58004 Federal Register / Vol. 88, No. 163 / Thursday, August 24, 2023 / Notices 

115See letter from Brian Sopinsky, General 

Counsel, Susquehanna International Group, LLP 

(‘‘SIG’’), to Vanessa Countryman, Secretary, 

Commission, dated February 7, 2023 and letters 

from Gerald D. O’Connell, SIG, to Vanessa 

Countryman, Secretary, Commission, dated March 

21, 2023 and July 24, 2023. 116 15 U.S.C. 78s(b)(3)(A)(ii). 117 17 CFR 240.19b–4(f)(2). 118 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Terms not defined herein are defined in the GSD 

Rules and MBSD Rules, as applicable, available at 

www.dtcc.com/legal/rules-and-procedures. 

commenter.115 In their letters, the sole 

commenter seeks to incorporate 

comments submitted on previous 

Exchange proposals to which the 

Exchange has previously responded. To 

the extent the sole commenter has 

attempted to raise new issues in its 

letters, the Exchange believes those 

issues are not germane to this proposal 

in particular, but rather raise larger 

issues with the current environment 

surrounding exchange non-transaction 

fee proposals that should be addressed 

by the Commission through rule 

making, or Congress, more holistically 

and not through an individual exchange 

fee filings. Among other things, the 

commenter is requesting additional data 

and information that is both opaque and 

a moving target and would constitute a 

level of disclosure materially over and 

above that provided by any competitor 

exchanges. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to section 

19(b)(3)(A)(ii) of the Act,116 and Rule 

19b–4(f)(2) 117 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 Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

PEARL–2023–36 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–PEARL–2023–36. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

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

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–PEARL–2023–36 and should be 

submitted on or before September 14, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.118

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18191 Filed 8–23–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98163; File No. SR–FICC– 

2023–012] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change 

Relating to the Margin Liquidity 

Adjustment Charge 

August 18, 2023. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on August 3, 

2023, Fixed Income Clearing 

Corporation (‘‘FICC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change 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 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

modifications to FICC’s Government 

Securities Division (‘‘GSD’’) Rulebook 

(‘‘GSD Rules’’) and Mortgage-Backed 

Securities Division (‘‘MBSD’’) Clearing 

Rules (‘‘MBSD Rules,’’ and collectively 

with the GSD Rules, the ‘‘Rules’’) 3 in 

order to (1) enhance the calculation of 

the Margin Liquidity Adjustment Charge 

(‘‘MLA Charge’’) in the GSD Rules for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members, (2) 

revise the language in the GSD Rules 

and MBSD Rules describing the asset 

groups/subgroups used in the 

calculation of the MLA Charge at GSD 

and MBSD, respectively, and (3) clarify 

the language in the GSD Rules and 

MBSD Rules describing the calculation 

of the MLA Charge at GSD and MBSD, 

as well as make technical changes in the 

GSD Rules, each as described in greater 

detail below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 


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4 GSD also clears and settles certain transactions 

on securities issued or guaranteed by U.S. 

government agencies and government sponsored 

enterprises. 5See GSD Rule 4 (Clearing Fund and Loss 

Allocation) and MBSD Rule 4 (Clearing Fund and 

Loss Allocation), supra note 3. FICC’s market risk 

management strategy is designed to comply with 

Rule 17Ad–22(e)(4) under the Act, where these 

risks are referred to as ‘‘credit risks.’’ 17 CFR 

240.17Ad–22(e)(4). 

6The GSD Rules and MBSD Rules identify when 

FICC may cease to act for a Member and the types 

of actions FICC may take. For example, FICC may 

suspend a firm’s membership with FICC, or prohibit 

or limit a Member’s access to FICC’s services, in the 

event that Member defaults on a financial or other 

obligation to FICC. See GSD Rule 21 (Restrictions 

on Access to Services) and MBSD Rule 14 

(Restrictions on Access to Services), supra note 3. 

7Supra note 3. 

8With respect to GSD, references herein to ‘‘net 

unsettled positions’’ refer to Net Unsettled 

Positions, as such term is defined in GSD Rule 1 

(Definitions). Supra note 3. 

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. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

There are three primary components 

of this proposed rule change. First, FICC 

is proposing to enhance the calculation 

of the MLA Charge at GSD for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members. Second, 

FICC is proposing to revise the language 

in the GSD Rules and MBSD Rules 

describing the asset groups/subgroups 

used in FICC’s calculation of the MLA 

Charge at GSD and MBSD, respectively. 

Third, FICC is proposing to clarify the 

language in the GSD Rules and MBSD 

Rules describing the calculation of the 

MLA Charge at GSD and MBSD, as well 

as make technical changes in the GSD 

Rules. 

When a Sponsored Member clears 

through multiple accounts sponsored by 

multiple Sponsoring Members at GSD, 

FICC may charge an MLA Excess 

Amount in addition to the MLA Charge. 

The MLA Excess Amount is being 

charged by FICC in order to address any 

market impact cost that could incur 

when such Sponsored Member defaults, 

and each of its Sponsoring Members, in 

its capacity as the Sponsored Member’s 

guarantor, liquidates net unsettled 

positions associated with the defaulted 

Sponsored Member. 

FICC currently allocates the MLA 

Excess Amount across each Sponsoring 

Member of the Sponsored Member using 

a market volatility risk-weighted 

allocation methodology. In order to 

better align with the position 

concentration risks arising from 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members, FICC is 

proposing to enhance its calculation of 

the MLA Charge for such Sponsored 

Members. 

In addition, FICC is proposing to 

revise the language in the GSD Rules 

and MBSD Rules describing the asset 

groups/subgroups used in FICC’s 

calculation of the MLA Charge at GSD 

and MBSD, respectively. This proposed 

change would enable FICC to calculate 

the MLA Charge at GSD and MBSD 

using a schedule of asset groups and 

subgroups that FICC would set and 

adjust from time to time, rather than as 

codified in the GSD Rules and MBSD 

Rules in the manner the asset groups 

and/or subgroups are today. 

Finally, FICC is proposing to modify 

certain language in the GSD Rules and 

MBSD Rules to make it clearer as to how 

the MLA Charge is calculated at GSD 

and MBSD, as well as make a technical 

change in the GSD Rules. 

(i) Overview of the Required Fund 

Deposit and the Clearing Fund 

FICC, through GSD and MBSD, serves 

as a central counterparty and provider 

of clearance and settlement services for 

transactions in the U.S. government 

securities and mortgage-backed 

securities markets.4 As part of its market 

risk management strategy, FICC 

manages its credit exposure to Members 

by determining the appropriate 

Required Fund Deposit to the Clearing 

Fund and monitoring its sufficiency, as 

provided for in the GSD Rules and 

MBSD Rules.5 The Required Fund 

Deposit serves as each Member’s 

margin. The objective of a Member’s 

Required Fund Deposit is to mitigate 

potential losses to FICC associated with 

liquidating a Member’s portfolio in the 

event FICC ceases to act for that Member 

(hereinafter referred to as a ‘‘default’’).6

The aggregate of all Members’ Required 

Fund Deposits constitutes the Clearing 

Fund. FICC would access the Clearing 

Fund should a defaulting Member’s own 

Required Fund Deposit be insufficient 

to satisfy losses to FICC caused by the 

liquidation of that Member’s portfolio. 

