67394 Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 made clarifications and 

corrections to the description of the proposed rule 

change and Exhibit 3a of the filing (Summary of 

Impact Study) to incorporate a longer impact 

analysis. As originally filed, the time-period of the 

impact analysis was November 2021 to October 

2022. As amended by Amendment No. 1, the timeperiod of the impact analysis is November 2021 to 

March 2023. These clarifications and corrections 

have been incorporated, as appropriate, into the 

proposed rule change. FICC has requested 

confidential treatment of Exhibit 3a, pursuant to 17 

CFR 240.24b–2. 

4See Securities Exchange Act Release No. 98160 

(Aug. 17, 2023), 88 FR 57485 (Aug. 23, 2023) (File 

No. SR–FICC–2023–011) (‘‘Notice of Filing’’). 

5Capitalized terms not defined herein are defined 

in the GSD Rulebook (‘‘Rules’’), available at https:// 

www.dtcc.com/∼/media/Files/Downloads/legal/ 

rules/ficc_gov_rules.pdf. 

6FICC operates two divisions: GSD and the 

Mortgage-Backed Securities Division (‘‘MBSD’’). 

GSD provides CCP services for the U.S. Government 

securities market; MBSD provides CCP services for 

the U.S. mortgage-backed securities market. GSD 

and MBSD maintain separate sets of rules, margin 

models, and clearing funds. The Proposed Rule 

Change relates solely to GSD. 

burden of 15 hours for each of the next 

three years; 

(c) for smaller private fund advisers, 

an estimated average annual burden of 

5 hours for event reporting for smaller 

private equity fund advisers for each of 

the next three years; 

(d) for large hedge fund advisers 

making their first Form PF filing, an 

estimated amortized average annual 

burden of 108 hours for each of the first 

three years; 

(e) for large hedge fund advisers that 

already make Form PF filings, an 

estimated amortized average annual 

burden of 600 hours for each of the next 

three years; 

(f) for large hedge fund advisers, an 

estimated average annual burden of 10 

hours for current reporting for each of 

the next three years; 

(g) for large liquidity fund advisers 

making their first Form PF filing, an 

estimated amortized average annual 

burden of 67 hours for each of the first 

three years; 

(h) for large liquidity fund advisers 

that already make Form PF filings, an 

estimated amortized average annual 

burden of 280 hours for each of the next 

three years; 

(i) for large private equity fund 

advisers making their first Form PF 

filing, an estimated amortized average 

annual burden of 84 hours for each of 

the first three years; 

(j) for large private equity fund 

advisers that already make Form PF 

filings, an estimated amortized average 

annual burden of 100 hours for each of 

the next three years; and 

(k) for large private equity fund 

advisers, an estimated average annual 

burden of 5 hours for event reporting for 

each of the next three years. 

With respect to annual internal costs, 

the Commission estimates the collection 

of information will result in 

122.86burden hours per year on average 

for each respondent. With respect to 

external cost burdens, the Commission 

estimates a range from $0 to $50,000 per 

adviser. Estimates of average burden 

hours and costs are made solely for the 

purposes of the Paperwork Reduction 

Act and are not derived from a 

comprehensive or even representative 

survey or study of the costs of 

Commission rules and forms. The 

changes in burden hours are due to the 

staff’s estimates of the time costs and 

external costs that result from the 

adopted amendments, the use of 

updated data, and the use of different 

methodologies to calculate certain 

estimates. Compliance with the 

collection of information requirements 

of Form PF is mandatory for advisers 

that satisfy the criteria described in 

Instruction 1 to the Form. Responses to 

the collection of information will be 

kept confidential to the extent permitted 

by law. The Commission does not 

intend to make public information 

reported on Form PF that is identifiable 

to any particular adviser or private fund, 

although the Commission may use Form 

PF information in an enforcement 

action. 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 OMB 

control number. 

The public may view background 

documentation for this information 

collection at the following website: 

www.reginfo.gov. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. Written comments and 

recommendations for the proposed 

information collection should be sent 

within 30 days of publication of this 

notice by October 30, 2023 to (i) 

MBX.OMB.OIRA.SEC_desk_officer@

omb.eop.gov and (ii) David Bottom, 

Director/Chief Information Officer, 

Securities and Exchange Commission, 

c/o John Pezzullo, 100 F Street NE, 

Washington, DC 20549, or by sending an 

email to: PRA_Mailbox@sec.gov . 

Dated: September 26, 2023. 

