82490 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

1See, e.g., Report of the Senate Committee on 

Banking, Housing, and Urban Affairs regarding The 

Restoring American Financial Stability Act of 2010, 

S. Rep. No. 111–176 at 34 (stating that ‘‘[s]ome parts 

of the OTC market may not be suitable for clearing 

and exchange trading due to individual business 

needs of certain users. Those users should retain 

the ability to engage in customized, uncleared 

contracts while bringing in as much of the OTC 

market under the centrally cleared and exchangetraded framework as possible.’’). 

2See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(2)(C)) (‘‘[t]he 

Commission shall * * * review each submission 

made under subparagraphs (A) and (B), and 

determine whether the security-based swap, or 

group, category, type, or class of security-based 

swaps, described in the submission is required to 

be cleared.’’). 

3See 15 U.S.C. 78s(b) and 12 U.S.C. 5465(e). 

4See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(1)). The Dodd-Frank 

Act does not require rulemaking with respect to 

Commission-initiated Reviews. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240 and 249 

[Release No. 34–63557; File No. S7–44–10] 

RIN 3235–AK87 

Process for Submissions for Review of 

Security-Based Swaps for Mandatory 

Clearing and Notice Filing 

Requirements for Clearing Agencies; 

Technical Amendments to Rule 19b–4 

and Form 19b–4 Applicable to All SelfRegulatory Organizations 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: In accordance with Section 

763(a) of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 

2010 (‘‘Dodd-Frank Act’’), the Securities 

and Exchange Commission 

(‘‘Commission’’) is proposing rules 

under the Securities Exchange Act of 

1934 (‘‘Exchange Act’’) to specify the 

process for a registered clearing agency’s 

submission for review of any securitybased swap, or any group, category, type 

or class of security-based swaps, that the 

clearing agency plans to accept for 

clearing, the manner of notice the 

clearing agency must provide to its 

members of such submission and the 

procedure by which the Commission 

may stay the requirement that a 

security-based swap is subject to 

mandatory clearing while the clearing of 

the security-based swap is reviewed. 

The Commission also is proposing to 

specify that when a security-based swap 

is required to be cleared, the submission 

of the security-based swap for clearing 

must be for central clearing to a clearing 

agency that functions as a central 

counterparty. In addition, the 

Commission is proposing rules to define 

and describe when notices of proposed 

changes to rules, procedures or 

operations are required to be filed by 

designated financial market utilities in 

accordance with Section 806(e) of Title 

VIII of the Dodd-Frank Act and to set 

forth the process for filing such notices 

with the Commission. Furthermore, the 

Commission is proposing rules to make 

conforming changes as required by the 

amendments to Section 19(b) of the 

Exchange Act contained in Section 916 

of the Dodd-Frank Act. 

DATES: Comments should be received on 

or before February 14, 2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form(http://www.sec.gov/ 

rules/proposed.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–44–10 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number S7–44–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments also are 

available for Web site 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 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: Kim 

Allen, Attorney Fellow, Catherine 

Moore, Senior Special Counsel, Kenneth 

Riitho, Special Counsel or Andrew 

Bernstein, Attorney-Advisor, at (202) 

551–5710; Office of Clearance and 

Settlement, Division of Trading and 

Markets, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–7010. 

SUPPLEMENTARY INFORMATION: The DoddFrank Act seeks to ensure that, wherever 

possible and appropriate, derivatives 

contracts formerly traded exclusively in 

the over-the-counter (‘‘OTC’’) market be 

cleared.1 One key way in which the 

Dodd-Frank Act promotes clearing of 

such contracts is by setting forth a 

process by which the Commission 

would determine whether a securitybased swap is required to be cleared; if 

the Commission makes a determination 

that a security-based swap is required to 

be cleared, then parties may not engage 

in such security-based swap without 

submitting it for clearing unless an 

exception applies. 

The Commission may determine that 

a security-based swap is required to be 

cleared based on a review of a clearing 

agency’s submission regarding a 

security-based swap, or any group, 

category, type or class of security-based 

swaps, that the clearing agency plans to 

accept for clearing (i.e., a Security-Based 

Swap Submission (as defined below)).2

If the Commission determines that a 

security-based swap is not required to 

be cleared, such security-based swap 

may still be cleared on a non-mandatory 

basis by the clearing agency if the 

clearing agency has rules that permit it 

to clear such security-based swap.3 In 

addition, paragraph (b)(1) of new 

Section 3C of the Exchange Act, as 

added by Section 763(a) of the DoddFrank Act (‘‘Exchange Act Section 3C’’) 

provides that ‘‘[t]he Commission on an 

ongoing basis shall review each 

security-based swap, or any group, 

category, type, or class of security-based 

swaps to make a determination that 

such security-based swap, or group, 

category, type, or class of security-based 

swaps should be required to be cleared’’ 

(‘‘Commission-initiated Review’’).4

Consistent with the policy objective of 

the Dodd-Frank Act to bring securitybased swaps into a central clearing 

environment where appropriate, the 

Commission is proposing to amend Rule 

19b–4 under the Exchange Act to 

incorporate two new requirements 

applicable to clearing agencies under 

Exchange Act Section 3C, and under 

Section 806(e) of the Dodd-Frank Act 

(‘‘Section 806(e)’’). The proposed 

amendments to Rule 19b–4 would 

mandate that submissions required 

under Exchange Act Section 3C for a 

security-based swap, or any group, 

category, type or class of security-based 

swaps, that a clearing agency plans to 

accept for clearing (‘‘Security-Based 

Swap Submissions’’) and advance 

notices required under Section 806(e) of 

proposed changes to rules, procedures 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82491 

5The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Pub. L. 111–203, H.R. 

4173). 

6See Public Law 111–203, Preamble. 

7See, e.g, Report of the Senate Committee on 

Banking, Housing, and Urban Affairs regarding The 

Restoring American Financial Stability Act of 2010, 

S. Rep. No. 111–176 at 29 (2010) (stating that 

‘‘[m]any factors led to the unraveling of this 

country’s financial sector and the government 

intervention to correct it, but a major contributor to 

the financial crisis was the unregulated [OTC] 

derivatives market.’’) 

8Section 712(d) of the Dodd-Frank Act provides 

that the Commission and the CFTC, in consultation 

with the Board of Governors of the Federal Reserve 

System, shall jointly further define the terms 

‘‘swap,’’ ‘‘security-based swap,’’ ‘‘swap dealer,’’ 

‘‘security-based swap dealer,’’ ‘‘major swap 

participant,’’ ‘‘major security-based swap 

participant,’’ ‘‘eligible contract participant,’’ and 

‘‘security-based swap agreement.’’ These terms are 

defined in Sections 721 and 761 of the Dodd-Frank 

Act and, with respect to the term ‘‘eligible contract 

participant,’’ in Section 1a(18) of the Commodity 

Exchange Act, 7 U.S.C. 1a(18), as re-designated and 

amended by Section 721 of the Dodd-Frank Act. 

Further, Section 721(c) of the Dodd-Frank Act 

requires the CFTC to adopt a rule to further define 

the terms ‘‘swap,’’ ‘‘swap dealer,’’ ‘‘major swap 

participant,’’ and ‘‘eligible contract participant,’’ and 

Section 761(b) of the Dodd-Frank Act permits the 

Commission to adopt a rule to further define the 

terms ‘‘security-based swap,’’ ‘‘security-based swap 

dealer,’’ ‘‘major security-based swap participant,’’ 

and ‘‘eligible contract participant,’’ with regard to 

security-based swaps, for the purpose of including 

transactions and entities that have been structured 

to evade Title VII of the Dodd-Frank Act. Finally, 

Section 712(a) of the Dodd-Frank Act provides that 

the Commission and CFTC, after consultation with 

the Board, shall jointly prescribe regulations 

regarding ‘‘mixed swaps’’ as may be necessary to 

carry out the purposes of Title VII. To assist the 

Commission and CFTC in further defining the terms 

specified above, and to prescribe regulations 

regarding ‘‘mixed swaps’’ as may be necessary to 

carry out the purposes of Title VII, the Commission 

and the CFTC have requested comment from 

interested parties. See Securities Exchange Act 

Release No. 62717 (Aug. 13, 2010), 75 FR 51429 

(Aug. 20, 2010) (Advance Joint Notice of Proposed 

Rulemaking Regarding Definitions Contained in 

Title VII of the Dodd-Frank Act). 

9See, e.g., Financial Stability Board, 

Implementing OTC Derivatives Market Reforms 

(Oct. 25, 2010) available at http:// 

www.financialstabilityboard.org/publications/ 

r_101025.pdf. 

10As previously noted, the Dodd-Frank Act seeks 

to ensure that, wherever possible and appropriate, 

derivatives contracts formerly traded exclusively in 

the OTC market be cleared. See Letter from 

Christopher Dodd, Chairman, Committee on 

Banking, Housing and Urban Affairs, United States 

Senate and Blanche Lincoln, Chairman, Committee 

on Agriculture, Nutrition, and Forestry, United 

States Senate, to Barney Frank, Chairman, Financial 

Services Committee, United States House of 

Representatives and Colin Peterson, Chairman, 

Committee on Agriculture, United States House of 

Representatives (June 30, 2010) (on file with the 

United States Senate). 

11The term ‘‘clearing agency’’ means any person 

who acts as an intermediary in making payments 

or deliveries or both in connection with 

transactions in securities or who provides facilities 

for the comparison of data regarding the terms of 

settlement of securities transactions, to reduce the 

number of settlements of securities transactions, or 

the allocation of securities settlement 

responsibilities. Such term also means any person, 

such as a securities depository, who (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). 

12See id. An entity that acts as a CCP for 

securities transactions is a clearing agency as 

defined in the Exchange Act and is required to 

register with the Commission. 

13See Cecchetti, Gyntelberg and Hollanders, 

Central counterparties for over-the-counter 

derivatives, BIS Quarterly Review, September 2009, 

available at http://www.bis.org/publ/qtrpdf/ 

r_qt0909f.pdf. 

or operations of financial market 

utilities (‘‘Advance Notices’’) be filed 

with the Commission on Form 19b–4. 

The proposed amendments to Rule 19b– 

4 also would specify the manner of 

notice the clearing agency must provide 

to its members of Security-Based Swap 

Submissions. 

Additionally, the Commission is 

proposing two related rules under 

Exchange Act Section 3C. Proposed 

Rule 3Ca–1 would establish the 

procedure by which the Commission, at 

the request of a counterparty or on its 

own initiative, may stay the requirement 

that a security-based swap is subject to 

mandatory clearing. Proposed Rule 3Ca– 

2 is intended to prevent evasions of the 

clearing requirement by specifying that 

security-based swaps required to be 

cleared must be submitted for central 

clearing to a clearing agency that 

functions as a central counterparty. 

Finally, the Commission is proposing 

technical, conforming and clarifying 

amendments to Rule 19b–4 and Form 

19b–4 to conform the rule and form 

with new deadlines and approval, 

disapproval and temporary suspension 

standards with respect to proposed rule 

changes filed under Section 19(b) of the 

Exchange Act, as modified by Section 

916 of the Dodd-Frank Act (‘‘Exchange 

Act Section 19(b)’’). 

I. Introduction 

On July 21, 2010, the President signed 

the Dodd-Frank Act into law.5 The 

Dodd-Frank Act was enacted to, among 

other purposes, promote the financial 

stability of the United States by 

improving accountability and 

transparency in the financial system and 

by providing for enhanced regulation 

and oversight of institutions designated 

as systemically important.6 Title VII and 

Title VIII of the Dodd-Frank Act are 

intended to further these goals and to 

mitigate systemic risk in part by 

imposing new requirements with 

respect to clearance and settlement 

systems. 

Title VII of the Dodd-Frank Act (‘‘Title 

VII’’) provides the Commission and the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) with enhanced 

authority to regulate OTC derivatives 

following the recent financial crisis.7

The Dodd-Frank Act is intended to 

bolster the existing regulatory structure 

and provide regulatory tools to oversee 

the OTC derivatives market, which has 

grown exponentially in recent years and 

is capable of affecting significant sectors 

of the U.S. economy. Title VII provides 

that the CFTC will regulate ‘‘swaps,’’ the 

Commission will regulate ‘‘securitybased swaps,’’ and the CFTC and the 

Commission will jointly regulate ‘‘mixed 

swaps.’’ 8

The OTC derivatives markets 

traditionally have been characterized by 

privately negotiated transactions 

entered into by two counterparties, in 

which each assumes the credit risk of 

the other counterparty.9 Clearing of 

swaps and security-based swaps was at 

the heart of Congressional reform of the 

derivatives markets in Title VII of the 

Dodd Frank Act.10 Clearing agencies are 

broadly defined under the Exchange Act 

and undertake a variety of functions.11

One such function is to act as a central 

counterparty (‘‘CCP’’), which is an entity 

that interposes itself between the 

counterparties to a trade.12 For example, 

when an OTC derivatives contract 

between two counterparties that are 

members of a CCP is executed and 

submitted for clearing, it is typically 

replaced by two new contracts— 

separate contracts between the CCP and 

each of the two original counterparties. 

At that point, the original counterparties 

are no longer counterparties to each 

other. Instead, each acquires the CCP as 

its counterparty, and the CCP assumes 

the counterparty credit risk of each of 

the original counterparties that are 

members of the CCP.13 Structured and 

operated appropriately, CCPs may 

improve the management of 

counterparty risk and may provide 

additional benefits such as multilateral 

netting of trades. 

Exchange Act Section 3C sets forth a 

mandatory clearing requirement for 

security-based swaps. This section 

requires the Commission to adopt rules 

for submissions for review of securitybased swaps that a clearing agency 

plans to accept for clearing for a 

determination by the Commission of 

whether the security-based swap (or 

group, category, type or class of 

security-based swaps) is required to be 

cleared, i.e., is subject to mandatory 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82492 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

14Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(2)(C)). 

15The definition of ‘‘financial market utility’’ in 

Section 803(6) of the Dodd-Frank Act contains a 

number of exclusions including but not limited to 

certain designated contract markets, registered 

futures associations, swap data repositories, swap 

execution facilities, national securities exchanges, 

national securities associations, alternative trading 

systems, security-based swap data repositories, 

security-based swap execution facilities, brokers, 

dealers, transfer agents, investment companies and 

futures commission merchants. 12 U.S.C. 

5462(6)(B). 

16Pursuant to Section 803(9) of the Dodd-Frank 

Act, a financial market utility is systemically 

important if the failure of or a disruption to the 

functioning of such financial market utility could 

create, or increase, the risk of significant liquidity 

or credit problems spreading among financial 

institutions or markets and thereby threaten the 

stability of the financial system of the United States. 

12 U.S.C. 5462(9). Under Section 804 of the DoddFrank Act, the Council has the authority, on a nondelegable basis and by a vote of not fewer than twothirds of the members then serving, including the 

affirmative vote of its chairperson, to designate 

those financial market utilities that the Council 

determines are, or are likely to become, 

systemically important. The Council may, using the 

same procedures as discussed above, rescind such 

designation if it determines that the financial 

market utility no longer meets the standards for 

systemic importance. Before making either 

determination, the Council is required to consult 

with the Board and the relevant Supervisory 

Agency (as determined in accordance with Section 

803(8) of the Dodd-Frank Act). Finally, Section 804 

of the Dodd-Frank Act sets forth the procedures for 

giving entities a 30-day notice and the opportunity 

for a hearing prior to a designation or rescission of 

the designation of systemic importance. 12 U.S.C. 

5463. 

17 12 U.S.C. 5465(e)(1)(A). 

18Section 803(8) of the Dodd-Frank Act defines 

the term ‘‘Supervisory Agency’’ in reference to the 

primary regulatory authority for the financial 

market utility. For example, Section 803(8) of the 

Dodd-Frank Act provides that the Commission is 

the Supervisory Agency for any financial market 

utility that is a Commission-registered clearing 

agency. See 12 U.S.C. 5462(8). To the extent that 

an entity is both a Commission-registered clearing 

agency and registered with another agency, such as 

a CFTC-registered derivatives clearing organization, 

the statute requires the two agencies to agree on one 

agency to act as the Supervisory Agency, and if the 

agencies cannot agree on which agency has primary 

jurisdiction, the Council shall decide which agency 

is the Supervisory Agency for purposes of the 

Dodd-Frank Act. 12 U.S.C. 5462(8). 

19 12 U.S.C. 5465(e)(1)(B). 

20 12 U.S.C. 5462(6). 

21See supra note 18 discussing the definition of 

‘‘Supervisory Agency’’ under the Dodd-Frank Act. 

22Pursuant to Section 814 of the Dodd Frank Act, 

Title VIII took effect on the date of enactment. 

23The definition of SRO in Section 3(a)(26) of the 

Exchange Act includes any registered clearing 

agency. 15 U.S.C. 78c(a)(26). All SROs are required 

to file proposed rule changes with the Commission 

under Exchange Act Section 19(b). 15 U.S.C. 78s(b). 

24SROs are required to file with the Commission, 

in accordance with rules prescribed by the 

Commission, copies of any proposed rule or any 

proposed change in, addition to, or deletion from 

the rules of the SRO (collectively referred to as a 

‘‘proposed rule change’’). 15 U.S.C. 78s(b)(1). 

25 17 CFR 240.19b–4(c). 

clearing.14 The Commission is 

proposing amendments to Rule 19b–4 

under the Exchange Act to implement 

the requirement in Exchange Act 

Section 3C that a clearing agency submit 

for Commission review each securitybased swap, or any group, category, type 

or class of security-based swaps, that the 

clearing agency plans to accept for 

clearing and provide notice to its 

members of such Security-Based Swap 

Submission. The Commission also is 

proposing new Rules 3Ca–1 and 3Ca–2 

under the Exchange Act. Proposed Rule 

3Ca–1 specifies the procedure for 

staying the clearing requirement 

applicable to a security-based swap, 

based either on an application of a 

counterparty to a security-based swap or 

on the Commission’s own initiative, 

until the Commission completes a 

review of the terms of the security-based 

swap and the clearing arrangement. 

Proposed Rule 3Ca–2 establishes a rule 

designed to prevent evasions of the 

clearing requirement by specifying that 

security-based swaps required to be 

cleared must be submitted for central 

clearing to a clearing agency that 

functions as a central counterparty. 

The Commission also is proposing 

rules to implement a filing requirement 

applicable to certain clearing agencies 

under Title VIII of the Dodd-Frank Act 

(‘‘Title VIII’’). Title VIII provides for 

enhanced regulation of financial market 

utilities, which include clearing 

agencies, that manage or operate a 

multilateral system for the purpose of 

transferring, clearing or settling 

payments, securities or other financial 

transactions among financial 

institutions or between financial 

institutions and the financial market 

utility.15 The regulatory regime in Title 

VIII will only apply, however, to 

financial market utilities that the 

Financial Stability Oversight Council 

(‘‘Council’’) designates as systemically 

important.16

Section 806(e)(1)(A) of Title VIII 

requires any financial market utility 

designated by the Council under Section 

804 of the Dodd-Frank Act as 

systemically important to file 60 days 

advance notice of changes to its rules, 

procedures or operations that could 

materially affect the nature or level of 

risk presented by the financial market 

utility.17 In addition, Section 

806(e)(1)(B) requires each Supervisory 

Agency 18 to adopt rules, in consultation 

with the Board of Governors of the 

Federal Reserve System (‘‘Board’’), that 

define and describe when designated 

financial market utilities are required to 

file Advance Notices with their 

Supervisory Agency.19

Clearing agencies registered with the 

Commission are financial market 

utilities, as defined in Section 803(6) of 

Title VIII; 20 thus, the Commission may 

be the Supervisory Agency of a clearing 

agency that is designated as 

systemically important by the Council 

(‘‘designated clearing agency’’).21 A 

clearing agency must begin filing 

Advance Notices pursuant to Section 

806(e) once the Council designates the 

clearing agency as systemically 

important.22 The Commission is 

proposing to implement the Section 

806(e) filing requirement by amending 

Rule 19b–4 to define and determine 

when Advance Notices must be filed by 

designated clearing agencies and to 

require that Advance Notices be filed on 

Form 19b–4. 

The Commission is proposing that 

Security-Based Swap Submissions and 

Advance Notices be filed with the 

Commission on Form 19b–4 using the 

existing Electronic Form 19b–4 Filing 

System (‘‘EFFS’’). Currently, EFFS is 

used by self-regulatory organizations 

(‘‘SROs’’), which include registered 

clearing agencies,23 to file proposed rule 

changes electronically with the 

Commission pursuant to Exchange Act 

Section 19(b).24 The Commission is 

proposing to require clearing agencies to 

use EFFS for the filing of Security-Based 

Swap Submissions and Advance 

Notices because registered clearing 

agencies already use EFFS for Exchange 

Act Section 19(b) filings and because 

there are similarities between the 

requirement to file proposed rule 

changes under Exchange Act Section 

19(b) and the new requirements under 

the Dodd-Frank Act to file SecurityBased Swap Submissions and Advance 

Notices. For example, a proposed rule 

change under Exchange Act Section 

19(b) includes a change in a ‘‘stated 

policy, practice, or interpretation’’ of an 

SRO rule. A ‘‘stated policy, practice, or 

interpretation’’ is defined in Exchange 

Act Section 19(b) as ‘‘any material 

aspect of the operation of the facilities 

of the SRO; or any statement made 

generally available to the membership 

of, to all participants in, or to persons 

having or seeking access * * * to 

facilities of, the self-regulatory 

organization (‘‘specified persons’’), or to 

a group or category of specified persons, 

that establishes or changes any 

standard, limit, or guideline with 

respect to (1) the rights, obligations, or 

privileges of specified persons * * *; or 

(2) the meaning, administration, or 

enforcement of an existing rule.’’ 25 In 

cases where accepting a security-based 

swap (or group, category, type or class 

of security-based swaps) for clearing 

constitutes a change in a ‘‘stated policy, 

practice, or interpretation’’ of the 

clearing agency, the clearing agency also 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82493 

26Public Law 111–203, section 916 (amending 

Exchange Act Section 19(b)(2)). 

27 Id. 

28See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(a)(1)). The requirement 

that a security-based swap be cleared stems from a 

determination by the Commission. Such 

determination may be made in connection with the 

review of a clearing agency’s submission regarding 

a security-based swap, or any group, category, type 

or class of security-based swaps, that the clearing 

agency plans to accept for clearing (i.e., a SecurityBased Swap Submission). See Public Law 111–203, 

section 763(a) (adding Exchange Act Section 

3C(b)(2)(C)) (‘‘[t]he Commission shall * * * review 

each submission made under subparagraphs (A) 

and (B), and determine whether the security-based 

swap, or group, category, type, or class of securitybased swaps, described in the submission is 

required to be cleared.’’). In addition, Exchange Act 

Section 3C(b)(1) provides that ‘‘[t]he Commission on 

an ongoing basis shall review each security-based 

swap, or any group, category, type, or class of 

security-based swaps to make a determination that 

such security-based swap, or group, category, type, 

or class of security-based swaps should be required 

to be cleared.’’ 

29See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(2)(A)). 

would be required to file a proposed 

rule change. Similarly, if a change that 

a designated clearing agency proposes to 

make that would require an Advance 

Notice would also constitute a change in 

a ‘‘stated policy, practice, or 

interpretation’’ of the clearing agency, 

the clearing agency would be required 

to file a proposed rule change in 

addition to the Advance Notice. 

The Commission also is proposing to 

amend Rule 19b–4 and Form 19b–4 to 

conform to the requirements specified 

in Exchange Act Section 19(b), as 

amended by Section 916 of the Dodd 

Frank Act.26 Section 916 provides new 

deadlines by which the Commission 

must publish and act upon proposed 

rule changes submitted by SROs and 

new standards for approval, disapproval 

and temporary suspension of proposed 

rule changes.27 In addition, the 

Commission is proposing a number of 

technical and clarifying amendments to 

Rule 19b–4 and Form 19b–4. 

In proposing these rules, the 

Commission is mindful that there are 

differences between the security-based 

swap market and the other securities 

markets that the Commission regulates. 

The Commission also is mindful that 

over time and as a result of Commission 

proposals to implement the Dodd-Frank 

Act, further development of the 

security-based swap market may alter 

the policy objectives and considerations 

relating to the clearing of security-based 

swaps. During the process of 

implementing the Dodd-Frank Act and 

beyond, the Commission therefore will 

closely monitor developments in the 

security-based swap market, including 

how the Security-Based Swap 

Submission and clearing processes 

interact with the evolving business and 

practices of security-based swap 

clearing agencies and other entities. 

II. Discussion of the Proposed Rules 

The Commission is proposing to 

adopt rules to implement the new 

requirements imposed by Title VII and 

Title VIII discussed above. In 

accordance with the requirements set 

forth in Exchange Act Section 3C (found 

in Title VII), the Commission is 

proposing amendments to Rule 19b–4 

and Form 19b–4 and new Rule 3Ca–1 

under the Exchange Act to establish 

processes for (i) clearing agencies 

registered with the Commission to 

submit for review each security-based 

swap, or any group, category, type or 

class of security-based swaps, that the 

clearing agency plans to accept for 

clearing for a determination by the 

Commission of whether the securitybased swap (or group, category, type or 

class of security-based swaps) is 

required to be cleared, and to determine 

the manner of notice the clearing agency 

must provide to its members of such 

submission and (ii) how the 

Commission may stay the requirement 

that a security-based swap is subject to 

mandatory clearing. The Commission 

also is proposing new Rule 3Ca–2 to 

prevent evasions of the clearing 

requirement. In addition, the 

Commission is proposing amendments 

to Rule 19b–4 and Form 19b–4 to 

implement the requirement, pursuant to 

Section 806(e), that any designated 

clearing agency for which the 

Commission is the Supervisory Agency 

will be required to provide advance 

notice to the Commission of changes to 

its rules, procedures or operations that 

could materially affect the nature or 

level of risks presented by the 

designated clearing agency. This release 

also discusses the filing requirements in 

Exchange Act Section 19(b), Exchange 

Act Section 3C, and Section 806(e) and 

a clearing agency’s obligation to fully 

comply with and seek a determination 

pursuant to each separate statutory 

requirement, when applicable. 

A. Security-Based Swap Submissions 

Exchange Act Section 3C creates, 

among other things, a clearing 

requirement with respect to securitybased swaps. Specifically, the section 

provides that ‘‘[i]t shall be unlawful for 

any person to engage in a security-based 

swap unless that person submits such 

security-based swap for clearing to a 

clearing agency that is registered under 

this Act or a clearing agency that is 

exempt from registration under this Act 

if the security-based swap is required to 

be cleared.’’ 28

Exchange Act Section 3C requires the 

Commission, not later than one year 

after the date of the enactment of the 

Dodd-Frank Act, to adopt rules for a 

clearing agency’s Security-Based Swap 

Submissions and to determine the 

manner of notice the clearing agency 

must provide to its members of such 

Security-Based Swap Submission.29 In 

connection with rulemaking related to 

Security-Based Swap Submissions, the 

Commission is proposing rules related 

to (i) the process for making SecurityBased Swap Submissions to the 

Commission, (ii) the substance of 

Security-Based Swap Submissions and 

(iii) the timing related to Security-Based 

Swap Submissions. The Commission 

also is proposing a process and timing 

for clearing agencies to provide notice to 

their members of Security-Based Swap 

Submissions. 

1. Process for Making Security-Based 

Swap Submissions to the Commission 

A clearing agency that plans to accept 

a security-based swap for clearing must 

file a Security-Based Swap Submission 

with the Commission for a 

determination by the Commission of 

whether a security-based swap, or a 

group, category, type or class of 

security-based swaps, is required to be 

cleared. As discussed in Section I, in 

cases where accepting a security-based 

swap (or group, category, type or class 

of security-based swaps) for clearing 

constitutes a change in a ‘‘stated policy, 

practice, or interpretation’’ of the 

clearing agency, the clearing agency also 

would be required to file a proposed 

rule change. In such cases, the 

Commission must determine (i) whether 

to approve the clearing agency’s 

proposed rule change to clear the 

applicable security-based swap and (ii) 

whether the security-based swap would 

be subject to the mandatory clearing 

requirement. 

The Commission is proposing to 

require clearing agencies to use EFFS 

and Form 19b–4 for Security-Based 

Swap Submissions. Clearing agencies, 

as SROs, are already required to file 

proposed rule changes on Form 19b–4 

on EFFS. Using the same filing process 

for Security-Based Swap Submissions 

would leverage existing technology and 

reduce the resources clearing agencies 

would have to expend on meeting 

Commission filing requirements. In 

addition, the Commission anticipates 

that a submission to clear a securitybased swap, or any group, category, type 

or class of security-based swaps, may be 

required to be filed under both 


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30A clearing agency rule is defined broadly in the 

Exchange Act to include the constitution, articles of 

incorporation, by-laws, and rules, or instruments 

corresponding to the foregoing. 15 U.S.C. 78c(a)(27). 

The Commission anticipates that a proposal to clear 

a new type, category or class of security-based swap 

will in many cases also be a change to the rules of 

a registered clearing agency that must be filed with 

the Commission for approval pursuant to Exchange 

Act Section 19(b). 

31See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(4)(A)). 

32Proposed Rule 19b–4(o)(3)(i). 33 15 U.S.C. 78q–1. 34See 15 U.S.C. 78s(b)(2)(C)(i), which provides 

that the Commission shall approve a proposed rule 

change of an SRO if it finds that such proposed rule 

change is consistent with the requirements of the 

Exchange Act and the rules and regulations issued 

thereunder that are applicable to such organization. 

35 Item 3(b) of Form 19b–4. 17 CFR 240.819. 

Exchange Act Section 19(b) has a similar but not 

identical requirement. It requires that an SRO 

provide a statement of the basis of the proposed 

rule change and provides that the Commission shall 

only approve a proposed rule change if it finds that 

it is consistent with the requirements of the 

Exchange Act and the rules and regulations 

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

36See 15 U.S.C. 78q–1(b)(3)(F). 

37 15 U.S.C. 78q–1(b)(3)(A), (B) and (F). 

38See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(4)(B)(i)–(v)). 

Exchange Act Section 19(b) and 

Exchange Act Section 3C. This is 

because a submission that must be filed 

with the Commission for a 

determination under new Exchange Act 

Section 3C also may qualify as a 

proposed rule change that must be filed 

with the Commission under Exchange 

Act Section 19(b).30 In other words, the 

two filing requirements are not mutually 

exclusive. Because a clearing agency 

may be required to file the same 

proposal under Exchange Act Section 

3C and Exchange Act Section 19(b), the 

Commission preliminarily believes that 

the most efficient use of the 

Commission’s and clearing agencies’ 

resources would be to require clearing 

agencies to use the existing Form 19b– 

4 filing process for both types of filings. 

Accordingly, the proposed rules related 

to the Security-Based Swap Submission 

process would be added to existing Rule 

19b–4, which currently governs the 

process for filing proposed rule changes. 