Pursuant to the GSD Rules and MBSD 

Rules, each Member’s Required Fund 

Deposit amount consists of a number of 

applicable components, each of which 

is calculated to address specific risks 

faced by FICC, as identified within the 

GSD Rules and MBSD Rules.7 One of 

these components is the MLA Charge, 

which is designed to address the risk 

presented to FICC when a Member’s 

portfolio contains large net unsettled 

positions in a particular group of 

securities with a similar risk profile or 

in a particular transaction type (referred 

to herein as ‘‘asset groups’’).8

(ii) Overview of the MLA Charge 

Upon a Member default, GSD Rule 

22A (Procedures for When the 

Corporation Ceases to Act) and MBSD 

Rule 17 (Procedures for When the 

Corporation Ceases to Act) each 

provides FICC with the authority to 

promptly close out and manage the 

positions of the defaulted Member and 

to apply the defaulted Member’s 

collateral. The process of closing out the 

net unsettled positions of a defaulted 

Member typically involves effecting 

market purchases and sales; that is, 

buying in securities the defaulted 

Member was obligated to deliver to 

FICC, and selling out securities the 

defaulted Member was obligated to 

receive from FICC and pay for, or 

otherwise liquidating the position. 

FICC may face increased transaction 

costs when it liquidates the net 

unsettled positions of a defaulted 

Member due to the unique 

characteristics of that Member’s 

portfolio. The transaction costs to FICC 

to liquidate a defaulted Member’s 

portfolio include market impact costs. 

Market impact costs are the costs due to 

the marketability of a security, and 

generally increase when a portfolio 

contains large net unsettled positions in 

a particular group of securities with a 

similar risk profile or in a particular 

transaction type. The MLA Charge is 

specifically designed to address this 

risk. 

The MLA Charge is designed to 

address the market impact costs of 

liquidating a defaulted Member’s 

portfolio that may increase when that 

portfolio includes large net unsettled 

positions in a particular group of 

securities with a similar risk profile or 

in a particular transaction type. These 

positions may be more difficult to 

liquidate because a concentration in that 

group of securities or in a transaction 

type could reduce the marketability of 

those large net unsettled positions. 

Therefore, such portfolios create a risk 

that FICC may face increased market 

impact cost to liquidate that portfolio in 

the assumed margin period of risk of 

three Business Days at market prices. 

The MLA Charge is calculated to 

address this increased market impact 

cost by assessing sufficient margin to 

mitigate this risk. The MLA Charge is 

calculated for different asset groups. 


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58006 Federal Register / Vol. 88, No. 163 / Thursday, August 24, 2023 / Notices 

9FICC determines average daily trading volume 

by reviewing data that is made publicly available 

by the Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), at https://www.sifma.org/ 

resources/archive/research/statistics. 

10See the definition of Margin Liquidity 

Adjustment Charge in GSD Rule 1 (Definitions) and 

MBSD Rule 1 (Definitions). Supra note 3. 

11The net directional market value of an asset 

group within a portfolio is calculated as the 

absolute difference between the market value of the 

long net unsettled positions in that asset group, and 

the market value of the short net unsettled positions 

in that asset group. For example, if the market value 

of the long net unsettled positions is $100,000, and 

the market value of the short net unsettled positions 

is $150,000, the net directional market value of the 

asset group is $50,000. 12To determine the gross market value of the net 

unsettled positions in each asset group, FICC sums 

the absolute value of each CUISP in the asset group. 13Supra note 9. 

14FICC’s margining methodology uses a three-day 

assumed period of risk. For purposes of this 

calculation, FICC uses a portion of the VaR Charge 

that is based on a one-day assumed period of risk 

and calculated by applying a simple square-root of 

time scaling, referred to herein as ‘‘1-day VaR 

Charge.’’ Any changes that FICC deems appropriate 

to this assumed period of risk would be subject to 

FICC’s model risk management governance 

procedures set forth in the Clearing Agency Model 

Risk Management Framework (‘‘Model Risk 

Management Framework’’). See Securities Exchange 

Act Release Nos. 81485 (Aug. 25, 2017), 82 FR 

41433 (Aug. 31, 2017) (SR–FICC–2017–014); 84458 

(Oct. 19, 2018), 83 FR 53925 (Oct. 25, 2018) (SR– 

FICC–2018–010); 88911 (May 20, 2020), 85 FR 

31828 (May 27, 2020) (SR–FICC–2020–004); 92380 

(July 13, 2021), 86 FR 38140 (July 19, 2021) (SR– 

FICC–2021–006); 94271 (Feb. 17, 2022), 87 FR 

10411 (Feb. 24, 2022) (SR–FICC–2022–001); and 

97890 (July 13, 2023), 88 FR 46287 (July 19, 2023) 

(SR–FICC–2023–008). 

15FICC reviews the method for calculating the 

thresholds from time to time and any changes that 

FICC deems appropriate would be subject to FICC’s 

model risk management governance procedures set 

forth in the Model Risk Management Framework. 

See id. 

Essentially, the calculation is designed 

to compare the total market value of net 

unsettled positions in a particular asset 

group, which FICC would be required to 

liquidate in the event of a Member 

default, to the available trading volume 

of that asset group or equities subgroup 

in the market.9 If the market value of the 

net unsettled positions in an asset group 

is large, as compared to the available 

trading volume of that asset group, then 

there is an increased risk that FICC 

would face additional market impact 

cost in liquidating those positions in the 

event of a Member default. Therefore, 

the calculation provides FICC with a 

measurement of the possible increased 

market impact cost that FICC could face 

when it liquidates large net unsettled 

positions in a particular asset group. 

To calculate the MLA Charge, FICC 

categorizes securities into one or more 

asset groups.10 At GSD, those asset 

groups currently include the following, 

each of which have similar risk profiles: 

(a) U.S. Treasury securities, which are 

further categorized by maturity—those 

maturing in (i) less than one year, (ii) 

equal to or more than one year and less 

than two years, (iii) equal to or more 

than two years and less than five years, 

(iv) equal to or more than five years and 

less than ten years, and (v) equal to or 

more than ten years; (b) TreasuryInflation Protected Securities (‘‘TIPS’’), 

which are further categorized by 

maturity—those maturing in (i) less than 

two years, (ii) equal to or more than two 

years and less than six years, (iii) equal 

to or more than six years and less than 

eleven years, and (iv) equal to or more 

than eleven years; (c) U.S. agency 

bonds; and (d) mortgage pools 

transactions. At MBSD, there is 

currently one mortgage-backed 

securities asset group. 