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21430 Filed 9–28–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98494; File No. SR–FICC– 

2023–011] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Change, as 

Modified by Amendment No. 1, To 

Adopt a Portfolio Differential Charge 

as an Additional Component to the 

Government Securities Division 

Required Fund Deposit 

September 25, 2023. 

I. Introduction 

On August 3, 2023, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2023–011 

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

Securities Exchange Act of 1934 

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

On August 16, 2023, FICC filed 

Amendment No. 1 to the proposed rule 

change, to make clarifications to the 

proposed rule change.3 The proposed 

rule change, as modified by Amendment 

No. 1, is hereinafter referred to as the 

‘‘Proposed Rule Change.’’ The Proposed 

Rule Change was published for 

comment in the Federal Register on 

August 23, 2023.4 The Commission has 

received no comments on the Proposed 

Rule Change. For the reasons discussed 

below, the Commission is approving the 

Proposed Rule Change.5

II. Background 

FICC is a central counterparty 

(‘‘CCP’’), which means it interposes 

itself as the buyer to every seller and 

seller to every buyer for the financial 

transactions it clears. FICC’s 

Government Securities Division 

(‘‘GSD’’) 6 provides trade comparison, 

netting, risk management, settlement, 

and CCP services for the U.S. 

Government securities market. As such, 

FICC is exposed to the risk that one or 

more of its members may fail to make 

a payment or to deliver securities. 

A key tool that FICC uses to manage 

its credit exposures to its members is 

the daily collection of the Required 

Fund Deposit (i.e., margin) from each 

member. A member’s margin is 

designed to mitigate potential losses 

associated with liquidation of the 

member’s portfolio in the event of that 

member’s default. The aggregated 

amount of all members’ margin 

constitutes the Clearing Fund, which 

FICC would be able to access should a 

defaulted member’s own margin be 

insufficient to satisfy losses to FICC 

caused by the liquidation of that 

member’s portfolio. Each member’s 

margin consists of a number of 


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7Market price risk refers to the risk that volatility 

in the market causes the price of a security to 

change between the execution of a trade and 

settlement of that trade. This risk is sometimes also 

referred to as volatility risk. 

8The first criterion, the ‘‘Dollar Threshold,’’ 

evaluates whether a member’s intraday VaR Charge 

equals or exceeds a set threshold dollar amount 

when compared to the VaR Charge that was 

included in the most recent margin collection. The 

second criterion, the ‘‘Percentage Threshold,’’ 

evaluates whether the intraday VaR Charge equals 

or exceeds a percentage increase of the VaR Charge 

that was included in the most recent margin 

collection. The third criterion, the ‘‘Coverage 

Target,’’ evaluates whether a member’s backtesting 

results are below the 99 percent confidence level. 

Securities Exchange Act Release No. 83362 (June 1, 

2018), 83 FR 26514 (June 7, 2018) (File No. SR– 

FICC–2018–001); Securities Exchange Act Release 

No. 83223 (May 11, 2018), 83 FR 23020 (May 17, 

2018) (File No. SR–FICC–2018–801). 

9FICC assesses an ISFD if a member’s risk 

exposure breaches all three of the Dollar Threshold, 

Percentage Threshold, and Coverage Target. FICC 

also assesses an ISFD if, under certain market 

conditions, a member’s intraday VaR Charge 

breaches both the Dollar Threshold and the 

Percentage Threshold. Id. 

10See Notice of Filing, supra note 4, at 57485. 

11Backtesting is an ex-post comparison of actual 

outcomes with expected outcomes derived from the 

use of margin models. See 17 CFR 240.17Ad– 

22(a)(1). 

12See id. at 57486. 

13See id. at 57487. 

14Trade comparison consists of the reporting, 

validating, and in some cases, matching by FICC of 

the long and short sides of a securities trade to 

ensure that the details of such trade are in 

agreement between the parties. See GSD Rule 5, 

supra note 5. 

15See Notice of Filing, supra note 4, at 57486. 

16See id. The proposed PD Charge is different 

from the ISFD because the PD Charge is meant to 

capture the risks presented by the unpredictability 

of a member’s historical trading activity, as 

measured, in part, by the variability in a member’s 

VaR Charge over the look-back period; by contrast, 

the ISFD is meant to capture the intraday volatility 

risks presented by the existing net unsettled 

positions in a member’s portfolio. See id. 

