governance Playbook details 

reporting lines of relevant personnel to 

the Board as well as how the Board 

guides management with respect to 

strategic planning and priority setting. 

Additionally, the Governance Playbook 

describes the composition of the Board, 

and details the fitness standards 

required of each Board member and the 

Board as a whole. Such procedures are 

in place to ensure that the Board 

consists of suitable individuals having 

appropriate skills and incentives and 

that Managers have the appropriate 

experience, skills, and integrity 

necessary to discharge their Board 

responsibilities. The Governance 

Playbook describes the election 

procedures for new Managers and 

specifies who is responsible for electing 

new Managers and for ensuring such 

Managers meet the fitness standards. 

The Governance Playbook contains 

information regarding scheduling of 

meetings and meeting frequency, and 

lists all documents relevant to Board 

operations. The Governance Playbook 

sets forth the process for determining 

the independence of those Managers 

who are required to be independent. 

Additionally, the document lists the 

independence qualifications considered 

as part of such independence 

determinations and describes the annual 

questionnaire process each independent 

Manager is required to complete. The 

performance of the Board and its 

individual Managers is reviewed on an 

annual basis, through a self-evaluation 


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9558 Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Notices 

3 15 U.S.C. 78q–1. 

4 17 CFR 240.17Ad–22. 

5 15 U.S.C. 78q–1(b)(3)(F). 

6 Id. 

7 Id. 

8 17 CFR 240.17Ad–22. 

9 17 CFR 240.17Ad–22(e)(2). 

10 15 U.S.C. 78q–1. 

survey; the Governance Playbook 

describes this survey process. 

The Governance Playbook also 

contains information on required 

disclosures under relevant regulations. 

The arrangements in place at ICC ensure 

that all major decisions of the Board are 

clearly disclosed to clearing members, 

other relevant stakeholders, and ICC’s 

regulators. Further, major decisions of 

the Board having a broad market impact 

are clearly disclosed to the public. With 

respect to information made available to 

the public, ICC posts on its website 

relevant rules and material procedures 

and documents. ICC maintains a 

comprehensive public Disclosure 

Framework that describes its material 

rules, policies, and procedures 

regarding its legal, governance, risk 

management, and operating framework, 

which is updated every two years or 

more frequently following material 

changes to ICC’s systems or 

environment in which it operates. 

The Governance Playbook describes 

the Board’s role in reviewing the 

performance and compensation of 

management, who are responsible for 

executing the Board’s decisions 

throughout the year. As part of this 

process, the Board will consider 

whether management continues to have 

the appropriate experience, skills, and 

integrity necessary to discharge their 

responsibilities. 

Additionally, the Governance 

Playbook contains information 

regarding the roles and responsibilities 

of the various committees at ICC, 

including the Audit Committee, Risk 

Committee, Risk Management 

Subcommittee, Advisory Committee, 

Futures Commission Merchant (‘‘FCM’’) 

Executive Council, Participant Review 

Committee, Credit Review 

Subcommittee, New Initiatives 

Approval Committee, Operations 

Working Group, Trading Advisory 

Group, Business Continuity Planning 

(‘‘BCP’’) and Disaster Recovery (‘‘DR’’) 

Oversight Committee of the Compliance 

Committee, Risk Working Group, 

Compliance Committee, and Steering 

Committee. The Governance Playbook 

further details the membership 

composition and meeting frequency for 

each committee and contains a listing of 

all relevant committee documents 

(including, as applicable, a charter, 

meeting minutes, and agendas). As 

applicable, the Governance Playbook 

details procedures for electing new 

members to a committee. The 

Governance Playbook also includes 

procedures for the annual Audit 

Committee performance review and the 

annual reconstitution of the Risk 

Committee. 

Further, the Governance Playbook 

contains information regarding ICC’s 

special purpose committees, including 

the Business Conduct Committee, 

Regional CDS Committees, and the CDS 

Default Committee. The Governance 

Playbook contains a brief description of 

each special purpose committee, details 

membership composition and meeting 

frequency, and lists relevant committee 

documents. As applicable, the 

Governance Playbook contains 

information regarding the appointment 

of new members. 