FICC first calculates a measurement of 

market impact cost with respect to the 

net unsettled positions of a Member in 

each of these asset groups. To determine 

the market impact cost for net unsettled 

positions in Treasuries maturing less 

than one year and TIPS at GSD, FICC 

uses the directional market impact cost, 

which is a function of the net unsettled 

positions’ net directional market 

value.11 To determine the market impact 

cost for all other net unsettled positions 

at GSD and MBSD, FICC adds together 

two components: (1) the directional 

market impact cost, as described above, 

and (2) the basis cost, which is based on 

the net unsettled positions’ gross market 

value.12

The calculation of market impact cost 

for net unsettled positions in Treasuries 

maturing less than one year and TIPS 

does not include basis cost because 

basis risk is negligible for these types of 

positions. For all asset groups, when 

determining the market impact cost at 

GSD and MBSD, the net directional 

market value and the gross market value 

of the net unsettled positions are 

divided by the average daily volumes of 

the securities in that asset group over a 

lookback period.13

FICC then compares the calculated 

market impact cost to a portion of the 

VaR Charge that is allocated to net 

unsettled positions in those asset 

groups.14 If the ratio of the calculated 

market impact cost to a portion of the 

VaR Charge is greater than a prescribed 

threshold, an MLA Charge is applied to 

that asset group.15 If the ratio of these 

two amounts is equal to or less than this 

threshold, an MLA Charge is not 

applied to that asset group. The 

threshold is based on an estimate of the 

market impact cost that is incorporated 

into the calculation of the 1-day VaR 

Charge, such that an MLA Charge is 

applied only when the calculated 

market impact cost exceeds this 

prescribed threshold. In addition, FICC 

may apply a downward adjusting 

scaling factor in the calculation of the 

MLA Charge based on the ratio of the 

calculated market impact cost to the 1- 

day VaR Charge. 

For each Member portfolio, FICC adds 

the MLA Charges for each asset group, 

as applicable, to determine a total MLA 

Charge for the Member portfolio. The 

final MLA charge is calculated daily 

and, when the charge is applicable, as 

described above, is included as a 

component of Members’ Required Fund 

Deposits. 

MLA Excess Amount for Sponsored 

Members 

At GSD, the calculation of the MLA 

Charge for a Sponsored Member that 

clears through a single account 

sponsored by a single Sponsoring 

Member is the same as described above. 

For a Sponsored Member that clears 

through multiple accounts sponsored by 

multiple Sponsoring Members, in 

addition to calculating an MLA Charge 

for each account as described above, 

FICC also calculates an MLA Charge for 

the combined net unsettled positions of 

the Sponsored Member across all of its 

Sponsoring Members (herein referred to 

as the ‘‘consolidated portfolio’’). 

Currently, if the MLA Charge of the 

consolidated portfolio is higher than the 

sum of all MLA Charges for each 

account of the Sponsored Member, the 

amount of such difference, referred to as 

the ‘‘MLA Excess Amount,’’ would be 

charged in addition to the applicable 

MLA Charge. If the MLA Charge of the 

consolidated portfolio is not higher than 

the sum of all MLA Charges for each 

account of the Sponsored Member, then 

only an MLA Charge for each of the 

Sponsored Member’s accounts, as 

applicable, would be charged. 

The MLA Excess Amount is designed 

to capture the additional market impact 

cost that could be incurred when a 

Sponsored Member defaults, and each 

of its Sponsoring Members, in its 

capacity as the Sponsored Member’s 

guarantor, liquidates net unsettled 

positions associated with that defaulted 

Sponsored Member. If large net 

unsettled positions in the same asset 

group are being liquidated by multiple 

Sponsoring Members, the market impact 

cost to liquidate those positions could 

increase. The MLA Excess Amount 

addresses this additional market impact 

cost by capturing any difference 

between the calculations of the MLA 

Charge for each of the Sponsored 

Member’s accounts and for the 

consolidated portfolio. The MLA Excess 

Amount for a Sponsored Member is 

currently allocated across each of its 


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16See the definition of Margin Liquidity 

Adjustment Charge in GSD Rule 1 (Definitions). 

Supra note 3. 

17See the definition of Margin Liquidity 

Adjustment Charge in MBSD Rule 1 (Definitions). 

Supra note 3. 

18FICC is requesting confidential treatment of the 

MLA Model Document and has filed it separately 

with the Commission. 

19Supra note 15. 

Sponsoring Members using a market 

volatility risk-weighted allocation 

methodology. 

FICC is proposing to revise how GSD 

calculates the MLA Charge for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members in order 

to better align with the market impact 

cost arising from position concentration 

of the Sponsored Member’s respective 

Sponsored Member accounts. As 

proposed, those Sponsored Member’s 

accounts with higher relative market 

impact cost and a lower relative VaR 

Charge would be apportioned a higher 

amount of the additional market impact 

cost than those Sponsored Member’s 

accounts with lower relative market 

impact cost and a higher relative VaR 

Charge. 

In light of the proposal to enhance 

GSD’s calculation of the MLA Charge for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members, FICC has 

determined it is appropriate to eliminate 

the MLA Excess Amount from the GSD 

Rules. This is because the market 

impact cost that the MLA Excess 

Amount is designed to address would 

now be mitigated by the proposed 

enhancement to the MLA Charge. 

Asset Groups/Subgroups Used in the 

MLA Charge Calculation 

As described above, to calculate the 

MLA Charge, FICC categorizes securities 

into one or more asset groups. Those 

asset groups, as currently codified in the 

GSD Rules,16 include the following, 

each of which have similar risk profiles: 

(a) U.S. Treasury securities, which are 

further categorized by maturity—those 

maturing in (i) less than one year, (ii) 

equal to or more than one year and less 

than two years, (iii) equal to or more 

than two years and less than five years, 

(iv) equal to or more than five years and 

less than ten years, and (v) equal to or 

more than ten years; (b) TreasuryInflation Protected Securities (‘‘TIPS’’), 

which are further categorized by 

maturity—those maturing in (i) less than 

two years, (ii) equal to or more than two 

years and less than six years, (iii) equal 

to or more than six years and less than 

eleven years, and (iv) equal to or more 

than eleven years; (c) U.S. agency 

bonds; and (d) mortgage pools 

transactions. There is one mortgagebacked securities asset group as 

currently codified in the MBSD Rules.17

FICC is proposing to revise the 

language in the GSD Rules and MBSD 

Rules describing the asset groups and/ 

or subgroups used in its calculation of 

the MLA Charge at GSD and MBSD. 

This proposed change would enable 

FICC to calculate the MLA Charge at 

GSD and MBSD using an applicable 

schedule of asset groupings that FICC 

would set and adjust from time to time, 

rather than as codified in the GSD Rules 

and MBSD Rules in the manner they are 

today. 

Clarifying and Technical Changes 

Finally, FICC is proposing to modify 

certain language in the GSD Rules and 

MBSD Rules to make it clearer as to how 

the MLA Charge is calculated at GSD 

and MBSD, as well as make technical 

changes in the GSD Rules. 

Specifically, FICC is proposing 

changes that would make it clearer that, 

for the purpose of determining the 

amount of MLA Charge at GSD and 

MBSD, the MLA Charge is first 

calculated for each asset group/ 

subgroup and then added together to 

result in one MLA Charge for each 

Member portfolio. FICC is also 

proposing changes that would reflect 

the calculation of market impact cost is 

performed for combined net unsettled 

positions in each asset group/subgroup, 

not for each net unsettled position. 