17Upon implementation of the Proposed Rule 

Change, FICC would use a 100-day look-back period 

in conjunction with a decay factor of 0.97, which 

FICC believes would provide a sufficient amount of 

time to reflect the current market conditions. As 

market conditions shift, FICC may modify the lookback period and/or the decay factor from time to 

time, subject to FICC’s model governance process 

and announced by FICC via an Important Notice 

posted on its website. See id. at note 14. 

18FICC states that the uncertainty of the market 

condition and/or changes in members’ business 

models may lead to changes in member activity 

patterns that would require a multiplier greater than 

1 be invoked from time to time. See id. at note 15. 

FICC would determine whether to modify the 

multiplier based on the backtesting results to 

evaluate the effectiveness of PD Charge as a 

mitigant of the position change risk and may change 

the multiplier from time to time to maintain the 

effectiveness of the PD Charge in generating 

sufficient backtesting coverage. Changes to the 

multiplier would be subject to FICC’s model 

governance process and be announced by FICC via 

an Important Notice posted to its website. 

components, each of which is calculated 

to address specific risks faced by FICC 

arising out of its members’ trading 

activity. Each member’s margin includes 

a value-at-risk (‘‘VaR’’) charge (‘‘VaR 

Charge’’) designed to capture the 

potential market price risk 7 associated 

with the securities in a member’s 

portfolio. The VaR Charge is typically 

the largest component of a member’s 

margin requirement. 

The VaR Charge uses a sensitivitybased VaR methodology and is based on 

the potential price volatility of unsettled 

positions in a member’s portfolio. It is 

designed to project the potential losses 

that could occur in connection with the 

liquidation of a defaulting member’s 

portfolio, assuming the portfolio would 

take three days to liquidate in normal 

market conditions and uses three 

inputs: (1) confidence level, (2) a time 

horizon and (3) historical market 

volatility. The projected liquidation 

gains or losses are used to determine the 

amount of the VaR Charge for each 

portfolio, which is calculated to capture 

the market price risk associated with 

each portfolio at a 99 percent 

confidence level. 

FICC calculates and collects a start-ofday VaR component, which is designed 

to address the risk presented by a 

member’s start-of-day positions. FICC 

also calculates and collects an intraday 

VaR component, which reflects the 

changes in a member’s positions and 

risk profile due to the submission of 

new trades and completed settlement 

activity from the start-of-day to noon. 

Additionally, FICC re-calculates the 

amount of the intraday VaR Charge 

applicable to each member portfolio, 

based on the open positions therein, to 

determine whether FICC will collect an 

additional margin amount (the 

‘‘Intraday Supplemental Fund Deposit’’ 

or ‘‘ISFD’’). FICC calculates the ISFD by 

evaluating certain criteria with respect 

to a member’s intraday VaR Charge and 

backtesting results.8 FICC may assess 

the ISFD in the event that a member’s 

risk exposure breaches certain criteria.9

FICC states that it regularly assesses 

market and liquidity risks as such risks 

relate to its margin methodologies to 

evaluate whether margin levels are 

commensurate with the particular risk 

attributes of each relevant product, 

portfolio, and market.10 For example, 

FICC employs daily backtesting 11 to 

determine the adequacy of each 

member’s margin. FICC compares each 

member’s margin with the simulated 

liquidation gains/losses, using the 

actual positions in the member’s 

portfolio(s) and the actual historical 

security returns. A backtesting 

deficiency occurs when a member’s 

margin would not have been adequate to 

cover the projected liquidation losses 

estimated from the member’s settlement 

activity based on the backtesting results. 

Backtesting deficiencies highlight 

exposure that could subject FICC to 

potential losses in the event of a 

member default. FICC states that it 

investigates the cause(s) of any 

backtesting deficiencies to determine 

whether there is an identifiable cause of 

repeat backtesting deficiencies and/or 

whether multiple members may 

experience backtesting deficiencies for 

the same underlying reason.12

FICC states that based on its regular 

review of the effectiveness of its margin 

methodology, FICC has identified 

backtesting deficiencies attributable to 

intraday margin fluctuations in certain 

member portfolios as those members 

execute trades throughout the day.13

Specifically, since FICC generally 

novates and guarantees trades upon 

comparison,14 a member’s trading 

activity may result in coverage gaps due 

to large un-margined intraday portfolio 

fluctuations that remain unmitigated 

from the time of novation until the next 

scheduled margin collection.15 FICC 

designed the Proposed Rule Change to 

mitigate such exposure. 