Finally, the Governance Playbook 

includes a revision history and an 

appendix with relevant information, 

including a record of the roles, 

responsibilities, and required skills of 

key senior management and a template 

relating to the reconstitution of the Risk 

Committee. 

(b) Statutory Basis 

ICC believes that the proposed rule 

change is consistent with the 

requirements of Section 17A of the Act 3

and the regulations thereunder 

applicable to it, including the applicable 

standards under Rule 17Ad–22.4 In 

particular, Section 17A(b)(3)(F) of the 

Act 5 requires that the rule change be 

consistent with the prompt and accurate 

clearance and settlement of securities 

transactions and derivative agreements, 

contracts and transactions cleared by 

ICC, the safeguarding of securities and 

funds in the custody or control of ICC 

or for which it is responsible, and the 

protection of investors and the public 

interest. ICC believes that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

ICC, in particular, to Section 

17(A)(b)(3)(F),6 because the proposed 

rule change would promote governance 

of ICC that is effective and efficient and 

ensure that ICC has governance 

arrangements that are clear and 

transparent and promote its safety and 

efficiency. The proposed rule change 

details ICC’s governance structure and 

assigns ownership to responsible parties 

of relevant governance procedures, 

including those responsible for electing 

new Managers, for ensuring such 

Managers meet fitness standards, and 

for ensuring that management has the 

appropriate experience and skills 

necessary to discharge their 

responsibilities. The document 

describes fitness standards required of 

each Board member and the Board as a 

whole, the review of management, and 

the roles and responsibilities of the 

various committees at ICC. ICC believes 

that the Governance Playbook augments 

its governance procedures and ensures 

that it has clear and transparent 

governance arrangements that support 

its ability to provide clearing services 

and effectively manage the risks 

associated with discharging its 

responsibilities, thereby promoting the 

prompt and accurate clearance and 

settlement of securities transactions, 

derivatives agreements, contracts, and 

transactions; the safeguarding of 

securities and funds which are in the 

custody or control of ICC or for which 

it is responsible; and the protection of 

investors and the public interest. As 

such, the proposed rule change is 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions, derivatives 

agreements, contracts, and transactions; 

to contribute to the safeguarding of 

securities and funds associated with 

security-based swap transactions in 

ICC’s custody or control, or for which 

ICC is responsible; and, in general, to 

protect investors and the public interest 

within the meaning of Section 

17A(b)(3)(F) of the Act.7

The amendments would also satisfy 

relevant requirements of Rule 17Ad– 

22.8 Rule 17Ad–22(e)(2) 9 requires each 

covered clearing agency to establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to provide for 

governance arrangements that are (i) 

clear and transparent; (ii) clearly 

prioritize the safety and efficiency of the 

covered clearing agency; (iii) support 

the public interest requirements in 

Section 17A of the Act 10 applicable to 

clearing agencies, and the objectives of 

owners and participants; (iv) establish 

that the board of directors and senior 

management have appropriate 

experience and skills to discharge their 

duties and responsibilities; (v) specify 

clear and direct lines of responsibility; 

and (vi) consider the interests of 

participants’ customers, securities 

issuers and holders, and other relevant 

stakeholders of the covered clearing 

agency. The Governance Playbook 

clearly assigns and documents 

responsibility and accountability for 

governance actions and decisions and 

details reporting lines of relevant 

personnel to the Board. The Governance 

Playbook documents the role of the 

Board, relevant committees, and 


khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Notices 9559 

11 Id. 

12 17 CFR 240.17Ad–22(e)(2). 