The Commission’s proposed approach 

would eliminate the need for multiple 

submissions to the Commission and 

could be accomplished by adding a box 

to Form 19b–4 that clearing agencies 

would check to indicate that they are 

making a Security-Based Swap 

Submission. As a practical matter, the 

Commission believes that when a 

security-based swap is submitted for 

review under Exchange Act Section 3C 

and concurrently filed under Exchange 

Act Section 19(b) as a proposed rule 

change, the two reviews will be carried 

out in tandem. In circumstances where 

no proposed rule change filing would be 

required, such as a case where a clearing 

agency’s rules already permit it to clear 

the security-based swap in question, 

EFFS and Form 19b–4 still would be 

used for the Security-Based Swap 

Submission. 

a. Substance of Security-Based Swap 

Submissions: Consistency With 

Exchange Act Section 17A 

In reviewing a Security-Based Swap 

Submission, the Commission is required 

to review whether the submission is 

consistent with Exchange Act Section 

17A.31 Accordingly, the Commission is 

proposing that each Security-Based 

Swap Submission contain a statement 

regarding how the submission is 

consistent with Exchange Act Section 

17A.32 Exchange Act Section 17A 

specifies, among other things, that the 

Commission is directed, having due 

regard for the public interest, the 

protection of investors, the safeguarding 

of securities and funds and maintenance 

of fair competition among brokers and 

dealers, clearing agencies, and transfer 

agents, to use its authority to facilitate 

the establishment of a national system 

for the prompt and accurate clearance 

and settlement of transactions in 

securities.33

The Commission must review 

whether a proposed rule change filed by 

an SRO pursuant to Exchange Act 

Section 19(b) is consistent with 

Exchange Act Section 17A.34 In 

connection with proposed rule changes, 

an SRO is required to ‘‘explain why the 

proposed rule change is consistent with 

the requirements of the [Exchange] Act 

and the rules and regulations 

thereunder applicable to the [SRO]. A 

mere assertion that the proposed rule 

change is consistent with those 

requirements is not sufficient.’’ 35

Presently, in complying with this 

requirement, registered clearing 

agencies, among other things, specify 

how the proposed rule change is 

consistent with the requirements under 

Exchange Act Section 17A(b)(3). All 

registered clearing agencies must 

comply with the standards in Exchange 

Act Section 17A, which include 

requirements under Exchange Act 

Section 17A(b)(3) to maintain rules for 

promoting the prompt and accurate 

clearance and settlement of securities 

transactions, assuring the safeguarding 

of securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible, fostering 

cooperation and coordination with 

persons engaged in the clearance and 

settlement of securities transactions, 

removing impediments to and 

perfecting the mechanism of a national 

system for the prompt and accurate 

clearance and settlement of securities 

transactions, and, in general, protecting 

investors and the public interest.36 A 

registered clearing agency is also 

required under Exchange Act Section 

17A(b)(3) to provide fair access to 

clearing and to have the capacity to 

facilitate the prompt and accurate 

clearance and settlement of securities 

transactions and derivative agreements, 

contracts, and transactions for which it 

is responsible, as well as to safeguard 

securities and funds in its custody or 

control or for which it is responsible.37

Under the proposed amendments to 

Rule 19b–4, a clearing agency would be 

required to specify how the SecurityBased Swap Submission is consistent 

with Exchange Act Section 17A and 

specifically the requirements applicable 

under subsection 17A(b)(3). 

b. Substance of Security-Based Swap 

Submissions: Quantitative and 

Qualitative Factors 

The Dodd-Frank Act requires the 

Commission to take into account several 

factors in addition to consistency with 

Exchange Act Section 17A in reviewing 

a clearing agency’s Security-Based Swap 

Submission.38 The Commission is 

proposing to require clearing agencies to 

provide information relevant to these 

factors through the proposed 

amendments to Rule 19b–4 and Form 

19b–4. Specifically, clearing agencies 

would be required to submit 

quantitative and qualitative information 

to assist the Commission in the 

consideration of the five factors 

Exchange Act Section 3C requires the 

Commission to take into account in 

reviewing a Security-Based Swap 

Submission, which include: 

(i) The existence of significant 

outstanding notional exposures, trading 

liquidity and adequate pricing data. 

(ii) The availability of a rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear the 

contract on terms that are consistent 

with the material terms and trading 

conventions on which the contact is 

then traded. 

(iii) The effect on the mitigation of 

systemic risk, taking into account the 

size of the market for such contract and 

the resources of the clearing agency 

available to clear the contract. 

(iv) The effect on competition, 

including appropriate fees and charges 

applied to clearing. 

(v) The existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant clearing agency or one or 


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39Proposed Rule 19b–4(o)(3)(ii). 

40For example, for some security-based swaps, 

industry standard documentation would include 

the applicable International Swaps and Derivatives 

Association, Inc. Master Agreement and any related 

asset-class-specific definitions. 

41The Commission has proposed Regulation 

SBSR, which contains a definition of ‘‘life cycle 

event.’’ See Exchange Act Release No. 63346 (Nov. 

19, 2010), 75 FR 75208 (Dec. 2, 2010) (‘‘Regulation 

SBSR—Reporting and Dissemination of SecurityBased Swap Information’’). 

42See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(a)(2) (‘‘[t]he rules of a 

clearing agency described in paragraph (1) shall— 

(A) prescribe that all security-based swaps 

submitted to the clearing agency with the same 

terms and conditions are economically equivalent 

within the clearing agency and may be offset with 

each other within the clearing agency; and (B) 

provide for non-discriminatory clearing of a 

security-based swap executed bilaterally or on or 

through the rules of an unaffiliated national 

securities exchange or security-based swap 

execution facility.’’). 

43Proposed Rule 19b–4(o)(3)(ii). 

44Proposed Rule 19b–4(o)(6)(i). 

45See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(4)(C)) and Proposed 

Rule 19b–4(o)(6)(ii). 

46See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(3)). Further, pursuant 

to proposed Rule 19b–4(o)(2), if any information 

submitted to the Commission by a clearing agency 

on Form 19b–4 were not complete or otherwise in 

compliance with Rule 19b–4 and Form 19b–4, such 

information would not be considered a SecurityBased Swap Submission and the Commission 

would be required to inform the clearing agency 

within twenty-one business days of such 

submission. 

47See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(3)). 

more of its clearing members with 

regard to the treatment of customer and 

security-based swap counterparty 

positions, funds, and property.39

Each Security-Based Swap 

Submission would be required to 

address the factors listed above to the 

extent they are applicable to the 

security-based swap, the clearing agency 

and the market. 

For example, in connection with the 

discussion responsive to factor (i) above, 

the clearing agency could address 

pricing sources, models and procedures 

demonstrating an ability to obtain price 

data to measure credit exposures in a 

timely and accurate manner, as well as 

measures of historical market liquidity 

and trading activity, and expected 

market liquidity and trading activity if 

the security-based swap is required to 

be cleared (including information on the 

sources of such measures). With respect 

to the discussion of factor (ii) above, the 

statement describing the availability of 

a rule framework could include a 

discussion of the rules, policies or 

procedures applicable to the clearing of 

the relevant security-based swap. 

Additionally, the discussion of credit 

support infrastructure could include the 

methods to address and communicate 

requests for, and posting of, collateral. 

With respect to factor (iii) above, the 

discussion of systemic risk could 

include a statement on the clearing 

agency’s risk management procedures, 

including among other things the 

measurement and monitoring of credit 

exposures, initial and variation margin 

methodology, methodologies for stress 

testing and back testing, settlement 

procedures and default management 

procedures. With respect to factor (iv) 

above, the discussion of fees and 

charges could address any volume 

incentive programs that may apply or 

impact the fees and charges. With 

respect to factor (v) above, the 

discussion could address segregation of 

accounts and all other customer 

protection measures under insolvency. 

In describing the security-based swap, 

or any group, category, type or class of 

security-based swaps, that a clearing 

agency plans to accept for clearing, the 

clearing agency could include the 

relevant product specifications, 

including copies of any standardized 

legal documentation, generally accepted 

contract terms,40 standard practices for 

managing and communicating any life 

cycle events associated with the 

security-based swap and related 

adjustments,41 and the manner in which 

the information contained in the 

confirmation of the security-based swap 

trade is transmitted. The clearing agency 

also could discuss its financial and 

operational capacity to provide clearing 

services to all customers subject to the 

clearing requirements as applicable to 

the particular security-based swap. 

Finally, the clearing agency could 

include an analysis of the effect of a 

clearing requirement on the market for 

the group, category, type, or class of 

security-based swaps, both domestically 

and globally, including the potential 

effect on market liquidity, trading 

activity, use of security-based swaps by 

direct and indirect market participants 

and any potential market disruption or 

benefits. This analysis could include 

whether the members of the clearing 

agency are operationally and financially 

capable of absorbing clearing business 

(including indirect access market 

participants) that may result from a 

determination that the security-based 

swap (or group, category, type or class 

of security-based swaps) is required to 

be cleared. 

c. Substance of Security-Based Swap 

Submissions: Open Access 

New Exchange Act Section 3C also 

requires that the rules of a clearing 

agency that clears security-based swaps 

subject to the clearing requirement 

provide for open access.42 In the course 

of reviewing a Security-Based Swap 

Submission, the Commission may assess 

whether a clearing agency’s rules 

provide for open access, particularly 

with respect to the relevant SecurityBased Swap Submission. Accordingly, 

the proposed rule provides that the 

Security-Based Swap Submission must 

include a statement regarding how a 

clearing agency’s rules: 

(i) Prescribe that all security-based 

swaps submitted to the clearing agency 

with the same terms and conditions are 

economically equivalent within the 

clearing agency and may be offset with 

each other within the clearing agency; 

and 

(ii) Provide for non-discriminatory 

clearing of a security-based swap 

executed bilaterally or on or through the 

rules of an unaffiliated national 

securities exchange or security-based 

swap execution facility.43

In making a determination, the 

Commission proposes to take into 

account the factors specified in 

Exchange Act Section 3C and any 

additional information the Commission 

determines to be appropriate. The 

proposed rule also requires a clearing 

agency to provide any additional 

information requested by the 

Commission as necessary to make a 

determination.44 The Commission 

believes that such a requirement would 

provide appropriate flexibility to 

facilitate our regulatory responsibilities. 

In making a determination of whether or 

not the clearing requirement would 

apply to the security-based swap, or any 

group, category, type, or class of 

security-based swaps, described in the 

submission, the Commission may 

require such terms and conditions as the 

Commission determines to be 

appropriate in the public interest.45

d. Timing Related to Security-Based 

Swap Submissions 

Under Exchange Act Section 3C, as 

added by Section 763(a) of the DoddFrank Act, the Commission is required 

to make its determination of whether a 

security-based swap described in a 

clearing agency’s Security-Based Swap 

Submission is required to be cleared not 

later than 90 days after receiving such 

Security-Based Swap Submission.46 The 

90-day determination period may be 

extended with the consent of the 

clearing agency making such SecurityBased Swap Submission.47 The 

Commission is required to make 

available to the public any SecurityBased Swap Submission it receives and 

to provide at least a 30-day public 

comment period ‘‘regarding its 


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82496 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

48See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(2)(C)). 

49See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(2)(A)). 

50Proposed Rule 19b–4(o)(5). 

51Commission rules currently require SROs to 

post on their Web sites a copy of any proposed rule 

change the SRO filed with the Commission, and any 

amendments thereto. Such posting is required 

within two business days after filing the proposed 

rule change with the Commission. See 17 CFR 

240.19b–4(l). In adopting this rule, the Commission 

stated that all market participants, investors and 

other interested parties should have access to 

proposed rule changes filed with the Commission, 

and any amendments, as soon as practicable, and 

that it did not believe that a two-business-day 

timeframe would be impractical or unduly 

burdensome on SROs. See Securities Exchange Act 

Release No. 50486 (Oct. 4, 2004), 69 FR 60287 (Oct. 

8, 2004) (Final Rules Regarding Proposed Rule 

Changes of Self-Regulatory Organizations). 

52Proposed Rule 19b–4(o)(5). 53See Items 5 and 9 (Exhibit 2) of Form 19b–4. 

17 CFR 240.819. 54 Item 5 of Form 19b–4. 17 CFR 240.819. 55Proposed Rule 19b–4(o)(4). In its release 

proposing rules to implement Section 723 of the 

Dodd-Frank Act, the CFTC has proposed a similar 

rule. 75 FR 67277 (November 2, 2010). 

determination whether the clearing 

requirement shall apply to the 

submission.’’ 48 This 30-day comment 

period enables the public to have an 

opportunity to comment on the 

Security-Based Swap Submission and to 

provide information for the Commission 

to consider as part of making its 

determination whether the clearing 

requirement should apply to the 

submission. Accordingly, the 

Commission proposes to make the 

Security-Based Swap Submission 

available for a 30-day public comment 

period within the 90-day determination 

period. The Commission would publish 

notice of the Security-Based Swap 

Submission in the Federal Register and 

publish notice on the Commission’s 

publicly-available Web site at http:// 

www.sec.gov. Such notice would 

include the solicitation of public 

comment. This proposed publication 

process would be consistent with the 

current process that is in place for 

proposed rule changes under Exchange 

Act Section 19(b)(2) and Rule 19b–4. 

e. Notice to Clearing Agency Members 

New Exchange Act Section 3C 

requires that a clearing agency provide 

notice to its members, in a manner 

determined by the Commission, of its 

Security-Based Swap Submissions.49 To 

meet the requirement of providing 

notice of Security-Based Swap 

Submissions to members, the 

Commission is proposing amendments 

to Rule 19b–4 that would require 

clearing agencies to post on their Web 

sites such submissions to the 

Commission, and any amendments 

thereto.50 This public posting would be 

required to be completed within two 

business days following the SecurityBased Swap Submission to the 

Commission. This timeframe is 

consistent with the notice requirement 

that currently applies to proposed rule 

changes,51 and the Commission believes 

that such timeframe would provide 

members of the clearing agency and the 

public with timely notice of the 

submission. The clearing agency would 

be required to maintain such material 

on its Web site until the Commission 

makes a determination regarding the 

Security-Based Swap Submission, the 

clearing agency withdraws the SecurityBased Swap Submission or the clearing 

agency is notified that the SecurityBased Swap Submission is not properly 

filed.52 These requirements should help 

ensure that submissions that are being 

actively considered by the Commission 

are readily available to the members of 

the clearing agency and the public and 

help provide for a more transparent 

process. 

The Commission notes that the 

current instructions for Form 19b–4 

require an SRO to file with the 

Commission copies of notices issued by 

the SRO soliciting comment on the 

proposed rule change and copies of all 

written comments on the proposed rule 

change received by the SRO (whether or 

not comments were solicited) from its 

members or participants. Any 

correspondence the SRO receives after it 

files a proposed rule change, but before 

the Commission takes final action on 

the proposed rule change, also is 

required to be filed with the 

Commission.53 The SRO is required to 

summarize the substance of all such 

comments received and respond in 

detail to any significant issues raised in 

the comments about the proposed rule 

change.54 The Commission is proposing 

that in connection with Security-Based 

Swap Submissions, clearing agencies 

would be subject to these same 

requirements. The Commission 

preliminarily believes that its proposal 

to apply such requirements in the 

instructions to Form 19b–4 to SecurityBased Swap Submissions would 

provide the Commission with an 

opportunity to consider the various 

viewpoints expressed by commenters by 

making sure relevant comments are 

included in the materials provided to 

the Commission. 

f. Submissions of a Group, Category, 

Type or Class of Security-Based Swaps 

The proposed amendments to Rule 

19b–4 and Form 19b–4 would require 

that clearing agencies submit securitybased swaps for review by group, 

category, type, or class to the extent it 

is practicable and reasonable to do so.55

Any aggregation would be required to be 

clearly described in a Security-Based 

Swap Submission so that market 

participants and the public know which 

security-based swaps may be subject to 

a clearing requirement. The Commission 

preliminarily believes that including 

multiple security-based swaps in each 

submission—to the extent that such 

groupings are practicable and 

reasonable (e.g., by taking into 

consideration appropriate risk 

management issues applicable to the 

aggregation)—would streamline the 

submission process for Commission 

staff and the clearing agencies. This in 

turn would allow more security-based 

swaps to be reviewed in a timely 

manner. 

Request for Comments 

The Commission generally requests 

comments on all aspects of the proposed 

amendments to Rule 19b–4 that would 

incorporate the process for making 

Security-Based Swap Submissions. In 

addition, the Commission requests 

comments on the following specific 

issues: 

• Are there specific considerations 

that the Commission should weigh more 

heavily in reviewing whether a 

Security-Based Swap Submission is 

consistent with Exchange Act Section 

17A? If so, what are such 

considerations? 

• Should the information included in 

this release as examples of the kinds of 

information the clearing agency should 

include in its Security-Based Swap 

Submission be required in all cases and 

incorporated into the rules? 

• To describe the security-based 

swap, or any group, category, type or 

class of security-based swaps, that a 

clearing agency plans to accept for 

clearing, should a clearing agency be 

required to include in its Security-Based 

Swap Submissions specific product 

specifications, including copies of any 

standardized legal documentation, 

generally accepted contract terms, 

standard practices for managing and 

communicating any life cycle events 

associated with the security-based swap 

and related adjustments, and the 

manner in which the information 

contained in the confirmation of the 

security-based swap trade is 

transmitted? If not, why not? Is there 

other information relating to the 

description of the security-based swaps 

that clearing agencies should be 

required to provide? If so, what 

information and why? Should this 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82497 

information be required in all cases and 

incorporated into the rules? 

• What specific information should a 

clearing agency be required to include 

in its Security-Based Swap Submissions 

regarding pricing sources, models and 

procedures demonstrating an ability to 

obtain price data to measure credit 

exposures in a timely and accurate 

manner, as well as measures of 

historical market liquidity and trading 

activity, and expected market liquidity 

and trading activity if the security-based 

swap is required to be cleared 

(including information on the sources of 

such measures)? Is there other 

information relating to pricing that 

clearing agencies should be required to 

provide? If so, what information and 

why? Should this information be 

required in all cases and incorporated 

into the rules? 

• What specific information should a 

clearing agency be required to include 

in its Security-Based Swap Submissions 

pertaining to the rules, policies or 

procedures applicable to the clearing of 

the relevant security-based swap? Is 

there other information relating to rule 

framework, capacity, operational 

expertise and resources the clearing 

agency should be required to provide? If 

so, what information and why? Should 

this information be required in all cases 

and incorporated into the rules? 

• Is there specific information a 

clearing agency should be required to 

include in its Security-Based Swap 

Submissions regarding the methods to 

address and communicate requests for, 

and posting of, collateral? Is there other 

information relating to collateral that 

the clearing agency should be required 

to provide? If so, what information and 

why? Should this information be 

required in all cases and incorporated 

into the rules? 

• What specific information should a 

clearing agency be required to include 

in its Security-Based Swap Submissions 

regarding the clearing agency’s risk 

management procedures, pertaining to 

among other things the measurement 

and monitoring of credit exposures, 

initial and variation margin 

methodology, methodologies for stress 

testing and back testing, settlement 

procedures and default management 

procedures? Is there other information 

relating to risk management that the 

clearing agency should be required to 

provide? If so, what information and 

why? Should this information be 

required in all cases and incorporated 

into the rules? 

• Should a clearing agency, in 

connection with each submission or in 

some circumstances, be required to 

include an independent validation of its 

margin methodology and its ability to 

maintain sufficient financial resources? 

Why or why not, or in which 

circumstances? If independent 

validation is required, how should the 

Commission assess the independence 

and technical expertise of the party 

providing the independent validation? 

What are the critical techniques, risk 

factors and components that should be 

covered by the model validation and 

why? If the clearing of the securitybased swap described in the SecurityBased Swap Submission would not 

require a change in the clearing agency’s 

margin methodology, do commenters 

believe it would be sufficient for the 

Commission to permit the clearing 

agency to refer to an applicable 

independent validation of the clearing 

agency’s margin methodology 

previously provided to the Commission 

with a statement explaining why the 

existing methodology does not require a 

change in connection with clearing the 

new security-based swap and how the 

current validation is still applicable in 

the context of the security-based swap 

the clearing agency plans to clear? If 

not, why not? 

• What information should a clearing 

agency be required to include in its 

Security-Based Swap Submissions 

regarding fees and charges and address 

any volume incentive programs that 

may apply or impact the fees and 

charges? Is there other information 

relating to fees and charges that the 

clearing agency should be required to 

provide? If so, what information and 

why? Should this information be 

required in all cases and incorporated 

into the rules? 

• Should a clearing agency be 

required to include in its Security-Based 

Swap Submission information regarding 

segregation of accounts and all other 

customer protection measures under 

insolvency? If not, why not? Is there 

other information relating to insolvency 

of the clearing agencies’ members the 

clearing agency should be required to 

provide? If so, what information and 

why? Should this information be 

required in all cases and incorporated 

into the rules? 

• Should a clearing agency be 

required to include in its Security-Based 

Swap Submission information on 

whether cross-margining is available to 

the clearing agency’s members with 

respect to their positions at other 

clearing agencies? If not, why not? What 

types of effects on competition are such 

cross-margining arrangements likely to 

have? Is there any specific information 

regarding cross-margining arrangements 

that the Commission should collect? If 

not, why not? If so, what information 

and why? Should this information be 

required in all cases and incorporated 

into the rules? 

• What information should a clearing 

agency be required to include in its 

Security-Based Swap Submission 

regarding its financial and operational 

capacity to provide clearing services to 

all customers subject to the clearing 

requirements as applicable to the 

particular security-based swap? Should 

this information be required to include 

an analysis of the effect of a clearing 

requirement on the market for the 

group, category, type, or class of 

security-based swaps, both domestically 

and globally, including the potential 

effect on market liquidity, trading 

activity, use of security-based swaps by 

direct and indirect market participants 

and any potential market disruption or 

benefits? Should it be required to 

include an analysis of whether the 

members of the clearing agency are 

operationally and financially capable of 

absorbing clearing business (including 

indirect access market participants) that 

may result from a determination that the 

security-based swap (or group, category, 

type or class of security-based swaps) is 

required to be cleared? If not, why not? 

Is there other information relating to 

capacity that the clearing agency should 

be required to provide? If so, what 

information and why? Should this 

information be required in all cases and 

incorporated into the rules? 

• Is the process for notice to clearing 

agency members by posting on the 

clearing agency Web site, as proposed 

by the Commission, adequate as a notice 

mechanism for members? If not, what 

should change? Is the two-day posting 

requirement appropriate to provide 

timely notice to members? Would a 

shorter or longer period be appropriate? 

• What other method of notice to 

clearing agency members could or 

should be required rather than Web site 

posting? 

• Should the Commission utilize the 

proposed rule change filing system for 

Security-Based Swap Submissions? 

What other methods of submitting 

Security-Based Swap Submissions to 

the Commission should the Commission 

consider and why? 

• What alternatives should the 

Commission consider to requiring 

clearing agencies to submit securitybased swaps for review by group, 

category, type, or class, to the extent it 

is practicable and reasonable to do so? 

• Should the Commission consider 

consolidating multiple Security-Based 

Swap Submissions from one clearing 

agency into a group, category, type, or 

class of Security-Based Swap 

Submissions, or subdividing a clearing 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82498 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

56See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(a)(1)). 

57See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(2)(C)) (‘‘[t]he 

Commission shall * * * review each submission 

made under subparagraphs (A) and (B), and 

determine whether the security-based swap, or 

group, category, type, or class of security-based 

swaps, described in the submission is required to 

be cleared.’’). 

58See 15 U.S.C. 78s(b) (proposed rule changes) 

and 12 U.S.C. 5465(e) (Advance Notices). 

59See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(1)). The Dodd-Frank 

Act does not require rulemaking with respect to 

Commission-initiated Reviews. 

60Proposed Rule 19b–4(o)(3)(ii). 

61See Section II.A.1.b for a discussion of the 

types of information that should be included in a 

Security-Based Swap Submission. 

62See Letter from Christopher Dodd, Chairman, 

Committee on Banking, Housing, and Urban Affairs, 

United States Senate and Blanche Lincoln, 

Chairman, Committee on Agriculture, Nutrition, 

and Forestry, United States Senate, to Barney Frank, 

Chairman, Financial Services Committee, United 

States House of Representatives and Collin 

Peterson, Chairman, Committee on Agriculture, 

United States House of Representatives (June 30, 

2010) (on file with the United States Senate) 

(‘‘Congress determined that clearing is at the heart 

of reform—bringing transactions and counterparties 

into a robust, conservative and transparent risk 

management framework. Congress also 

acknowledged that clearing may not be suitable for 

every transaction or every counterparty. End users 

who hedge their risks may find it challenging to use 

a standard derivative contract to exactly match up 

their risks with counterparties willing to purchase 

their specific exposures. Standardized derivative 

contracts may not be suitable for every 

transaction.’’). Additionally, and as discussed 

herein in Section II.A.1.a, Exchange Act Section 

3C(b)(4)(A) requires the Commission to review 

whether a Security-Based Swap Submission is 

consistent with Exchange Act Section 17A. 

63See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(b)(4)(B)). 

agency’s submission of a group, 

category, type, or class of security-based 

swaps, as appropriate, for review? 

• What information should the 

clearing agency include in its SecurityBased Swaps Submissions to identify 

the scope of the group, category, type or 

class of security-based swaps it plans to 

clear that will provide sufficient 

parameters to put people on notice that 

a security-based swap may be required 

to be cleared? 

• What characteristics of securitybased swaps should be common among 

security-based swaps in order to 

aggregate them by group, category, type 

or class? Would these characteristics be 

the same across asset classes such as 

security-based equities derivatives, 

credit derivatives and loan-based 

swaps? Should the Commission specify 

those attributes in the rule? 

• Are there any factors that would 

make aggregation more difficult? Would 

these be the same or different across 

asset classes? 

• Are there factors that may be 

clearing-agency specific with respect to 

aggregation? If so, what are those 

factors? 

As discussed above, Exchange Act 

Section 3C provides, among other 

things, for a determination by the 

Commission of whether security-based 

swaps are required to be cleared.56 The 

Commission may determine that a 

security-based swap is required to be 

cleared based on a review of a clearing 

agency’s submission regarding a 

security-based swap, or any group, 

category, type or class of security-based 

swaps, that the clearing agency plans to 

accept for clearing (i.e., a Security-Based 

Swap Submission).57 Consistent with 

proposal, if the Commission determines 

that a security-based swap is not 

required to be cleared, such securitybased swap may still be cleared on a 

non-mandatory basis by the clearing 

agency if the clearing agency has rules 

that permit it to clear such securitybased swap.58 In addition, Exchange Act 

Section 3C(b)(1) provides that ‘‘[t]he 

Commission on an ongoing basis shall 

review each security-based swap, or any 

group, category, type, or class of 

security-based swaps to make a 

determination that such security-based 

swap, or group, category, type, or class 

of security-based swaps should be 

required to be cleared’’ (i.e., a 

Commission-initiated Review).59

The proposed addition of paragraph 

(o) to Rule 19b–4 and related 

amendments to Form 19b–4 are 

intended to provide a process for 

Security-Based Swap Submissions. The 

Commission is required under the 

Dodd-Frank Act to adopt rules 

specifying the process for SecurityBased Swap Submissions. As part of the 

process of review of each SecurityBased Swap Submission (and in each 

Commission-initiated Review), the 

Commission must take into account the 

five factors specified in Exchange Act 

Section 3C(b)(4)(B): 

(i) The existence of significant 

outstanding notional exposures, trading 

liquidity and adequate pricing data. 

(ii) The availability of a rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear the 

contract on terms that are consistent 

with the material terms and trading 

conventions on which the contract is 

then traded. 

(iii) The effect on the mitigation of 

systemic risk, taking into account the 

size of the market for such contract and 

the resources of the clearing agency 

available to clear the contract. 

(iv) The effect on competition, 

including appropriate fees and charges 

applied to clearing. 

(v) The existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant clearing agency or one or 

more of its clearing members with 

regard to the treatment of customer and 

security-based swap counterparty 

positions, funds, and property.60

Proposed Rule 19b–4(o) and related 

amendments for Form 19b–4 would 

require clearing agencies to include in 

their Security-Based Swap Submissions 

information that will assist the 

Commission in the quantitative and 

qualitative assessment of the statutory 

factors listed above. The proposal also 

set forth examples of the information 

clearing agencies should include in 

addressing these five factors.61

Promoting clearing is a critical 

component of the reform mandated by 

the Dodd-Frank Act, which seeks to 

bring transactions and counterparties 

into a robust, conservative and 

transparent risk management 

framework.62 Exchange Act Section 

3C(b)(4)(B) 63 sets forth the factors the 

Commission is required to take into 

account in determining whether a 

security-based swap is required to be 

cleared or should be required to be 

cleared in connection with a SecurityBased Swap Submission or 

Commission-initiated Review, 

respectively. The Commission 

recognizes that in interpreting and 

applying these factors, it should be 

guided by the general principles 

underlying the Dodd-Frank Act, 

including in particular the goal of 

promoting clearing where appropriate. 

At the same time, the Commission is 

mindful that its application of these 

factors may have a significant effect on 

the market for individual security-based 

swaps. In addition, an overly broad or 

narrow application of the mandatory 

clearing requirement could undermine 

the policy objectives of the Dodd-Frank 

Act. For example, a premature 

determination that a security-based 

swap is subject to mandatory clearing 

may, in certain circumstances, limit the 

ability of certain market participants to 

utilize that product (including for risk 

management purposes) which in turn 

could ultimately result in less clearing 

and more limited use of the securitybased swap than might otherwise have 

been the case if it had been permitted 

to trade without being subject to a 

mandatory clearing requirement for a 

longer period of time. 

On the other hand, an overly narrow 

application of the mandatory clearing 

requirement would undermine the 

potential benefits of centralized clearing 

for counterparties and the marketplace 

generally that Exchange Act Section 3C 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82499 

64See S. Rep. No. 111–176 at 34 (stating that 

‘‘[s]ome parts of the OTC market may not be suitable 

for clearing and exchange trading due to individual 

business needs of certain users. Those users should 

retain the ability to engage in customized, 

uncleared contracts while bringing in as much of 

the OTC market under the centrally cleared and 

exchange-traded framework as possible. Also, OTC 

(contracts not cleared centrally) should still be 

subject to reporting, capital, and margin 

requirements so that regulators have the tools to 

monitor and discourage potentially risky activities, 

except in very narrow circumstances. These 

exceptions should be crafted very narrowly with an 

understanding that every company, regardless of 

the type of business they are engaged in, has a 

strong commercial incentive to evade regulatory 

requirements.’’). 

65See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(d)(1), which states that 

‘‘[t]he Commission shall prescribe rules under this 

section (and issue interpretations of rules 

prescribed under this section), as determined by the 

Commission to be necessary to prevent evasions of 

the mandatory clearing requirements under this 

Act.’’). 

66See supra note 11 discussing the definition of 

‘‘clearing agency’’ pursuant to Exchange Act Section 

3(a)(23)). 

67See Securities Exchange Act Release Nos. No. 

20221 (Sept. 23, 1983), 48 FR 45167 (October 3, 

1983), (Order Approving the Clearing Agency 

Registration of Four Depositories and Four Clearing 

Corporations) and 39829 (April 6, 1998), 63 FR 

17943 (April 13, 1998) (Confirmation and 

Affirmation of Securities Trades; Matching). 

68See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(a)(1)). 

69The Commission has identified the following 

entities and activities as falling within the 

definition of clearing agency: (i) Clearing 

corporations; (ii) securities depositories; and (iii) 

matching services. Structured and operated 

appropriately, CCPs may improve the management 

of counterparty risk and may provide additional 

benefits such as multilateral netting of trades. See 

supra note 67 and Section I.A. 

was intended to provide. Moreover, 

because security-based swaps that are 

subject to the clearing requirement also 

are required to be executed on a 

national securities exchange or a swap 

execution facility if such an exchange or 

facility makes the security-based swap 

available to trade, imposing a clearing 

requirement could have a substantial 

impact generally on the trading 

environment of the relevant 

instruments, which in turn could affect 

the relative transparency and liquidity 

of those instruments in ways that may 

promote, or detract from, the overall 

goals of the Dodd-Frank Act. 

In short, the Commission recognizes, 

as did Congress, that a determination 

that clearing is required could have 

ancillary consequences. The DoddFrank Act includes an exception from 

the mandatory clearing requirement to 

help address concerns regarding 

circumstances when clearing may not be 

appropriate.64

However, because the Commission 

must still apply the statutory factors, in 

light of the policy goals of the DoddFrank Act, to determine whether 

clearing is required, the Commission is 

seeking comment generally on how the 

factors identified in the statute should 

be applied in making determinations as 

to whether particular security-based 

swaps are or should be required to be 

cleared. 

Request for Comments 

• Are there specific considerations 

that the Commission should weigh more 

heavily in making a determination that 

a security-based swap is, or should be, 

required to be cleared? If so, what are 

such considerations and why should 

they be given greater weight? 

• In a Commission-initiated review, 

should the Commission consider 

information that is different from the 

information the Commission has 

proposed for a clearing agency to 

provide in a Security-Based Swap 

Submission to enable the Commission 

to make a determination regarding a 

clearing requirement? If so, what 

information should be considered and 

why? 

• How should the Commission 

measure ‘‘significant outstanding 

notional exposures’’? Should the 

Commission consider a threshold or a 

range for what qualifies as ‘‘significant 

outstanding notional exposures’’? If so, 

should this threshold or range vary 

depending on the asset class? 

• How should the Commission 

analyze whether pricing data is 

adequate? 

• In taking into account the effect of 

requiring a security-based swap (or 

group, category, type or class of 

security-based swaps) to be cleared on 

the mitigation of systemic risk, how 

should the Commission evaluate the 

resources of the clearing agency 

available to clear the security-based 

swaps? 

• In considering the existence of legal 

certainty in the event of the insolvency 

of the relevant clearing agency or one or 

more of its clearing members, are there 

specific factors that the Commission 

should take into account? Would 

seeking information from third-party 

sources such as legal opinions be 

appropriate? Are there any cross-border 

considerations that should be 

considered? 

• How should the Commission 

analyze the pool of potential 

counterparties to a security-based swap 

(or group, category, type or class of 

security-based swaps) subject to the 

clearing requirement? 

• How should the Commission 

analyze the potential effect, including 

the potential effect on liquidity, trading 

activity, use of security-based swaps by 

direct and indirect market participants 

and any potential disruption or benefit 

to the market for a security-based swap 

(or group, category, type, or class of 

security-based swaps) required to be 

cleared? 