III. Description of the Proposed Rule 

Change 

FICC proposes to add a new margin 

component, the Portfolio Differential 

Charge (‘‘PD Charge’’), to its 

methodology for calculating members’ 

margin. FICC designed the PD Charge to 

help mitigate the risks posed to FICC by 

the variability of clearing activity 

submitted by members to GSD 

throughout the day, by measuring the 

historical period-over-period increases 

in the VaR Charge of a member over a 

given time-period.16 FICC would 

calculate the PD Charge twice a day, and 

if applicable, add the PD Charge to the 

calculation of the member’s margin. 

Specifically, in determining the PD 

Charge, FICC would take into account 

the historical period-over-period 

increases between the (1) start-of-day 

and intraday VaR components, and (2) 

intraday and end-of-day VaR 

components, respectively, of a member’s 

margin over a look-back period of no 

less than 100 days, with a decay factor 

of no greater than 1.17 FICC would 

calculate the PD Charge to equal the 

exponentially weighted moving average 

of such changes to the member’s VaR 

Charge during the look-back period, 

times a multiplier that is no less than 

one and no greater than three, as 

determined by FICC from time to time 

based on backtesting results.18 The use 

of this type of average means that FICC 

would use an exponentially weighted 


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19See id. at 57486. 20As part of the Proposed Rule Change, FICC 

filed Exhibit 3a—Summary of Impact Analysis (i.e., 

the Impact Study), comparing, on a member by 

member basis, the actual margin collections during 

the period of the Impact Study to the hypothetical 

margin collections FICC would have collected had 

the PD Charge been in place during that period. The 

Impact Study shows that the rolling 12-month 

Clearing Fund requirement backtesting coverage 

ratio (from April 2022 through March 2023) would 

have improved from 98.37 percent to 98.62 percent. 

The Impact Study also shows what the average 

daily PD Charge would be on a per member basis. 

Pursuant to 17 CFR 240.24b–2, FICC requested 

confidential treatment of Exhibit 3b. For further 

discussion of the Impact Study, see the Notice of 

Filing. See id. at 57487. 

21See id. 22 15 U.S.C. 78s(b)(2)(C). 23 15 U.S.C. 78q–1(b)(3)(F). 

24 17 CFR 240.17Ad–22(e)(4)(i), (e)(6)(i), and 

(e)(6)(iii). 

25 15 U.S.C. 78q–1(b)(3)(F). 

26 Id. 

27 15 U.S.C. 78q–1(b)(3)(F). 

28 Id. 

29 17 CFR 240.17Ad–22(e)(4)(i). 

30 Id. 

31See supra note 20. 

array of VaR Charges, the result of 

which is to emphasize more recent 

observations in determining the PD 

Charge (that is, it places more weight 

and significance on more recent data 

points). 

FICC believes the PD Charge would 

address the period-over-period changes 

to members’ VaR Charges, and thereby 

help mitigate the risks posed to FICC by 

un-margined period-over-period 

fluctuations to member portfolios 

resulting from trades that FICC novates 

and guarantees during the coverage gap 

between margin collections.19 In 

support, FICC cites an impact study it 

conducted that covers the period from 

November 2021 to March 2023 (the 

‘‘Impact Study’’).20 The Impact Study 

shows, among other things, that if the 

PD Charge had been in place from April 

2022 through March 2023, the number 

of backtesting deficiencies would have 

been reduced by 77 (from 498 to 421, or 

approximately 15 percent) and the 

backtesting coverage for 44 members 

(approximately 34 percent of the GSD 

membership) would have improved, 

with 14 members who were below 99 

percent coverage brought back to above 

99 percent.21

IV. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 22

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Act and 

rules and regulations thereunder 

applicable to such organization. After 

carefully considering the Proposed Rule 

Change, the Commission finds that the 

Proposed Rule Change is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to FICC. In particular, the 

Commission finds that the Proposed 

Rule Change is consistent with Section 

17A(b)(3)(F) 23 of the Act and Rules 

17Ad–22(e)(4)(i), (e)(6)(i), and (e)(6)(iii) 

thereunder.24

A. Consistency With Section 

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

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

requires that the rules of a clearing 

agency, such as FICC, be designed to, 

among other things, 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.26 The Commission believes 

that the Proposed Rule Change is 

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

the Act for the reasons stated below. 