Similarly, FICC is proposing changes to 

make it clearer that the associated VaR 

Charge allocation is also performed for 

each asset group/subgroup, not for each 

net unsettled position. 

FICC is also proposing technical 

changes to reflect correct term usage in 

the GSD Rules. 

(iii) Proposed Changes 

Enhancing the MLA Charge Calculation 

at GSD for Sponsored Members that 

Clear Through Multiple Accounts 

Sponsored by Multiple Sponsoring 

Members 

For a Sponsored Member that clears 

through multiple accounts sponsored by 

multiple Sponsoring Members, in lieu of 

charging an MLA Excess Amount in 

addition to the applicable MLA Charge, 

FICC is proposing to enhance GSD’s 

calculation of the MLA Charge for such 

Sponsored Member in order to better 

align with the additional market impact 

cost that could be incurred when the 

Sponsored Member defaults, and each 

of its Sponsoring Members, in its 

capacity as the Sponsored Member’s 

guarantor, liquidates the defaulted 

Sponsored Member’s large net unsettled 

positions in the same asset group. 

Specifically, FICC is proposing that 

when a Sponsored Member clears 

through multiple accounts sponsored by 

multiple Sponsoring Members, for each 

such account, GSD would calculate an 

MLA Charge both (1) for each asset 

group/subgroup in the account on a 

standalone basis, as described above, 

and (2) for each asset group/subgroup in 

the account as part of a consolidated 

portfolio, as described below, with the 

higher amount applied as the MLA 

Charge for the relevant asset group/ 

subgroup. 

When calculating the MLA Charge for 

each asset group/subgroup in the 

account as part of a consolidated 

portfolio, GSD would first calculate the 

market impact cost for each asset group/ 

subgroup based on the aggregate net 

unsettled positions of that asset group/ 

subgroup in the consolidated portfolio. 

The calculated market impact cost for 

each asset group/subgroup would then 

be allocated to each asset group/ 

subgroup in each account of the 

Sponsored Member on a pro rata basis 

based on the market impact cost of that 

asset group/subgroup in the account. 

The allocated market impact cost for 

an asset group/subgroup would then be 

compared to a portion of the VaR Charge 

that is allocated to that asset group/ 

subgroup in the account. If the ratio of 

the allocated market impact cost to a 

portion of the VaR Charge is greater than 

a prescribed threshold, as determined 

by FICC from time to time, there would 

be an MLA Charge for that asset group/ 

subgroup. If the ratio of the two 

amounts is equal to or less than this 

threshold, then there would not be an 

MLA Charge for that asset group/ 

subgroup. As described above and in 

further detail in Exhibit 3b to this filing 

(DTCC Model Development 

Documentation—FICC Market Liquidity 

Adjustment Model and Bid-ask Charge 

Model) (‘‘MLA Model Document’’),18

the threshold is currently determined by 

an optimization process based on the 

ratio of an estimate of the market impact 

cost to the 1-day VaR Charge and would 

remain so with respect to the changes 

made in accordance with this 

proposal.19

When applicable, the MLA Charge for 

each asset group/subgroup in the 

account as part of the consolidated 

portfolio would be calculated as a 

proportion of the product of (1) the 

amount by which the ratio of the 

allocated market impact cost for the 

asset group/subgroup to the portion of 

the VaR Charge allocated to that asset 

group/subgroup exceeds the prescribed 


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20FICC reviews the asset groupings from time to 

time and any changes that FICC deems appropriate 

would be subject to FICC’s model risk management 

governance procedures set forth in the Model Risk 

Management Framework. See supra note 14. 

21 15 U.S.C. 78q–1(b)(3)(F). 

22 17 CFR 240.17Ad–22(e)(6)(i) and (e)(19). 

threshold, and (2) a portion of the VaR 

Charge allocated to that asset group/ 

subgroup. 

As stated above, GSD would then 

compare the MLA Charge for each asset 

group/subgroup in the account on a 

standalone basis against the MLA 

Charge for each asset group/subgroup in 

the account as part of a consolidated 

portfolio. The higher of the two amounts 

would be applied as the MLA Charge for 

the asset group. The applicable MLA 

Charges for each asset group/subgroup 

would be added together to result in one 

total MLA Charge for that account of the 

Sponsored Member. 

To implement the proposal as 

described above, FICC would amend 

GSD Rule 1 (Definitions) to modify the 

description of the MLA Charge. FICC 

would also amend GSD Rule 1 to 

remove MLA Excess Amount as it 

would no longer be needed under the 

proposal. 

Revise Asset Groups/Subgroups 

Language in the GSD Rules and MBSD 

Rules 

When calculating the MLA Charge at 

GSD and MBSD, it is important to have 

Members’ net unsettled positions with 

similar risk profiles placed in the same 

group or category so that market impact 

cost to each asset group or category can 

be properly measured. However, the risk 

profiles of positions may shift from time 

to time due to changes in market 

conditions, and such shift in risk 

profiles may require FICC to set and 

adjust the asset groupings from time to 

time in order to reflect these changes. 

Because the various groupings used in 

the calculation of the MLA Charge are 

currently codified in the GSD Rules and 

MBSD Rules, any changes to the 

groupings would require the filing of a 

proposed rule change with the 

Commission. 

In order to provide FICC with more 

flexibility in setting and adjusting the 

groupings from time to time,20 FICC is 

proposing to remove from the GSD 

Rules references to specific maturity 

groupings used in FICC’s calculation of 

the MLA Charge. In addition, in order 

to better reflect the different risk profiles 

of the mortgage pools/mortgage-backed 

securities asset groups, FICC is 

proposing to add language in the GSD 

Rules and MBSD Rules that would 

provide mortgage pools/mortgagebacked securities asset groups may be 

further categorized into subgroups by 

mortgage pool types. In place thereof, 

FICC would publish on its website 

schedules of asset groups and subgroups 

used in the calculation of the MLA 

Charge for GSD and MBSD, respectively. 

Specifically, FICC is proposing to 

revise the MLA Charge definition in 

GSD Rule 1 (Definitions) to provide that 

for the purpose of calculating the MLA 

Charge at GSD, a Member’s net 

unsettled positions shall be categorized 

into (a) U.S. Treasury securities, which 

shall be further categorized into 

subgroups by maturity; (b) TreasuryInflation Protected Securities (‘‘TIPS’’), 

which shall be further categorized into 

subgroups by maturity; (c) U.S. agency 

bonds; and (d) mortgage pools, which 

may be further categorized into 

subgroups by mortgage pool types. 

FICC is also proposing to revise the 

MLA Charge definition in MBSD Rule 1 

(Definitions) to provide that for the 

purpose of calculating the MLA Charge 

at MBSD, a Member’s net unsettled 

positions in TBA transactions, Specified 

Pool Trades and Stipulated Trades shall 

be included in one mortgage-backed 

securities asset group, which may be 

further categorized into subgroups by 

mortgage pool types. 