13 17 CFR 240.17Ad–22(e)(23). 14 Id. 15 17 CFR 200.30–3(a)(12). 

management in the governance process 

in order to provide for clear and 

transparent governance arrangements 

that specify clear and direct lines of 

responsibility. Moreover, the 

governance arrangements set out in the 

document promote the safety and 

efficiency of ICC and support the public 

interest requirements in Section 17A of 

the Act 11 applicable to clearing 

agencies, and the objectives of owners 

and participants, by describing the 

roles, responsibilities, and required 

skills of the Board, committees, and 

management, thereby ensuring that such 

groups have the appropriate experience, 

skills, and integrity necessary to 

discharge their responsibilities and to 

ensure that ICC continues to provide 

safe and sound central counterparty 

services. Further, ICC’s governance 

structure, as set out in the Governance 

Playbook, is designed to provide a 

forum for ICC to receive feedback from 

multiple stakeholders as ICC’s 

committees are actively involved in the 

governance process to ensure that ICC’s 

rules, strategy, and major decisions 

reflect appropriately the interests of 

market participants and other relevant 

stakeholders. As such, ICC believes that 

the proposed rule change is consistent 

with the requirements of Rule 17Ad– 

22(e)(2).12

Rule 17Ad–22(e)(23) 13 requires each 

covered clearing agency to establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to provide for (i) 

publicly disclosing all relevant rules 

and material procedures, including key 

aspects of its default rules and 

procedures; (ii) providing sufficient 

information to enable participants to 

identify and evaluate the risks, fees, and 

other material costs they incur by 

participating in the covered clearing 

agency; (iii) publicly disclosing relevant 

basic data on transaction volume and 

values; (iv) a comprehensive public 

disclosure that describes its material 

rules, policies, and procedures 

regarding its legal, governance, risk 

management, and operating framework, 

accurate in all material respects at the 

time of publication; and (v) updating the 

public disclosure every two years, or 

more frequently following changes to its 

system or the environment in which it 

operates to the extent necessary to 

ensure statements previously provided 

remain accurate in all material respects. 

The Governance Playbook contains 

procedures regarding required 

disclosures to ensure transparency and 

availability of sufficient information to 

enable participants to identify and 

evaluate the risks, fees, and other 

material costs they incur by 

participating in ICC. The document 

requires that ICC post on its website 

relevant rules and material procedures 

and maintain a comprehensive public 

Disclosure Framework that describes its 

material rules, policies, and procedures 

regarding its legal, governance, risk 

management, and operating framework, 

which is updated every two years or 

more frequently following material 

changes to ICC’s systems or 

environment in which it operates. 

Therefore, ICC believes the proposed 

rule change is consistent with the 

requirements of Rule 17ad–22(e)(23) 

[sic].14

(B) Clearing Agency’s Statement on 

Burden on Competition 

ICC does not believe the proposed 

rule change would have any impact, or 

impose any burden, on competition. 

The proposed rule change to update and 

formalize the Governance Playbook will 

apply uniformly across all market 

participants. Therefore, ICC does not 

believe the proposed rule change would 

impose any burden on competition that 

is inappropriate in furtherance of the 

purposes of the Act. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments relating to the 

proposed rule change have not been 

solicited or received. ICC will notify the 

Commission of any written comments 

received by ICC. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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, security-based swap 

submission, or advance notice 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– 

ICC–2021–004 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–ICC–2021–004. 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 such 

filings will also be available for 

inspection and copying at the principal 

office of ICE Clear Credit and on ICE 

Clear Credit’s website at https://

www.theice.com/clear-credit/regulation. 

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–ICC–2021–004 and 

should be submitted on or before March 

9, 2021. 


khammond on DSKJM1Z7X2PROD with NOTICES
9560 Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Notices 

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

2 17 CFR 240.19b–4. 

3On November 27, 2020, FICC also filed the 

proposal contained in the proposed rule change as 

advance notice SR–FICC–2020–804 with the 

Commission pursuant to Section 806(e)(1) of the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act entitled the Payment, Clearing, and 

Settlement Supervision Act of 2010 (‘‘Clearing 

Supervision Act’’), 12 U.S.C. 5465(e)(1), and Rule 

19b–4(n)(1)(i) of the Act, 17 CFR 240.19b–4(n)(1)(i). 