As described above in Section III, 

FICC proposes to add the PD Charge to 

the margin requirements that FICC may 

collect. As discussed in more detail in 

Section IV.B infra, the Commission 

believes adding the PD Charge to FICC’s 

margin methodology would help ensure 

that FICC collects sufficient margin to 

cover its credit exposure associated with 

the variability of clearing activity 

submitted by members to GSD 

throughout the day by measuring the 

historical period-over-period increases 

in the VaR Charges of members over the 

look-back period. By helping FICC to 

collect sufficient margin, the Proposed 

Rule Change would better ensure that, 

in the event of a member default, FICC’s 

operation of its critical clearance and 

settlement services would not be 

disrupted because of insufficient 

financial resources. Accordingly, the 

Commission finds that the Proposed 

Rule Change should help FICC to 

continue providing prompt and accurate 

clearance and settlement of securities 

transactions, consistent with Section 

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

Moreover, as described above in 

Section II, FICC would access the 

mutualized Clearing Fund should a 

defaulted member’s own margin be 

insufficient to satisfy losses to FICC 

caused by the liquidation of that 

member’s portfolio. Because FICC’s 

proposal to adopt the PD Charge should 

help ensure that FICC has collected 

sufficient margin from members, the 

Proposed Rule Change should also help 

minimize the likelihood that FICC 

would have to access the Clearing Fund, 

thereby limiting non-defaulting 

members’ exposure to mutualized 

losses. The Commission believes that by 

helping to limit the exposure of FICC’s 

non-defaulting members to mutualized 

losses, the Proposed Rule Change would 

help FICC assure the safeguarding of 

securities and funds which are in its 

custody or control, consistent with 

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

B. Consistency With Rule 17Ad– 

22(e)(4)(i) Under the Act 

Rule 17Ad–22(e)(4)(i) under the Act 

requires that each covered clearing 

agency, such as FICC, establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to effectively 

identify, measure, monitor, and manage 

its credit exposures to participants and 

those arising from its payment, clearing, 

and settlement processes, including by 

maintaining sufficient financial 

resources to cover its credit exposure to 

each participant fully with a high degree 

of confidence.29 The Commission 

believes that the Proposed Rule Change 

is consistent with Rule 17Ad–22(e)(4)(i) 

under the Act for the reasons stated 

below.30

The Commission agrees that FICC’s 

proposal to add the PD Charge to its 

margin methodology would enable FICC 

to better manage its credit exposures to 

members by maintaining sufficient 

resources to cover those credit 

exposures fully with a high degree of 

confidence. Specifically, the proposed 

PD Charge would allow FICC to collect 

additional margin on an intraday basis 

to help FICC effectively mitigate the 

risks attributable to intraday margin 

fluctuations in certain member 

portfolios as those members execute 

trades throughout the day between 

margin collections. As discussed above 

in Section II, since FICC generally 

novates and guarantees trades upon 

comparison, a member’s trading activity 

may result in coverage gaps due to large 

un-margined intraday portfolio 

fluctuations that remain unmitigated 

from the time of novation until the next 

scheduled margin collection. The PD 

Charge would help FICC mitigate such 

exposure. 

The Commission has reviewed and 

analyzed the materials filed by FICC, 

including FICC’s Impact Study and 

backtesting results submitted 

confidentially,31 which show that had 

the PD Charge been in place from April 

2022 through March 2023, it would 

have reduced number of backtesting 

deficiencies and thereby better enabled 

FICC to collect margin sufficient to meet 

its coverage requirements. Accordingly, 


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32 17 CFR 240.17Ad–22(e)(4)(i). 

33 17 CFR 240.17Ad–22(e)(6)(i). 

34See supra note 20. 

35See id. 

36 17 CFR 240.17Ad–22(e)(6)(i). 

37 17 CFR 240.17Ad–22(e)(6)(iii). 

38See Notice of Filing, supra note 4, at 57486. 

39 17 CFR 240.17Ad–22(e)(6)(iii). 

40 15 U.S.C. 78q–1. 

41 15 U.S.C. 78s(b)(2). 

42 In approving the Proposed Rule Change, the 

Commission considered its impact on efficiency, 

competition, and capital formation. 15 U.S.C. 78c(f). 

43 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

for the reasons discussed above, the 

Commission finds that the Proposed 

Rule Change is reasonably designed to 

better enable FICC to effectively 

identify, measure, monitor, and manage 

its credit exposure to members, and 

those arising from its payment, clearing, 

and settlement processes, including by 

maintaining sufficient financial 

resources to cover its credit exposure to 

each member fully with a high degree of 

confidence consistent with Rule 17Ad– 

22(e)(4)(i).32

C. Consistency With Rule 17Ad– 

22(e)(6)(i) Under the Act 

Rule 17Ad–22(e)(6)(i) under the Act 

requires that each covered clearing 

agency that provides central 

counterparty services, such as FICC, 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to cover 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.33 The Commission believes that 

the proposal is consistent with Rule 

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

reason stated below. 