In addition, in both GSD Rule 1 and 

MBSD Rule 1, FICC is proposing to 

revise the MLA Charge definition to 

state (i) the asset groups and subgroups 

shall be set forth in a schedule that is 

published on FICC’s website, (ii) it shall 

be the Member’s responsibility to 

retrieve the schedule, and (iii) FICC 

would provide Members with at a 

minimum 5 Business Days’ advance 

notice of any change to the schedule via 

an Important Notice. 

Clarifying and Technical Changes 

FICC is proposing to modify certain 

language in the GSD Rules and MBSD 

Rules to make it clearer as to how the 

MLA Charge is calculated at GSD and 

MBSD. Specifically, FICC is proposing 

changes to the definition of ‘‘Margin 

Liquidity Adjustment Charge’’ in GSD 

Rule 1 (Definitions) and MBSD Rule 1 

(Definitions) that would make it clearer 

that, for the purpose of determining the 

amount of MLA Charge at GSD and 

MBSD, the MLA Charge is first 

calculated for each asset group/ 

subgroup and then added together to 

result in one MLA Charge for each 

Member portfolio. FICC is also 

proposing changes that would reflect 

the calculation of market impact cost is 

performed for combined net unsettled 

positions in each asset group/subgroup, 

not for each net unsettled position. 

Similarly, FICC is proposing changes to 

make it clearer that the associated VaR 

Charge allocation is also performed for 

each asset group/subgroup, not for each 

net unsettled position. 

In addition, FICC is proposing 

technical changes to reflect correct term 

usage in the GSD Rules. Specifically, 

FICC is proposing to modify the 

definition of Margin Liquidity 

Adjustment Charge in GSD Rule 1 

(Definitions) by (i) deleting the reference 

to ‘‘mortgage pools transactions’’ and 

replacing it with ‘‘mortgage pools’’ and 

(ii) deleting ‘‘MLA charge’’ and 

replacing it with ‘‘MLA Charge’’ in two 

places. 

Impact Study 

FICC conducted an impact study for 

the period from October 19, 2020 

through October 31, 2022 (‘‘Impact 

Study’’). The results of the Impact Study 

indicate that, if the proposed 

enhancements to the MLA Charge 

calculation had been in place for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members, the 

enhancements would have resulted in 

an average daily change of $9.47 million 

in the aggregate MLA Charge for the 

impacted Sponsored Members 

(approximately 1.18% of the impacted 

Sponsored Members’ average daily 

aggregate VaR Charge and 0.20% of the 

Sponsoring Members’ average daily 

aggregate VaR Charge). The largest daily 

increase in the aggregate MLA Charge 

for the impacted Sponsored Members 

would be $31.44 million (approximately 

2.86% of the impacted Sponsored 

Members’ aggregate VaR Charge and 

0.57% of the Sponsoring Members’ 

aggregate VaR Charge). 

Implementation Timeframe 

Subject to approval by the 

Commission, FICC expects to 

implement this proposal by no later 

than 60 Business Days after such 

approval and would announce the 

effective date of the proposed changes 

by an Important Notice posted to FICC’s 

website. 

2. Statutory Basis 

FICC believes the proposed changes 

are consistent with the requirements of 

the Act, and the rules and regulations 

thereunder applicable to a registered 

clearing agency. In particular, FICC 

believes that the proposed rule change 

is consistent with section 17A(b)(3)(F) 

of the Act,21 and Rules 17Ad–22(e)(6)(i) 

and (e)(19), each promulgated under the 

Act,22 for the reasons described below. 

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

requires, in part, that the rules of a 


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23 15 U.S.C. 78q–1(b)(3)(F). 

24 Id. 

25 Id. 

26Pursuant to section 806(e)(1) of title VIII of the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act and Rule 19b–4(n)(1)(i) under the 

Act, if a change materially affects the nature or level 

of risks presented by FICC, then FICC is required 

to file an advance notice filing. 12 U.S.C. 5465(e)(1) 

and 17 CFR 240.19b–4(n)(1)(i). 

27 15 U.S.C. 78q–1(b)(3)(F). 

28 Id. 

29 17 CFR 240.17Ad–22(e)(6)(i). 

30 Id. 

31 Id. 

32 Id. 

clearing agency be designed to promote 

the prompt and accurate clearance and 

settlement of securities transactions, 

and assure the safeguarding of securities 

and funds which are in the custody or 

control of the clearing agency or for 

which it is responsible.23 FICC believes 

that the proposed changes described are 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions, and assure the 

safeguarding of securities and funds 

which are in the custody or control of 

FICC or for which it is responsible, 

consistent with section 17A(b)(3)(F) of 

the Act.24

As described above, the proposed 

changes to enhance the MLA Charge 

calculation at GSD for Sponsored 

Members that clear through multiple 

accounts sponsored by multiple 

Sponsoring Members are designed to 

enable FICC to better align the MLA 

Charge with the risks arising from 

position concentration of such 

Sponsored Members. Better aligning the 

MLA Charge with such risk would help 

ensure that FICC collects MLA Charges 

from the Sponsoring Members of these 

Sponsored Members that are 

commensurate with the additional 

market impact cost that could be 

incurred when such a Sponsored 

Member defaults, and each of its 

Sponsoring Members, in its capacity as 

the Sponsored Member’s guarantor, 

liquidates the defaulted Sponsored 

Member’s large net unsettled positions 

in the same asset grouping so that 

FICC’s operations would not be 

disrupted, and non-defaulting Members 

would not be exposed to losses they 

cannot anticipate or control. In this way, 

the proposed rule change to enhance the 

MLA Charge calculation at GSD for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members would 

assure the safeguarding of securities and 

funds which are in the custody and 

control of FICC or for which it is 

responsible, consistent with section 

17A(b)(3)(F) of the Act.25

FICC believes the proposed changes to 

revise the asset group/subgroup 

language in the Rules would provide 

FICC with more flexibility in setting and 

adjusting the asset groupings used in the 

calculation of the MLA Charge at GSD 

and MBSD because such adjustments 

would no longer require a rule change.26

By being able to make adjustments to 

the asset groupings from time to time 

without a rule change, FICC would have 

the flexibility to respond to changes in 

the risk profile of Members’ positions 

more promptly. FICC believes that 

having this additional flexibility to 

respond to changing risk profiles of 

Members’ positions more promptly 

would help better ensure that FICC 

collects MLA Charges from Members 

that are commensurate with the risk 

exposure that FICC may face in 

liquidating Members’ portfolios such 

that, in the event of a Member default, 

FICC’s operations would not be 

disrupted, and non-defaulting Members 

would not be exposed to losses they 

cannot anticipate or control. In this way, 

the proposed rule change to revise the 

asset group/subgroup language in the 

Rules would assure the safeguarding of 

securities and funds which are in the 

custody and control of FICC or for 

which it is responsible, consistent with 

section 17A(b)(3)(F) of the Act.27

In addition, FICC believes the 

proposed clarifying and technical 

changes would help to ensure that the 

GSD Rules and MBSD Rules are clear to 

Members. When Members better 

understand their rights and obligations 

regarding the GSD Rules and MBSD 

Rules, Members are more likely to act in 

accordance with the GSD Rules and 

MBSD Rules, which FICC believes 

would promote the prompt and accurate 

clearance and settlement of securities 

transactions. As such, FICC believes that 

the proposed clarifying and technical 

changes would be consistent with 

section 17A(b)(3)(F) of the Act.28

Rule 17Ad–22(e)(6)(i) under the Act 29

requires a covered clearing agency to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to cover, if the 