• Is there information reported to the 

swap data repository that is otherwise 

not available to the public that a 

clearing agency would require to 

prepare its Security-Based Swap 

Submission? If so, what information 

would be required, and why? 

2. Prevention of Evasion of the Clearing 

Requirement. 

Exchange Act Section 3C directs the 

Commission to prescribe rules (and 

interpretations of rules) the Commission 

determines to be necessary to prevent 

evasions of the clearing requirements.65

The term ‘‘clearing agency’’ is defined 

broadly under the Exchange Act,66 and 

clearing agencies may offer a spectrum 

of clearing services. Specifically, the 

Commission has identified the 

following entities and activities as 

falling within the definition of clearing 

agency: (i) Clearing corporations; (ii) 

securities depositories; and (iii) 

matching services.67 As a result, there 

may be entities that operate as registered 

clearing agencies for security-based 

swaps that do not provide central 

clearing and act as a CCP. The 

Commission preliminarily believes that 

the broad definition of the term 

‘‘clearing agency’’ could be used by 

market participants to evade the 

clearing requirement of Exchange Act 

Section 3C(a)(1), which states that ‘‘[i]t 

shall be unlawful for any person to 

engage in a security-based swap unless 

that person submits such security-based 

swap for clearing to a clearing agency 

that is registered under this Act or a 

clearing agency that is exempt from 

registration under this Act if the 

security-based swap is required to be 

cleared.’’ 68 For example, market 

participants seeking to evade the 

requirement to clear a security-based 

swap set forth in Exchange Act Section 

3C(a)(1) could submit the security-based 

swap for matching services (rather than 

for central clearing) to a clearing agency 

that is either registered with the 

Commission or exempt from registration 

under the Exchange Act. 

The Commission preliminarily 

believes that other types of clearing 

functions and services offered by 

clearing agencies would not achieve the 

goal of central clearing contemplated 

under the Dodd-Frank Act—improving 

the management of counterparty risk.69

The Commission preliminarily believes 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82500 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

70Proposed Rule 3Ca–2. The definitional section 

of the Exchange Act provides that defined terms 

may have different meanings in different contexts. 

See Exchange Act Section 3(a) (‘‘When used in this 

title, unless the context otherwise requires 

* * * .’’). 15 U.S.C. 78c(a). 

71See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(c)(1)). 

72See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(c)(4)). 

73Proposed Rule 3Ca–1(b). 

74See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(c)(3)(A)). 

75See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(a)(2)). 76Proposed Rule 3Ca–1(b)(3). 77Proposed Rule 3Ca–1(d). 78See Public Law 111–203, section 763(a) (adding 

Exchange Act Section 3C(c)(2)). 79Proposed Rule 3Ca–1(e)(1) and Public Law 

111–203, section 763(a) (adding Exchange Act 

Section 3C(c)(3)(A)). 80Proposed Rule 3Ca–1(e)(2) and Public Law 

111–203, section 763(a) (adding Exchange Act 

Section 3C(c)(3)(B)). 81See proposed Rule 3Ca–1(e)(2). 

that proposed Rule 3Ca–2 would 

prevent potential evasions of the 

clearing requirement by requiring 

market participants to submit securitybased swaps to a clearing agency for 

central clearing as opposed to other 

clearing functions or services. 

Accordingly, proposed Rule 3Ca–2 

would clarify the reference to ‘‘submits 

such security-based swap for clearing to 

a clearing agency’’ in Exchange Act 

Section 3C(a)(1) to mean that the 

security-based swap must be submitted 

for central clearing to a clearing agency 

that functions as a CCP.70 Submission to 

a clearing agency for clearing services 

other than central clearing as a CCP 

would not meet the clearing 

requirement. 

Request for Comments 

The Commission generally requests 

comments on all aspects of proposed 

Rule 3Ca–2. In addition, the 

Commission requests comments on the 

following specific issues: 

• Should the Commission require 

security-based swaps to be submitted for 

central clearing to a clearing agency that 

acts as a CCP to meet the clearing 

requirement? 

• Are there clearing agency functions 

or services that are not CCP functions 

performed by a clearing agency but that 

may provide comparable benefits to 

those of a CCP? If so, please identify 

such functions or services and the 

benefits they provide. 

B. Stay of the Clearing Requirement and 

Review by the Commission 

Exchange Act Section 3C states that, 

after making a determination that a 

security-based swap (or group, category, 

type or class of security-based swaps) is 

required to be cleared, the Commission, 

on application of a counterparty to a 

security-based swap or on the 

Commission’s own initiative, may stay 

the clearing requirement until the 

Commission completes a review of the 

terms of the security-based swap and 

the clearing arrangement.71 In 

connection with a stay of the clearing 

requirement and subsequent review of 

the terms of the security-based swap 

and the clearing arrangement, the 

Commission is required to adopt rules 

for reviewing a clearing agency’s 

clearing of a security-based swap, or any 

group, category, type or class of 

security-based swaps, that the clearing 

agency has accepted for clearing.72

Proposed Rule 3Ca–1 would establish a 

procedure for staying the clearing 

requirement and the Commission’s 

subsequent review of the terms of the 

security-based swap and the clearing 

arrangement. 

Under proposed Rule 3Ca–1, a 

counterparty to a security-based swap 

subject to the clearing requirement 

wishing to apply for a stay of the 

clearing requirement would be required 

to submit a written statement to the 

Commission that includes (i) a request 

for a stay of the clearing requirement, 

(ii) the identity of the counterparties to 

the security-based swap and a contact at 

the counterparty requesting the stay, 

(iii) the identity of the clearing agency 

clearing the security-based swap, (iv) 

the terms of the security-based swap 

subject to the clearing requirement and 

a description of the clearing 

arrangement and (v) the reasons a stay 

should be granted and the securitybased swap should not be subject to a 

clearing requirement, specifically 

addressing the same factors a clearing 

agency must address in its SecurityBased-Swap Submission pursuant to 

proposed Rule 19b–4(o).73 The 

Commission preliminarily believes that 

such information would assist the 

Commission in determining whether to 

grant the stay. Under proposed Rule 

3Ca–1, the counterparty’s statement to 

the Commission requesting the stay of 

the clearing requirement would be made 

available to the public on the 

Commission’s Web site in order to 

provide the public with notice of the 

submission of the stay. A stay of the 

clearing requirement may be applicable 

to the counterparty requesting the stay 

or more broadly, to the security-based 

swap, or any group, category, type or 

class of security-based swaps, subject to 

the clearing requirement. The 

Commission would provide notice to 

the public regarding a stay of the 

clearing requirement that is generally 

applicable. 

Pursuant to Exchange Act Section 3C, 

in undertaking its review of the clearing 

requirement subsequent to granting a 

stay, the Commission would consider 

the clearing agency’s clearing of the 

security-based swap (or group, category, 

type of class of security-based swaps) 

for consistency with the determination 

criteria under Exchange Act Section 

3C(b)(4).74 The Commission also may 

take into consideration the clearing 

agency’s rules for open access as related 

to the security-based swap (or group, 

category, type or class of security-based 

swaps) subject to review.75 The 

Commission may determine that it 

requires additional information in the 

possession of the clearing agency (as 

distinguished from the information it 

received from the counterparty). 

Accordingly, proposed Rule 3Ca–1 

requires the application for the stay to 

identify the clearing agency that is 

clearing the security-based swap 76 and 

also requires that any clearing agency 

that has accepted for clearing the 

security-based swap, or any group, 

category, type or class of security-based 

swaps, subject to the stay, provide 

information requested by the 

Commission in the course of its review 

during the stay.77 Exchange Act Section 

3C also requires the Commission to 

complete such clearing review not later 

than 90 days after issuance of the stay, 

unless the clearing agency that clears 

the security-based swap agrees to an 

extension of the time limit.78

Proposed Rule 3Ca–1 provides that, 

upon completion of its review, the 

Commission may determine 

unconditionally, or subject to such 

terms and conditions as the Commission 

determines to be appropriate in the 

public interest, that the security-based 

swap (or group, category, type or class 

of security-based swaps) must be 

cleared.79 Alternatively, the 

Commission may determine that the 

clearing requirement does not apply to 

the security-based swap (or group, 

category, type or class of security-based 

swaps).80 If the Commission were to 

make a determination that the clearing 

requirement does not apply to a 

security-based swap (or group, category, 

type or class of security-based swaps), 

the proposed rule makes clear that 

clearing may continue on a nonmandatory basis.81 As previously noted, 

moving security-based swaps into 

clearing in a gradual manner through 

non-mandatory clearing may in certain 

circumstances be appropriate. For 

example, a premature determination 

that a product is subject to mandatory 

clearing may, in certain circumstances, 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82501 

82 If the proposed change is related to clearing a 

type, group, class, or category of security-based 

swap, it may also be required to be filed as a 

Security-Based Swap Submission under Exchange 

Act Section 3C. 

83As discussed below in Section I.F., the 

processes under Exchange Act Section 19(b) and 

Section 806(e) may not always overlap. For 

example, certain changes to the operations of a 

designated clearing agency may not require a rule 

filing under Exchange Act Section 19(b), which 

does not specifically apply to changes in 

operations. Such changes may, however, trigger a 

requirement to file an Advance Notice if they would 

materially affect the nature or level of risks 

presented by the designated clearing agency. 

Nevertheless, the two processes are sufficiently 

similar as to warrant using the same method for 

filing. 

84 12 U.S.C. 5465(e)(1)(A). 

85 Id. 

86Proposed Rule 19b–4(n)(2)(i). 

87Core clearance and settlement functions may 

include, but are not limited to, the processing, 

comparison, netting, or guaranteeing of securities 

transactions as well as any processes or procedures, 

such as internal risk management controls, that 

support these functions. 

88Proposed Rule 19b–4(n)(2)(ii). 

limit the ability of certain market 

participants to utilize that product 

(including for risk management 

purposes) which in turn could 

ultimately result in less clearing and 

more limited use of the product than 

might otherwise have been the case if it 

had been permitted to trade without 

being subject to a mandatory clearing 

requirement for a longer period of time. 

Request for Comments 

The Commission generally requests 

comments on all aspects of proposed 

Rule 3Ca–1. In addition, the 

Commission requests comments on the 

following specific issues: 

• Does the proposal provide sufficient 

guidance regarding the process for a 

stay? Are there any alternative 

approaches the Commission should 

consider? 

• Should the Commission require a 

counterparty applying for a stay to 

provide information that is broader or in 

addition to the information the 

Commission has proposed? If so, what 

information should be added to the 

requirement? 

• Should the informational 

requirement imposed on a counterparty 

applying for a stay be narrower than that 

which the Commission has proposed? If 

so, what information should be 

eliminated from the requirement? 

• Are there any terms or conditions 

that the Commission should generally 

consider imposing as part of a stay? 

• Under what circumstances would it 

be reasonable for the Commission to 

determine that clearing is not required 

after making an initial determination 

that clearing is required? 

• Should a Commission 

determination to allow clearing of a 

securities-based swap on a nonmandatory basis be subject to ongoing 

review or limited by a certain 

timeframe? What type of timeframe may 

be appropriate? 

C. Title VIII Notice Filing Requirements 

for Designated Clearing Agencies 

The Commission is proposing to add 

a new paragraph (n) to Rule 19b–4 to 

implement the filing requirement in 

Section 806(e). New paragraph (n) 

would require that an Advance Notice 

be submitted to the Commission 

electronically on Form 19b–4. In 

addition, new paragraph (n) would 

define when a proposed change to a 

clearing agency’s rules, procedures or 

operations could materially affect the 

nature or level of risks presented by the 

designated financial market utility. This 

definition would determine when an 

Advance Notice under Section 806(e) 

must be filed with the Commission. The 

Commission also is proposing 

corresponding amendments to Form 

19b–4 as discussed in more detail in 

Section II.D. 

As with Security-Based Swap 

Submissions filed pursuant to Exchange 

Act Section 3C, the Commission 

anticipates that in many cases a 

proposed change may be required to be 

filed as an Advance Notice under 

Section 806(e) and as a proposed rule 

change under Exchange Act Section 

19(b).82 This is because a proposal that 

qualifies as a proposed change to a rule, 

procedure or operation that materially 

affects the nature or level of risk 

presented by the designated clearing 

agency under Section 806(e) may also 

qualify as a proposed rule change under 

Exchange Act Section 19(b). As a result, 

a designated clearing agency may be 

required to file a proposal as an 

Advance Notice and as a proposed rule 

change. Designated clearing agencies, as 

SROs, will already be required to file 

proposed rule changes on Form 19b–4 

using EFFS.83 Accordingly, and similar 

to the proposal for Security-Based Swap 

Submissions, the Commission is 

proposing to require clearing agencies to 

use the existing filing system, EFFS, and 

Form 19b–4 for the filing of Advance 

Notices under Section 806(e). This 

would allow designated clearing 

agencies to comply with the notice 

requirement in Section 806(e) using the 

same system they use for submitting 

proposed rule changes under Exchange 

Act Section 19(b) and, as applicable, 

Security-Based Swap Submissions 

under Exchange Act Section 3C. 

Leveraging the existing filing system, 

EFFS, for the submission of Advance 

Notices is intended to utilize efficiently 

Commission and designated clearing 

agency resources. 

1. Standards for Determining When 

Advance Notice Is Required 

Section 806(e)(1)(A) requires a 

designated financial market utility to 

provide 60 days advance notice to its 

Supervisory Agency of any proposed 

change to its rules, procedures or 

operations that could materially affect 

the nature or level of risks presented by 

the designated financial market 

utility.84 The Commission is proposing 

that for purposes of this requirement, 

the phrase ‘‘materially affect the nature 

or level of risks presented’’ 85 would be 

defined to mean the existence of a 

reasonable possibility that the change 

could affect the performance of essential 

clearing and settlement functions or the 

overall nature or level of risk presented 

by the designated clearing agency.86 The 

proposed definition is designed to 

include all changes that would affect the 

risk management functions performed 

by the clearing agency that are related 

to systemic risk, as well as changes that 

could affect the clearing agency’s ability 

to continue to perform its core clearance 

and settlement functions.87

In order to help designated clearing 

agencies determine whether an Advance 

Notice is required, the Commission is 

proposing to include in the rule a list of 

categories of changes to rules, 

procedures or operations that the 

Commission preliminarily believes 

could materially affect the nature or 

level of risks presented by a designated 

clearing agency. The proposed list of 

such changes may include, but are not 

limited to, changes that materially affect 

participant and product eligibility, daily 

or intraday settlement procedures, 

default procedures, system safeguards, 

governance or financial resources of the 

designated clearing agency, or otherwise 

generally affect risk management 

processes or capabilities.88 The 

Commission preliminarily believes that 

changes in these areas pertain to core 

functions of a clearing agency and, as a 

result, may affect the ability of a 

designated clearing agency to manage its 

risks appropriately and to continue to 

conduct systemically important 

clearance and settlement services. For 

example, participant and product 

eligibility requirements of a designated 

clearing agency are designed to ensure 

that the clearing agency’s members have 

sufficient financial resources and 

operational capacity to meet obligations 

arising from participation in the clearing 

agency, and to ensure that the products 

cleared by the clearing agency are 


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89Proposed Rule 19b–4(n)(2)(iii). 

90Proposed Rule 19b–4(n)(1). 

91Proposed Rule 19b–4(n)(3). 

92Under the Commission’s current practice with 

respect to Exchange Act Section 19(b), proposed 

rule changes are generally published with a twentyone day comment period. The Commission expects 

that Advance Notices will be published for the 

same comment period. 

93 12 U.S.C. 5465(e)(3). In addition, the 

Commission is required to provide the Board with 

any information it issues or submits in connection 

therewith. 

94Proposed Rule 19b–4(n)(5). 

95Proposed Rule 19b–4(n)(4)(i). 

96Proposed Rule 19b–4(n)(4)(ii). 

97Proposed Rule 19b–4(n)(3). 

sufficiently liquid and adequate pricing 

data is available. In addition, a 

designated clearing agency’s default 

procedures exist to ensure that, should 

a default occur, the clearing agency has 

the financial resources, liquidity and 

operational abilities to continue to make 

payments to non-defaulting participants 

on time. Additional examples of the 

types of matters that would fall within 

the categories listed above include 

changes to the methods for making 

margin calculations, liquidity 

arrangements and significant new 

services of the clearing agency. 

Moreover, while a broad 

interpretation of the materiality 

threshold is consistent with the 

underlying principles of Title VIII and 

desirable to permit a review of all 

matters that impact the risks presented 

by clearing agencies, not every change 

to a designated clearing agency’s rules, 

procedures or operations will be 

material. Accordingly, the Commission 

has included two broad categories of 

examples in the proposed rule of 

changes to rules, procedures or 

operations that the Commission 

preliminarily believes would not 

materially affect the nature or level or 

risks presented by a designated clearing 

agency and therefore, would not require 

the filing of an Advance Notice. The 

first category includes, but is not limited 

to, changes to an existing procedure, 

control, or service that do not modify 

the rights or obligations of the 

designated financial market utility or 

persons using its payment, clearing, or 

settlement services and that do not 

adversely affect the safeguarding of 

securities, collateral, or funds in the 

custody or control of the designated 

financial market utility or for which it 

is responsible. The second category 

includes, but is not limited to, changes 

concerned solely with the 

administration of the designated 

clearing agency or related to the routine, 

daily administration, direction and 

control of employees.89

The Commission preliminarily 

believes that the proposed definition of 

‘‘materially affect the nature or level of 

risks presented’’ provides sufficient 

information for designated clearing 

agencies to know when advance notice 

under Section 806(e) is required while 

allowing flexibility to capture all 

relevant proposed changes as specific 

circumstances warrant. However, as this 

would be a new requirement, the 

Commission expects that designated 

clearing agencies may discuss, at least 

initially, proposed changes with 

Commission staff prior to determining if 

advance notice under Section 806(e) is 

required to be filed with respect to a 

proposed change to the clearing 

agency’s rules, procedures or 

operations. 

2. Providing Notice of the Matters 

Included in an Advance Notice to the 

Board and Interested Persons 

Given the role of clearing agencies in 

supporting financial markets, the 

Commission recognizes that members of 

the public may have an interest in 

proposed changes to the rules, 

procedures or operations of systemically 

important clearing agencies. 

Accordingly, new paragraph (n) of Rule 

19b–4 would provide that, upon the 

filing of any Advance Notice by a 

designated clearing agency, the 

Commission would publish notice 

thereof in the Federal Register, together 

with the terms of the substance of the 

proposed change to the rules, 

procedures, or operations of the 

designated clearing agency and a 

description of the subjects and issues 

involved.90 This requirement is 

consistent with the existing procedures 

for proposed rule changes under 

Exchange Act Section 19(b) and the 

proposed procedures for Security-Based 

Swap Submissions under Exchange Act 

Section 3C. In addition, the Commission 

is proposing that designated clearing 

agencies post Advance Notices and any 

amendments thereto on their Web sites 

within two business days of filing the 

notice or amendments in order to ensure 

that interested parties have timely and 

transparent access to the matters 

discussed therein, particularly in 

circumstances where a proposed change 

is not required to be filed under 

Exchange Act Section 19(b) and, as a 

result, would not otherwise be 

published for comment.91 Consistent 

with the use and proposed use of Form 

19b–4, the purpose of this proposed rule 

would be to allow the Commission to 

give interested persons an opportunity 

to review and to submit written data, 

views and arguments concerning the 

matters referred to in the Advance 

Notice.92 Comments and other 

information received would be 

considered by the Commission in 

determining whether to object to an 

Advance Notice. 

Section 806(e)(3) requires that the 

Commission provide the Board with a 

complete copy of any information it 

receives in connection with the 

Advance Notice.93 To satisfy this 

requirement, new paragraph (n) would 

require a designated clearing agency to 

provide to the Board copies of all 

materials submitted to the Commission 

relating to an Advance Notice 

contemporaneously with such 

submission to the Commission.94 Such 

copies would be provided to the Board 

in triplicate and in hard copy format, 

pursuant to proposed changes to the 

instructions of Form 19b–4. 

The Commission also is proposing 

that a designated clearing agency be 

required to post a notice on its Web site 

that the proposed change described in 

an Advance Notice has been permitted 

to take effect within two business days 

of such date as determined in 

accordance with the timeframe set forth 

in Section 806(e).95 The purpose of this 

proposed rule is to provide a means for 

public notice when a proposed change 

under Title VIII is permitted to become 

effective, since the Commission will not 

affirmatively approve an Advance 

Notice under Section 806(e)—i.e., it will 

not issue a public order granting 

approval as it does with proposed rule 

changes under Exchange Act Section 

19(b). As a result, there will not be a 

Commission action to indicate when an 

Advance Notice has been permitted to 

take effect. Moreover, the designated 

clearing agency also would be required 

to post notice on its Web site of the time 

at which the proposed change becomes 

effective if that date is different from the 

date on which the proposed change is 

permitted to become effective. To be 

consistent with the notice requirements 

applicable to proposed rule changes 

under Exchange Act Section 19(b) and 

to give interested parties timely notice 

of the change, this notice would be 

required to be posted within two 

business days of the effective date.96

Once the notice of the effectiveness of 

the proposed change has been posted, 

the designated clearing agency would be 

permitted to remove its original posting 

of the Advance Notice and any 

amendments thereto from its Web site. 

A designated clearing agency also could 

remove the Advance Notice from its 

Web site if it withdrew the notice or if 

it was notified that such notice was not 

properly filed.97


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98 12 U.S.C. 5465(e)(1)(E). 

99 12 U.S.C. 5465(e)(1)(H). 

100 12 U.S.C. 5465(e)(4). 

101 12 U.S.C. 5465(e)(1)(F). 

102 12 U.S.C. 5465(e)(1)(I). 

103 12 U.S.C. 5465(e)(4). 

104 12 U.S.C. 5465(e)(2)(A). 

105 12 U.S.C. 5465(e)(2)(B). 

106 12 U.S.C. 5465(e)(2)(C). 

107 12 U.S.C. 5465(e)(2)(D). Pursuant to Section 

806(e)(3), the Commission is required to provide the 

Board concurrently with a complete copy of any 

notice, request or other information it receives. 

However, the Commission is proposing that the 

designated clearing agency file copies of any such 

notice, requests or other information with the Board 

in order to help meet this requirement. 

3. Timing and Determination of 

Advance Notices Pursuant to Section 

806(e) 

Section 806(e) does not require the 

Commission to approve affirmatively a 

proposed change referred to in the 

Advance Notice; however, Section 

806(e) requires that the Commission 

notify the designated clearing agency of 

any objection to the proposed change. 

Section 806(e)(1)(E) provides that an 

objection must be made within 60 days 

of the Commission’s receipt of the 

Advance Notice, unless the Commission 

requests additional information in 

consideration of the notice, in which 

case the 60-day period will recommence 

on the date such information is received 

by the Commission.98 Additionally, 

pursuant to Section 806(e)(1)(H), the 

Commission may extend the review 

period for an additional 60 days for 

proposed changes that raise novel or 

complex issues, subject to the 

Commission providing the designated 

clearing agency with prompt written 

notice of the extension.99 Finally, 

Section 806(e)(4) requires that the 

Commission consult with the Board 

before taking any action on, or 

completing its review of, the change 

referred to in the Advance Notice.100

The timeframes set forth in Section 

806(e) determine when a proposed 

change to a designated clearing agency’s 

rules, procedures or operations will 

become effective, and the Commission 

is not proposing any rules related to 

these timeframes. 

4. Implementation of Proposed Changes 

and Emergency Changes Pursuant to 

Section 806(e) 

Section 806(e)(1)(F) provides 

generally that a designated clearing 

agency may not implement a proposed 

change filed as an Advance Notice if the 

Commission notifies it of an objection 

during the applicable review period.101

Section 806(e), however, provides two 

exceptions to this prohibition. First, 

Section 806(e)(1)(I) permits the 

designated clearing agency to 

implement a change before the 60-day 

review period (or such longer period as 

extended in accordance with the statute) 

expires if the Commission notifies the 

designated clearing agency in writing 

that it does not object to the proposed 

change to the designated clearing 

agency’s rules, procedures or operations 

and authorizes the designated clearing 

agency to implement the change on an 

earlier date, subject to any conditions 

imposed by the Commission.102 As 

noted above, however, before taking any 

action on, or completing its review of, 

a change proposed by a designated 

clearing agency in an Advance Notice, 

the Commission is required to consult 

with the Board.103

Second, Section 806(e)(2) allows a 

designated clearing agency to 

implement a change that would 

otherwise require providing an Advance 

Notice if it determines that (i) an 

emergency exists and (ii) immediate 

implementation of the change is 

necessary for the designated clearing 

agency to continue to provide its 

services in a safe and sound manner.104

If a designated clearing agency 

determines to implement an emergency 

change, it must provide notice to the 

Commission as soon as practicable, and 

in no event later than 24 hours after 

implementation of the relevant 

change.105 Such emergency notice must 

contain all of the information otherwise 

required to be in an Advance Notice as 

well as a description of (i) the nature of 

the emergency and (ii) the reason the 

change was necessary in order for the 

designated clearing agency to continue 

to provide its services in a safe and 

sound manner.106 In reviewing the 

emergency notice, the Commission may 

require modification or rescission of the 

relevant change if it determines that the 

change is not consistent with the 

purposes of Title VIII, including all 

applicable rules, orders, or the risk 

management standards prescribed under 

Section 805(a) of Title VIII.107 The 

procedures for implementing a 

proposed change to a designated 

clearing agency’s rules, procedures or 

operations before the expiration of the 

standard review period or on an 

emergency basis are set forth in Section 

806(e). The Commission is not 

proposing any rules related to these 

implementation procedures. 

Request for Comments 

The Commission generally requests 

comments on all aspects of the proposed 

amendments to Rule 19b–4 to 

incorporate the process for designated 

clearing agencies to file Advance 

Notices with the Commission pursuant 

to Section 806(e). In addition, the 

Commission requests comments on the 

following specific issues: 

• Do the proposed rules sufficiently 

define and describe when advance 

notice of proposed changes to rules, 

procedures or operations are required to 

be filed by designated financial market 

utilities in accordance with Section 

806(e)? 

• Is the proposed definition for the 

term ‘‘materially affect the nature or 

level of risks presented’’ by a designated 

clearing agency broad enough to capture 

all types of changes that could 

materially affect the nature or level of 

risks presented by a designated clearing 

agency? Alternatively, should the 

definition include a greater degree of 

specificity regarding the proposed 

changes that must be filed as Advance 

Notices with the Commission? 

• Should additional examples be 

provided regarding the categories of 

changes that may materially affect the 

nature or level of risks presented by a 

designated clearing agency and, as a 

result, would be required to be filed 

with the Commission under Section 

806(e)? Should additional examples be 

provided regarding the categories of 

changes that may not materially affect 

the nature or level of risks presented by 

a designated clearing agency and, as a 

result, would not be required to be filed 

with the Commission under Section 

806(e)? If so, what additional examples 

should be provided? 

• Should the Commission utilize the 

proposed rule change filing system 

under Rule 19b–4 for Advance Notices 

required to be filed by designated 

clearing agencies under Section 806(e)? 

Do commenters have suggestions for 

other methods of filing Advance Notices 

with the Commission? 

• Should the Commission specify any 

additional requirements to those already 

in Section 806(e) with respect to 

Advance Notices implemented on an 

emergency basis? If so, please specify 

such requirements. Is the proposed 

rule’s requirement for proposed changes 

implemented on an emergency basis too 

onerous? If so, please specify changes 

that should be made. 

• Is there any specific additional 

information that should be included in 

the Advance Notice filing requirement 

regarding the nature or level of risks 

presented by the designated clearing 

agency? 

D. Amendments to Form 19b–4 

In conjunction with the proposed 

Rule 19b–4 amendments, the 

Commission is proposing to amend 

Form 19b–4 to include Security-Based 

Swap Submissions and Advance 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82504 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

108See proposed amendments to the General 

Instructions for Form 19b–4. 

109 15 U.S.C. 78s(b)(3)(A). 

110 15 U.S.C. 78s(b)(2)(E). 

Notices. Specifically, the Commission is 

proposing to amend the cover page of 

Form 19b–4 to add additional 

checkboxes so that a clearing agency 

may indicate that the filing is being 

submitted as a Security-Based Swap 

Submission or an Advance Notice (in 

the case of a designated clearing agency) 

as well as a proposed rule change under 

Exchange Act Section 19(b). A clearing 

agency would be able to select more 

than one filing type, check the 

appropriate box or boxes to indicate the 

filing type and submit all related 

information as a single filing. In other 

words, in cases where a proposed 

change must be filed pursuant to more 

than one filing requirement, the clearing 

agency would be able to meet all 

applicable filing requirements by 

submitting a single Form 19b–4 

electronically on the existing filing 

system, EFFS, to the Commission. 

The Commission also is proposing to 

amend the General Instructions for 

Form 19b–4 regarding the filing 

requirements for Security-Based Swap 

Submissions and Advance Notices. The 

Commission is proposing to amend the 

instructions to include specific 

information that is required to be filed 

as part of a Security-Based Swap 

Submission or an Advance Notice. 

With respect to Security-Based Swap 

Submissions, the proposed amendments 

to the Form 19b–4 General Instructions 

would require clearing agencies to 

include a statement that includes, but is 

not limited to: (i) How the submission 

is consistent with Exchange Act Section 

17A; (ii) information that will assist the 

Commission in the quantitative and 

qualitative assessment of the factors 

specified in Exchange Act Section 3C; 

and (iii) how the rules of the clearing 

agency meet the criteria for open access. 

Additionally, in order to facilitate the 

Commission’s review of a SecurityBased Swap Submission, the proposed 

instructions provide examples of the 

types of information the clearing agency 

should provide relating to product 

specifications; pricing sources, models 

and procedures; risk management 

procedures; measures of market 

liquidity and trading activity; credit 

support; the effect of a clearing 

requirement on the market for the swap; 

applicable rules, policies, or procedures; 

terms and trading conventions on which 

the swap is currently traded; and 

financial and operational capacity. 

With respect to Advance Notices, the 

proposed amendments to the Form 19b– 

4 General Instructions would require the 

designated clearing agency to provide a 

description of the nature of the 

proposed change and the expected 

effects on risks to the designated 

clearing agency, its participants, or the 

market and it must provide a 

description of how the designated 

clearing agency will manage any 

identified risks. A designated clearing 

agency also would be instructed to 

provide any additional information 

requested by the Commission necessary 

to assess the effect the proposed change 

would have on the nature or level of 

risks associated with the designated 

clearing agency’s payment, clearing or 

settlement activities and the sufficiency 

of any proposed risk management 

techniques. 

The Commission is proposing to 

provide a new Exhibit 1A to the General 

Instructions for the Federal Register 

notice template used by clearing 

agencies as an exhibit to the Form 19b– 

4 filing. New Exhibit 1A would be used 

only by clearing agencies. All other 

SROs would continue to use the current 

Exhibit 1 to prepare the Federal 

Register notice for proposed rule 

changes. The Commission is proposing 

a separate exhibit for clearing agencies 

because the proposed rule to require 

notice of Security-Based Swap 

Submissions and Advance Notices to be 

published in the Federal Register would 

apply only to clearing agencies. 

Instructions on preparing a Federal 

Register notice for Security-Based Swap 

Submissions and Advance Notices 

would be unnecessary for all other 

SROs. In order to avoid any confusion, 

the Commission is proposing to provide 

clearing agencies with Exhibit 1A to use 

to prepare a Federal Register notice for 

a proposed rule change, Security-Based 

Swap Submission, or Advance Notice, 

or any combination of the three. The 

proposed amendments to the General 

Instructions for Form 19b–4 also would 

incorporate the statutory timeframes 

and other procedural requirements that 

are in Exchange Act Section 3C and 

Section 806(e). 

Moreover, pursuant to existing Rule 

19b–4(j), SROs are required to sign Form 

19b–4 electronically in connection with 

filing a proposed rule change and to 

retain a copy of the signature page in 

accordance with Rule 17a–1. Under the 

proposed rules, Rule 19b–4(j) would be 

modified such that it would apply also 

to Security-Based Swap Submissions 

filed in accordance with Exchange Act 

Section 3C and Advance Notices filed in 

accordance with Section 806(e). 