Notice of filing of the advance notice and extension 

of the review period was published for comment in 

the Federal Register on January 6, 2021. Securities 

Exchange Act Release No. 90834 (December 31, 

2020), 86 FR 584 (January 6, 2021) (SR–FICC–2020– 

804). The proposal contained in the proposed rule 

change and the advance notice shall not take effect 

until all regulatory actions required with respect to 

the proposal are completed. 

4Securities Exchange Act Release No. 90568 

(December 4, 2020), 85 FR 79541 (December 10, 

2020) (SR–FICC–2020–017) (‘‘Notice’’). 

5See Letter from Christopher Killian, Managing 

Director, Securities Industry and Financial Markets 

Association, dated January 29, 2021, to Vanessa 

Countryman, Secretary, Commission, available at 

https://www.sec.gov/comments/sr-ficc-2020-017/ 

srficc2020017-8154310-226759.pdf; Letter from 

Christopher A. Iacovella, Chief Executive Officer, 

American Securities Association, dated January 28, 

2021, to Vanessa Countryman, Secretary, 

Commission, available at https://www.sec.gov/ 

comments/sr-ficc-2020-804/srficc2020804-8302307- 

228379.pdf; Letter from James Tabacchi, Chairman, 

Independent Dealer and Trader Association and 

Mike Fratantoni, Chief Economist, Senior Vice 

President, Mortgage Bankers Association, dated 

January 26, 2021, to Allison Herren Lee, Acting 

Chair, Commission, available at https://

www.sec.gov/comments/sr-ficc-2020-017/ 

srficc2020017-8290678-228219.pdf; Letter from 

Kelli McMorrow, Head of Government Affairs, 

American Securities Association, dated December 

18, 2020, to Vanessa Countryman, Secretary, 

Commission, available at https://www.sec.gov/ 

comments/sr-ficc-2020-017/srficc2020017-8173139- 

227003.pdf; Letter from Pete Mills, Senior Vice 

President, Mortgage Bankers Association, dated 

December 17, 2020, to Jay Clayton, Chairman, 

Commission, available at https://www.sec.gov/ 

comments/sr-ficc-2020-017/srficc2020017-8155338- 

226778.pdf; Letter from Christopher Killian, 

Managing Director, Securities Industry and 

Financial Markets Association, dated December 16, 

2020, to Vanessa Countryman, Secretary, 

Commission, available at https://www.sec.gov/ 

comments/sr-ficc-2020-017/srficc2020017-8154310- 

226759.pdf; Letter from Curtis Richins, President & 

CEO, Mortgage Capital Trading, Inc., dated 

December 15, 2020, to Vanessa Countryman, 

Secretary, Commission, available at https://

www.sec.gov/comments/sr-ficc-2020-017/ 

srficc2020017-8156568-226839.pdf; and Letter from 

James Tabacchi, Chairman, Independent Dealer and 

Trader Association, dated December 10, 2020, to 

Vanessa Countryman, Secretary, Commission, 

available at https://www.sec.gov/comments/sr-ficc2020-017/srficc2020017-8127766-226454.pdf. See 

comments on the proposed rule change (SR–FICC– 

2020–017), available at https://www.sec.gov/ 

comments/sr-ficc-2020-017/srficc2020017.htm. 

Because the proposal contained in the proposed 

rule change was also filed as an advance notice, 

supra note 3, the Commission is considering all 

public comments received on the proposal 

regardless of whether the comments were submitted 

to the advance notice or the proposed rule change. 

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

7Securities Exchange Act Release No. 90794 

(December 23, 2020), 85 FR 86591 (December 30, 

2020) (SR–FICC–2020–017). 

8 15 U.S.C. 78s(b)(2)(B). 

9The vast majority of agency MBS trading occurs 

in a forward market, on a ‘‘to-be-announced’’ or 

‘‘TBA’’ basis. In a TBA trade, the seller of MBS 

agrees on a sale price, but does not specify which 

particular securities will be delivered to the buyer 

on settlement day. Instead, only a few basic 

characteristics of the securities are agreed upon, 

such as the MBS program, maturity, coupon rate, 

and the face value of the bonds to be delivered. 