covered clearing agency provides 

central counterparty services, its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market. FICC believes that the proposed 

changes are consistent with the 

requirements of Rule 17Ad–22(e)(6)(i).30

Specifically, the proposed changes to 

enhance the MLA Charge calculation at 

GSD for Sponsored Members that clear 

through multiple accounts sponsored by 

multiple Sponsoring Members are 

designed to enable FICC to better align 

the MLA Charge with the risks arising 

from position concentration of such 

Sponsored Members. Better aligning the 

MLA Charge with such risk would 

enable FICC to better risk manage its 

credit exposure to its Members because 

FICC would then be able to collect MLA 

Charges from the Sponsoring Members 

of these Sponsored Members that are 

commensurate with the additional 

market impact cost that could be 

incurred when such a Sponsored 

Member defaults, and each of its 

Sponsoring Members, in its capacity as 

the Sponsored Member’s guarantor, 

liquidates the defaulted Sponsored 

Member’s large net unsettled positions 

in the same asset grouping. Being able 

to better align the MLA Charge with the 

risks arising from position concentration 

of Sponsored Members that clear 

through multiple accounts sponsored by 

multiple Sponsoring Members would 

allow FICC to continue to produce 

margin levels commensurate with the 

risks and particular attributes of each 

relevant product, portfolio, and market. 

Therefore, FICC believes these proposed 

changes are consistent with Rule 17Ad– 

22(e)(6)(i) under the Act.31

FICC believes the proposed change to 

revise the asset group/subgroup 

language in the Rules would provide 

FICC with more flexibility in setting and 

adjusting the asset groupings used in the 

calculation of the MLA Charge at GSD 

and MBSD because such adjustments 

would no longer require a rule change. 

By being able to make adjustments to 

the asset groupings from time to time 

without a rule change, FICC would have 

the flexibility to respond to changes in 

the risk profile of Members’ positions 

more promptly. FICC believes that 

having this additional flexibility to 

respond to changing risk profiles of 

Members’ positions more promptly 

would help better ensure that FICC 

collects MLA Charges from Members 

that are commensurate with the risk 

exposure that FICC may face in 

liquidating Members’ portfolios. In this 

way, the proposed rule change to revise 

the asset group/subgroup language in 

the Rules would allow FICC to continue 

to produce margin levels commensurate 

with the risks and particular attributes 

of each relevant product, portfolio, and 

market. Therefore, FICC believes this 

proposed change is consistent with Rule 

17Ad–22(e)(6)(i) under the Act.32


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33 17 CFR 240.17Ad–22(e)(19). 

34 Id. 

35 Id. 

36 15 U.S.C. 78q–1(b)(3)(I). 

37 15 U.S.C. 78q–1(b)(3)(F). 

38 Id. 

39 17 CFR 240.17Ad–22(e)(6)(i). 

40 17 CFR 240.17Ad–22(e)(19). 

Rule 17Ad–22(e)(19) under the Act 33

requires a covered clearing agency to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to identify, 

monitor, and manage the material risks 

to the covered clearing agency arising 

from arrangements in which firms that 

are indirect participants in the covered 

clearing agency rely on the services 

provided by the direct participants to 

access the covered clearing agency’s 

payment, clearing, or settlement 

facilities. FICC believes that the 

proposed changes are consistent with 

the requirements of Rule 17Ad– 

22(e)(19).34

Specifically, the proposed changes to 

enhance the MLA Charge calculation at 

GSD for Sponsored Members that clear 

through multiple accounts sponsored by 

multiple Sponsoring Members are 

designed to enable FICC to better align 

the MLA Charge with the risks arising 

from position concentration of such 

Sponsored Members. Better aligning the 

MLA Charge with such risk would 

enable FICC to better risk manage the 

material risks arising from position 

concentration of Sponsored Members 

that clear through multiple accounts 

sponsored by multiple Sponsoring 

Members because FICC would then be 

able to collect MLA Charges from the 

Sponsoring Members of these 

Sponsored Members that are 

commensurate with the additional 

market impact cost that could be 

incurred when such a Sponsored 

Member defaults, and each of its 

Sponsoring Members, in its capacity as 

the Sponsored Member’s guarantor, 

liquidates the defaulted Sponsored 

Member’s large net unsettled positions 

in the same asset grouping. Therefore, 

FICC believes these proposed changes 

are consistent with Rule 17Ad–22(e)(19) 

under the Act.35

(B) Clearing Agency’s Statement on 

Burden on Competition 

FICC believes proposed changes to 

enhance the MLA Charge calculation at 

GSD for Sponsored Members that clear 

through multiple accounts sponsored by 

multiple Sponsoring Members may have 

an impact on competition because these 

changes could result in the Sponsoring 

Members of such Sponsored Members 

being assessed a higher margin than 

they would have been assessed under 

the current MLA Charge calculation. 

When these proposed changes result in 

a higher MLA Charge, they could 

burden competition for Sponsoring 

Members that have lower operating 

margins or higher costs of capital 

compared to other Sponsoring Members. 

Whether such burden on competition 

would be significant would depend on 

each Sponsoring Member’s financial 

status and the specific risks presented 

by the portfolio(s) of the Sponsoring 

Member’s Sponsored Members. 

FICC believes any burden on 

competition imposed by the proposed 

changes to enhance the MLA Charge 

calculation at GSD for Sponsored 

Members that clear through multiple 

accounts sponsored by multiple 

Sponsoring Members would not be 

significant. As the result of the Impact 

Study indicates, if the enhanced MLA 

Charge calculation had been in place, 

the associated aggregate MLA Charge 

daily change would be approximately 

$9.47 million (or 1.18% of the impacted 

Sponsored Members’ average daily 

aggregate VaR Charge and 0.20% of the 

Sponsoring Members’ average daily 

aggregate VaR Charge) on average. 

However, regardless of whether the 

burden on competition would be 

significant, FICC believes that any 

burden on competition imposed by the 

proposed changes to enhance the MLA 

Charge calculation at GSD for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members would be 

both necessary and appropriate in 

furtherance of FICC’s efforts to mitigate 

risks and meet the requirements of the 

Act,36 as described in this filing and 

further below. 