The Commission agrees that FICC’s 

proposal to add the PD Charge to its 

margin methodology would enable FICC 

to more effectively address the risks 

posed to FICC by un-margined periodover-period fluctuations to member 

portfolios resulting from trades that 

FICC novates and guarantees during the 

coverage gap between margin 

collections. In its filing materials, FICC 

provided information regarding the 

impacts of the proposed PD Charge on 

its margin collection.34 Specifically, the 

Impact Study shows that if the PD 

Charge had been in place from April 

2022 through March 2023, the number 

of backtesting deficiencies would have 

been reduced by 77 (from 498 to 421, or 

approximately 15 percent) and the 

backtesting coverage for 44 members 

(approximately 34 percent of the GSD 

membership) would have improved, 

with 14 members who were below 99 

percent coverage brought back to above 

99 percent.35 The Commission has 

reviewed and analyzed FICC’s analysis 

and agrees that adding the PD Charge to 

FICC’s margin methodology would 

enable FICC to more effectively mitigate 

the risks attributable to intraday margin 

fluctuations arising out of member 

trading activity between margin 

collections. As a result, implementing 

the Proposed Rule Change would better 

enable FICC to collect margin amounts 

at levels commensurate with FICC’s 

intraday credit exposures to its 

members. 

Accordingly, the Commission finds 

the Proposed Rule Change is consistent 

with Rule 17Ad–22(e)(6)(i) under the 

Act because it is designed to assist FICC 

in maintaining a risk-based margin 

system that considers, and produces 

margin levels commensurate with, the 

risks of portfolios that experience 

significant volatility on an intraday 

basis.36

D. Consistency With Rule 17Ad– 

22(e)(6)(iii) Under the Act 

Rule17Ad–22(e)(6)(iii) under the Act 

requires that each covered clearing 

agency, such as FICC, establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to cover its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, calculates margin 

sufficient to cover its potential future 

exposure to participants in the interval 

between the last margin collection and 

the close out of positions following a 

participant default.37 The Commission 

believes that the proposal is consistent 

with Rule 17Ad–22(e)(6)(iii) under the 

Act for the reason stated below. 

As stated above in Section II, FICC’s 

proposal to add the PD Charge is 

designed to address FICC’s exposure to 

its members attributable to trading 

activity that takes place in the interval 

between margin collections. 

Specifically, since FICC generally 

novates and guarantees trades upon 

comparison, a member’s trading activity 

may result in coverage gaps due to large 

un-margined intraday portfolio 

fluctuations that remain unmitigated 

between margin collections.38 As 

discussed above in Section IV.C, based 

on the Commission’s review of the filing 

materials, the Commission agrees that 

that FICC’s proposal to add the PD 

Charge to its margin methodology 

should enable FICC to more effectively 

address the risks posed to FICC by unmargined period-over-period 

fluctuations to member portfolios 

resulting from trades that FICC novates 

and guarantees during the coverage gap 

between margin collections. 

Accordingly, the Commission finds 

the Proposed Rule Change is consistent 

with Rule 17Ad–22(e)(6)(iii) under the 

Act because it is designed to better 

enable FICC to cover its credit 

exposures to its members by 

establishing a risk-based margin system 

that specifically calculates margin 

sufficient to cover its potential future 

exposure to members in the interval 

between the last margin collection and 

the close out of positions following a 

member default.39

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change, as modified by 

Amendment No. 1, is consistent with 

the requirements of the Act and in 

particular with the requirements of 

Section 17A of the Act 40 and the rules 

and regulations promulgated 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 41 that 

proposed rule change SR–FICC–2023– 

011, be, and hereby is, approved.42

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.43

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21338 Filed 9–28–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98497; File No. SR– 

CboeBZX–2023–062] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of 

Designation of a Longer Period for 

Commission Action on a Proposed 

Rule Change To Amend the Initial 

Period After Commencement of 

Trading of a Series of ETF Shares on 

the Exchange as It Relates to the 

Holders of Record and/or Beneficial 

Holders, as Provided in Exchange Rule 

14.11(l) 

September 25, 2023. 

On August 14, 2023, Cboe BZX 

Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 


lotter on DSK11XQN23PROD with NOTICES1