In addition, the proposed changes to 

the General Instructions for Form 19b– 

4 would reflect the new deadlines by 

which the Commission must publish 

and act upon proposed rule changes 

submitted by SROs and the new 

standards for approval, disapproval or 

suspension of proposed rule changes 

pursuant to the amendments to 

Exchange Act Section 19(b) contained in 

Section 916 of the Dodd-Frank Act. The 

Commission is proposing a number of 

technical and clarifying amendments to 

Rule 19b–4 and Form 19b–4 to make the 

instructions consistent with the new 

requirements in Section 916 of the 

Dodd-Frank Act and with current 

practices of SRO filers.108

Section 916 of the Dodd-Frank Act 

also modified Exchange Act Section 

19(b)(3)(A), which permits certain types 

of proposed rule changes to take effect 

immediately upon filing with the 

Commission and without the notice and 

approval procedures required by 

Exchange Act Section 19(b)(2), to make 

clear that any rule establishing or 

changing a fee, due or other charge 

imposed by the SRO qualifies for this 

designation, regardless of whether the 

fee, due or other charge is applicable 

only to a member.109 The General 

Instructions for Form 19b–4 have been 

modified to reflect this clarification. 

The Commission requests comment 

on all aspects of the proposed 

amendments to Form 19b–4. In 

addition, the Commission requests 

comments on the following specific 

issues: 

• Do the proposed amendments to 

Form 19b–4 adequately capture the 

filing requirements in Exchange Act 

Section 3C and Section 806(e) while 

allowing clearing agencies to meet the 

requirements for filing notice of 

proposed rule changes under Exchange 

Act Section 19(b)? If not, why not? 

• Would additional changes to Rule 

19b–4 or Form 19b–4 be useful in order 

to accommodate the filing of Advance 

Notices under Section 806(e)? If so, 

what specific changes should the 

Commission consider? 

E. Amendments to Rule 19b–4 Relating 

to Section 916 of the Dodd-Frank Act 

Under Exchange Act Section 

19(b)(2)(E),110 as amended by the DoddFrank Act, the Commission is required 

to send the SRO notice to the Federal 

Register for publication thereof within 

15 days of the date on which the SRO’s 

Web site publication is made. The 

Commission is proposing to amend Rule 

19b–4 to provide that if a SRO does not 

post a proposed rule change on its Web 

site on the same day that it files the 

proposal with the Commission, then the 

SRO shall inform the Commission of the 

date on which it posted such proposal 

on its Web site. The purpose of this 


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Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82505 

111Title VII contains a clause, which provides in 

pertinent part, that ‘‘[u]nless otherwise provided by 

its terms, [Subtitle B] does not divest * * * the 

Securities and Exchange Commission * * * of any 

authority derived from any other provision of 

applicable law.’’ See Section 771 of the Dodd-Frank 

Act. Similarly, Section 811 of the Dodd-Frank Act 

provides that ‘‘[u]nless otherwise provided by its 

terms, this title does not divest any appropriate 

financial regulator, any Supervisory Agency, or any 

other Federal or State agency, of any authority 

derived from any other applicable law, except that 

any [risk management] standards prescribed by the 

[Board] under section 805 shall supersede any less 

stringent requirements established under other 

authority to the extent of any conflict.’’ Accordingly 

the new requirements under Titles VII and VIII do 

not supersede the existing requirements under the 

Exchange Act that would require clearing agencies 

(which are all SROs) to file a proposed rule change 

when the change proposed in a Security-Based 

Swap Submission or Advance Notice also meets the 

criteria for a proposed rule change. 

112Assuming the Commission utilizes its 

maximum allotment of time under Exchange Act 

Section 19(b)(2), including with respect to any 

extensions of time requiring the consent of the SRO, 

the Commission must either approve, disapprove or 

institute proceedings with respect to a proposed 

rule change filing within approximately 105 days 

after receipt. See Public Law 111–203, section 916 

(amending Exchange Act Section 19(b)(2)). 15 

U.S.C. 78s(b)(2). Similarly, the Commission must 

make its determination on a Security-Based Swap 

Submission within 90 days after receipt, unless the 

clearing agency agrees to an extension of this time 

limitation. See Public Law 111–203, section 763(a) 

(adding Exchange Act Section 3C(b)(3)). The 

Commission is not required to approve 

affirmatively a proposed change filed as an 

Advance Notice under Section 806(e), but it must 

notify the designated clearing agency of any 

objection to the proposed change within 60 days 

after receiving the notice filing, unless the 

Commission requests additional information in 

consideration of the notice, in which case the 60- 

day period will recommence on the date such 

information is received by the Commission. 12 

U.S.C. 5465(e)(1)(G). 

change is to advise the Commission of 

the date the SRO posted the proposed 

rule change filing to its Web site, as 

such posting initiates the timing for the 

requirement of the Commission to send 

notice of the proposed rule change to 

the Federal Register. 

The Commission requests comment 

on all aspects of the proposed 

amendments to Rule 19b–4 relating to 

Section 916 of the Dodd-Frank Act. In 

addition, the Commission requests 

comments on the following specific 

issues: 

• Should the Commission specify the 

manner and form by which the SRO 

should inform the Commission of the 

date on which it posted the proposed 

rule change on its Web site? If so, what 

manner and form should the 

notification take? 

F. New Requirements Under Exchange 

Act Section 3C and Section 806(e) and 

the Existing Filing Requirement in 

Exchange Act Section 19(b) 

The proposed amendments to Rule 

19b–4 and Form 19b–4 incorporate two 

new requirements under the DoddFrank Act that are similar to the existing 

filing requirement for proposed rule 

changes under Exchange Act Section 

19(b). The first is the requirement to file 

Security-Based Swap Submissions 

under new Exchange Act Section 3C. 

The second is the requirement to file 

Advance Notices under new Section 

806(e). As discussed previously, the 

Commission anticipates that in many 

cases a clearing agency may take an 

action that would trigger more than one 

of these filing requirements 111 and it 

seeks to streamline the filing processes 

for Exchange Act Section 3C, Section 

806(e) and Exchange Act Section 19(b) 

by proposing that all such filings be 

made electronically on Form 19b–4. 

The amendments to Rule 19b–4 and 

to Form 19b–4 are being proposed to 

avoid duplicative filings and to 

streamline the process and burden on 

clearing agencies and the Commission. 

However, the filing requirements of 

Exchange Act Section 3C, Section 806(e) 

and Exchange Act Section 19(b) are 

distinct from each other and subject to 

different statutory standards for 

Commission review. As a result, a 

clearing agency that files a proposal 

pursuant to more than one of these 

sections must meet the requirements of 

each applicable regulatory scheme 

before the applicable change may 

become effective. 

Accordingly, it is likely that many 

proposals made by clearing agencies 

may be filed and require review under 

more than one of the three Commission 

review procedures discussed herein. For 

example, a designated clearing agency 

may be required to submit an Advance 

Notice in connection with its SecurityBased Swap Submission if the 

requirement to clear the security-based 

swap described in the submission 

would materially affect the nature or 

level of risks presented by the 

designated clearing agency. Moreover, if 

the designated clearing agency did not 

have existing authority under its rules to 

clear the relevant security-based swap, 

such action likely also would require a 

proposed rule change filing under 

Exchange Act Section 19(b). 

In other cases, only one of the three 

Commission-review procedures may 

apply because the scope of proposals 

requiring review under each of Section 

806(e) and Exchange Act Section 3C is 

in some ways broader and in other ways 

narrower in comparison to Exchange 

Act Section 19(b). There is, for example, 

the potential that certain changes to the 

operations of a designated clearing 

agency may not require a proposed rule 

change filing under Exchange Act 

Section 19(b) or a Security-Based Swap 

Submission under Exchange Act Section 

3C, but may trigger a requirement to file 

an Advance Notice under Section 

806(e). By contrast, because the notice 

requirement under Section 806(e) 

applies only to matters that materially 

affect the nature or level of risk 

presented by a designated clearing 

agency, it is also possible that a rule 

change filing would be required under 

Exchange Act Section 19(b) but not 

trigger the advance notice requirement 

under Section 806(e). 

When a clearing agency submits a 

filing for more than one purpose (i.e., 

proposed rule change, Security-Based 

Swap Submission and/or Advance 

Notice), the Commission will endeavor 

to evaluate such filings in tandem as 

part of a parallel process. Although the 

timing for review under each of 

Exchange Act Section 3C, Section 806(e) 

and Exchange Act Section 19(b) is 

different,112 all three processes contain 

some degree of flexibility, and the 

Commission will attempt to streamline 

the review processes to avoid any 

unnecessary delays or duplicative 

requests for information. 

However, each of the three processes 

would remain distinct from the other 

processes. Each proposed rule change 

filing, Security-Based Swap Submission 

and Advance Notice would be reviewed 

and evaluated independently by the 

Commission in accordance with the 

applicable statute and regulatory 

authority. Moreover, the proposed 

imposition of new requirements to file 

Advance Notices with the Commission 

and to make Security-Based Swap 

Submissions would not replace 

Exchange Act Section 19(b) notice 

process provision, nor will a filing made 

under one of the two new requirements 

eliminate the need to satisfy the 

requirements of the other process to the 

extent they are applicable. The 

Commission review required by 

Exchange Act Section 3C is different 

from the review required under Section 

806(e), which in turn is different from 

the review required under Exchange Act 

Section 19(b). 

Section 806(e) requires an analysis of 

the risk management issues that may 

impact the clearing agency, its 

participants, or the market. Exchange 

Act Section 19(b), by contrast, requires 

a broader evaluation and an analysis as 

to whether the proposed rule change 

meets the requirements of the Exchange 

Act and the rules thereunder. Finally, 

Exchange Act Section 3C only applies 

when a clearing agency plans to accept 

for clearing a security-based swap (or a 

group, category, type or class of 

security-based swaps), and the standard 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82506 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

113For example, a rule proposal may provide for 

sound risk management practices but have an 

anticompetitive aspect that would not satisfy the 

requirements of the Exchange Act. 

114Public Law 111–203, section 712(a)(7). 

115 Id. 

116See Public Law 111–203, section 723 

(amending Section 2 of the Commodity Exchange 

Act). See also supra note 55 discussing the CFTC’s 

proposed rules pursuant to Section 723 of the 

Dodd-Frank Act. 117 75 FR 67282 (November 2, 2010). 118 44 U.S.C. 3501 et seq. 

for review is based on a number of 

specified factors, including but not 

limited to: (i) How the submission is 

consistent with Exchange Act Section 

17A and (ii) the factors specified in 

Exchange Act Section 3C relating to the 

security-based swap, the market for the 

security-based swaps, and the clearing 

agency. 

The Commission preliminarily 

believes that these distinct reviews 

make it possible for a submission made 

on Form 19b–4 to be acceptable under 

the standards for review for one of the 

three purposes but not under the 

others.113 Accordingly, under the 

proposal, where a proposed change is 

required to be filed pursuant to more 

than one filing requirement, the change 

would not become effective until 

determinations are obtained under each 

of the other applicable statutory 

provisions. In cases where only the 

requirements of one of Exchange Act 

Section 19(b), Exchange Act Section 3C 

or Section 806(e) are implicated, only 

the applicable process would need to be 

completed before the proposal could 

become effective. 

III. General Request for Comment 

The Commission seeks comment 

generally on all aspects of the proposed 

amendments to Rule 19b–4 and Form 

19b–4 and proposed Rules 3Ca–1 and 

3Ca–2. Commenters are encouraged to 

provide empirical data or economic 

studies to support their views and 

arguments related to the proposed rules. 

In addition to the questions above, 

commenters are welcome to offer their 

views on any other matter raised by the 

proposed rules. With respect to any 

comments, we note that they are of 

greatest assistance to the Commission if 

accompanied by supporting data and 

analysis of the issues addressed in those 

comments and if accompanied by 

alternative suggestions to our proposal 

where appropriate. 

In addition, Title VII requires that the 

Commission consult and coordinate to 

the extent possible with the CFTC for 

the purposes of assuring regulatory 

consistency and comparability, to the 

extent possible,114 and states that in 

adopting rules, the CFTC and 

Commission shall treat functionally or 

economically similar products or 

entities in a similar manner.115

The CFTC is required to adopt rules 

related to the process for review of 

swaps for mandatory clearing as 

required under Section 723 of the DoddFrank Act.116 Understanding that the 

Commission and the CFTC regulate 

different products and markets, and as 

such, appropriately may be proposing 

alternative regulatory requirements, we 

request comments on the impact of any 

differences between the Commission 

and CFTC approaches to the process for 

submissions for review of security-based 

swaps and swaps for mandatory 

clearing. Specifically, do the regulatory 

approaches under the Commission’s 

proposed rulemaking pursuant to 

Exchange Act Section 3C and the 

CFTC’s proposed rulemaking pursuant 

to Section 723 of the Dodd-Frank Act 

result in duplicative or inconsistent 

efforts on the part of market participants 

subject to both regulatory regimes or 

result in gaps between those regimes? If 

so, in what ways do commenters believe 

that such duplication, inconsistencies, 

or gaps should be minimized? Do 

commenters believe the approaches 

proposed by the Commission and the 

CFTC to regulate the process for review 

of security-based swaps and swaps for 

mandatory clearing are comparable? If 

not, why not? Do commenters believe 

there are approaches that would make 

the regulation of the process for review 

of security-based swaps for mandatory 

clearing more comparable? If so, what 

are they? Do commenters believe that it 

would be appropriate for us to adopt an 

approach proposed by the CFTC that 

differs from our proposal? Is so, which 

one? We request commenters to provide 

data, to the extent possible, supporting 

any such suggested approaches. 

Similarly, the CFTC is required to 

adopt rules related to the process, 

pursuant to Section 806(e), by which 

any financial market utility designated 

by the Council as systemically 

important (and for which the CFTC is 

the Supervisory Agency) will be 

required to provide advance notice to 

the CFTC of changes to its rules, 

procedures or operations that could 

materially affect the nature or level of 

risks presented by such financial market 

utility.117 The Commission requests 

comments on the impact of any 

differences between the Commission 

and CFTC approaches to the process for 

submitting proposed changes to rules, 

procedures or operations for review 

pursuant to Section 806(e). Specifically, 

do the regulatory approaches under the 

Commission’s proposed rulemaking and 

the CFTC’s proposed rulemaking 

pursuant to Section 806(e) result in 

duplicative or inconsistent efforts on the 

part of market participants subject to 

both regulatory regimes or result in gaps 

between those regimes? If so, in what 

ways do commenters believe that such 

duplication, inconsistencies, or gaps 

should be minimized? Do commenters 

believe the approaches proposed by the 

Commission and the CFTC with respect 

to the process for submitting advance 

notice of proposed changes to rules, 

procedures or operations for review 

pursuant to Section 806(e) are 

comparable? If not, why not? Do 

commenters believe there are 

approaches that would make the 

regulation of the process for submitting 

for advance review notices of proposed 

changes to rules, procedures or 

operations pursuant to Section 806(e) 

more comparable? If so, what are they? 

Do commenters believe that it would be 

appropriate for us to adopt an approach 

proposed by the CFTC that differs from 

our proposal? Is so, which one? We 

request commenters to provide data, to 

the extent possible, supporting any such 

suggested approaches. 

IV. Paperwork Reduction Act 

Rule 19b–4, Form 19b–4 and Rule 

3Ca–1 contain ‘‘collection of information 

requirements’’ within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).118 Accordingly, the 

Commission has submitted the 

information to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with 44 U.S.C. 

3507 and 5 CFR 1320.11. The 

Commission is proposing to submit the 

current collection of information titled 

‘‘Rule 19b–4 Filings with Respect to 

Proposed Rule Changes by SelfRegulatory Organizations’’ (OMB 

Control No. 3235–0045). The 

Commission is proposing to submit the 

current collection of information titled 

‘‘Form 19b–4 under the Securities 

Exchange Act of 1934’’ (OMB Control 

No. 3235–0045). The Commission also 

is proposing to submit a new collection 

of information titled ‘‘Rule 3Ca–1 Stay of 

Clearing Requirement and Review by 

the Commission under the Securities 

Exchange Act of 1934’’. An agency may 

not conduct or sponsor, and a person is 

not required to respond to, a collection 

of information unless it displays a 

currently valid control number. Any 

information submitted to the 

Commission will be made publicly 

available. 


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Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82507 

119Proposed Rule 19b–4(l). 120 15 U.S.C. 78s(b)(1). 

A. Summary of Collection of 

Information 

1. Proposed Amendments to Rule 19b– 

4 and Form 19b–4 

Rule 19b–4 currently requires an SRO 

seeking Commission approval for a 

proposed rule change to provide the 

information stipulated in Form 19b–4. 

Form 19b–4 currently requires a 

description of the terms of a proposed 

rule change, the proposed rule change’s 

impact on various market segments and 

the relationship between the proposed 

rule change and the SRO’s existing 

rules. Form 19b–4 also requires an 

accurate statement of the authority and 

statutory basis for, and purpose of, the 

proposed rule change, the proposal’s 

impact on competition and a summary 

of any written comments received by 

the SRO from SRO members. An SRO 

also is required to submit Form 19b–4 

to the Commission electronically, post a 

proposed rule change on its Web site 

within two business days of its filing, 

and to post and maintain a current and 

complete set of its rules on its Web site. 

The Commission is proposing to 

require two new collections of 

information on Form 19b–4 related to 

new filing requirements applicable to 

clearing agencies under the Dodd-Frank 

Act. The proposed amendments would 

not otherwise change the collection of 

information requirements currently in 

Rule 19b–4 and Form 19b–4. These new 

reporting requirements are in addition 

to the information currently required by 

Rule 19b–4 and Form 19b–4. 

The proposed rule would require 

clearing agencies to file information 

with the Commission under Exchange 

Act Section 3C and Section 806(e) on 

Form 19b–4. Exchange Act Section 3C 

requires clearing agencies to submit for 

a Commission determination of whether 

mandatory clearing applies, any 

security-based swap, or any group, 

category, type or class of security-based 

swaps, that the clearing agency plans to 

accept for clearing and provide notice to 

its members of such submission. Section 

806(e) requires that a clearing agency 

designated as systemically important by 

the Council file with the Commission 

advance notice of proposed changes to 

its rules, procedures or operations that 

could materially affect the nature or 

level of risk presented by the designated 

clearing agency. 

The Commission anticipates that in 

many cases, a clearing agency would be 

required to file a proposal under 

Exchange Act Section 3C or Section 

806(e) when it is already required to file 

a proposed rule change under Exchange 

Act Section 19(b). Accordingly, clearing 

agencies would be able to submit on a 

Form 19b–4, proposals under Exchange 

Act Section 3C or Section 806(e) that 

they are already required to submit 

under Exchange Act Section 19(b). In 

some cases, however, a clearing agency 

would be required to file a proposal 

under Exchange Act Section 3C or 

Section 806(e) and not under Exchange 

Act Section 19(b), for example where a 

proposal materially affects the nature or 

level of risks presented by the clearing 

agency but does not change the rules of 

the clearing agency. 

In addition, Exchange Act Section 3C 

and Section 806(e) each require 

information to be provided as part of the 

filing that is in addition to the 

information required to be filed with a 

proposed rule change under Exchange 

Act Section 19(b). A clearing agency 

would be required to include as part of 

the Security-Based Swap Submission a 

statement that includes, but is not 

limited to: (i) How the submission is 

consistent with Exchange Act Section 

17A; (ii) information that will assist the 

Commission in the quantitative and 

qualitative assessment of the factors 

specified in Exchange Act Section 3C; 

and (iii) how the rules of the clearing 

agency meet the criteria for open access. 

Section 806(e) provides that the 

Advance Notice include a description of 

the nature of the proposed change and 

the expected effects on risks to the 

designated clearing agency, its 

participants, or the market and it must 

provide a description of how the 

designated clearing agency will manage 

any identified risks. A designated 

clearing agency also would be required 

to provide any additional information 

requested by the Commission necessary 

to assess the effect the proposed change 

would have on the nature or level of 

risks associated with the designated 

clearing agency’s payment, clearing or 

settlement activities and the sufficiency 

of any proposed risk management 

techniques. 

The proposed amendments to Rule 

19b–4 also would require a clearing 

agency to post certain information on its 

Web site, and require a SRO that does 

not post a proposed rule change on its 

Web site on the same day that it filed 

the proposal with the Commission to 

inform the Commission of the date on 

which it posted such proposal on its 

Web site.119 Security-Based Swap 

Submissions and Advance Notices, and 

any amendments thereto, would be 

required to be posted on the clearing 

agency’s Web site within two business 

days of filing the information with the 

Commission. The information generally 

shall remain posted on the clearing 

agency’s Web site until a determination 

is made with respect to the SecurityBased Swap Submission or the Advance 

Notice becomes effective. A clearing 

agency also would be required to post 

notice on its Web site of the 

effectiveness of any change to its rules, 

procedures, or operations referred to in 

an Advance Notice within two business 

days of the effective date determined in 

accordance with Section 806(e). 

2. Stay of Clearing Requirement 

Proposed Rule 3Ca–1 provides that 

the Commission, on application of a 

counterparty to a security-based swap, 

or on the Commission’s own initiative, 

may stay the clearing requirement until 

the Commission completes a review of 

the terms of the security-based swap (or 

group, category, type, or class of 

security-based swaps) and the clearing 

of the security-based swap (or group, 

category, type, or class of security-based 

swaps) that the clearing agency has 

accepted for clearing. A counterparty to 

a security-based swap that applies for a 

stay of the clearing requirement for a 

security-based swap, or any group, 

category, type, or class of security-based 

swaps, would be required to submit to 

the Commission the information set 

forth in proposed Rule 3Ca–1(b). 

Any clearing agency that has accepted 

for clearing a security-based swap, or 

any group, category, type or class of 

security-based swaps, that is subject to 

the stay of the clearing requirement 

would be required to provide 

information requested by the 

Commission as it determines to be 

necessary and appropriate to assess any 

of the factors in the course of the 

Commission’s review. The Commission 

preliminarily believes such information 

would likely include updates to the 

information the clearing agency 

provided in the Security-Based Swap 

Submission relating to the securitybased swap then subject to the stay 

under review. 

B. Proposed Use of Information 

1. Proposed Amendments to Rule 19b– 

4 and Form 19b–4 

The information currently required 

under Rule 19b–4 and reported on Form 

19b–4 is used by the Commission to 

review rule change proposals filed by 

SROs pursuant to Exchange Act Section 

19(b)(1) 120 and to provide notice of the 

proposals to the general public. The 

Commission relies upon the information 

received in SRO filings, as well as 

public comment regarding the 

information, in reviewing and reaching 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82508 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

121 12 U.S.C. 5465(e)(3) and (4). 

122The Commission authorized five entities to 

clear credit default swaps. See Securities Exchange 

Act Release Nos. 60372 (July 23, 2009), 74 FR 37748 

(July 29, 2009) and 61973 (April 23, 2010), 75 FR 

22656 (April 29, 2010) (CDS clearing by ICE Clear 

Europe Limited); 60373 (July 23, 2009), 74 FR 

37740 (July 29, 2009) and 61975 (April 23, 2010), 

75 FR 22641 (April 29, 2010) (CDS clearing by 

Eurex Clearing AG); 59578 (March 13, 2009), 74 FR 

11781 (March 19, 2009), 61164 (December 14, 

2009), 74 FR 67258 (December 18, 2009) and 61803 

(March 30, 2010), 75 FR 17181 (April 5, 2010) (CDS 

clearing by Chicago Mercantile Exchange Inc.); 

59527 (March 6, 2009), 74 FR 10791 (March 12, 

2009), 61119 (December 4, 2009), 74 FR 65554 

(December 10, 2009) and 61662 (March 5, 2010), 75 

FR 11589 (March 11, 2010) (CDS clearing by ICE 

Trust US LLC); 59164 (December 24, 2008), 74 FR 

139 (January 2, 2009) (temporary CDS clearing by 

LIFFE A&M and LCH.Clearnet Ltd.) (collectively, 

‘‘CDS Clearing Exemption Orders’’). LIFFE A&M and 

LCH.Clearnet Ltd. allowed their order to lapse 

without seeking renewal. 

123 15 U.S.C. 78mm. Of the four clearing agencies 

granted temporary exemptions from registration, 

only three have cleared products that likely are 

classified as security-based swaps under Title VII. 

124See Public Law 111–203, section 763(b). 

125The Commission does not expect there to be 

a large number of clearing agencies that clear 

security-based swaps, based on the significant level 

of capital and other financial resources necessary 

for the formation of a clearing agency. 

decisions about whether to approve a 

proposed rule change. 

The information to be provided by 

clearing agencies pursuant to the 

proposed amendments to Rule 19b–4 

and Form 19b–4 would be used by the 

Commission to evaluate Security-Based 

Swap Submissions and Advance 

Notices. The Commission would use the 

information filed on Form 19b–4 related 

to Security-Based Swap Submissions to 

determine whether the security-based 

swap, or any group, category, type or 

class of security-based swaps, described 

in the Security-Based Swap Submission 

is required to be cleared pursuant to 

Exchange Act Section 3C(1). 

The Commission would use the 

information on Form 19b–4 related to 

Advance Notices filed under Section 

806(e) to determine the effect on the 

nature or level of risks that would be 

presented by a designated clearing 

agency based on a proposed change to 

its rules, procedures or operations, and 

the expected effects on risk to the 

designated clearing agency, its 

participants and the market and to 

determine whether the Commission 

should make an objection to the 

proposed change. In addition, the 

information on the form would be 

provided to the Board because the 

Commission is required to provide 

copies of all Advance Notices and any 

additional information provided by the 

designated clearing agency relating to 

the Advance Notice and to consult with 

the Board before taking any action on or 

completing its review of the Advance 

Notice.121 In some instances, the 

Commission also may use the 

information on the form to determine 

whether to allow a proposed change to 

take effect in less than 60 days following 

the receipt of the Advance Notice and 

to determine whether a change made on 

an emergency basis is warranted or 

whether it should be modified or 

rescinded. 

The information proposed to be filed 

on Form 19b–4 relating to Exchange Act 

Section 3C and Section 806(e) also 

would be used by participants of the 

clearing agency, market participants, 

other clearing agencies, or the general 

public to comment on the proposal, as 

the Commission is proposing to require 

that a clearing agency post the 

information on its Web site. In addition, 

pursuant to Exchange Act Section 3C, a 

clearing agency would be required to 

provide its members with notice of the 

Security-Based Swap Submission. As 

with proposed rule changes under 

Exchange Act Section 19(b), the 

Commission would solicit comment 

from interested parties on proposals 

filed under Exchange Act Section 3C 

and Section 806(e). Interested parties 

could use the information to comment 

on the proposed change and to provide 

feedback on the development of the 

clearing agency’s service offerings and 

the rules, procedures and operations of 

the clearing agency. 

The information collected by the 

Commission with respect to the date on 

which the SRO posted a proposed rule 

change on its Web site (if such posting 

date is not the same as the filing date) 

would be used to inform the 

Commission of the date by which the 

Commission must send the SRO notice 

to the Federal Register for publication. 

2. Stay of Clearing Requirement 

The information provided as required 

by proposed Rule 3Ca–1 would be used 

by the Commission to determine 

whether to grant the stay of the clearing 

requirement sought by a counterparty 

and to review whether the clearing 

requirement would continue to apply to 

such security-based swap, or any group, 

category, type, or class of security-based 

swaps. 

C. Respondents 

1. Proposed Amendments to Rule 19b– 

4 and Form 19b–4 

There are currently 25 SROs subject to 

the collection of information under Rule 

19b–4 and Form 19b–4, although that 

number may vary owing to the 

consolidation of SROs or the 

introduction of new entities. In fiscal 

year 2009, these SRO respondents filed 

1,405 rule change proposals subject to 

the current collection of information, of 

which 1,071 proposed rule changes 

ultimately became effective. 

Although Rule 19b–4 and Form 19b– 

4 apply to all SROs, the new collection 

of information requirements in the 

proposed rules would apply to clearing 

agencies and, in certain limited 

circumstances, to other SROs. The 

proposed amendments relating to 

Exchange Act Section 3C would apply 

to clearing agencies that clear securitybased swaps. Currently, four clearing 

agencies are authorized to clear credit 

default swaps, which include securitybased swaps,122 pursuant to temporary 

conditional exemptions under Exchange 

Act Section 36.123 The obligation to 

centrally clear security-based swap 

transactions is a new requirement under 

Title VII, and it is anticipated that 

clearing agencies operating under 

temporary conditional exemptions will 

register or will become registered 

security-based swap clearing 

agencies.124 Based on the fact that there 

are currently four clearing agencies 

authorized to clear security-based swaps 

and that there could conceivably be a 

few more in the foreseeable future,125

the Commission preliminarily estimates 

that four to six clearing agencies may 

plan to centrally clear security-based 

swaps and be subject to the information 

collection requirements in the proposed 

rules relating to Exchange Act Section 

3C. The Commission is using the higher 

estimate (six) for the PRA analysis. 

The amendments to Rule 19b–4 and 

Form 19b–4 relating to the Section 

806(e) advance notice requirement of 

changes to rules, procedures or 

operations would only apply to clearing 

agencies that are registered with the 

Commission, designated by the Council 

as systemically important, and for 

which the Commission is the 

Supervisory Agency. There are currently 

six clearing agencies registered with the 

Commission; however, only four of 

these clearing agencies are currently 

clearing securities transactions. In 

addition, it is anticipated that several 

more clearing agencies will be registered 

with the Commission following the 

effectiveness of Title VII to clear 

security-based swaps. For purposes of 

the PRA analysis, the Commission 

estimates that the four registered 

securities clearing agencies that are 

currently clearing securities and the six 

estimated clearing agencies that may 

clear security-based swaps would be 

subject to the applicable collection of 

information requirements. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82509 

2. Stay of Clearing Requirement 

The Commission preliminarily 

estimates that six security-based swap 

clearing agencies’ activities associated 

with security-based swap clearing 

requirements would potentially be 

subject to the collection of information 

under proposed Rule 3Ca–1 in 

connection with any counterparty 

requesting a stay of clearing 

requirement. 

D. Total Annual Reporting and 

Recordkeeping Burden 

1. Background 

The proposed amendments to Rule 

19b–4 and Form 19b–4 are designed to 

facilitate the processes for providing the 

Commission with Security-Based Swap 

Submissions and Advance Notices and 

to make these processes efficient by 

utilizing the existing infrastructure for 

proposed rule changes, thereby 

conserving both clearing agency and 

Commission resources. When amended, 

Form 19b–4 would enable clearing 

agencies to submit Security-Based Swap 

Submissions and Advance Notices 

electronically with the Commission. 

The proposed amendments to Rule 19b– 

4 also would require a clearing agency 

to post on its Web site any SecurityBased Swap Submissions and any 

Advance Notices, and any amendments 

thereto, submitted to the Commission 

within two business days of submission. 

A further amendment to Rule 19b–4 

would require an SRO that filed a 

proposed rule change with the 

Commission to inform the Commission 

of the date on which it posted such 

proposal on its Web site if the posting 

did not occur on the same day that the 

SRO filed the proposal with the 

Commission. Finally, proposed Rule 

3Ca–1 would specify the process for a 

security-based swap counterparty to 

apply to the Commission for a stay of 

the clearing requirement. 

2. Rule 19b–4 and Form 19b–4 

In order to estimate the collection of 

information, the Commission received 

informal comments from a few clearing 

agencies that would be subject to the 

new requirements in the proposed 

amendments to Rule 19b–4 and Form 

19b–4. Clearing agencies would have to 

train personnel and develop policies 

and procedures to implement the 

proposed new filing requirements under 

Rule 19b–4 and Form 19b–4 in 

connection with Security-Based Swap 

Submissions and Advance Notices. In 

addition, clearing agencies indicated 

they would have to submit additional 

information to the Commission, either 

as separate filings or as part of filings 

also submitted as proposed rule changes 

under Exchange Act Section 19(b). 

The clearing agencies emphasized 

that the estimated burdens would 

depend in large part on the rules 

ultimately adopted by the Commission 

to define and determine how frequently 

Security-Based Swap Submissions and 

Advance Notices would be required to 

be filed and the nature and extent of 

information that would be required with 

each filing. In addition, the clearing 

agencies stated that the burden per 

filing could vary widely, depending on 

the complexity of each individual filing. 

For example, some clearing agency 

proposals may require more information 

or analysis to be submitted as part of the 

filing. The clearing agencies also stated 

that the annual burden also could vary 

widely from year to year depending on 

the number of new proposals the 

clearing agency makes in a particular 

year. As a result, the estimates provided 

as part of the survey are preliminary and 

may change after clearing agencies have 

the opportunity to review and closely 

evaluate the proposed rules. 

The estimates varied among clearing 

agencies, which may reflect the different 

internal processes, training programs, 

and review procedures for new projects 

currently in place at the different 

clearing agencies. In addition, some 

clearing agencies are currently 

registered with the Commission while 

others are not. Clearing agencies 

registered with the Commission already 

file proposed rule changes under 

Exchange Act Section 19(b) and have 

more familiarity with the collection of 

information requirements related to 

Rule 19b–4 and Form 19b–4, while 

clearing agencies that are not registered 

with the Commission are not as familiar 

with these requirements and may incur 

a greater burden in connection with 

learning EFFS and training personnel. 