FICC believes any burden on 

competition imposed by the proposed 

changes to enhance the MLA Charge 

calculation at GSD for Sponsored 

Members that clear through multiple 

accounts sponsored by multiple 

Sponsoring Members would be 

necessary in furtherance of the Act, 

specifically section 17A(b)(3)(F) of the 

Act.37 As described above, the proposed 

changes would enable FICC to better 

align the MLA Charge with the risks 

arising from position concentration of 

such Sponsored Members. Better 

aligning the MLA Charge with such risk 

would help ensure that FICC collects 

MLA Charges from the Sponsoring 

Members of these Sponsored Members 

that are commensurate with the 

additional market impact cost that could 

be incurred when such a Sponsored 

Member defaults, and each of its 

Sponsoring Members, in its capacity as 

the Sponsored Member’s guarantor, 

liquidates the defaulted Sponsored 

Member’s large net unsettled positions 

in the same asset grouping such that 

FICC’s operations would not be 

disrupted, and non-defaulting Members 

would not be exposed to losses they 

cannot anticipate or control. In this way, 

the proposed rule change to enhance the 

MLA Charge calculation at GSD for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members would 

assure the safeguarding of securities and 

funds which are in the custody and 

control of FICC or for which it is 

responsible, consistent with section 

17A(b)(3)(F) of the Act.38

In addition, FICC believes the 

proposed changes to enhance the MLA 

Charge calculation at GSD for 

Sponsored Members that clear through 

multiple accounts sponsored by 

multiple Sponsoring Members are 

necessary to support FICC’s compliance 

with Rules 17Ad–22(e)(6)(i) and (e)(19) 

under the Act. Specifically, as described 

above, FICC believes these proposed 

changes would enable FICC to better 

align the MLA Charge with the risks 

arising from position concentration of 

such Sponsored Members. Being able to 

better align the MLA Charge with the 

risks arising from position concentration 

of Sponsored Members that clear 

through multiple accounts sponsored by 

multiple Sponsoring Members would 

allow FICC to continue to produce 

margin levels commensurate with the 

risks and particular attributes of each 

relevant product, portfolio, and market, 

consistent with Rule 17Ad–22(e)(6)(i) 

under the Act.39 Better aligning the 

MLA Charge with the risks arising from 

position concentration of Sponsored 

Members that clear through multiple 

accounts sponsored by multiple 

Sponsoring Members would also enable 

FICC to better risk manage its credit 

exposure to its Members because FICC 

would then be able to collect MLA 

Charges from the Sponsoring Members 

of these Sponsored Members that are 

commensurate with the additional 

market impact cost that could be 

incurred when such a Sponsored 

Member defaults, and each of its 

Sponsoring Members, in its capacity as 

the Sponsored Member’s guarantor, 

liquidates the defaulted Sponsored 

Member’s large net unsettled positions 

in the same asset grouping, consistent 

with Rule 17Ad–22(e)(19) under the 

Act.40

FICC believes that the abovedescribed burden on competition that 

could be created by the proposed 

changes to enhance the MLA Charge 


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41 15 U.S.C. 78q–1(b)(3)(I). 

42 15 U.S.C. 78q–1(b)(3)(F). 

43 Id. 

44 17 CFR 240.17Ad–22(e)(6)(i). 

calculation at GSD for Sponsored 

Members that clear through multiple 

accounts sponsored by multiple 

Sponsoring Members would be 

appropriate in furtherance of the Act 

because such changes have been 

appropriately designed to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

FICC or for which it is responsible, as 

described in detail above. These 

proposed changes would enable FICC to 

better align the MLA Charge with the 

risks arising from position concentration 

of such Sponsored Members. Being able 

to better align the MLA Charge with the 

risks arising from position concentration 

of Sponsored Members that clear 

through multiple accounts sponsored by 

multiple Sponsoring Members would 

allow FICC to continue to produce 

margin levels commensurate with the 

risks and particular attributes of each 

Sponsored Member’s portfolio. 

FICC believes the proposed changes to 

revise the asset group/subgroup 

language in the Rules may have an 

impact on competition because these 

changes would enable FICC to adjust the 

asset groupings used in the calculation 

of the MLA Charge from time to time, 

which could result in Members being 

assessed a higher margin than they 

would have been assessed under the 

current asset groupings. When these 

proposed changes result in a higher 

MLA Charge, they could burden 

competition for Members that have 

lower operating margins or higher costs 

of capital compared to other Members. 

Whether such burden on competition 

would be significant would depend on 

each Member’s financial status and the 

specific risks presented by each 

Member’s portfolio(s). Regardless of 

whether the burden on competition 

would be significant, FICC believes that 

any burden on competition imposed by 

the proposed changes to revise the asset 

group/subgroup language in the Rules 

would be both necessary and 

appropriate in furtherance of FICC’s 

efforts to mitigate risks and meet the 

requirements of the Act,41 as described 

in this filing and further below. 

FICC believes that any such burden 

on competition imposed by the 

proposed changes to revise the asset 

group/subgroup language in the Rules 

would be necessary in furtherance of the 

Act, specifically section 17A(b)(3)(F) of 

the Act.42 As described above, these 

proposed changes would provide FICC 

with more flexibility in setting and 

adjusting the asset groupings used in the 

calculation of the MLA Charge at GSD 

and MBSD because such adjustments 

would no longer require a rule change. 

By being able to make adjustments to 

the asset groupings from time to time 

without a rule change, FICC would have 

the flexibility to respond to changes in 

the risk profile of Members’ positions 

more promptly. FICC believes that 

having this additional flexibility to 

respond to changing risk profiles of 

Members’ positions more promptly 

would help better ensure that FICC 

collects MLA Charges from Members 

that are commensurate with the risk 

exposure that FICC may face in 

liquidating Members’ portfolios such 

that, in the event of a Member default, 

FICC’s operations would not be 

disrupted, and non-defaulting Members 

would not be exposed to losses they 

cannot anticipate or control. In this way, 

the proposed changes to revise the asset 

group/subgroup language in the Rules 

would assure the safeguarding of 

securities and funds which are in the 

custody and control of FICC or for 

which it is responsible, consistent with 

section 17A(b)(3)(F) of the Act.43

In addition, FICC believes the 

proposed changes to revise the asset 

group/subgroup language in the Rules 

are necessary to support FICC’s 

compliance with Rule 17Ad–22(e)(6)(i) 

under the Act. Specifically, as described 

above, FICC believes these proposed 

changes would provide FICC with more 

flexibility in setting and adjusting the 

asset groupings used in the calculation 

of the MLA Charge at GSD and MBSD 

and help better ensure that FICC collects 

MLA Charges from Members that are 

commensurate with the risk exposure 

that it may face in liquidating Members’ 

portfolios. In this way, the proposed 

changes to revise the asset group/ 

subgroup language in the Rules would 

allow FICC to continue to produce 

margin levels commensurate with the 

risks and particular attributes of each 

relevant product, portfolio, and market. 

Therefore, FICC believes these proposed 

changes are consistent with Rule 17Ad– 

22(e)(6)(i) under the Act.44

FICC believes that the abovedescribed burden on competition that 

could be created by the proposed 

changes to revise the asset group/ 

subgroup language in the Rules would 

be appropriate in furtherance of the Act 

because such changes have been 

appropriately designed to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

FICC or for which it is responsible, as 

described in detail above. These 

proposed changes would help better 

ensure that FICC collects MLA Charges 

from Members that are commensurate 

with the risk exposure that FICC may 

face in liquidating Members’ portfolios. 