10Although FICC expects its margin methodology 

to cover projected liquidation losses at a 99 percent 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02994 Filed 2–12–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91092; File No. SR–FICC– 

2020–017] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Instituting Proceedings To Determine 

Whether To Approve or Disapprove a 

Proposed Rule Change To Modify the 

Calculation of the MBSD VaR Floor To 

Incorporate a Minimum Margin Amount 

February 9, 2021. 

I. Introduction 

On November 20, 2020, Fixed Income 

Clearing Corporation (‘‘FICC’’) 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–FICC–2020–017 to introduce 

a new ‘‘Minimum Margin Amount’’ to 

complement the existing VaR Floor 

calculation.3 The proposed rule change 

was published for comment in the 

Federal Register on December 10, 

2020.4 The Commission has received 

comment letters on the proposed rule 

change.5 On December 23, 2020, 

pursuant to Section 19(b)(2) of the Act,6

the Commission designated a longer 

period within which to approve, 

disapprove, or institute proceedings to 

determine whether to approve or 

disapprove the proposed rule change 

and the Commission designated a longer 

period for comment on the proposed 

rule change.7 This order institutes 

proceedings, pursuant to Section 

19(b)(2)(B) of the Act,8 to determine 

whether to approve or disapprove the 

proposed rule change. 

II. Summary of the Proposed Rule 

Change 

A. Background 

FICC, through its Mortgage-Backed 

Securities Division (‘‘MBSD’’), serves as 

a central counterparty (‘‘CCP’’) and 

provider of clearance and settlement 

services for the non-private label 

mortgage-backed securities markets. A 

key tool that FICC uses to manage its 

respective credit exposures to its 

members is collecting margin from each 

member. The aggregated amounts of all 

members’ margin constitutes the 

Clearing Fund, which FICC would 

access should a defaulted member’s 

own margin be insufficient to satisfy 

losses to the CCP caused by the 

liquidation of that member’s portfolio. 

Each member’s margin consists of a 

number of applicable components, 

including a value-at-risk (‘‘VaR’’) Charge 

designed to capture the potential market 

price risk associated with the securities 

in a member’s portfolio. The VaR Charge 

is typically the largest of the margin 

components. 

To determine the VaR Charge, FICC 

generally uses a risk-based calculation 

designed to quantify the risks related to 

the volatility of market prices associated 

with the securities in a member’s 

portfolio. However, FICC also uses a 

haircut-based calculation to determine a 

VaR Floor, which replaces the riskbased calculation to become a member’s 

VaR Charge in the event that the VaR 

Floor is greater than the amount 

determined by the risk-based 

calculation, operating as a minimum 

VaR Charge. FICC uses the VaR Floor to 

mitigate the risk that the risk-based 

calculation does not result in margin 

amounts that accurately reflect FICC’s 

applicable credit exposure, which may 

occur in certain member portfolios 

containing long and short positions in 

different asset classes that share a high 

degree of historical price correlation. 

B. Minimum Margin Amount 

FICC is proposing to introduce a new 

calculation called the ‘‘Minimum 

Margin Amount’’ to complement the 

existing VaR Floor calculation. Under 

the proposal, FICC would revise the 

existing definition of the VaR Floor to 

be the greater of (1) the current VaR 

Floor calculation, and (2) the Minimum 

Margin Amount. The Minimum Margin 

Amount would enhance FICC’s margin 

collection during periods of market 

volatility, particularly when TBA 9 price 

changes significantly exceed those 

implied by the VaR model risk factors, 

such as rates and option-adjusted 

spread. FICC observed this situation 

occur during March and April 2020, 

with the result that margin amounts 

collected were not sufficient to mitigate 

FICC’s credit exposure to its members’ 

portfolios.10 The Minimum Margin 


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