The Commission heard from staff of 

eight clearing agencies. The estimates 

varied among clearing agencies, and 

therefore the Commission is using 

conservative numbers in developing its 

estimates for the PRA. In addition, in 

order to provide a conservative estimate, 

the Commission has calculated the 

burden for the requirements related to 

Advance Notices assuming that they 

would apply to all ten clearing agencies 

and the burden for the requirements 

related to Security-Based Swap 

Submissions assuming they would 

apply to six clearing agencies. 

Finally, the Commission recognizes 

that there would likely to be some 

substantive and procedural overlap with 

respect to the processes for preparing 

and submitting Security-Based Swap 

Submissions, Advance Notices and 

proposed rule changes that relate to the 

same subject matter. For example, in 

connection with a decision to clear a 

new type of security-based swap that 

was not previously permitted under the 

clearing agency’s rules, a clearing 

agency could be required to make a 

filing as a Security-Based Swap 

Submission, an Advance Notice and a 

proposed rule change. In this case, 

because these submissions all relate to 

the same underlying issue, the amount 

of time required to prepare a single 

Form 19b–4 for all three purposes is 

likely to be less than the aggregate 

amount of time ordinarily required to 

prepare and submit an unrelated 

Security-Based Swap Submission, 

Advance Notice and proposed rule 

change. Nevertheless, the Commission 

is calculating the PRA burden for each 

process individually without accounting 

for any reduction due to the anticipated 

overlap. The Commission has decided 

to calculate the burdens in this manner 

in order to provide the most 

conservative estimates possible. 

Additionally, the estimates of each of 

the following burdens are derived from 

discussions between the Commission’s 

staff and personnel of the clearing 

agencies, as described above. 

a. Internal Policies and Procedures 

The Commission preliminarily 

believes that newly-registered clearing 

agencies could incur some one-time 

costs associated with training their 

personnel about the procedures for 

submitting Security-Based Swap 

Submissions and/or Advance Notices in 

electronic format through EFFS. Based 

on staff discussions with the clearing 

agencies, the Commission preliminarily 

estimates that each newly registered 

clearing agency will spend 

approximately 20 hours training all staff 

members who will use EFFS to submit 

Security-Based Swap Submissions, 

Advance Notices and/or proposed rule 

changes electronically. Accordingly, the 

Commission estimates that the total onetime burden of training staff members of 

newly-registered clearing agencies to 

use EFFS will be 120 hours (six clearing 

agencies × 20 hours). 

Going forward, the Commission 

preliminarily estimates that each 

existing SRO (including currentlyregistered clearing agencies) will spend 

approximately 10 hours annually 

training new staff members and 

updating the training of existing staff 

members to use EFFS, resulting in a 

total annual burden of 310 hours ((six 

newly-registered clearing agencies × 10 

hours) + (25 SROs × 10 hours)). The 

Commission preliminarily believes that 

only a minimal amount of EFFS training 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82510 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

126See Exchange Act Release No. 50486, 69 FR 

60287, supra note 51. 

127 In 2008, the Commission submitted to OMB a 

request for approval of an extension of the existing 

collection of information provided for in Rule 19b– 

4 and Form 19b–4. 73 FR 5245 (January 29, 2008) 

(Submission for OMB review; comment request). 

The PRA analysis conducted in 2008 estimated that 

the average time to complete a proposed rule 

change filing was 23.22 hours, without 

differentiating between average and complex rule 

filings. In light of the changes made to Exchange 

Act Section 19(b) pursuant to Section 916 of DoddFrank, which provides for new deadlines by which 

the Commission must publish and act upon 

proposed rule changes, the Commission has 

decided to revert to the figures contained in the 

PRA analysis conducted in 2004. Specifically, the 

shortened time period by which proposed rule 

changes will be reviewed by the Commission is 

likely to cause the SROs to spend additional time 

preparing and checking the filing, as there will be 

less time for them to correct a filing after it has been 

made, justifying the use of the more conservative 

estimates. 

128The number of projected SROs is equal to 31 

(25 currently registered SROs + six newly-registered 

clearing agencies). 

129The hourly rate for an attorney is from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2010, modified by the 

Commission’s staff to account for an 1,800-hour 

work-year and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits and overhead. 

130See id. 

will be submission-specific and that 

training a person to submit either a 

proposed rules change, Security-Based 

Swap Submission or Advance Notice 

will generally be sufficient to allow 

such person to make one or more of the 

other types of submissions. 

Based on staff discussions with the 

clearing agencies, the Commission 

preliminarily estimates that there would 

be a one-time paperwork burden of 130 

hours for each newly-registered clearing 

agency to draft and implement internal 

policies and procedures relating to 

using EFFS to submit Security-Based 

Swap Submissions, Advance Notices 

and proposed rule changes with the 

Commission, for a total of 780 hours 

(130 hours × six newly-registered 

clearing agencies). In addition, the 

Commission preliminarily estimates 

that there will be a one-time paperwork 

burden of 30 hours for each currentlyregistered clearing agency to draft and 

implement modifications to existing 

internal policies and procedures for 

using EFFS in order to update them for 

submitting Security-Based Swap 

Submissions and/or Advance Notices 

with the Commission for a total of 120 

hours (30 hours × four currentlyregistered clearing agencies). 

b. Proposed Rule Changes 

An SRO rule change proposal is 

generally filed with the Commission 

after an SRO’s staff has obtained 

approval of its board of directors. The 

time required to complete a filing varies 

significantly and is difficult to separate 

from the time an SRO spends in 

developing internally the proposed rule 

change. In a PRA analysis conducted in 

2004 in connection with amendments to 

Rule 19b–4 and Form 19b–4, the 

Commission estimated that 34 hours is 

the amount of time that would be 

required to complete an average 

proposed rule change filing and 129 

hours is the amount of time required to 

complete a novel or complex proposed 

rule change filing.126 Based on the 

filings it currently receives from SROs, 

the Commission preliminarily believes 

that these estimates remain valid and 

has relied on these figures to prepare the 

analysis discussed below.127

In fiscal year 2009, 25 SRO 

respondents filed 1,405 rule change 

proposals subject to the current 

collection of information. Of this total, 

the Commission estimates that 60 

proposed rule changes could be 

characterized as novel or complex and 

1,345 proposed rule changes could be 

characterized as average. The 

Commission preliminarily estimates 

that the total annual reporting burden 

for filing proposed rule changes with 

the Commission under the proposed 

amendments to Rule 19b–4 and Form 

19b–4 will be 66,303 hours (((1,345/25) 

× 31128 average rule change proposals × 

34 hours) + ((60/25) × 31 complex rule 

change proposals × 129 hours)). Thus, 

on average, the reporting burden for 

filing proposed rule changes is 38.06 

hours (66,303 hours/(1668 average rule 

change proposals + 74 complex rule 

change proposals)). 

c. Security-Based Swap Submissions 

The time required by clearing 

agencies to prepare, review and submit 

Security-Based Swap Submissions to 

comply with proposed Rule 19b–4(o)(1) 

likely will vary significantly based on 

the unique characteristics of each 

Security-Based Swap Submission and 

the submitting clearing agency. Based 

on staff discussions with the clearing 

agencies, the Commission preliminarily 

estimates that the amount of time that 

a clearing agency would require to 

internally prepare, review and submit a 

Security-Based Swap Submission is 140 

hours. The Commission also estimates 

that each clearing agency will submit 20 

Security-Based Swap Submissions 

annually. Accordingly, the Commission 

estimates that the total annual reporting 

burden for clearing agencies submitting 

Security-Based Swap Submissions 

electronically with the Commission 

under the proposed amendments to 

Rule 19b–4 and Form 19b–4 will be 

16,800 hours (20 Security-Based Swap 

Submissions × 140 hours × six 

respondents). 

The Commission also preliminarily 

estimates that a clearing agency would 

require 60 hours of outside legal work 

to prepare, review and submit a 

Security-Based Swap Submission, based 

on staff discussions with the clearing 

agencies. Assuming an hourly cost of 

$354 for an outside attorney,129 the total 

annual cost in the aggregate for the six 

respondent clearing agencies to meet 

these requirements would be $2,548,800 

(60 hours × $354 per hour for an outside 

attorney × 20 Security-Based Swap 

Submissions × six respondent clearing 

agencies). 

d. Advance Notices 

With respect to Advance Notices, the 

Commission preliminarily estimates 

that the amount of time that designated 

clearing agency representatives will 

require to internally prepare, review and 

electronically file each Advance Notice 

with the Commission to comply with 

proposed Rule 19b–4(n)(1) is 90 hours. 

This figure is based on the staff’s 

discussions with the clearing agencies. 

The Commission also estimates that two 

hours should be added to the time 

required to prepare each Advance 

Notice to comply with the requirement 

contained in proposed Rule 19b–4(n)(5) 

to provide to the Board copies of all 

materials submitted to the Commission 

relating to an Advance Notice 

contemporaneously with such 

submission to the Commission. The 

Commission preliminarily estimates 

that each designated clearing agency 

will submit 35 Advance Notices to the 

Commission annually. Accordingly, the 

Commission estimates that the total 

annual reporting burden on designated 

clearing agencies submitting Advance 

Notices electronically with the 

Commission under the proposed 

amendments to Rule 19b–4 and Form 

19b–4 will be 32,200 hours (35 Advance 

Notices × 92 hours × ten respondents). 

Based on staff discussions with the 

clearing agencies, the Commission also 

preliminarily estimates that a 

designated clearing agency will require 

40 hours of outside legal work to 

prepare, review and electronically file 

each Advance Notice with the 

Commission. Assuming an hourly cost 

of $354 for an outside attorney,130 the 

total annual cost in the aggregate for the 

ten respondent clearing agencies to meet 

these requirements would be $4,956,000 

(40 hours × $354 per hour for an outside 

attorney × 35 Advance Notices × ten 

respondents). 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
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131See supra note 127. 132See supra note 129. 

e. Summary 

The Commission preliminarily 

estimates that the total annual reporting 

burden for clearing agencies to 

internally prepare, file and submit 

Security-Based Swap Submissions, 

proposed rule changes and Advance 

Notices electronically with the 

Commission under the Rule 19b–4 and 

Form 19b–4 will be 115,303 hours 

(16,800 hours for Security-Based Swap 

Submissions + 32,200 hours for 

Advance Notices + 66,303 hours for 

proposed rule changes). The 

Commission also preliminarily 

estimates that the total annual cost in 

the aggregate for the respondent clearing 

agencies to internally prepare, file and 

submit Security-Based Swap 

Submissions, proposed rule changes 

and Advance Notices electronically 

with the Commission under the Rule 

19b–4 and Form 19b–4 will be 

$7,504,800 ($2,548,800 for SecurityBased Swap Submissions + $4,956,000 

for Advance Notices). 

3. Posting of Security-Based Swap 

Submissions, Advance Notices and 

Proposed Rule Changes on Clearing 

Agency Web Sites 

The Commission preliminarily 

believes that newly-registered clearing 

agencies could incur some one-time 

costs associated with posting SecurityBased Swap Submissions, Advance 

Notices and proposed rule changes on 

their Web sites. The Commission 

preliminarily estimates that each newlyregistered clearing agency will spend 

approximately 15 hours creating or 

updating its existing Web site in order 

to provide the capability to post these 

submissions online resulting in a total 

one-time burden of 90 hours (six 

clearing agencies × 15 hours). 

With respect to annual burdens, the 

Commission preliminarily estimates 

that four hours would be required by a 

clearing agency to post a Security-Based 

Swap Submission on its Web site to 

comply with proposed Rule 19b–4(o)(5). 

This figure is based on the staff’s 

discussions with the clearing agencies. 

The Commission estimates that the total 

annual reporting burden for clearing 

agencies to post Security-Based Swap 

Submissions on their Web sites will be 

480 hours (20 Security-Based Swap 

Submissions × four hours × six 

respondents). 

The Commission preliminarily 

estimates that four hours would be 

required by a designated clearing agency 

to post an Advance Notice on its Web 

site to comply with proposed Rule 19b– 

4(n)(3). The Commission preliminarily 

estimates that the total annual reporting 

burden for designated clearing agencies 

to post Advance Notices on their Web 

sites will be 1,400 hours (35 Advance 

Notices × four hours × 10 respondents). 

To comply with proposed Rule 19b– 

4(n)(4), the Commission estimates that 

four hours would be required by a 

designated clearing agency to post 

notice on its Web site of any change to 

its rules, procedures or operations 

referred to in an Advance Notice once 

it has been permitted to take effect. The 

Commission therefore estimates that the 

total annual reporting burden for 

designated clearing agencies to post 

notice on their Web sites of any changes 

to their rules, procedures or operations 

referred to in Advance Notices would be 

1,400 hours (35 Advance Notices × four 

hours × 10 respondents). 

The Commission previously estimated 

that an SRO would take four hours to 

post proposed rule change proposals 

under Exchange Act Section 19(b) and 

amendments on its Web site and four 

hours to update the posted SRO rules on 

its Web site once the proposed rules 

become effective.131 The Commission 

preliminarily believes that these 

estimates remain valid. In addition, of 

the 1,405 proposed rule changes filed in 

fiscal year 2009, 1,071 were approved or 

non-abrogated. Accordingly, the total 

annual reporting burden for SROs to 

post proposed rule change proposals on 

their Web sites and to update their 

posted rules on their Web sites once the 

proposed rules become effective will be 

12,280 hours ((1,071/25) × 31 SRO 

respondents) approved or non-abrogated 

rules × four hours) + ((1,405/25) × 31 

SRO respondents) rule change proposals 

× four hours)). 

In summary, the Commission 

preliminarily estimates that the total 

annual reporting burden for all clearing 

agencies to post submitted SecurityBased Swap Submissions, Advance 

Notices, notices of changes to rules, 

procedures or operations referred to in 

Advance Notices once they take effect 

and proposed rule changes on their Web 

sites under Rule 19b–4 and Form 19b– 

4 will be 15,560 hours (480 hours for 

Security-Based Swap Submissions + 

1,400 hours for Advance Notices + 1,400 

hours for posting notices of changes to 

rules, procedures or operations referred 

to in Advance Notices + 12,280 hours 

for proposed rule changes). The 

Commission requests comment on all of 

the above estimates. 

4. Rule 3Ca–1 

Commission staff communicated with 

certain clearing agencies that likely 

would be subject to a stay of the clearing 

requirement and related review under 

proposed Rule3Ca–1 in order to 

estimate the collection of information. 

The clearing agencies emphasized that 

the estimated burdens would depend in 

large part on the number of stays 

requested annually and the scope of the 

information requested by the 

Commission in the course of the related 

review. 

The Commission staff communicated 

with staff of three entities, representing 

four clearing agencies total, as two 

clearing agencies are subsidiaries of the 

same holding company. As the 

responses varied among clearing 

agencies, the Commission has generally 

used conservative responses in 

developing its estimates for the PRA. 

Based on staff discussions with the 

clearing agencies, the Commission 

preliminarily estimates that a clearing 

agency will spend approximately 18 

hours to retrieve, review and submit the 

information associated with the stay of 

the clearing requirement. The 

Commission preliminarily estimates 

that each clearing agency will be 

required to provide information 

requested by the Commission in the 

course of its reviews of five requests for 

a stay of the clearing requirement, 

resulting in a total annual reporting 

burden of 540 hours (five stay 

applications × 18 hours to retrieve, 

review and submit the information × six 

clearing agencies). The Commission also 

preliminarily estimates that a clearing 

agency will require seven hours of 

outside legal work to retrieve, review 

and submit the information associated 

with the stay of the clearing 

requirement. This figure is based on the 

staff’s discussions with the clearing 

agencies. Assuming an hourly cost of 

$354 for an outside attorney,132 the total 

estimated annual cost in the aggregate 

for the six respondent clearing agencies 

to meet these requirements would be 

$74,340 (seven hours × $354 per hour 

for an outside attorney × five stay of 

clearing applications × six respondents). 

The Commission requests comment on 

these estimates. 

Finally, based on its estimates with 

respect to the preparation SecurityBased Swap Submissions, the 

Commission preliminarily estimates 

that 100 hours would be required by a 

counterparty to a security-based swap to 

prepare and submit an application 

requesting a stay of the clearing 

requirement. The Commission 

preliminarily estimates that 

counterparties to security-based swaps 

transactions will submit 30 applications 

requesting stays of the clearing 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82512 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

133See supra note 129. 

134 In the initial year, the paperwork burden is 

calculated as follows: 120 Hours (one-time 

paperwork burden to train newly-registered clearing 

agency staff members to use EFFS) + 780 hours 

(one-time paperwork burden for each newlyregistered clearing agency to draft and implement 

policies and procedures relating to using EFFS to 

submit proposed rule changes, Security-Based 

Swap Submissions and Advance Notices) + 120 

hours (one-time paperwork burden for each 

currently-registered clearing agency to draft and 

implement policies and procedures relating to using 

EFFS to submit Security-Based Swap Submissions 

and/or Advance Notices) + 90 hours (one-time 

paperwork burden for each newly-registered 

clearing agency to create or update their existing 

Web sites in order to provide the capability to post 

proposed rule changes, Security-Based Swap 

Submissions and Advance Notices online) + 

115,303 hours (the total annual reporting burden for 

all SROs to prepare, review and submit SecurityBased Swap Submissions, proposed rule changes 

and Advance Notices with the Commission) + 

15,560 hours (the total annual burden for all SROs 

to post Security-Based Swap Submissions, Advance 

Notices, notices of changes to rules, procedures or 

operations referred to in Advance Notices and 

proposed rule changes (including updates to the 

posted SRO rules) on their Web sites + 14 hours for 

SROs to notify the Commission of the date on 

which it posted a proposed rule change on its Web 

site = 131,987 hours. After the initial year, the 

paperwork burden is calculated as follows: 115,303 

Hours (the total annual reporting burden for all 

SROs to prepare, review and submit Security-Based 

Swap Submissions, proposed rule changes and 

Advance Notices with the Commission) + 15,560 

hours (the total annual burden for all SROs to post 

Security-Based Swap Submissions, Advance 

Notices, notices of changes to rules, procedures or 

operations referred to in Advance Notices and on 

their Web sites) + 310 hours (the total annual 

burden of training new staff members and updating 

the training of existing staff members to use EFFS) 

+ 14 hours for SROs to notify the Commission of 

the date on which it posted a proposed rule change 

on its Web site = 131,187 hours. 

135SROs may also destroy or otherwise dispose 

of such records at the end of five years according 

to Rule 17a–6 of the Act. 17 CFR 240.17a–6. 

136Rule 19b–4(j) currently requires SROs to sign 

Form 19b–4 electronically in connection with filing 

a proposed rule change and to retain a copy of the 

signature page in accordance with Rule 17a–1. 

Under the proposed rules, Rule 19b–4(j) would be 

modified such that it would apply also to SecurityBased Swap Submissions and Advance Notices. 

137 17 CFR 232.302(b). 

requirement. Assuming an hourly cost 

of $354 for an outside attorney,133 the 

total annual cost in the aggregate for the 

respondent counterparties to meet these 

requirements would be $1,062,000 (100 

hours × $354 per hour for an outside 

attorney × 30 stay of clearing 

applications). 

The Commission requests comment 

on all of the above estimates. 

4. Amendment To Conform to Section 

916 of the Dodd-Frank Act 

The Commission preliminarily 

estimates that the requirement that an 

SRO inform the Commission of the date 

on which it posted a proposed rule 

change on its Web site (if the posting 

did not occur on the same day that the 

SRO filed the proposal with the 

Commission) will impose only a 

minimal burden, if any, on an SRO. The 

Commission preliminarily believes that 

SROs currently post their proposed rule 

changes on their Web site on the same 

day on which they file them with the 

Commission. Further, it is in the interest 

of an SRO to continue to do so, since 

prompt Web site posting triggers the 

requirement on the Commission to 

publish notice of the proposal. The new 

notice requirement would only be 

applicable in a situation where the SRO 

is unable to post its proposed rule 

change on the same day that it files with 

the Commission, which the Commission 

expects would be an unlikely 

occurrence. However, because the 

deadline applicable to Commission 

publication is tied to SRO Web site 

posting, and the Commission has no 

means of ascertaining when Web site 

posting was made other than receiving 

that information from the SRO itself, the 

Commission is proposing this 

requirement to capture necessary 

information to allow it to comply with 

Exchange Act Section 19, as amended 

by Section 916 of the Dodd-Frank Act. 

Based on its experience receiving and 

reviewing proposed rule changes filed 

by SROs, the Commission preliminarily 

estimates that SROs will fail to post 

proposed rule changes on their Web 

sites on the same day as the filing was 

made with the Commission in 1% of all 

cases, or 14 times each year. Further, the 

Commission preliminarily estimates 

that each SRO will spend approximately 

one hour preparing and submitting 

notice to the Commission of the date on 

which it posted the proposed rule 

change on its Web site, resulting in a 

total annual burden of 14 hours. 

Thus, the Commission preliminarily 

estimates that the total annual reporting 

burden under Rule 19b–4 and Form 

19b–4 will be 131,987 hours in the 

initial year and 131,187 hours 

thereafter.134 Additionally, the 

Commission preliminarily estimates 

that the total annual reporting burden 

under proposed Rule 3Ca–1 will be 540 

hours. The Commission requests 

comment on all of the above estimates. 

E. Retention Period of Recordkeeping 

Requirements 

Clearing agencies will be required to 

retain records of the collection of 

information (the manually signed 

signature page of the Form 19b–4, a file 

available to interested persons for 

public inspection and copying, of all 

Security-Based Swap Submissions, 

Advance Notices and proposed rule 

changes made pursuant to Rule 19b–4) 

and all correspondence and other 

communications reduced to writing 

(including comment letters) to and from 

such SROs concerning any SecurityBased Swap Submissions, Advance 

Notices and proposed rule changes, for 

a period of not less than five years, the 

first two years in an easily accessible 

place, according to the current 

recordkeeping requirements set forth in 

Exchange Act Rule 17a–1.135

The Commission preliminarily 

believes that maintaining the physical 

signature page, Security-Based Swap 

Submissions, Advance Notices, 

proposed rule changes and all related 

correspondence and other 

communications would enable 

interested parties, including the 

Commission, to access a record of the 

authority under which a particular 

Security-Based Swap Submission, 

Advance Notice or proposed rule 

change was made. The Commission 

notes that the retention of the physical 

signature page is an existing 

maintenance requirement for SROs.136

The Commission further notes that a 

similar manual signature retention 

requirement exists for EDGAR filers.137

F. Collection of Information Is 

Mandatory 

Any collection of information 

pursuant to Rule 19b–4 and Form 19b– 

4 to require electronic submission of 

security-based swaps, Advance Notices 

and proposed rule changes with the 

Commission is a mandatory collection 

of information. Any collection of 

information pursuant to Rule 19b–4 to 

require Web site posting by clearing 

agencies of their Security-Based Swap 

Submissions, Advance Notices and 

proposed rules changes also is a 

mandatory collection of information. 

Any collection of information pursuant 

to the proposed Rule 3Ca–1 in 

connection with the application for the 

stay of the clearing requirement is a 

mandatory collection of information. 

Any collection of information pursuant 

to Rule 19b–4 to require SROs to inform 

the Commission of the date on which it 

posted a proposed rule change on its 

Web site (if such date is not the same 

day that it filed the proposal with the 

Commission) also is a mandatory 

collection of information. 

G. Responses to Collection of 

Information Will Not Be Kept 

Confidential 

The collection of information 

pursuant to Rule 19b–4, Form 19b–4 

and proposed Rule 3Ca–1 would not be 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82513 

138While there is a general requirement that 

information be made publicly available, SROs may 

request confidential treatment of certain 

information in accordance with the provisions of 

the Freedom of Information Act. 5 U.S.C. 552. 

kept confidential.138 The posting of 

Security-Based Swap Submissions, 

Advance Notices and proposed rule 

changes would be publicly available on 

the SRO’s Web site. 

H. Request for Comment 

Pursuant to 44 U.S.C. 3506(c)(2)(B), 

the Commission solicits comments to: 

(1) Evaluate whether the proposed 

collection of information is necessary 

for the performance of the functions of 

the agency, including whether the 

information shall have practical utility; 

(2) Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

(3) Enhance the quality, utility and 

clarity of the information to be 

collected; and 

(4) Minimize the burden of collection 

of information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

Persons wishing to submit comments 

on the collection of information 

requirements should direct them to the 

following persons: (1) Desk Officer for 

the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, Room 3208, 

New Executive Office Building, 

Washington, DC 20503; and (2) 

Elizabeth Murphy, Secretary, Securities 

and Exchange Commission, Station 

Place, 100 F Street, NE., Washington, 

DC 20549–1090 with reference to File 

No. S7–44–10. OMB is required to make 

a decision concerning the collection of 

information between 30 and 60 days 

after publication, so a comment to OMB 

is best assured of having its full effect 

if OMB receives it within 30 days of 

publication. The Commission has 

submitted the proposed collection of 

information to OMB for approval. 

Requests for the materials submitted to 

OMB by the Commission with regard to 

this collection of information should be 

in writing, refer to File No. S7–44–10, 

and be submitted to the Securities and 

Exchange Commission, Records 

Management, Office of Investor 

Education and Advocacy, Station Place, 

100 F Street, NE., Washington, DC 

20549–0213. 

V. Consideration of Costs and Benefits 

A. Processes for Security-Based Swap 

Submissions for Review and Staying a 

Clearing Requirement While the 

Clearing of the Security-Based Swap Is 

Reviewed 

Under Exchange Act Section 3C, 

Congress mandated that the 

Commission adopt rules: (i) For a 

clearing agency’s submission for review 

of any security-based swap, or a group, 

category, type or class of security-based 

swaps, that the clearing agency seeks to 

accept for clearing, and the manner of 

notice the clearing agency must provide 

to its members of such submission; and 

(ii) for the procedure by which the 

Commission may stay a clearing 

requirement while the clearing of a 

security-based swap is reviewed. The 

proposed rule relating to Security-Based 

Swap Submissions specifies the content 

of Security-Based Swap Submissions, 

how such Security-Based Swap 

Submissions shall be submitted, and the 

manner of notice the clearing agency 

must provide to its members regarding 

such submissions. The Commission also 

is proposing a rule to specify the 

procedure for staying the clearing 

requirement applicable to a securitybased swap, based either on an 

application of a counterparty to a 

security-based swap or on the 

Commission’s own initiative, until the 

Commission completes a review of the 

terms of the security-based swap and 

the clearing arrangement. The 

Commission is sensitive to the costs and 

benefits that would result from the 

proposed rules and has identified 

certain costs and benefits of the 

proposal, which are discussed more 

fully below. 

1. Processes for Security-Based Swap 

Submissions for Review 

Pursuant to Exchange Act Section 3C, 

a clearing agency must submit to the 

Commission each security-based swap, 

or any group, category, type or class of 

security-based swaps, that the clearing 

agency plans to accept for clearing. The 

Commission is required to review each 

Security-Based Swap Submission and 

determine whether the security-based 

swap, or any group, category, type or 

class of security-based swaps, described 

in the submission is required to be 

cleared. In reviewing a Security-Based 

Swap Submission, the Commission is 

required to review whether the SecurityBased Swap Submission is consistent 

with Exchange Act Section 17A, and 

must take into account the following 

factors: 

(i) The existence of significant 

outstanding notional exposures, trading 

liquidity and adequate pricing data. 

(ii) The availability of a rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear the 

contract on terms that are consistent 

with the material terms and trading 

conventions on which the contact is 

then traded. 

(iii) The effect on the mitigation of 

systemic risk, taking into account the 

size of the market for such contract and 

the resources of the clearing agency 

available to clear the contract. 

(iv) The effect on competition, 

including appropriate fees and charges 

applied to clearing. 

(v) The existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant clearing agency or one or 

more of its clearing members with 

regard to the treatment of customer and 

security-based swap counterparty 

positions, funds, and property. 

Additionally, Exchange Act Section 

3C requires, in general, that the rules of 

a clearing agency provide for open 

access, specifically requiring that the 

rules: 

(a) Prescribe that all security-based 

swaps submitted to the clearing agency 

with the same terms and conditions are 

economically equivalent within the 

clearing agency and may be offset with 

each other within the clearing agency; 

and 

(b) Provide for non-discriminatory 

clearing of a security-based swap 

executed bilaterally or on or through the 

rules of an unaffiliated national 

securities exchange or security-based 

swap execution facility. 

Pursuant to Exchange Act Section 3C, 

the Commission is required to make 

available to the public any SecurityBased Swap Submission and provide at 

least a 30-day public comment period. 

The Commission is required to make its 

determination not later than 90 days 

after receiving the Security-Based Swap 

Submission, unless the submitting 

clearing agency agrees to an extension. 

The proposed rule would require that 

the clearing agency include in each 

Security-Based Swap Submission 

information that will assist the 

Commission in reviewing the SecurityBased Swap Submission for consistency 

with Section 17A and meeting the 

statutory requirements set forth above in 

items (i)–(v). Additionally, the proposed 

rule would require that the clearing 

agency specify how the clearing 

agency’s rules for open access (set forth 

in items (a) and (b) above) are applicable 

to the security-based swap described in 

the Security-Based Swap Submission. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82514 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

139As discussed in section II.A.1 of this release, 

the Commission anticipates that registered clearing 

agencies, as SROs, often will be required to file a 

proposed rule change pursuant to Exchange Act 

Section 19(b) in connection with clearing a 

security-based swap, or any group, type, category or 

class of security-based swaps, and, at the same time, 

will be required to make a related Security-Based 

Swap Submission for a determination by the 

Commission of whether such security-based swap 

(or group, category, type or class of security-based 

swaps) is required to be cleared. A proposed rule 

change constitutes a change in a ‘‘stated policy, 

practice, or interpretation’’ of an SRO rule. The 

definition of a ‘‘stated policy, practice, or 

interpretation’’ in Exchange Act Section 19(b) 

includes, among other things, ‘‘any material aspect 

of the operation of the facilities of the SRO; or any 

statement made generally available to the 

membership of, to all participants in, or to persons 

having or seeking access * * * to facilities of, the 

self-regulatory organization (‘‘specified persons’’), or 

to a group or category of specified persons, that 

establishes or changes any standard, limit, or 

guideline with respect to (1) the rights, obligations, 

or privileges of specified persons * * *; or (2) the 

meaning, administration, or enforcement of an 

existing rule.’’ 17 CFR 240.19b–4(b). In cases where 

accepting a security-based swap (or group, category, 

type or class of security-based swaps) for clearing 

constitutes a change in a ‘‘stated policy, practice, or 

interpretation’’ of the clearing agency, the clearing 

agency also would be required to file a proposed 

rule change. 

140The hourly rate for a compliance attorney is 

from SIFMA’s Management & Professional Earnings 

in the Securities Industry 2010, modified by the 

Commission’s staff to account for an 1800-hour 

work-year and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits and overhead. 

141See supra note 129. 

The proposed rule would specify that a 

clearing agency submit security-based 

swaps to the Commission for review by 

group, category, type or class to the 

extent reasonable and practicable to do 

so. 

In addition, the Commission is 

proposing how Security-Based Swap 

Submissions shall be submitted by 

clearing agencies. Because the 

Commission preliminarily believes that 

there likely will be significant overlap 

between filings under Exchange Act 

Section 19(b) and Rule 19b–4 regarding 

proposed rule changes and SecurityBased Swap Submissions, the 

Commission is proposing that SecurityBased Swap Submissions be filed on 

Form 19b–4. In many cases, a SecurityBased Swap Submission also will be a 

proposed rule change for purposes of 

Exchange Act Section 19(b).139

The proposed rule provides that a 

clearing agency must provide notice to 

its members of a Security-Based Swap 

Submission and any amendments 

thereto, by posting the submission on its 

Web site within two business days. The 

proposed rule further requires the 

clearing agency to maintain this 

information on its Web site until the 

Commission makes a determination 

regarding the Security-Based Swap 

Submission, the clearing agency 

withdraws the submission, or the 

clearing agency is notified that the 

submission was not properly filed. 

a. Benefits 

The proposed rule is designed to 

implement the submission and notice 

requirements in Exchange Act Section 

3C. The Commission anticipates that the 

proposed rule would further the 

purposes of Exchange Act Section 3C by 

facilitating the filing and regulatory 

review of Security-Based Swap 

Submissions and reduce costs to filers 

by utilizing a format that clearing 

agencies may be familiar with or, as 

they become registered clearing 

agencies, that they will be required to 

use for all proposed rule changes, Form 

19b–4. In addition, the proposed rule 

would further reduce costs to filers by 

avoiding a duplication of efforts in 

providing notice to members of the 

clearing agency, as well as other 

interested persons, such as 

counterparties to security-based swaps, 

through requiring posting of the 

Security-Based Swap Submission on the 

clearing agency’s Web site within two 

business days of filing with the 

Commission. The Commission 

anticipates this prompt notice would 

provide the clearing agency members 

and other interested persons with the 

opportunity to comment on the 

submission with the potential for 

providing new information about the 

suitability of the security-based swap for 

clearing. 