Being able to collect MLA Charges from 

Members that are commensurate with 

the risk exposure that FICC may face in 

liquidating Members’ portfolios would 

allow FICC to continue to produce 

margin levels commensurate with the 

risks and particular attributes of each 

Member’s portfolio. 

FICC does not believe the proposed 

clarifying and technical changes to the 

GSD Rules and MBSD Rules would 

impact competition. These proposed 

changes would help to ensure that the 

GSD Rules and MBSD Rules remain 

clear. In addition, the changes would 

facilitate Members’ understanding of the 

GSD Rules and MBSD Rules and their 

obligations thereunder. These proposed 

changes would not affect FICC’s 

operations or the rights and obligations 

of the membership. As such, FICC 

believes the proposed clarifying and 

technical changes to the GSD Rules and 

MBSD Rules would not have any impact 

on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

FICC has not received or solicited any 

written comments relating to this 

proposal. If any written comments are 

received, they will be publicly filed as 

an Exhibit 2 to this filing, as required by 

Form 19b–4 and the General 

Instructions thereto. 

Persons submitting comments are 

cautioned that, according to Section IV 

(Solicitation of Comments) of the 

Exhibit 1A in the General Instructions to 

Form 19b–4, the Commission does not 

edit personal identifying information 

from comment submissions. 

Commenters should submit only 

information that they wish to make 

available publicly, including their 

name, email address, and any other 

identifying information. 

All prospective commenters should 

follow the Commission’s instructions on 

how to submit comments, available at 

https://www.sec.gov/regulatory-actions/ 

how-to-submit-comments. General 

questions regarding the rule filing 

process or logistical questions regarding 

this filing should be directed to the 

Main Office of the SEC’s Division of 

Trading and Markets at 

tradingandmarkets@sec.gov or 202– 

551–5777. 

FICC reserves the right not to respond 

to any comments received. 


lotter on DSK11XQN23PROD with NOTICES1
58012 Federal Register / Vol. 88, No. 163 / Thursday, August 24, 2023 / Notices 

45 17 CFR 200.30–3(a)(12). 

1The CAT NMS Plan is a national market system 

plan approved by the Commission pursuant to 

section 11A of the Exchange Act and the rules and 

regulations thereunder. See Securities Exchange Act 

Release No. 79318 (Nov. 15, 2016), 81 FR 84696 

(Nov. 23, 2016) (‘‘Order Approving CAT NMS 

Plan’’). 

2 15 U.S.C 78k–1(a)(3). 

3 17 CFR 242.608. 

4 17 CFR 242.608. 

5See 17 CFR 242.608(a)(4) and (a)(5). 

6See supra note 4. Unless otherwise defined 

herein, capitalized terms used herein are defined as 

set forth in the CAT NMS Plan. 

7Section 3 of Appendix D of the CAT NMS Plan 

at D–7. 

8Section 3 of Appendix D of the CAT NMS Plan 

at D–8. 

9See supra nn.5–6. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FICC–2023–012 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–FICC–2023–012. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of FICC and on DTCC’s website 

(dtcc.com/legal/sec-rule-filings). Do not 

include personal identifiable 

information in submissions; you should 

submit only information that you wish 

to make available publicly. We may 

redact in part or withhold entirely from 

publication submitted material that is 

obscene or subject to copyright 

protection. All submissions should refer 

to File Number SR–FICC–2023–012 and 

should be submitted on or before 

September 14, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.45

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18187 Filed 8–23–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98165; File No. 4–698] 

Joint Industry Plan; Notice of Filing of 

Amendment to the National Market 

System Plan Governing the 

Consolidated Audit Trail 

August 18, 2023. 

I. Introduction 

On August 2, 2023, the Operating 

Committee for Consolidated Audit Trail, 

LLC (‘‘CAT LLC’’), on behalf of the 

following parties to the National Market 

System Plan Governing the 

Consolidated Audit Trail (the ‘‘CAT 

NMS Plan’’ or ‘‘Plan’’):1 BOX Exchange 

LLC, Cboe BYX Exchange, Inc., Cboe 

BZX Exchange, Inc., Cboe EDGA 

Exchange, Inc., Cboe EDGX Exchange, 

Inc., Cboe C2 Exchange, Inc., Cboe 

Exchange, Inc., Financial Industry 

Regulatory Authority, Inc., Investors 

Exchange LLC, Long-Term Stock 

Exchange, Inc., MEMX LLC, Miami 

International Securities Exchange LLC, 

MIAX Emerald, LLC, MIAX PEARL, 

LLC, Nasdaq BX, Inc., Nasdaq GEMX, 

LLC, Nasdaq ISE, LLC, Nasdaq MRX, 

LLC, Nasdaq PHLX LLC, The NASDAQ 

Stock Market LLC, New York Stock 

Exchange LLC, NYSE American LLC, 

NYSE Arca, Inc., NYSE Chicago, Inc. 

and NYSE National, Inc. (collectively, 

the ‘‘Participants’’ or ‘‘SROs’’) filed with 

the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

pursuant to section 11A(a)(3) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’),2 and Rule 608 

thereunder,3 a proposed amendment to 

the CAT NMS Plan to modify the 

current linkage timeline (‘‘Current 

Linkage Timeline’’) for the consolidated 

audit trail (‘‘CAT’’), as contained in 

Appendix A, attached hereto (‘‘Revised 

Linkage Timeline’’). The Commission is 

publishing this notice to solicit 

comments from interested persons on 

the amendment.4

II. Description of the Plan 

Set forth in this Section II is the 

statement of the purpose and summary 

of the amendment, along with 

information required by Rule 608(a)(4) 

and (5) under the Exchange Act,5 as 

prepared and submitted by the 

Participants to the Commission and 

reproduced below verbatim.6

A. Description of the Proposed 

Amendments to the CAT NMS Plan 

1. Current Linkage Timeline 

The CAT NMS Plan requires that all 

CAT Data reported to the Central 

Repository must be processed and 

assembled to create the complete 

lifecycle of each Reportable Event.7 The 

Plan Processor uses a daisy chain 

approach to link and create the order 

lifecycles. In the daisy chain approach, 

a series of unique order identifiers, 

assigned to all order events handled by 

CAT Reporters, are linked together by 

the Central Repository and assigned a 

single CAT-generated CAT Order ID that 

is associated with each individual order 

event and used to create the complete 

lifecycle of an order.8 Under the Current 

Linkage Timeline, the CAT provides a 

final CAT Order ID at T+5 at 8 a.m. ET 

pursuant to the following timeline: 

T+1 @8 a.m.: Initial submissions due 

T+1 @12 p.m.: Initial data validation, 

communication of errors to CAT 

Reporters; unlinked data available 

to regulators 

T+1 @9 p.m.: Interim CAT Order ID 

available 9

T+3 @8 a.m.: Resubmission of corrected 

data 


lotter on DSK11XQN23PROD with NOTICES1