The Commission anticipates the 

proposed rule requiring the clearing 

agency to provide information the 

Commission requires to review 

Security-Based Swap Submissions 

would reduce the cost of acquiring 

necessary information. Requiring the 

clearing agency to provide necessary 

information would ensure that the 

information used by the Commission to 

evaluate the security-based swap for 

mandatory clearing is correct and 

complete, reducing the likelihood that 

further information requests will be 

required. 

Proposed Rule 19b–4(o)(4) requires a 

clearing agency to submit security-based 

swaps to the Commission for review by 

group, category, type or class of 

security-based swaps, to the extent 

reasonable and practicable to do so. The 

Commission preliminarily believes a 

broad interpretation of what constitutes 

a group, category, type or class of 

security-based swaps is likely to provide 

benefits to clearing agencies and the 

Commission. Specifically, it would 

likely lower the costs associated with 

the Security-Based Swap Submission 

process since clearing agencies would 

be burdened with preparing fewer 

Security-Based Swap Submissions, and 

the Commission would be required to 

process and review fewer submissions. 

b. Costs 

Form 19b–4 is currently used by 

registered clearing agencies to file notice 

of proposed rule changes under 

Exchange Act Section 19(b) and any 

clearing agency that becomes registered 

will be required to use Form 19b–4 for 

all proposed rule changes. Accordingly, 

clearing agencies would be familiar with 

the electronic filing process in place for 

Form 19b–4 and their staffs would not 

be required to learn a new filing system. 

In addition, clearing agencies would be 

able to submit a change that is both a 

proposed rule change under Exchange 

Act Section 19(b) and a Security-Based 

Swap Submission in the same filing. 

Although there are additional 

information requirements for a SecurityBased Swap Submission, clearing 

agencies would be able to provide the 

required information as part of the Form 

19b–4 submission. 

More importantly, the Commission 

preliminarily believes much of the 

information the clearing agency 

provides in a Security-based Swap 

Submission would be the same as 

information the clearing agency 

collected and analyzed in making its 

business decision to plan to accept the 

security-based swap, or any group, 

category, type, or class of security-based 

swaps, for clearing. The Commission 

preliminarily believes that the clearing 

agency may incur costs in presenting 

this information in a clear and coherent 

manner in the format as required under 

the proposed rule. 

As previously discussed in the PRA 

analysis in Section IV, the proposed 

amendments to Rule 19b–4 and Form 

19b–4 will require a clearing agency to 

submit for a Commission determination, 

any security-based swap, or any group, 

category, type or class of security-based 

swaps that the clearing agency plans to 

accept for clearing. The Commission 

preliminarily estimates that the total 

annual reporting burden for clearing 

agencies to internally prepare, review 

and submit Security-Based Swap 

Submissions electronically with the 

Commission under the proposed 

amendments to Rule 19b–4 and Form 

19b–4 will be 24,000 hours; this figure 

includes 7,200 hours of outside legal 

work. Assuming an hourly cost of $320 

for an in-house compliance attorney,140

and an hourly cost of $354 for an 

outside attorney,141 these requirements 


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142See supra note 140. 

143See supra note 140. 

144The hourly rate for a senior systems analyst is 

from SIFMA’s Management & Professional Earnings 

in the Securities Industry 2010, modified by the 

Commission’s staff to account for an 1800-hour 

work-year and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits and overhead. 

145The hourly rate for a Webmaster is from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2010, modified by the 

Commission’s staff to account for an 1800-hour 

work-year and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits and overhead. 

146See Public Law 111–203, section 763(a) 

(adding Exchange Act Section 3C(c)(1)). 

147Proposed Rule 3Ca–1(b). 

would result in a total annual cost of 

$7,924,800 in the aggregate for the six 

respondent clearing agencies (16,800 

hours × $320 per hour for a compliance 

attorney) + (7,200 hours × $354 per hour 

for an outside attorney). 

The Commission preliminarily 

estimates that there would be a one-time 

burden of 780 hours for all newlyregistered clearing agencies to draft and 

implement internal policies and 

procedures related to using EFFS to 

submit Security-Based Swap 

Submissions, Advance Notices and 

proposed rule changes with the 

Commission. Assuming an hourly cost 

of $320 for an in-house compliance 

attorney,142 these requirements would 

result in a total one-time cost of 

$249,600 in the aggregate for the six 

respondent clearing agencies (780 hours 

× $320 per hour for an in-house 

compliance attorney). 

The Commission also preliminarily 

estimates that there would be a one-time 

burden of 120 hours for all currentlyregistered clearing agencies to draft and 

implement modifications to existing 

internal policies and procedures for 

using EFFS in order to update them for 

the submission of Security-Based Swap 

Submissions and/or Advance Notices 

with the Commission. Assuming an 

hourly cost of $320 for an in-house 

compliance attorney,143 these 

requirements would result in a one-time 

cost of $38,400 in the aggregate for the 

four respondent clearing agencies (120 

hours × $320 per hour for an in-house 

compliance attorney). 

The Commission preliminarily 

believes that newly-registered clearing 

agencies could incur some one-time 

costs associated with training their 

personnel about the procedures for 

submitting Security-Based Swap 

Submissions and/or Advance Notices in 

electronic format through EFFS. The 

Commission preliminarily estimates 

that six newly-registered clearing 

agencies would incur a one-time upfront 

burden of 120 hours to train clearing 

agency staff members to use EFFS to 

submit Security-Based Swap 

Submissions, Advance Notices and/or 

proposed rule changes electronically. 

The Commission preliminarily 

estimates that after the initial year, 

existing SROs (including currentlyregistered clearing agencies) would 

spend approximately 290 hours 

annually training new staff members 

and updating the training of existing 

staff members to use EFFS. Assuming an 

hourly cost of $259 for a senior systems 

analyst,144 these requirements would 

result in an overall estimated initial 

annual cost of $31,080 in the aggregate 

for the six newly-registered clearing 

agencies (120 hours × $259 per hour for 

a senior systems analyst) and an annual 

cost after the initial year of $75,110 

thereafter in the aggregate for all SROs 

(290 hours × $259 per hour for a senior 

systems analyst). 

Pursuant to existing Rule 19b–4(l), 

each SRO is required to post on its Web 

site a copy of any proposed rule change 

the SRO filed with the Commission and 

any amendments thereto. The proposed 

rule to implement the submission and 

notice requirements in Exchange Act 

Section 3C includes a similar posting 

requirement for Security-Based Swap 

Submissions. The Commission 

preliminary estimates that the total 

annual reporting burden for clearing 

agencies to post Security-Based Swap 

Submissions on their Web sites would 

be 480 hours. Assuming an hourly cost 

of $225 for a Webmaster,145 these 

requirements would result in a total 

estimated annual cost of $108,000 in the 

aggregate for the six respondent clearing 

agencies (480 hours × $225 per hour for 

a Webmaster). 

Some Security-Based Swap 

Submissions would be required to be 

filed only as Security-Based Swap 

Submissions under Exchange Act 

Section 3C and not as proposed rule 

changes under Exchange Act Section 

19(b), for example where a clearing 

agency’s rules already permit it to clear 

the security-based swap in question. As 

a result, clearing agencies would incur 

additional costs by filing a greater 

number of forms than they do currently 

under Exchange Act Section 19(b). 

2. Staying a Clearing Requirement While 

the Clearing of the Security-Based Swap 

Is Reviewed 

Under Exchange Act Section 3C, after 

making a determination that a securitybased swap (or group, category, type or 

class of security-based swaps) is 

required to be cleared, the Commission, 

on application of a counterparty to a 

security-based swap or on the 

Commission’s own initiative, may stay 

the clearing requirement until the 

Commission completes a review of the 

terms of the security-based swap and 

the clearing arrangement.146 In 

connection with a stay of the clearing 

requirement, the Commission is 

required to adopt rules for reviewing a 

clearing agency’s clearing of a securitybased swap, or any group, category, type 

or class of security-based swaps, that the 

clearing agency has accepted for 

clearing. 

Under proposed Rule 3Ca–1, a 

counterparty to a security-based swap 

subject to the clearing requirement who 

applies for a stay of the clearing 

requirement would be required to 

submit a written statement to the 

Commission that includes a request for 

a stay of the clearing requirement; the 

identity of the counterparties to the 

security-based swap and a contact at the 

counterparty requesting the stay; the 

identity of the clearing agency clearing 

the security-based swap; the terms of 

the security-based swap subject to the 

clearing requirement and a description 

of the clearing arrangement; and the 

reasons why a stay should be granted 

and why the security-based swap 

should not be subject to a clearing 

requirement, specifically addressing the 

same factors a clearing agency must 

address in its Security-Based-Swap 

Submission pursuant to proposed Rule 

19b–4(o).147 The proposed rule also 

provides that any clearing agency that 

has accepted for clearing a securitybased swap that is subject to the stay 

shall provide information requested by 

the Commission necessary to assess any 

of the factors it determines to be 

appropriate in the course of its review. 

a. Benefits 

The Commission preliminarily 

believes that the proposed rule provides 

benefits in creating an efficient 

mechanism for collecting information to 

be used in the Commission’s 

determination to grant the requested 

stay and subsequent review of the 

clearing requirement. Specifically, the 

counterparty will provide information 

specifically within its possession— 

reasons why the stay should be granted 

and why the security-based swap 

should not be subject to a clearing 

requirement. Additionally, any 

information requested from the clearing 

agency likely will include information 

unique to the clearing agency and will 

facilitate the Commission’s review of 

the clearing requirement subject to the 

stay. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82516 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

148See supra note 140. 

149See supra note 129. 150Proposed Rule 19b–4(n)(2)(iii). 

b. Costs 

The proposed rule requires a 

counterparty requesting a stay provide 

basic identifying information and 

information supporting its request for a 

stay and its position that the securitybased swap should not be subject to a 

clearing requirement. With respect to 

the proposed rule’s requirement that a 

clearing agency shall provide 

information requested by the 

Commission necessary to assess any of 

the factors it determines to be 

appropriate in the course of its review, 

the Commission preliminarily believes 

this information will likely be 

information the clearing agency has in 

its possession, including updates of 

information provided in the related 

Security-Based Swap Submission. The 

Commission preliminarily estimates 

that each clearing agency would receive 

five applications per annum to stay the 

clearing requirement. The Commission 

also preliminarily estimates that the 

total annual reporting burden for the six 

respondent clearing agencies to compile 

and provide the information requested 

by the Commission in connection with 

the review of the stay of clearing 

applications would be 750 hours; this 

figure includes 210 hours of outside 

legal work. Assuming an hourly cost of 

$320 for an in-house compliance 

attorney,148 and an hourly cost of $354 

for an outside attorney,149 these 

requirements would result in a total 

estimated annual cost of $247,140 in the 

aggregate for the six respondent clearing 

agencies (540 hours × $320 per hour for 

a compliance attorney) + (210 hours × 

$354 per hour for an attorney). 

Finally, the Commission preliminarily 

estimates that 100 hours would be 

required by a counterparty to a securitybased swap to prepare and submit an 

application requesting a stay of the 

clearing requirement. The Commission 

also preliminarily estimates that 

counterparties to security-based swaps 

transactions would submit 30 

applications requesting stays of the 

clearing requirement. Assuming an 

hourly cost of $354 for an outside 

attorney, the total annual cost in the 

aggregate for the respondent 

counterparties to meet these 

requirements would be $1,062,000 (100 

hours × $354 per hour for an outside 

attorney × 30 stay of clearing 

applications). 

The Commission requests that 

commenters provide views and 

supporting information regarding the 

costs and benefits associated with the 

proposed rules relating to SecurityBased Swap submissions and stay of the 

clearing requirement and related review. 

The Commission seeks estimates of 

these costs and benefits, as well as any 

costs and benefits not already identified. 

The Commission also requests comment 

on whether other provisions of the 

Dodd-Frank Act for which Commission 

rulemaking is required are likely to have 

an effect on the costs and benefits of the 

proposed rules. 

B. Advance Notices Required Under 

Section 806(e) 

Congress has mandated that the 

Commission adopt rules to define when 

proposed changes to a designated 

clearing agency’s rules, procedures or 

operations could materially affect the 

nature or level of risks presented by the 

clearing agency. The proposed rule 

would determine when notice of such 

changes must be filed with the 

Commission and would prescribe how 

such notices shall be filed. The 

Commission is sensitive to the costs and 

benefits that would result from the 

proposed rule and has identified certain 

costs and benefits of the proposal, 

which are discussed more fully below. 

1. Benefits 

Pursuant to Section 806(e), any 

registered clearing agency designated as 

a systemically important financial 

market utility and for which the 

Commission is the Supervisory Agency 

will be required to file with the 

Commission advance notice of proposed 

changes to its rules, procedures or 

operations that could materially affect 

the nature or level of risks presented by 

the clearing agency. The proposed rule 

would reduce regulatory uncertainty 

pertaining to the filing requirement in 

Section 806(e) by defining the term 

‘‘materially affect the nature or level of 

risks presented’’ with respect to a 

change to rules, procedures, or 

operations. The term would be defined 

as a matter as to which there is a 

reasonable possibility that the change 

could affect the performance of essential 

clearing and settlement functions or the 

overall nature or level of risk presented 

by the designated clearing agency. Such 

changes would include, but are not 

limited to, changes that materially affect 

participant and product eligibility, risk 

management, daily or intraday 

settlement procedures, default 

procedures, system safeguards, 

governance or financial resources of the 

designated financial market utility. 

However, such changes generally would 

exclude changes to an existing 

procedure, control, or service that do 

not modify the rights or obligations of 

the designated financial market utility 

or persons using its payment, clearing, 

or settlement services and that do not 

adversely affect the safeguarding of 

securities, collateral, or funds in the 

custody or control of the designated 

financial market utility or for which it 

is responsible, or changes concerned 

solely with the administration of the 

designated financial market utility or 

related to the routine, daily 

administration, direction, and control of 

employees.150

The Commission also is proposing to 

facilitate the compliance with the filing 

requirement in Section 806(e) by 

prescribing how Advance Notices of 

proposed changes to rules, procedures 

or operations shall be filed by 

designated clearing agencies. Because 

the requirement to file notice under 

Section 806(e) is similar to the filing 

requirement for proposed rule changes 

under Exchange Act Section 19(b), the 

Commission is proposing that Advance 

Notices be filed on Form 19b–4. In 

many cases, it is likely that a proposed 

change for purposes of Section 806(e) 

will also be a proposed rule change for 

purposes of Exchange Act Section 19(b), 

reducing costs associated with multiple 

filings. 

The proposed rule is designed to 

implement the filing requirement in 

Section 806(e) and to establish criteria 

for designated clearing agencies 

regarding when notices shall be filed 

and the method for filing such notices. 

The Commission preliminarily believes 

that the proposed rule would lower the 

costs of filing and regulatory review of 

proposed changes that could materially 

affect the nature or level of risks 

presented by systemically important 

clearing institutions. In addition, the 

proposed rule is intended to provide the 

public with the opportunity to comment 

on such proposals by designated 

clearing agencies. The Commission 

preliminarily believes the proposed rule 

would help to assure that the additional 

information required under Section 

806(e) is provided through amendments 

to the existing Form 19b–4. However, a 

filing submitted under both Section 

806(e) and Exchange Act Section 19(b) 

would be required to satisfy the 

standards under both sections in order 

to become effective. 

2. Costs 

The Commission preliminarily 

believes the costs associated with the 

proposed rule should not be significant 

for designated clearing agencies. Form 

19b–4 is currently used by registered 

clearing agencies to file notice of 


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Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82517 

151See supra note 145. 

152See supra note 145. 

153See supra note 140. 

154 15 U.S.C. 78w(a). 155 15 U.S.C. 77b(b). 156 15 U.S.C. 78c(f). 

proposed rule changes under Exchange 

Act Section 19(b). Accordingly, 

designated clearing agencies would be 

familiar with the filing process in Form 

19b–4, and staffs would not be required 

to learn a new filing system. In addition, 

clearing agencies would be able to 

submit a change that is both a proposed 

rule change under Exchange Act Section 

19(b) and a proposed change under 

Section 806(e) in the same filing. 

Although there are additional 

information requirements for a Section 

806(e) filing, designated clearing 

agencies would be able to provide the 

required information as part of the Form 

19b–4 submission. 

Some proposed changes may be 

required to be filed only as Advance 

Notices under Section 806(e) and not as 

proposed rule changes under Exchange 

Act Section 19(b). As a result, the 

Commission preliminarily believes 

clearing agencies will incur additional 

costs by filing a greater number of forms 

than they do currently under Exchange 

Act Section 19(b). Based on informal 

comments from clearing agencies, the 

Commission preliminarily estimates 

that each designated clearing agency 

will file 35 Advance Notices with the 

Commission annually at a cost of $3,200 

per submission (10 hours × compliance 

attorney at $320 per hour) or $1,120,000 

($3200 × 35 Advance Notices × 10 

respondent clearing agencies) in the 

aggregate for the ten respondent clearing 

agencies. 

Proposed Rule 19b–4(n)(3) requires 

designated clearing agencies to post 

copies of Advance Notices filed with the 

Commission on their Web sites. The 

Commission estimates that the total 

annual reporting burden for designated 

clearing agencies to post Advance 

Notices on their Web sites would be 

1400 hours. Assuming an hourly cost of 

$225 for a Webmaster,151 these 

requirements would result in an 

estimated annual cost of $315,000 in the 

aggregate for the ten respondent clearing 

agencies (1400 hours × $225 per hour 

for a Webmaster). 

Proposed Rule 19b–4(n)(4) requires a 

designated clearing agency to post 

notice on its Web site of any change to 

its rules, procedures or operations 

referred to in an Advance Notice once 

it has been permitted to take effect. The 

Commission estimates that the total 

annual reporting burden for designated 

clearing agencies to post notice on their 

Web sites of any change to their rules, 

procedures or operations referred to in 

Advance Notices once they take effect 

would be 1400 hours. Assuming an 

hourly cost of $225 for a Webmaster,152

these requirements would result in an 

estimated annual cost of $315,000 in the 

aggregate for the ten respondent clearing 

agencies (1400 hours × $225 per hour 

for a Webmaster). 

C. Amendment To Conform to Section 

916 of the Dodd-Frank Act 

The Commission preliminarily 

estimates that the requirement that an 

SRO inform the Commission of the date 

on which it posted a proposed rule 

change on its Web site (if the posting 

did not occur on the same day that the 

SRO filed the proposal with the 

Commission) will impose only a 

minimal burden, if any, on an SRO. As 

discussed in Section IV.B.4., the 

Commission preliminarily believes that 

SROs currently post their proposed rule 

changes on their Web site on the same 

day on which they file them with the 

Commission. It would be an unlikely 

occurrence for an SRO to fail to post its 

proposed rule change on the same day 

that it files with the Commission, since 

prompt Web site posting triggers the 

requirement on the Commission to 

publish notice of the proposed rule 

change. 

The Commission preliminarily 

estimates that SROs will fail to post 

proposed rule changes on their Web 

sites on the same day as the filing was 

made with the Commission in 1% of all 

cases, or 14 times each year, and that 

each SRO will spend approximately one 

hour preparing and submitting notice to 

the Commission of the date on which it 

posted the proposed rule change on its 

Web site, resulting in a total annual 

burden of 14 hours. Assuming an hourly 

cost of $320 for an in-house compliance 

attorney,153 this requirement would 

result in a total estimated annual cost of 

$4,480 in the aggregate for all SROs (14 

hours × $320 per hour for a compliance 

attorney) in the aggregate for all SROs. 

The Commission requests that 

commenters provide views and 

supporting information regarding the 

costs and benefits associated with the 

proposals. The Commission seeks 

estimates of these costs and benefits, as 

well as any costs and benefits not 

already identified. The Commission also 

requests comment on whether other 

provisions of the Dodd-Frank Act for 

which Commission rulemaking is 

required are likely to have an effect on 

the costs and benefits of the proposed 

rules. 

VI. Consideration of Burden on 

Competition and Promotion of 

Efficiency, Competition and Capital 

Formation 

Exchange Act Section 23(a) 154

requires the Commission, when making 

rules and regulations under the 

Exchange Act, to consider the impact a 

new rule would have on competition. 

Exchange Act Section 23(a)(2) prohibits 

the Commission from adopting any rule 

that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. Section 

2(b) of the Securities Act of 1933 155 and 

Exchange Act Section 3(f) 156 require the 

Commission, when engaging in 

rulemaking that requires it to consider 

whether an action is necessary or 

appropriate in the public interest, to 

consider, in addition to the protection of 

investors, whether the action would 

promote efficiency, competition, and 

capital formation. Below, the 

Commission addresses these issues for 

the amendments to Rule 19b–4 and 

Form 19b–4 to reflect the use of these 

forms for filing Security-Based Swap 

Submissions and Advance Notices, and 

proposed Rule 3Ca–1 to facilitate the 

process for staying the clearing 

requirement applicable to a securitybased swap until the Commission 

completes a review of the terms of the 

security-based swap and the clearing 

arrangement. 

A. Proposed Amendments to Rule 

19b–4 and Form 19b–4 

The proposed amendments to Rule 

19b–4 and Form 19b–4 are designed to 

facilitate the statutorily mandated 

processes for submitting Security-Based 

Swap Submissions and Advance 

Notices to the Commission, and to make 

each process efficient by utilizing the 

existing process and EFFS infrastructure 

for proposed rule changes. Using an 

existing process to accomplish an 

additional legislative requirement 

would conserve both clearing agency 

and Commission resources. If amended, 

Form 19b–4 would enable clearing 

agencies to submit Security-Based Swap 

Submissions, and any amendments 

thereto, and any Advance Notices 

electronically to the Commission. 

Submitting Security-Based Swap 

Submissions and Advance Notices in 

this manner would impose fewer costs 

on clearing agencies and the 

Commission when compared to 

requiring clearing agencies to use new 

infrastructure or business processes to 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82518 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

157Public Law 104–121, Title II, 110 Stat. 857 

(1996) (codified in various sections of 5 U.S.C., 15 

U.S.C. and as a note to 5 U.S.C. 601). 

158 5 U.S.C. 601 et seq. 

159 5 U.S.C. 603(a). 

160 5 U.S.C. 551 et seq. 

161Section 601(b) of the RFA permits agencies to 

formulate their own definitions of ‘‘small entities.’’ 

The Commission has adopted definitions for the 

term ‘‘small entity’’ for the purposes of rulemaking 

make Security-Based Swap Submissions 

or Advance Notices. 

The proposed requirement that the 

clearing agency aggregate security-based 

swaps into groups, categories, types or 

classes to the extent reasonable and 

practicable to do so, in each SecurityBased Swap Submission likely would 

appropriately streamline the submission 

process for Commission staff and 

clearing agencies (i.e., such aggregations 

would decrease the number of SecurityBased Swap Submissions each clearing 

agency would prepare and submit, and 

accordingly, the Commission would 

review). This requirement is intended to 

make the Security-Based Swap 

Submission process more efficient. 

The proposed amendments to Rule 

19b–4 and Form 19b–4 also are 

intended to improve the transparency of 

security-based swaps transactions. The 

proposed amendments to Rule 19b–4 

would require a clearing agency to post 

on its Web site any Security-Based 

Swap Submissions and any 

amendments thereto, it submitted to the 

Commission within two business days 

of submission to the Commission, to 

fulfill the statutory requirement that 

clearing agencies provide notice to their 

members of such submissions. The 

Commission preliminarily believes that 

public Web site posting of SecurityBased Swap Submissions may promote 

competition among security-based swap 

clearing agencies because it will make it 

easier (and more timely) for clearing 

agencies to be able to determine the 

security-based swaps their competitors 

intend to clear and analyze whether 

they too wish to clear such securitybased swap. 

Similarly, the proposed amendments 

to Rule 19b–4 would require a 

designated clearing agency to post on its 

Web site proposed changes to its rules, 

procedures, or operations that trigger 

the Section 806(e) advance notice 

requirement and a description of the 

subjects and issues involved within two 

business days of the submission of an 

Advance Notice to the Commission. A 

designated clearing agency also will be 

required to post a notice on its Web site 

of the effectiveness of any change to its 

rules, procedures, or operations referred 

to in an Advance Notice within two 

business days of the effective date, as 

monitored by the designated clearing 

agency and determined in accordance 

with Section 806(e). The Commission 

preliminarily believes that public Web 

site posting of this information may 

promote competition and transparency 

among clearing agencies by giving 

interested persons an opportunity to 

submit written data, views, and 

arguments concerning proposed changes 

that could materially affect the nature or 

level of risks presented by a designated 

clearing agency. 

The proposed amendments to Rule 

19b–4 and Form 19b–4 with respect to 

the information that clearing agencies 

are required to provide are intended to 

facilitate the Commission’s review 

process for Security-Based Swap 

Submissions and Advance Notices and 

to make the process efficient by 

requiring information the clearing 

agency is uniquely qualified to provide 

and likely may already have available. 

The Commission preliminarily 

believes none of the proposed 

amendments to Rule 19b–4 and Form 

19b–4 would have an adverse impact on 

competition or capital formation, but 

instead should increase confidence in 

the robustness of the security-based 

swap market, encouraging participation 

and allowing better risk management 

practices. To the extent that securitybased swaps mitigate the risk associated 

with capital raising activities, increased 

investor confidence and use of securitybased swaps should foster more efficient 

capital formation and thereby benefit 

issuers and investors. 

Proposed Rule 3Ca–1 is designed to 

facilitate the statutorily mandated 

process for staying the clearing 

requirement applicable to a securitybased swap until the Commission 

completes a review of the terms of the 

security-based swap and the clearing 

arrangement. The proposed rule is 

designed to create an efficient 

mechanism for collecting information to 

be used in the Commission’s 

determination to grant the requested 

stay and subsequent review of the 

clearing requirement. 

The Commission has not identified 

any effects on competition or capital 

formation of the process specified in 

proposed Rule 3Ca–1. The Commission 

preliminarily believes proposed Rule 

3Ca–1 would not have an adverse 

impact on competition or capital 

formation. 

The Commission generally requests 

comment on the competitive or 

anticompetitive effects of the proposed 

amendments to Rule 19b–4 and Form 

19b–4 on any market participants if 

adopted as proposed. The Commission 

also requests comment on what impact 

the amendments, if adopted, would 

have on efficiency and capital 

formation. The Commission requests 

that commenters provide analysis and 

empirical data, if available, to support 

their views regarding any such effects. 

The Commission notes that such effects 

may be difficult to quantify. The 

Commission also requests comment 

regarding the competitive effects of 

pursuing alternative regulatory 

approaches that are consistent with 

Exchange Act Section 3C, as added by 

Section 763(a) of the Dodd-Frank Act. In 

addition, the Commission requests 

comment on how the other provisions of 

the Dodd-Frank Act for which 

Commission rulemaking is required, 

will interact with and influence the 

competitive effects of the proposed 

amendments to Rule 19b–4 and Form 

19b–4. 

VII. Consideration of Impact on the 

Economy 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (‘‘SBREFA’’),157 the Commission 

must advise the OMB as to whether the 

proposed rule constitutes a ‘‘major’’ rule. 

Under SBREFA, a rule is considered 

‘‘major’’ where, if adopted, it results or 

is likely to result in: (i) An annual effect 

on the economy of $100 million or more 

(either in the form of an increase or a 

decrease); (ii) a major increase in costs 

or prices for consumers or individual 

industries; or (iii) significant adverse 

effect on competition, investment or 

innovation. If a rule is ‘‘major,’’ its 

effectiveness will generally be delayed 

for sixty days pending Congressional 

review. 

The Commission requests comment 

on the potential impact of the 

amendments to Rule 19b–4 and Form 

19b–4 and new Rules 3Ca–1 and 3Ca– 

2 on the economy on an annual basis, 

any potential increase in costs or prices 

for consumers or individual industries, 

and any potential effect on competition, 

investment or innovation. Commenters 

are requested to provide empirical data 

and other factual support for their view 

to the extent possible. 

VIII. Regulatory Flexibility 

Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) 158 requires the Commission, in 

promulgating rules, to consider the 

impact of those rules on small entities. 

Section 603(a) 159 of the Administrative 

Procedure Act,160 as amended by the 

RFA, generally requires the Commission 

to undertake a regulatory flexibility 

analysis of all proposed rules to 

determine the impact of such 

rulemaking on ‘‘small entities.’’ 161


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82519 

in accordance with the RFA. These definitions, as 

relevant to this proposed rulemaking, are set forth 

in Rule 0–10, 17 CFR 240.0–10. 

162See 5 U.S.C. 605(b). 

163See CDS Clearing Exemption Orders, supra 

note 122. 

164 17 CFR 240.0–10(d). 

165 13 CFR 121.201, Sector 52. 

166See 17 CFR 240.0–10(d). 

167 17 CFR 240.0–10(d). 

168 17 CFR 240.0–10(a). 

169 17 CFR 240.0–10(c). 

170 13 CFR 121.201, Sector 52. 

Section 605(b) of the RFA states that 

this requirement shall not apply to any 

proposed rule which, if adopted, would 

not have a significant economic impact 

on a substantial number of small 

entities.162

A. Clearing Agencies 

The amendments to Rule 19b–4 

would apply to (i) all clearing agencies 

that clear security-based swaps and (ii) 

all designated clearing agencies. 

Proposed Rules 3Ca–1 and 3Ca–2 would 

apply to all security-based swap 

clearing agencies. Four entities are 

currently exempt from registration as a 

clearing agency under Exchange Act 

Section 17A to provide central clearing 

services for CDS, a class of securitybased swaps.163 The Commission 

preliminarily believes, based on its 

understanding of the market, that likely 

no more than six security-based swap 

clearing agencies could be subject to the 

requirements of the proposed 

amendments to Rule 19b–4 and 

proposed Rules 3Ca–1 and 3Ca–2. In 

addition, the Commission preliminarily 

believes that approximately ten 

registered clearing agencies could be 

designated by the Council as 

systemically important (and for which 

the Commission will be the Supervisory 

Agency), which includes the four 

existing securities clearing agencies and 

the six estimated clearing agencies that 

may clear security-based swaps. 

For the purposes of Commission 

rulemaking in connection with the RFA, 

a small entity includes, when used with 

reference to a clearing agency, a clearing 

agency that: (i) Compared, cleared and 

settled less than $500 million in 

securities transactions during the 

preceding fiscal year; (ii) had less than 

$200 million of funds and securities in 

its custody or control at all times during 

the preceding fiscal year (or at any time 

that it has been in business, if shorter); 

and (iii) is not affiliated with any person 

(other than a natural person) that is not 

a small business or small 

organization.164 Under the standards 

adopted by the Small Business 

Administration, small entities in the 

finance industry include the following: 

(i) For entities engaged in investment 

banking, securities dealing and 

securities brokerage activities, entities 

with $6.5 million or less in annual 

receipts; (ii) for entities engaged in trust, 

fiduciary and custody activities, entities 

with $6.5 million or less in annual 

receipts; and (iii) funds, trusts and other 

financial vehicles with $6.5 million or 

less in annual receipts.165

Based on the Commission’s existing 

information about the entities likely to 

register to clear security-based swaps, 

the Commission preliminarily believes 

that such entities will not be small 

entities, but rather part of large business 

entities that exceed the thresholds 

defining ‘‘small entities’’ set out above. 

Additionally, while other clearing 

agencies may become eligible to operate 

as central counterparties for securitybased swaps, the Commission 

preliminarily does not believe that any 

such entities would be ‘‘small entities’’ 

as defined in Exchange Act Rule 0– 

10.166 Furthermore, we believe it is 

unlikely that clearing agencies acting as 

central counterparties for security-based 

swaps would have annual receipts of 

less than $6.5 million. Accordingly, the 

Commission believes that any clearing 

agencies clearing security-based swaps 

by acting as central counterparties for 

such transactions will exceed the 

thresholds for ‘‘small entities’’ set forth 

in Exchange Act Rule 0–12. 

B. Security-Based Swap Counterparties 

Proposed Rule 3Ca–1 would apply to 

any counterparty to a security-based 

swap subject to the clearing requirement 

that applies for a stay of the clearing 

requirement. For the purposes of 

Commission rulemaking and as 

applicable to this proposed Rule 3Ca–1, 

a small entity includes: (i) When used 

with reference to a clearing agency, a 

clearing agency that (a) compared, 

cleared and settled less than $500 

million in securities transactions during 

the preceding fiscal year, (b) had less 

than $200 million of funds and 

securities in its custody or control at all 

times during the preceding fiscal year 

(or at any time that it has been in 

business, if shorter) and (c) is not 

affiliated with any person (other than a 

natural person) that is not a small 

business or small organization; 167 (ii) 

when used as reference to an ‘‘issuer’’ or 

a ‘‘person,’’ other than an investment 

company, an ‘‘issuer’’ or a ‘‘person’’ that, 

on the last day of its most recent fiscal 

year, had total assets of $5 million or 

less; 168 or (iii) when used as reference 

to broker-dealer, a broker-dealer (a) with 

total capital (net worth plus 

subordinated liabilities) of less than 

$500,000 on the date in the prior fiscal 

year as of which its audited financial 

statements were prepared pursuant to 

Rule 17a–5(d) under the Exchange Act, 

or, if not required to file such 

statements, a broker-dealer that had 

total capital (net worth plus 

subordinated liabilities) of less than 

$500,000 on the last business day of the 

preceding fiscal year (or in that time 

that it has been in business, if shorter) 

and (b) is not affiliated with any person 

(other than a natural person) that is not 

a small business or small 

organization.169 Under the standards 

adopted by the Small Business 

Administration, small entities in the 

finance industry include the following: 

(i) For entities engaged in investment 

banking, securities dealing and 

securities brokerage activities, entities 

with $6.5 million or less in annual 

receipts; (ii) for entities engaged in trust, 

fiduciary and custody activities, entities 

with $6.5 million or less in annual 

receipts; and (iii) funds, trusts and other 

financial vehicles with $6.5 million or 

less in annual receipts.170

With regard to security-based swap 

transactions that have counterparties 

that may meet the definition of a ‘‘small 

entity’’ under Exchange Act Rule 0–10 

and, under proposed Rule 3Ca–1, apply 

to the Commission for a stay of the 

clearing requirement, the Commission 

believes that it is unlikely that the stay 

application process of proposed Rule 

3Ca–1 would have a significant 

economic impact upon such an entity. 

Given that the proposed stay application 

process entails the submission of a 

written statement to the Commission 

setting forth information about the 

security-based swap transaction for 

which the stay is sought, the 

Commission believes the impact of the 

application process on a counterparty 

would be minimal. Furthermore, even if 

the stay application process were to 

have a significant economic impact 

upon such non-clearing agency 

counterparty, the Commission believes 

that the number of entities so impacted 

would be no more than 30, based on the 

informal discussions between the staff 

and the clearing agencies, in terms of 

number of stay requests and number of 

small entities making such requests. 

Accordingly, in respect of non-clearing 

agency counterparties to security-based 

swap transactions, the Commission 

preliminarily believes that proposed 

Rule 3Ca–1 would not have a significant 

economic impact on a substantial 

number of small entities. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82520 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

C. Certification 

For the reasons stated above, the 

Commission certifies that the proposed 

amendments to Rule 19b–4 and 

proposed Rules 3Ca–1 and 3Ca–2 would 

not have a significant economic impact 

on a substantial number of small entities 

for the purposes of the RFA. The 

Commission encourages written 

comments regarding this certification. 

The Commission requests that 

commenters describe the nature of any 

impact on small entities, including 

clearing agencies eligible to clear 

security-based swaps, designated 

clearing agencies and counterparties to 

security-based swap transactions, and 

provide empirical data to support the 

extent of the impact. 

IX. Statutory Authority 

Pursuant to the Exchange Act, and 

particularly Sections 3C, 17A and 19(b) 

thereof, 15 U.S.C. 78c–3, 78q–1 and 

78s(b) and Section 806(e) of the DoddFrank Act, 12 U.S.C 5465(e), the 

Commission proposes to amend Rule 

19b–4 and Form 19b–4 and add new 

Rules 3Ca–1 and 3Ca–2, as set forth 

below. 

List of Subjects in 17 CFR Parts 240 and 

249 

Brokers, Reporting and recordkeeping 

requirements, Securities. 

Text of the Proposed Rule 

In accordance with the foregoing, 

Title 17, chapter II of the Code of 

Federal Regulations is proposed to be 

amended as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

1. The general authority citation for 

part 240 is revised to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78d, 78e, 78f, 78g, 

78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 

78o, 78o–4, 78p, 78q, 78s, 78u–5, 78w, 78x, 

78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 

80b–3, 80b–4, 80b–11, and 7201 et seq.; 18 

U.S.C. 1350 and 12 U.S.C. 5221(e)(3), unless 

otherwise noted. 

* * * * * 

Section 240.19b–4 is also issued under 12 

U.S.C. 5465(e). 

2. Sections 240.3ca–1 and 240.3ca–2 

are added following § 240.3b–19 to read 

as follows: 

§ 240.3ca–1 Stay of clearing requirement 

and review by the Commission. 

(a) After making a determination 

pursuant to a clearing agency’s securitybased swap submission that a securitybased swap, or any group, category, type 

or class of security-based swaps, is 

required to be cleared, the Commission, 

on application of a counterparty to a 

security–based swap or on the 

Commission’s own initiative, may stay 

the clearing requirement until the 

Commission completes a review of the 

terms of the security-based swap (or 

group, category, type, or class of 

security-based swaps) and the clearing 

of the security-based swap (or group, 

category, type, or class of security-based 

swaps) by the clearing agency that has 

accepted it for clearing. 

(b) A counterparty to a security-based 

swap applying for a stay of the clearing 

requirement for a security-based swap 

(or group, category, type, or class of 

security-based swaps) shall submit a 

written statement to the Commission 

that includes: 

(1) A request for a stay of the clearing 

requirement; 

(2) The identity of the counterparties 

to the security-based swap and a contact 

at the counterparty requesting the stay; 

(3) The identity of the clearing agency 

clearing the security-based swap; 

(4) The terms of the security-based 

swap subject to the clearing requirement 

and a description of the clearing 

arrangement; and 

(5) Reasons why such stay should be 

granted and why the security-based 

swap should not be subject to a clearing 

requirement, specifically addressing the 

same factors a clearing agency must 

address in its security-based-swap 

submission pursuant to § 240.19b– 

4(o)(3) of this chapter. 

(c) A stay of the clearing requirement 

may be granted with respect to a 

security-based swap, or the group, 

category, type, or class of security-based 

swaps, as determined by the 

Commission. 

(d) The Commission’s review shall 

include, but need not be limited to, a 

quantitative and qualitative assessment 

of the factors specified in § 240.19b– 

4(o)(3) of this chapter. Any clearing 

agency that has accepted for clearing a 

security-based swap, or any group, 

category, type or class of security-based 

swaps, that is subject to the stay of the 

clearing requirement shall provide 

information requested by the 

Commission necessary to assess any of 

the factors it determines to be 

appropriate in the course of its review. 

(e) Upon completion of its review, the 

Commission may: 

(1) Determine, subject to any terms 

and conditions that the Commission 

determines to be appropriate in the 

public interest, that the security-based 

swap, or group, category, type, or class 

of security-based swaps must be cleared; 

or 

(2) Determine that the clearing 

requirement will not apply to the 

security-based swap, or group, category, 

type, or class of security-based swaps, 

but clearing may continue on a nonmandatory basis. 

§ 240.3ca–2 Submission of security-based 

swaps for clearing. 

Pursuant to section 3C(a)(1) of the Act 

(15 U.S.C. 78c–3(a)(1)), it shall be 

unlawful for any person to engage in a 

security-based swap unless that person 

submits such security-based swap for 

clearing to a clearing agency that is 

registered under this Act or a clearing 

agency that is exempt from registration 

under the Act if the security-based swap 

is required to be cleared. The phrase 

submits such security-based swap for 

clearing to a clearing agency in the 

clearing requirement of Section 3C(a)(1) 

of the Act shall mean that the securitybased swap will be submitted for central 

clearing to a clearing agency that 

functions as a central counterparty. 

3. § 240.19b–4 is amended by: 

a. Removing paragraph (b); 

b. Redesignating paragraph (a) as 

paragraph (b); 

c. Adding new paragraph (a); 

d. In paragraph (i), by revising the 

phrase ‘‘of all filings made pursuant to 

this section’’ to read ‘‘of all filings, 

notices and submissions made pursuant 

to this section 240.19b–4’’; 

e. In paragraph (i), adding the words 

‘‘notice or submission,’’ after the phrase 

‘‘any such filing,’’; 

f. In paragraph (i), removing the 

phrase ‘‘the filing of the proposed rule 

change.’’ and adding in its place ‘‘the 

filing, notice or submission of the 

proposed rule change, advance notice or 

security-based swap submission, as 

applicable.’’; 

g. In paragraph (j), first sentence, 

removing the words ‘‘with respect to 

proposed rule changes’’; 

h. In paragraph (k) adding ‘‘240.19b– 

4’’ after the words ‘‘this section’’; 

i. Revising paragraph (l), introductory 

paragraph; 

j. In paragraph (l)(4), replacing the 

phrase ‘‘website’’ to read ‘‘Web site’’; 

k. In paragraph (m)(1), replacing the 

phrase ‘‘website’’ to read ‘‘Web site’’; 

l. In paragraph (m)(2), replacing the 

phrase ‘‘website’’ to read ‘‘Web site’’; 

m. In paragraph (m)(3), replacing the 

phrase ‘‘website’’ to read ‘‘Web site’’; 

n. Adding paragraph (n); and 

o. Adding paragraph (o). 

3. The additions and revisions read as 

follows: 

§ 240.19b–4 Filings with respect to 

proposed rule changes by self-regulatory 

organizations. 

* * * * * 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82521 

(a) Definitions. As used in this 

§ 240.19b–4: 

(1) The term advance notice means a 

notice required to be made by a 

designated clearing agency pursuant to 

Section 806(e) of the Payment, Clearing 

and Settlement Supervision Act (12 

U.S.C. 5465); 

(2) The term designated clearing 

agency means a clearing agency that is 

registered with the Commission, and for 

which the Commission is the 

Supervisory Agency (as determined in 

accordance with section 803(8) of the 

Payment, Clearing and Settlement 

Supervision Act), that has been 

designated by the Financial Stability 

Oversight Council pursuant to section 

804 of the Payment, Clearing and 

Settlement Supervision Act (12 U.S.C. 

5463) as systemically important or 

likely to become systemically important; 

(3) The term Payment, Clearing and 

Settlement Supervision Act means Title 

VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(124 Stat. 1802, 1803, 1807, 1809, 1811, 

1814, 1816, 1818, 1820, 1821; 12 U.S.C. 

5461 et seq.); 

(4) The term proposed rule change 

has the meaning set forth in Section 

19(b)(1) of the Act (15 U.S.C. 78s(b)(1)); 

(5) The term security-based swap 

submission means a submission 

required to be made by a clearing 

agency pursuant to section 3C(b)(2) of 

the Act (15 U.S.C. 78c–3(b)(2)) for each 

security-based swap, or any group, 

category, type or class of security-based 

swaps, that such clearing agency plans 

to accept for clearing; 

(6) The term stated policy, practice, or 

interpretation means: 

(i) Any material aspect of the 

operation of the facilities of the selfregulatory organization; or 

(ii) Any statement made generally 

available to the membership of, to all 

participants in, or to persons having or 

seeking access (including, in the case of 

national securities exchanges or 

registered securities associations, 

through a member) to facilities of, the 

self-regulatory organization (‘‘specified 

persons’’), or to a group or category of 

specified persons, that establishes or 

changes any standard, limit, or 

guideline with respect to: 

(A) The rights, obligations, or 

privileges of specified persons or, in the 

case of national securities exchanges or 

registered securities associations, 

persons associated with specified 

persons; or 

(B) The meaning, administration, or 

enforcement of an existing rule. 

* * * * * 

(l) The self-regulatory organization 

shall post each proposed rule change, 

and any amendments thereto, on its 

Web site within two business days after 

the filing of the proposed rule change, 

and any amendments thereto, with the 

Commission. If a self-regulatory 

organization does not post a proposed 

rule change on its Web site on the same 

day that it filed the proposal with the 

Commission, then the self-regulatory 

organization shall inform the 

Commission of the date on which it 

posted such proposal on its Web site. 

Such proposed rule change and 

amendments shall be maintained on the 

self-regulatory organization’s Web site 

until: 

* * * * * 

(n)(1) A designated clearing agency 

shall provide an advance notice to the 

Commission of any proposed change to 

its rules, procedures, or operations that 

could materially affect the nature or 

level of risks presented by such 

designated clearing agency. Such 

advance notice shall be submitted to the 

Commission electronically on Form 

19b–4 (referenced in 17 CFR 249.819). 

The Commission shall, upon the filing 

of any advance notice, provide for 

prompt publication thereof. 

(2)(i) For purposes of this paragraph 

(n), the phrase materially affect the 

nature or level of risks presented, when 

used to qualify determinations on a 

change to rules, procedures, or 

operations at the designated clearing 

agency, means matters as to which there 

is a reasonable possibility that the 

change could affect the performance of 

essential clearing and settlement 

functions or the overall nature or level 

of risk presented by the designated 

clearing agency. 

(ii) Changes to rules, procedures or 

operations that could materially affect 

the nature or level or risks presented by 

a designated clearing agency utility may 

include, but are not limited to, changes 

that materially affect participant and 

product eligibility, risk management, 

daily or intraday settlement procedures, 

default procedures, system safeguards, 

governance or financial resources of the 

designated clearing agency. 

(iii) Changes to rules, procedures or 

operations that may not materially affect 

the nature or level or risks presented by 

a designated clearing agency include, 

but are not limited to: 

(A) Changes to an existing procedure, 

control, or service that do not modify 

the rights or obligations of the 

designated financial market utility or 

persons using its payment, clearing, or 

settlement services and that do not 

adversely affect the safeguarding of 

securities, collateral, or funds in the 

custody or control of the designated 

financial market utility or for which it 

is responsible; or 

(B) Changes concerned solely with the 

administration of the designated 

financial market utility or related to the 

routine, daily administration, direction, 

and control of employees; 

(3) The designated clearing agency 

shall post the advance notice, and any 

amendments thereto, on its Web site 

within two business days after the filing 

of the advance notice, and any 

amendments, thereto the Commission. 

Such advance notice and amendments 

shall be maintained on the designated 

clearing agency’s Web site until the 

earlier of: 

(i) The date the designated clearing 

agency withdraws the advance notice or 

is notified that the advance notice is not 

properly filed; or 

(ii) The date the designated clearing 

agency posts a notice of effectiveness as 

required by paragraph (n)(4)(ii) of this 

section. 

(4)(i) The designated clearing agency 

shall post a notice on its Web site 

within two business days of the date 

that any change to its rules, procedures, 

or operations referred to in an advance 

notice has been permitted to take effect 

as such date is determined in 

accordance with Section 806(e) of the 

Payment, Clearing and Settlement 

Supervision Act (12 U.S.C. 5465) 

(ii) The designated clearing agency 

shall post a notice on its Web site 

within two business days of the 

effectiveness of any change to its rules, 

procedures, or operations referred to in 

an advance notice. 

(5) A designated clearing agency shall 

provide copies of all materials 

submitted to the Commission relating to 

an advance notice with the Board of 

Governors of the Federal Reserve 

System contemporaneously with such 

submission to the Commission. 

(o)(1) A clearing agency shall submit 

to the Commission a security-based 

swap submission and provide notice to 

its members of such security-based 

swap submission. 

(2) Every clearing agency that is 

registered with the Commission that 

plans to accept a security-based swap, 

or any group, category, type or class of 

security-based swaps for clearing shall 

submit to the Commission electronically 

on Form 19b–4 (referenced in CFR 

249.819) the information required to be 

submitted for a security-based swap 

submission, as provided in § 240.19b–4 

of this chapter and Form 19b–4. Any 

information submitted to the 

Commission electronically on Form 

19b–4 that is not complete or otherwise 

in compliance with § 240.19b–4 of this 

chapter and Form 19b–4, shall not be 


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considered a security-based swap 

submission and the Commission shall 

so inform the clearing agency within 

twenty-one business days of the 

submission on Form 19b–4. 

(3) A security-based swap submission 

submitted by a clearing agency to the 

Commission shall include a statement 

that includes, but is not limited to: 

(i) How the security-based swap 

submission is consistent with Section 

17A of the Act (15 U.S.C. 78q–1); and 

(ii) Information that will assist the 

Commission in the quantitative and 

qualitative assessment of the factors 

specified in Section 3C of the Act (15 

U.S.C. 78c–3), including, but not limited 

to: 

(A) The existence of significant 

outstanding notional exposures, trading 

liquidity and adequate pricing data; 

(B) The availability of a rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear the 

contract on terms that are consistent 

with the material terms and trading 

conventions on which the contract is 

then traded; 

(C) The effect on the mitigation of 

systemic risk, taking into account the 

size of the market for such contract and 

the resources of the clearing agency 

available to clear the contract; 

(D) The effect on competition, 

including appropriate fees and charges 

applied to clearing; 

(E) The existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant clearing agency or one or 

more of its clearing members with 

regard to the treatment of customer and 

security-based swap counterparty 

positions, funds, and property; 

(F) How the rules of the clearing 

agency prescribe that all security-based 

swaps submitted to the clearing agency 

with the same terms and conditions are 

economically equivalent within the 

clearing agency and may be offset with 

each other within the clearing agency, 

as applicable to the security-based 

swaps described in the security-based 

swap submission. 

(G) How the rules of the clearing 

agency provide for non-discriminatory 

clearing of a security-based swap 

executed bilaterally or on or through the 

rules of an unaffiliated national 

securities exchange or security-based 

swap execution facility, as applicable to 

the security-based swaps described in 

the security-based swap submission. 

(4) A clearing agency shall submit 

security-based swaps to the Commission 

for review by group, category, type or 

class of security-based swaps, to the 

extent reasonable and practicable to do 

so. 

(5) A clearing agency shall post each 

security-based swap submission, and 

any amendments thereto, on its Web site 

within two business days after the 

submission of the security-based swap 

submission, and any amendments 

thereto, with the Commission. Such 

security-based swap submission and 

amendments shall be maintained on the 

clearing agency’s Web site until the 

Commission makes a determination 

regarding the security-based swap 

submission or the clearing agency 

withdraws the security-based swap 

submission, or is notified that the 

security-based swap submission is not 

properly filed. 

(6) Upon receipt of a security-based 

swap submission pursuant to this 

section, the Commission shall review 

the security-based swap submission and 

determine whether the security-based 

swap, or group, category, type or class 

of security-based swaps, described in 

the submission is required to be cleared. 

(i) When making a determination, the 

Commission will take into account the 

factors addressed in the security-based 

swap submission and any additional 

factors the Commission determines to be 

appropriate. The clearing agency shall 

provide any additional information 

requested by the Commission as 

necessary to assess any of the factors it 

determines to be appropriate in order to 

make the determination of whether the 

clearing requirement applies. 

(ii) In making a determination that the 

clearing requirement shall apply, the 

Commission may include such terms 

and conditions to the requirement as the 

Commission determines to be 

appropriate in the public interest. 

(7) Notices of orders issued pursuant 

to Section 3C of the Act (15 U.S.C. 78c– 

3), regarding security-based swap 

submissions will be given by prompt 

publication thereof, together with a 

statement of written reasons therefor. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

4. The general authority citation for 

part 249 is revised to read as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq; and 18 U.S.C. 

1350, unless otherwise noted. 

* * * * * 

Section 249.819 is also issued under 12 

U.S.C. 5465(e). 

5. Revise § 249.819 to read as follows: 

§ 249.819 Form 19b–4, for electronic 

filings with respect to proposed rule 

changes, advance notices and securitybased swap submissions by all selfregulatory organizations. 

This form shall be used by all selfregulatory organizations, as defined in 

Section 3(a)(26) of the Securities 

Exchange Act of 1934 (15 U.S.C. 

78c(a)(26)), to file electronically 

proposed rule changes with the 

Commission pursuant to Section 19(b) 

of the Act and § 240.19b–4 of this 

chapter, advance notices with the 

Commission pursuant to Section 806(e) 

of the Payment, Clearing and Settlement 

Supervision Act (12 U.S.C. 5465) and 

§ 240.19b–4 of this chapter and securitybased swap submissions with the 

Commission pursuant to Section 

3C(b)(2) of the Act (15 U.S.C. 78c– 

3(b)(2)) and § 240.19b–4 of this chapter. 

6. Form 19b–4 (referenced in 

§ 249.819) is revised to read as follows: 

Note: The text of Form 19b–4 does not and 

the amendments will not appear in the Code 

of Federal Regulations. 

BILLING CODE P 


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171Because Section 19(b)(7)(C) of the Act states 

that filings abrogated pursuant to this Section 

should be re-filed pursuant to paragraph (b)(1) of 

Section 19 of the Act, SROs are required to file 

electronically such proposed rule changes in 

accordance with this form. 

BILLING CODE C 

General Instructions for Form 19b–4 

A. Use of the Form 

All self-regulatory organization 

proposed rule changes, except filings 

with respect to proposed rule changes 

by self-regulatory organizations 

submitted pursuant to Section 19(b)(7) 

of the Securities Exchange Act of 1934 

(‘‘Act’’), security-based swap 

submissions, and advance notices shall 

be filed in an electronic format through 

the Electronic Form 19b–4 Filing 

System (‘‘EFFS’’), a secure Web site 

operated by the Commission. This form 

shall be used for filings of proposed rule 

changes by all self-regulatory 

organizations pursuant to Section 19(b) 

of the Act, except filings with respect to 

proposed rule changes by self-regulatory 

organizations submitted pursuant to 

Section 19(b)(7) of the Act.171 National 

securities exchanges, registered 

securities associations, registered 

clearing agencies, and the Municipal 

Securities Rulemaking Board are selfregulatory organizations for purposes of 


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this form. This form shall be used for all 

security-based swap submissions and 

advance notices filed by registered 

clearing agencies. A proposed change 

that is required to be filed with the 

Commission under more than one of 

these three processes (a proposed rule 

change, security-based swap 

submission, or advance notice) shall be 

submitted on the same Form 19b–4. 

B. Need for Careful Preparation of the 

Completed Form, Including Exhibits 

This form, including the exhibits, is 

intended to elicit information necessary 

for the public to provide meaningful 

comment on the proposed rule change, 

security-based swap submission, or 

advance notice and for the Commission 

to determine whether the proposed rule 

change, security-based swap 

submission, or advance notice is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder or the Payment, Clearing and 

Settlement Supervision Act and the 

rules and regulations thereunder 

applicable to the self-regulatory 

organization. The self-regulatory 

organization must provide all the 

information called for by the form, 

including the exhibits, and must present 

the information in a clear and 

comprehensible manner. 

The proposed rule change, securitybased swap submission, or advance 

notice shall be considered filed on the 

date on which the Commission receives 

the proposed rule change, securitybased swap submission, or advance 

notice if the filing complies with all 

requirements of this form. Any filing 

that does not comply with the 

requirements of this form may be 

returned to the self-regulatory 

organization. Any filing so returned 

shall for all purposes be deemed not to 

have been filed with the Commission. 

See also Rule 0–3 under the Act (17 CFR 

240.0–3). 

C. Documents Comprising the 

Completed Form 

The completed form filed with the 

Commission shall consist of the Form 

19b–4 Page 1, numbers and captions for 

all items, responses to all items, and 

exhibits required in Item 11. In 

responding to an item, the completed 

form may omit the text of the item as 

contained herein if the response is 

prepared to indicate to the reader the 

coverage of the item without the reader 

having to refer to the text of the item or 

its instructions. Each filing shall be 

marked on the Form 19b–4 with the 

initials of the self-regulatory 

organization, the four-digit year, and the 

number of the filing for the year (e.g., 

SRO–YYYY–XX). If the SRO is filing 

Exhibits 2 or 3 via paper, the exhibits 

must be filed within 5 calendar days of 

the electronic submission of all other 

required documents. 

D. Amendments 

If information on this form is or 

becomes inaccurate before the 

Commission takes action on the 

proposed rule change or the securitybased swap submission, or prior to the 

expiration of the statutory review period 

with respect to advance notices (as 

determined in accordance with 806(e) of 

the Payment, Clearing and Settlement 

Supervision Act), the self-regulatory 

organization shall correct any such 

inaccuracy. Amendments shall be filed 

as specified in Instruction F. 

Amendments to a filing shall include 

the Form 19b–4 Page 1 marked to 

number consecutively the amendments, 

numbers and captions for each amended 

item, amended response to the item, and 

required exhibits. The amended 

response to Item 3 shall explain the 

purpose of the amendment and, if the 

amendment changes the purpose of or 

basis for the proposed rule change, 

security-based swap submission, or 

advance notice, the amended response 

shall also provide a revised purpose and 

basis statement. Exhibit 1 or Exhibit 1A, 

as applicable, shall be re-filed if there is 

a material change from the immediately 

preceding filing in the language of the 

proposed rule change or in the 

information provided relating to the 

proposed rule change, security-based 

swap submission, or advance notice. 

If the amendment alters the text of an 

existing rule, the amendment shall 

include the text of the existing rule, 

marked in the manner described in Item 

1(a) using brackets to indicate words to 

be deleted from the existing rule and 

underscoring to indicate words to be 

added. The purpose of this marking 

requirement is to maintain a current 

copy of how the text of the existing rule 

is being changed. 

If the amendment alters the text of the 

proposed rule change as it appeared in 

the immediately preceding filing (even 

if the proposed rule change does not 

alter the text of an existing rule), the 

amendment shall include, as Exhibit 4, 

the entire text of the rule as altered. This 

full text shall be marked, in any 

convenient manner, to indicate 

additions to and deletions from the 

immediately preceding filing. The 

purpose of Exhibit 4 is to permit the 

staff to identify immediately the 

changes made from the text of the rule 

with which it has been working. 

If the self-regulatory organization is 

amending only part of the text of a 

lengthy proposed rule change, it may, 

with the Commission’s permission, file 

only those portions of the text of the 

proposed rule change in which changes 

are being made if the filing (i.e., partial 

amendment) is clearly understandable 

on its face. Such partial amendment 

shall be clearly identified and marked to 

show deletions and additions. 

If, after the Form 19b–4 is filed but 

before the Commission takes final action 

on it, the self-regulatory organization 

receives or prepares any correspondence 

or other communications reduced to 

writing (including comment letters) to 

and from such self-regulatory 

organization concerning the proposed 

rule change, security-based swap 

submission, or advance notice, the 

communications shall be filed as 

Exhibit 2. If information in the 

communication makes the filing 

inaccurate, the filing shall be amended 

to correct the inaccuracy. If such 

communications cannot be filed 

electronically in accordance with 

Instruction F, the communications shall 

be filed in accordance with Instruction 

G. 

E. Completion of Action by the SelfRegulatory Organization on the 

Proposed Rule Change 

The Commission will not approve a 

proposed rule change or make a 

determination regarding a securitybased swap submission or raise no 

objection to an advance notice before 

the self-regulatory organization has 

completed all action required to be 

taken under its constitution, articles of 

incorporation, bylaws, rules, or 

instruments corresponding thereto 

(excluding action specified in any such 

instrument with respect to (i) 

compliance with the procedures of the 

Act or (ii) the formal filing of 

amendments pursuant to State law). 

F. Signature and Filing of the 

Completed Form 

All proposed rule changes, securitybased swap submissions, advance 

notices, amendments, extensions, and 

withdrawals of proposed rule changes, 

security-based swap submissions, and 

advance notices shall be filed through 

the EFFS. In order to file Form 19b–4 

through EFFS, self-regulatory 

organizations must request access to the 

SEC’s External Application Server by 

completing a request for an external 

account user ID and password. Initial 

requests will be received by contacting 

the Trading and Markets Administrator 

located on our Web site (http:// 

www.sec.gov). An e-mail will be sent to 

the requestor that will provide a link to 


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a secure Web site where basic profile 

information will be requested. 

A duly authorized officer of the selfregulatory organization shall 

electronically sign the completed Form 

19b–4 as indicated on Page 1 of the 

Form. In addition, a duly authorized 

officer of the self-regulatory 

organization shall manually sign one 

copy of the completed Form 19b–4, and 

the manually signed signature page 

shall be maintained pursuant to Section 

17 of the Act. A registered clearing 

agency for which the Commission is not 

the appropriate regulatory agency also 

shall file with its appropriate regulatory 

agency three copies of the form, one of 

which shall be manually signed, 

including exhibits. A clearing agency 

that also is a designated clearing agency 

shall file with the Board of Governors of 

the Federal Reserve System three copies 

of the form, one of which shall be 

manually signed, including exhibits. 

The Municipal Securities Rulemaking 

Board also shall file copies of the form, 

including exhibits, with the Board of 

Governors of the Federal Reserve 

System, the Comptroller of the 

Currency, and the Federal Deposit 

Insurance Corporation. 

G. Procedures for Submission of Paper 

Documents for Exhibits 2 and 3 

To the extent that Exhibits 2 and 3 

cannot be filed electronically in 

accordance with Instruction F, four 

copies of Exhibits 2 and 3 shall be filed 

with the Division of Trading and 

Markets, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549. Page 1 of the 

electronic Form 19b–4 shall accompany 

paper submissions of Exhibits 2 and 3. 

If the SRO is filing Exhibits 2 and 3 via 

paper, they must be filed within five 

calendar days of the electronic filing of 

all other required documents. 

H. Withdrawals of Proposed Rule 

Changes, Security-Based Swap 

Submissions or Advance Notices 

If a self-regulatory organization 

determines to withdraw a proposed rule 

change, security-based swap 

submission, or advance notice, it must 

complete Page 1 of the Form 19b–4 and 

indicate by selecting the appropriate 

check box to withdraw the filing. 

I. Procedures for Granting an Extension 

of Time for Commission Final Action 

After the Commission publishes 

notice of a proposed rule change or 

security-based swap submission, if a 

self-regulatory organization wishes to 

grant the Commission an extension of 

the time to take final action as specified 

in Section 19(b)(2) or Section 3C, the 

self-regulatory organization shall 

indicate on the Form 19b–4 Page 1 the 

granting of said extension as well as the 

date the extension expires. 

Information To Be Included in the 

Completed Form (‘‘Form 19b–4 

Information’’) 

1. Text of the Proposed Rule Change 

(a) Include the text of the proposed 

rule change, security-based swap 

submission, or advance notice. Text of 

the proposed rule change also should be 

included either in Exhibit 5 or Exhibit 

1 (or Exhibit 1A in the filing of a 

clearing agency). Changes in, additions 

to, or deletions from, any existing rule 

shall be set forth with brackets used to 

indicate words to be deleted and 

underscoring used to indicate words to 

be added. 

If any form, report, or questionnaire is 

(i) Proposed to be used in connection 

with the implementation or operation of 

the proposed rule change, securitybased swap submission, or advance 

notice, or 

(ii) Prescribed or referred to in the 

proposed rule change, security-based 

swap submission, or advance notice; 

then the form, report, or questionnaire 

must be attached to and shall be 

considered as part of the proposed rule 

change, security-based swap 

submission, or advance notice. If 

completion of the form, report, or 

questionnaire is voluntary or is required 

pursuant to an existing rule of the selfregulatory organization, then the form, 

report, or questionnaire, together with a 

statement identifying any existing rule 

that requires completion of the form, 

report, or questionnaire, shall be 

attached as Exhibit 3. If the form, report, 

or questionnaire cannot be filed 

electronically in accordance with 

Instruction F, the documents shall be 

filed in accordance with Instruction G. 

(b) If the self-regulatory organization 

reasonably expects that the proposed 

rule change, security-based swap 

submission, or advance notice will have 

any direct effect, or significant indirect 

effect, on the application of any other 

rule of the self-regulatory organization, 

set forth the designation or title of any 

such rule and describe the anticipated 

effect of the proposed rule change, 

security-based swap submission, or 

advance notice on the application of 

such other rule. 

(c) Include the file numbers for prior 

filings with respect to any existing rule 

specified in response to Item 1(b). 

2. Procedures of the Self-Regulatory 

Organization 

Describe action on the proposed rule 

change, security-based swap 

submission, or advance notice taken by 

the members or board of directors or 

other governing body of the selfregulatory organization. See Instruction 

E. 

3. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

Provide a statement of the purpose of 

the proposed rule change and its basis 

under the Act and the rules and 

regulations thereunder applicable to the 

self-regulatory organization. With 

respect to proposed rule changes filed 

pursuant to Section 19(b)(1) of the Act, 

except for proposed rule changes that 

have been abrogated pursuant to Section 

19(b)(7)(C) of the Act, the statement 

should be sufficiently detailed and 

specific to support a finding that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to the self-regulatory 

organization. With respect to proposed 

rule changes filed pursuant to Section 

19(b)(1) of the Act that have been 

abrogated pursuant to Section 

19(b)(7)(C) of the Act, the statement 

should be sufficiently detailed and 

specific to support a finding under 

Section 19(b)(7)(D) of the Act that the 

proposed rule change does not unduly 

burden competition or efficiency, does 

not conflict with the securities laws, 

and is not inconsistent with the public 

interest or the protection of investors. At 

a minimum, the statement should: 

(a) Describe the reasons for adopting 

the proposed rule change, any problems 

the proposed rule change is intended to 

address, the manner in which the 

proposed rule change will operate to 

resolve those problems, the manner in 

which the proposed rule change will 

affect various persons (e.g., brokers, 

dealers, issuers, and investors), and any 

significant problems known to the selfregulatory organization that persons 

affected are likely to have in complying 

with the proposed rule change; and 

(b) Explain why the proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

the self-regulatory organization. A mere 

assertion that the proposed rule change 

is consistent with those requirements is 

not sufficient. With respect to a 

proposed rule change filed pursuant to 

Section 19(b)(1) of the Act that has been 

abrogated pursuant to Section 


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19(b)(7)(C) of the Act, explain why the 

proposed rule change does not unduly 

burden competition or efficiency, does 

not conflict with the securities laws, 

and is not inconsistent with the public 

interest and the protection of investors, 

in accordance with Section 19(b)(7)(D) 

of the Act. A mere assertion that the 

proposed rule change satisfies these 

requirements is not sufficient. In the 

case of a registered clearing agency, also 

explain how the proposed rule change 

will be implemented consistently with 

the safeguarding of securities and funds 

in its custody or control or for which it 

is responsible. Certain limitations that 

the Act imposes on self-regulatory 

organizations are summarized in the 

notes that follow. 

Failure to describe and justify the 

proposed rule change in the manner 

described above may result in the 

Commission not having sufficient 

information to make an affirmative 

finding that the proposed rule change is 

consistent with the Act and the rules 

and regulations issued thereunder that 

are applicable to the self-regulatory 

organization. 

Note 1. National Securities Exchanges and 

Registered Securities Associations. Under 

Sections 6 and 15A of the Act, rules of a 

national securities exchange or registered 

securities association may not permit unfair 

discrimination between customers, issuers, 

brokers, or dealers, and may not regulate, by 

virtue of any authority conferred by the Act, 

matters not related to the purposes of the Act 

or the administration of the self-regulatory 

organization. Rules of a registered securities 

association may not fix minimum profits or 

impose any schedule of or fix rates of 

commissions, allowances, discounts, or other 

fees to be charged by its members. 

Under Section 11A(c)(5) of the Act, a 

national securities exchange or registered 

securities association may not limit or 

condition the participation of any member in 

any registered clearing agency. 

Note 2. Registered Clearing Agencies. 

Under Section 17A of the Act, rules of a 

registered clearing agency may not permit 

unfair discrimination in the admission of 

participants or among participants in the use 

of the clearing agency, may not regulate, by 

virtue of any authority conferred by the Act, 

matters not related to the purposes of Section 

17A of the Act or the administration of the 

clearing agency, and may not impose any 

schedule of prices, or fix rates or other fees, 

for services rendered by its participants. 

Note 3. Municipal Securities Rulemaking 

Board. Under Section 15B of the Act, rules 

of the Municipal Securities Rulemaking 

Board may not permit unfair discrimination 

between customers, issuers, municipal 

securities brokers, or municipal securities 

dealers, may not fix minimum profits, or 

impose any schedule or fix rates of 

commissions, allowances, discounts, or other 

fees to be charged by municipal securities 

brokers or municipal securities dealers, and 

may not regulate, by virtue of any authority 

conferred by the Act, matters not related to 

the purposes of the Act with respect to 

municipal securities or the administration of 

the Board. 

4. Self-Regulatory Organization’s 

Statement on Burden on Competition 

State whether the proposed rule 

change will have an impact on 

competition and, if so, (i) state whether 

the proposed rule change will impose 

any burden on competition or whether 

it will relieve any burden on, or 

otherwise promote, competition and (ii) 

specify the particular categories of 

persons and kinds of businesses on 

which any burden will be imposed and 

the ways in which the proposed rule 

change will affect them. If the proposed 

rule change amends an existing rule, 

state whether that existing rule, as 

amended by the proposed rule change, 

will impose any burden on competition. 

If any impact on competition is not 

believed to be a significant burden on 

competition, explain why. Explain why 

any burden on competition is necessary 

or appropriate in furtherance of the 

purposes of the Act. In providing those 

explanations, set forth and respond in 

detail to written comments as to any 

significant impact or burden on 

competition perceived by any person 

who has made comments on the 

proposed rule change to the selfregulatory organization. A mere 

assertion that the proposed rule change 

satisfies these requirements is not 

sufficient. The statement concerning 

burdens on competition should be 

sufficiently detailed and specific to 

support a Commission finding that the 

proposed rule change does not impose 

any unnecessary or inappropriate 

burden on competition. Failure to 

describe and justify the proposed rule 

change in the manner described above 

may result in the Commission not 

having sufficient information to make 

an affirmative finding that the proposed 

rule change is consistent with the Act 

and the rules and regulations issued 

thereunder that are applicable to the 

self-regulatory organization. 

5. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

If written comments were received 

(whether or not comments were 

solicited) from members of or 

participants in the self-regulatory 

organization or others, summarize the 

substance of all such comments 

received and respond in detail to any 

significant issues that those comments 

raised about the proposed rule change. 

If an issue is summarized and 

responded to in detail under Item 3 or 

Item 4, that response need not be 

duplicated if appropriate cross-reference 

is made to the place where the response 

can be found. If comments were not or 

are not to be solicited, so state. 

6. Extension of Time Period for 

Commission Action 

State whether the self-regulatory 

organization consents to an extension of 

the time period specified in Section 

19(b)(2) or Section 19(b)(7)(D) of the Act 

and the duration of the extension, if 

any, to which the self-regulatory 

organization consents. 

7. Basis for Summary Effectiveness 

Pursuant to Section 19(b)(3) or for 

Accelerated Effectiveness Pursuant to 

Section 19(b)(2) or Section 19(b)(7)(D) 

(a) If the proposed rule change is to 

take, or to be put into, effect, pursuant 

to Section 19(b)(3), state whether the 

filing is made pursuant to paragraph (A) 

or (B) thereof. 

(b) In the case of paragraph (A) of 

Section 19(b)(3), designate that the 

proposed rule change: 

(i) Is a stated policy, practice, or 

interpretation with respect to the 

meaning, administration, or 

enforcement of an existing rule, 

(ii) Establishes or changes a due, fee, 

or other charge, 

(iii) Is concerned solely with the 

administration of the self-regulatory 

organization, 

(iv) Effects a change in an existing 

service of a registered clearing agency 

that (A) does not adversely affect the 

safeguarding of securities or funds in 

the custody or control of the clearing 

agency or for which it is responsible and 

(B) does not significantly affect the 

respective rights or obligations of the 

clearing agency or persons using the 

service, and set forth the basis on which 

such designation is made, 

(v) Effects a change in an existing 

order-entry or trading system of a selfregulatory organization that (A) does not 

significantly affect the protection of 

investors or the public interest; (B) does 

not impose any significant burden on 

competition; and (C) does not have the 

effect of limiting the access to or 

availability of the system, or 

(vi) Effects a change that (A) does not 

significantly affect the protection of 

investors or the public interest; (B) does 

not impose any significant burden on 

competition; and (C) by its terms, does 

not become operative for 30 days after 

the date of the filing, or such shorter 

time as the Commission may designate 

if consistent with the protection of 


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investors and the public interest; 

provided that the self-regulatory 

organization has given the Commission 

written notice of its intent to file the 

proposed rule change, along with a brief 

description and text of 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. 

If it is requested that the proposed rule 

change become operative in less than 30 

days, provide a statement explaining 

why the Commission should shorten 

this time period. 

(c) In the case of paragraph (B) of 

Section 19(b)(3), set forth the basis upon 

which the Commission should, in the 

view of the self-regulatory organization, 

determine that the protection of 

investors, the maintenance of fair and 

orderly markets, or the safeguarding of 

securities and funds requires that the 

proposed rule change should be put into 

effect summarily by the Commission. 

Note: The Commission has the power 

under Section 19(b)(3)(C) of the Act to 

summarily temporarily suspend within sixty 

days of its filing any proposed rule change 

which has taken effect upon filing pursuant 

to Section 19(b)(3)(A) of the Act or was put 

into effect summarily by the Commission 

pursuant to Section 19(b)(3)(B) of the Act. In 

exercising its summary power under Section 

19(b)(3)(B), the Commission is required to 

make one of the findings described above but 

may not have a full opportunity to make a 

determination that the proposed rule change 

otherwise is consistent with the requirements 

of the Act and the rules and regulations 

thereunder. The Commission will generally 

exercise its summary power under Section 

19(b)(3)(B) on condition that the proposed 

rule change to be declared effective 

summarily shall also be subject to the 

procedures of Section 19(b)(2) of the Act. 

Accordingly, in most cases, a summary order 

under Section 19(b)(3)(B) shall be effective 

only until such time as the Commission shall 

enter an order, pursuant to Section 

19(b)(2)(A) of the Act, to approve such 

proposed rule change or, depending on the 

circumstances, until such time as the 

Commission shall institute proceedings to 

determine whether to disapprove such 

proposed rule change or, alternatively, such 

time as the Commission shall, at the 

conclusion of such proceedings, enter an 

order, pursuant to Section 19(b)(2)(B), 

approving or disapproving such proposed 

rule change. 

(d) If accelerated effectiveness 

pursuant to Section 19(b)(2) or Section 

19(b)(7)(D) of the Act is requested, 

provide a statement explaining why 

there is good cause for the Commission 

to accelerate effectiveness. 

8. Proposed Rule Change Based on 

Rules of Another Self-Regulatory 

Organization or of the Commission 

State whether the proposed rule 

change is based on a rule either of 

another self-regulatory organization or 

of the Commission, and, if so, identify 

the rule and explain any differences 

between the proposed rule change and 

that rule, as the filing self-regulatory 

organization understands it. In 

explaining any such differences, give 

particular attention to differences 

between the conduct required to comply 

with the proposed rule change and that 

required to comply with the other rule. 

9. Security-Based Swap Submissions 

Filed Pursuant to Section 3C of the Act 

(a) A clearing agency shall submit to 

the Commission on this Form 19b–4, a 

security-based swap submission for any 

security-based swap, or any group, 

category, type or class of security-based 

swaps that the clearing agency plans to 

accept for clearing. 

(b) The clearing agency shall include 

in the security-based swaps submission 

a statement that includes, but is not 

limited to: 

(i) How the security-based swap 

submission is consistent with Section 

17A of the Act (15 U.S.C. 78q–1); 

(ii) Information that will assist the 

Commission in the quantitative and 

qualitative assessment of the factors 

specified in Section 3C of the Act (15 

U.S.C. 78c–3), including, but not limited 

to: 

(A) The existence of significant 

outstanding notional exposures, trading 

liquidity and adequate pricing data; 

(B) The availability of a rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear the 

contract on terms that are consistent 

with the material terms and trading 

conventions on which the contract is 

then traded; 

(C) The effect on the mitigation of 

systemic risk, taking into account the 

size of the market for such contract and 

the resources of the clearing agency 

available to clear the contract; 

(D) The effect on competition, 

including appropriate fees and charges 

applied to clearing; 

(E) The existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant clearing agency or one or 

more of its clearing members with 

regard to the treatment of customer and 

security-based swap counterparty 

positions, funds, and property; 

(F) How the rules of the clearing 

agency prescribe that all security-based 

swaps submitted to the clearing agency 

with the same terms and conditions are 

economically equivalent within the 

clearing agency and may be offset with 

each other within the clearing agency, 

as applicable to the security-based 

swaps described in the security-based 

swap submission. 

(G) How the rules of the clearing 

agency provide for non-discriminatory 

clearing of a security-based swap 

executed bilaterally or on or through the 

rules of an unaffiliated national 

securities exchange or security-based 

swap execution facility, as applicable to 

the security-based swaps described in 

the security-based swap submission. 

Note: In connection with the factor 

specified in Item 9(b)(ii)(A) above, the 

clearing agency could address pricing 

sources, models and procedures 

demonstrating an ability to obtain price data 

to measure credit exposures in a timely and 

accurate manner, as well as measures of 

historical market liquidity and trading 

activity, and expected market liquidity and 

trading activity if the security-based swap is 

required to be cleared (including information 

on the sources of such measures). With 

respect to the discussion of the factor 

specified in Item 9(b)(ii)(B) above, the 

statement describing the availability of a rule 

framework could include a discussion of the 

rules, policies or procedures applicable to the 

clearing of the relevant security-based swap. 

Additionally, the discussion of credit support 

infrastructure specified in Item 9(b)(ii)(B) 

above could include the methods to address 

and communicate requests for, and posting 

of, collateral. With respect to the factor 

specified in Item 9(b)(ii)(C) above, the 

discussion of systemic risk could include a 

statement on the clearing agency’s risk 

management procedures, including among 

other things the measurement and 

monitoring of credit exposures, initial and 

variation margin methodology, 

methodologies for stress testing and back 

testing, settlement procedures and default 

management procedures. With respect to the 

factor specified in Item 9(b)(ii)(D) above, the 

discussion of fees and charges could address 

any volume incentive programs that may 

apply or impact the fees and charges. With 

respect to the factor specified in Item 

9(b)(ii)(E) above, the discussion could 

address segregation of accounts and all other 

customer protection measures under 

insolvency. 

In describing the security-based swap, or 

any group, category, type or class of securitybased swaps, that a clearing agency plans to 

accept for clearing, the clearing agency could 

include the relevant product specifications, 

including copies of any standardized legal 

documentation, generally accepted contract 

terms, standard practices for managing and 

communicating any life cycle events 

associated with the security-based swap and 

related adjustments, and the manner in 

which the information contained in the 

confirmation of the security-based swap trade 

is transmitted. The clearing agency also 

could discuss its financial and operational 

capacity to provide clearing services to all 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82529 

customers subject to the clearing 

requirements as applicable to the particular 

security-based swap. Finally, the clearing 

agency could include an analysis of the effect 

of a clearing requirement on the market for 

the group, category, type, or class of securitybased swaps, both domestically and globally, 

including the potential effect on market 

liquidity, trading activity, use of securitybased swaps by direct and indirect market 

participants and any potential market 

disruption or benefits. This analysis could 

include whether the members of the clearing 

agency are operationally and financially 

capable of absorbing clearing business 

(including indirect access market 

participants) that may result from a 

determination that the security-based swap 

(or group, category, type or class of securitybased swap) is required to be cleared. 

(c) A clearing agency shall submit 

security-based swaps to the Commission 

for review by group, category, type or 

class of security-based swaps, to the 

extent reasonable and practicable to do 

so. 

(d) A clearing agency shall file as an 

amendment to this Form 19b–4 any 

additional information necessary to 

assess any of the factors the Commission 

determines to be appropriate in order to 

make a determination regarding the 

clearing requirement. 

(e) A security-based swap submission 

pursuant to Section 3C that also is 

required to be filed as a proposed rule 

change under Section 19(b) or an 

advance notice under Section 806(e) of 

the Payment, Clearing and Settlement 

Supervision Act shall not take effect 

until determinations are obtained under 

each of the other applicable statutory 

provisions. 

10. Advance Notices Filed Pursuant to 

Section 806(e) of the Payment, Clearing 

and Settlement Supervision Act 

(a) A designated clearing agency shall 

provide notice on this Form 19b–4 sixty 

(60) days in advance of any proposed 

change to its rules, procedures, or 

operations that could, as defined in Rule 

19b–4, materially affect the nature or 

level of risks presented by the 

designated clearing agency. 

(b) A designated clearing agency shall 

include in the notice a description of: 

(i) The nature of the change and 

expected effects on risks to the 

designated clearing agency, its 

participants, or the market; and 

(ii) How the designated financial 

market utility plans to manage any 

identified risks. 

(c) A designated clearing agency shall 

file as amendment to this Form 19b–4 

any additional information that is 

required to be filed by the Commission 

as necessary to assess the effect the 

proposed change would have on the 

nature or level of risks associated with 

the designated clearing agency’s 

payment, clearing, or settlement 

activities and the sufficiency of any 

proposed risk management techniques. 

(d) A designated clearing agency that 

implements a proposed change on an 

emergency basis must file notice with 

the Commission on Form 19b–4 within 

24 hours of implementing the change. In 

addition to the information required for 

advance notices, the notice of an 

emergency change shall include a 

description of the nature of the 

emergency and the reason the change 

was necessary for the designated 

clearing agency to continue to operate in 

a safe and sound manner. Any change 

implemented by a designated clearing 

agency on an emergency basis also must 

comply with Section 19(b) and Section 

3C of the Act to the extent those 

sections are applicable. 

(e) A proposed change filed pursuant 

to Section 806(e) that is also required to 

be filed as a proposed rule change under 

Section 19(b) or a security-based swap 

submission under Section 3C shall not 

take effect until determinations are 

obtained under each of the other 

applicable statutory provisions. 

11. Exhibits 

List of exhibits to be filed, as specified 

in Instructions C and D: 

Exhibit 1. Completed Notice of 

Proposed Rule Change for publication in 

the Federal Register. Amendments to 

Exhibit 1 should be filed in accordance 

with Instructions D and F. 

Exhibit 1A. Completed Notice of 

Proposed Rule Change, Security-Based 

Swap Submission, or Advance Notice 

for publication in the Federal Register. 

Amendments to Exhibit 1A should be 

filed in accordance with Instructions D 

and F. 

Exhibit 2 (a) Copies of notices issued 

by the self-regulatory organization 

soliciting comment on the proposed rule 

change, security-based swap 

submission, or advance notice and 

copies of all written comments on the 

proposed rule change, security-based 

swap submission, or advance notice 

received by the self-regulatory 

organization (whether or not comments 

were solicited), presented in 

alphabetical order, together with an 

alphabetical listing of such comments. If 

such notices and comments cannot be 

filed electronically in accordance with 

Instruction F, the notices and comments 

shall be filed in accordance with 

Instruction G. 

(b) Copies of any transcript of 

comments on the proposed rule change, 

security-based swap submission, or 

advance notice made at any public 

meeting or, if a transcript is not 

available, a copy of the summary of 

comments on the proposed rule change 

made at such meeting. If such transcript 

of comments or summary of comments 

cannot be filed electronically in 

accordance with Instruction F, the 

transcript of comments or summary of 

comments shall be filed in accordance 

with Instruction G. 

(c) If after the proposed rule change, 

security-based swap submission, or 

advance notice is filed but before the 

Commission takes final action on it, the 

self-regulatory organization prepares or 

receives any correspondence or other 

communications reduced to writing 

(including comment letters) to and from 

such self-regulatory organization 

concerning the proposed rule change, 

the communications shall be filed in 

accordance with Instruction F. If such 

communications cannot be filed 

electronically in accordance with 

Instruction F, the communications shall 

be filed in accordance with Instruction 

G. 

Exhibit 3. Copies of any form, report, 

or questionnaire covered by Item 1(a). If 

such form, report, or questionnaire 

cannot be filed electronically in 

accordance with Instruction F, the form, 

report, or questionnaire shall be filed in 

accordance with Instruction G. 

Exhibit 4. For amendments to a filing, 

marked copies, if required by 

Instruction D, of the text of the proposed 

rule change as amended. 

Exhibit 5. The SRO may choose to 

attach as Exhibit 5 proposed changes to 

rule text in place of providing it in Item 

I and which may otherwise be more 

easily readable if provided separately 

from Form 19b–4. Exhibit 5 shall be 

considered part of the proposed rule 

change. 

SPECIFIC INSTRUCTIONS FOR 

EXHIBIT 1—NOTICE OF PROPOSED 

RULE CHANGE 

EXHIBIT 1 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34– ; File No. SR ] 

[Date] 

Self-Regulatory Organizations; [Name of 

Self-Regulatory Organization]; Notice of 

Filing [and Immediate Effectiveness] of 

a Proposed Rule Change Relating to 

[brief description of subject matter of 

proposed rule change] 

General Instructions 

A. Format Requirements 

The notice must comply with the 

guidelines for publication in the Federal 

Register, as well as any requirements for 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82530 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

*To be completed by the Commission. This date 

will be the date on which the Commission receives 

the proposed rule change if the filing complies with 

all requirements of this form. See Instruction B to 

Form 19b–4. 

electronic filing as published by the 

Commission (if applicable). For 

example, all references to the Federal 

securities laws must include the 

corresponding cite to the United States 

Code in a footnote. All references to SEC 

rules must include the corresponding 

cite to the Code of Federal Regulations 

in a footnote. All references to 

Securities Exchange Act Releases must 

include the release number, release 

date, Federal Register cite, Federal 

Register date, and corresponding file 

number (e.g., SR–[SRO]–XX–XX). A 

material failure to comply with these 

guidelines will result in the proposed 

rule change being deemed not properly 

filed. See also Rule 0–3 under the Act 

(17 CFR 240.0–3). Leave a 1-inch margin 

at the top, bottom, and right hand side, 

and a 11⁄2 inch margin at the left hand 

side. Number all pages consecutively, 

consistent with Rule 0–3 under the Act 

(17 CFR 240.0–3). Double space all 

primary text and single space lists of 

items, quoted material when set apart 

from primary text, footnotes, and notes 

to tables. 

B. Need for Careful Preparation of the 

Notice 

The self-regulatory organization must 

provide all information required in the 

notice and present it in a clear and 

comprehensible manner. It is the 

responsibility of the self-regulatory 

organization to prepare Items I, II and III 

of the notice. The Commission cautions 

self-regulatory organizations to pay 

particular attention to assure that the 

notice accurately reflects the 

information provided in the Form 19b– 

4 it accompanies. Any filing that does 

not comply with the requirements of 

Form 19b–4, including the requirements 

applicable to the notice, may be 

returned to the self-regulatory 

organization. Any document so returned 

shall for all purposes be deemed not to 

have been filed with the Commission. 

See Instruction B to Form 19b–4. 

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

Securities Exchange Act of 1934, 15 

U.S.C. 78s(b)(1), notice is hereby given 

that on (date),* the (name of selfregulatory organization) 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 by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

Information To Be Included in the 

Completed Notice 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

(Supply a brief statement of the terms 

of substance of the proposed rule 

change. If the proposed rule change is 

relatively brief, a separate statement 

need not be prepared, and the text of the 

proposed rule change may be inserted in 

lieu of the statement of the terms of 

substance. If the proposed rule change 

amends an existing rule, indicate 

changes in the rule by brackets for 

words to be deleted and underlined for 

words to be added.) 

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 

self-regulatory organization 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 self-regulatory organization has 

prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 

(Reproduce the headings, and 

summarize briefly the most significant 

aspects of the responses, to Items 3, 4, 

and 5 of Form 19b–4, redesignating 

them as A, B, and C, respectively.) 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

(If the proposed rule change is to be 

considered by the Commission pursuant 

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

following paragraph should be used.) 

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. 

(If the proposed rule change is to take, 

or to be put into, effect pursuant to 

Section 19(b)(3)(A) of the Act and 

paragraph (f)(6) of Rule 19b–4 

thereunder, the following paragraph 

should be used.) 

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) of the 

Act and Rule 19b–4(f)(6) thereunder. 

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 proposed rule change is to take, 

or to be put into, effect pursuant to 

Section 19(b)(3)(A) of the Act and 

subparagraphs (1)–(5) of paragraph (f) of 

Rule 19b–4 thereunder, the following 

paragraph should be used.) 

The foregoing rule change has become 

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

of the Act and paragraph (f) of Rule 

19b–4 thereunder. 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 proposed rule change is to be 

considered by the Commission pursuant 

to Section 19(b)(7)(D) of the Act, the 

following paragraph should be used.) 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date 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 such proposed 

rule change, or 

(B) After consultation with the 

Commodity Futures Trading 

Commission, 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 is consistent with the Act. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82531 

172 17 CFR 200.30–3(a)(12). 

*To be completed by the Commission. This date 

will be the date on which the Commission receives 

the proposed rule change, security-based swap 

submission, or advance notice filing if the filing 

complies with all requirements of this form. See 

Instruction B to Form 19b–4. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number XX on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to [Name of Secretary], Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549. 

All submissions should refer to File 

Number XX. This file number should be 

included on the subject line if e-mail 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 Web site 

(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 Web site 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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

[self-regulatory organization]. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number XX and should be submitted on 

or before January 20, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.172

Secretary. 

SPECIFIC INSTRUCTIONS FOR 

EXHIBIT 1A—NOTICE OF PROPOSED 

RULE CHANGE, SECURITY-BASED 

SWAP SUBMISSION, OR ADVANCE 

NOTICE FILED BY CLEARING 

AGENCIES 

EXHIBIT 1A 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34– ; File No. SR ] 

[Date] 

Self-Regulatory Organizations; [Name of 

Clearing Agency]; Proposed Rule 

Change, Security-Based Swap 

Submission, or Advance Notice Relating 

to [brief description of subject matter of 

proposed rule change, security-based 

swap submission, or advance notice] 

General Instructions 

A. Format Requirements 

The notice must comply with the 

guidelines for publication in the Federal 

Register, as well as any requirements for 

electronic filing as published by the 

Commission (if applicable). For 

example, all references to the Federal 

securities laws must include the 

corresponding cite to the United States 

Code in a footnote. All references to SEC 

rules must include the corresponding 

cite to the Code of Federal Regulations 

in a footnote. All references to 

Securities Exchange Act Releases must 

include the release number, release 

date, Federal Register cite, Federal 

Register date, and corresponding file 

number (e.g., SR–[SRO]–XX–XX). A 

material failure to comply with these 

guidelines will result in the proposed 

rule change being deemed not properly 

filed. See also Rule 0–3 under the Act 

(17 CFR 240.0–3). Leave a 1-inch margin 

at the top, bottom, and right hand side, 

and a 11⁄2 inch margin at the left hand 

side. Number all pages consecutively, 

consistent with Rule 0–3 under the Act 

(17 CFR 240.0–3). Double space all 

primary text and single space lists of 

items, quoted material when set apart 

from primary text, footnotes, and notes 

to tables. 

B. Need for Careful Preparation of the 

Notice 

The clearing agency must provide all 

information required in the notice and 

present it in a clear and comprehensible 

manner. It is the responsibility of the 

clearing agency to prepare Items I, II and 

III of the notice. The Commission 

cautions clearing agencies to pay 

particular attention to assure that the 

notice accurately reflects the 

information provided in the Form 19b– 

4 it accompanies. Any filing that does 

not comply with the requirements of 

Form 19b–4, including the requirements 

applicable to the notice, may be 

returned to the clearing agency. Any 

document so returned shall for all 

purposes be deemed not to have been 

filed with the Commission. See 

Instruction B to Form 19b–4. 

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

Securities Exchange Act of 1934, 15 

U.S.C. 78s(b)(1) and Rule 19b–4, 17 CFR 

240.19b–4, notice is hereby given that 

on (date),* the (name of clearing agency) 

filed with the Securities and Exchange 

Commission the proposed rule change, 

security-based swap submission, or 

advance notice as described in Items I, 

II and III below, which Items have been 

prepared by the clearing agency. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, security-based swap 

submission, or advance notice from 

interested persons. 

Information To Be Included in the 

Completed Notice 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change, Security-Based Swap 

Submission, or Advance Notice 

(Supply a brief statement of the terms 

of substance of the proposed rule 

change, security-based swap submission 

or advance notice. If the proposed rule 

change is relatively brief, a separate 

statement need not be prepared, and the 

text of the proposed rule change may be 

inserted in lieu of the statement of the 

terms of substance. If the proposed rule 

change amends an existing rule, 

indicate changes in the rule by brackets 

for words to be deleted and underlined 

for words to be added.) 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, Security-Based 

Swap Submission, or Advance Notice 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change, securitybased swap submission 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. (Reproduce 

the headings, and summarize briefly the 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
82532 Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 

most significant aspects of the 

responses, to Items 3, 4, and 5 of Form 

19b–4, redesignating them as A, B, and 

C, respectively.) 

III. Date of Effectiveness of the 

Proposed Rule Change, Security-Based 

Swap Submission, and Advance Notice 

and Timing for Commission Action 

(If the proposed rule change is to be 

considered by the Commission pursuant 

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

following paragraph should be used.) 

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. 

(If the proposed rule change is to take, 

or to be put into, effect pursuant to 

Section 19(b)(3)(A) of the Act and 

paragraph (f)(6) of Rule 19b–4 

thereunder, the following paragraph 

should be used.) 

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) of the 

Act and Rule 19b–4(f)(6) thereunder. 

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 proposed rule change is to take, 

or to be put into, effect pursuant to 

Section 19(b)(3)(A) of the Act and 

subparagraphs (1)–(5) of paragraph (f) of 

Rule 19b–4 thereunder, the following 

paragraph should be used.) 

The foregoing rule change has become 

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

of the Act and paragraph (f) of Rule 

19b–4 thereunder. 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 proposed rule change is to be 

considered by the Commission pursuant 

to Section 19(b)(7)(D) of the Act, the 

following paragraph should be used.) 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date 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 such proposed 

rule change, or 

(B) After consultation with the 

Commodity Futures Trading 

Commission institute proceedings to 

determine whether the proposed rule 

change should be disapproved. 

(If the proposed change is filed as a 

security-based swap submission 

pursuant to Section 3C of the Act, the 

following paragraph should be used.) 

Within 90 days after receiving a 

security-based swap submission, unless 

the submitting clearing agency agrees to 

an extension of time limitation, the 

Commission shall by order make its 

determination whether the securitybased swap, or group, category, type or 

class of security-based swaps, described 

in the security-based swap submission 

is required to be cleared. In making its 

determination that the clearing 

requirement shall apply, the 

Commission may include such terms 

and conditions to the requirement as the 

Commission determines to be 

appropriate in the public interest. 

The clearing agency shall post notice 

on its Web site of any clearing 

requirement that is implemented. 

(If the proposed change is filed as an 

advance notice pursuant to the 

Payment, Clearing and Settlement 

Supervision Act, the following 

paragraph should be used.) 

The proposed change may be 

implemented if the Commission does 

not object to the proposed change 

within 60 days of the later of (i) the date 

that the proposed change was filed with 

the Commission or (ii) the date that any 

additional information requested by the 

Commission is received. The clearing 

agency shall not implement the 

proposed change if the Commission has 

any objection to the proposed change. 

The Commission may extend period 

for review by an additional 60 days if 

the proposed change raises novel or 

complex issues, subject to the 

Commission or the Board of Governors 

of the Federal Reserve System providing 

the clearing agency with prompt written 

notice of the extension. A proposed 

change may be implemented in less 

than 60 days from the date the advance 

notice is filed, or the date further 

information requested by the 

Commission is received, if the 

Commission notifies the clearing agency 

in writing that it does not object to the 

proposed change and authorizes the 

clearing agency to implement the 

proposed change on an earlier date, 

subject to any conditions imposed by 

the Commission. 

The clearing agency shall post notice 

on its Web site of proposed changes that 

are implemented. 

(If the proposed change is filed 

following the implementation of a 

change on an emergency basis pursuant 

to the Payment, Clearing and Settlement 

Supervision Act, the following 

paragraph should be used.) 

The clearing agency implemented a 

proposed change that otherwise would 

be required to be filed as an advance 

notice because the clearing agency 

determined that (i) an emergency 

existed and (ii) immediate 

implementation was necessary for the 

clearing agency to continue to provide 

its services in a safe and sound manner. 

The Commission may require 

modification or recision of the proposed 

change if it finds it is not consistent 

with the purposes of the Payment, 

Clearing and Settlement Supervision 

Act or any applicable rules, orders, or 

standards prescribed under Section 

805(a). 

(If the proposal is submitted pursuant 

to more than one filing requirement, the 

clearing agency shall add the following 

language in addition to the language 

above.) 

The proposal shall not take effect 

until all regulatory actions required 

with respect to the proposal are 

completed. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number XX on the subject line. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 250 / Thursday, December 30, 2010 / Proposed Rules 82533 

173 17 CFR 200.30–3(a)(12). 

Paper Comments 

• Send paper comments in triplicate 

to [Name of Secretary], Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549. 

All submissions should refer to File 

Number XX. This file number should be 

included on the subject line if e-mail 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 Web site 

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

Copies of the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change, security-based swap 

submission, or advance notice that are 

filed with the Commission, and all 

written communications relating to the 

proposed rule change, security-based 

swap submission, or advance notice 

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 Web site 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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

[clearing agency]. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number XX and 

should be submitted on or before 

January 20, 2011. 

Dated: December 15, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.173

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–32085 Filed 12–29–10; 8:45 am] 

BILLING CODE P 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2