Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68803 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(2). 

12 15 U.S.C. 78s(b)(2)(B). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98304 

(September 6, 2023), 88 FR 62612. 

4 17 CFR 200.30–3(a)(12). 

change would not impose an undue 

burden on competition as it is charged 

to all Members on all their transactions 

that clear in the Customer range at the 

OCC; thus, the amount of ORF imposed 

is based on the amount of Customer 

volume transacted. The Exchange 

believes that the proposed ORF would 

not place certain market participants at 

an unfair disadvantage because all 

options transactions must clear via a 

clearing firm. Such clearing firms can 

then choose to pass through all, a 

portion, or none of the cost of the ORF 

to its customers, i.e., the entering firms. 

In addition, because the ORF is 

collected from Member clearing firms by 

the OCC on behalf of the Exchange, the 

Exchange believes that using options 

transactions in the Customer range 

serves as a proxy for how to apportion 

regulatory costs among such Members. 

Intermarket Competition. The 

proposed fee change is not designed to 

address any competitive issues. Rather, 

the proposed change is designed to help 

the Exchange adequately fund its 

regulatory activities while seeking to 

ensure that total regulatory revenues do 

not exceed total regulatory costs. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 10 of the Act and 

subparagraph (f)(2) of Rule 19b–4 11

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

At any time within 60 days of the 

filing of such 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 

under Section 19(b)(2)(B) 12 of the Act to 

determine whether the proposed rule 

change 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– 

CboeBZX–2023–074 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–CboeBZX–2023–074. 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–CboeBZX–2023–074 and should be 

submitted on or before October 25, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–22037 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98664; File No. SR–CBOE– 

2023–044] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Withdrawal 

of a Proposed Rule Change To Adopt 

a Quote Protection Timer 

September 29, 2023. 

On August 30, 2023, Cboe Exchange, 

Inc. (‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 1 and Rule 19b–4 thereunder,2 a 

proposed rule change to amend 

Exchange Rule 5.32 to adopt a passive 

quote protection mechanism. The 

proposed rule change was published for 

comment in the Federal Register on 

September 12, 2023.3 No comments 

were received on the proposed rule 

change. On September 20, 2023, the 

Exchange withdrew the proposed rule 

change (CBOE–2023–044). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.4

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–22040 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98592; File No. SR–FICC– 

2023–014] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change 

Relating to the GSD and MBSD 

Schedules of Haircuts for Eligible 

Clearing Fund Securities 

September 28, 2023 

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

Securities Exchange Act of 1934 


lotter on DSK11XQN23PROD with NOTICES1
68804 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

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. 

4The GSD Rules and MBSD Rules each 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. 

5See GSD Rule 4, Section 3 (Form of Deposit) and 

MBSD Rule 4, Section 3 (Form of Deposit), supra 

note 3. 

6See GSD Rule 1 (Definitions) and MBSD Rule 1 

(Definitions) for applicable definitions, including 

Eligible Clearing Fund Securities and its 

components, which are Eligible Clearing Fund 

Agency Securities, Eligible Clearing Fund MortgageBacked Securities, and Eligible Clearing Fund 

Treasury Securities. Supra note 3. 

7See Schedule of Haircuts for Eligible Clearing 

Fund Securities in the GSD Rules and MBSD Rules, 

supra note 3. The Schedule of Haircuts for Eligible 

Clearing Fund Securities in the GSD Rules and 

MBSD Rules was last modified in 2011 in order to 

harmonize with the increased haircuts on clearing 

fund collaterals at the National Securities Clearing 

Corporation, an affiliate of FICC. See Securities 

Exchange Act Release No. 64488 (May 13, 2011), 76 

FR 29018 (May 19, 2011) (SR–FICC–2011–03). 

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

notice is hereby given that on 

September 22, 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 primarily 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 modify the GSD and MBSD 

Schedules of Haircuts for Eligible 

Clearing Fund Securities and remove 

them from the respective Rules, and 

make other clarifying changes, 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 

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 

FICC is proposing to modify the GSD 

and MBSD Schedules of Haircuts for 

Eligible Clearing Fund Securities, and to 

remove them and the related 

concentration limits from the respective 

Rules, and make other clarifying 

changes, as described in greater detail 

below. 

Background 

FICC, through GSD and MBSD, serves 

as a central counterparty and provider 

of clearance and settlement services for 

the U.S. government securities and 

mortgage-backed securities markets. A 

key tool that FICC uses to manage its 

credit exposures to its members is the 

daily collection of margin from each 

member. The aggregated amount of all 

GSD and MBSD members’ margin 

constitutes the GSD Clearing Fund and 

MBSD Clearing Fund (collectively 

referred to herein as the ‘‘Clearing 

Fund’’). 

The objective of the Clearing Fund 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’’).4 FICC would access the 

Clearing Fund should a defaulting 

member’s own margin be insufficient to 

satisfy losses to FICC caused by the 

liquidation of that member’s portfolio. 

The Clearing Fund reduces the risk that 

FICC would need to mutualize any 

losses among non-defaulting members 

during the liquidation process. 

Under GSD Rule 4 (Clearing Fund and 

Loss Allocation) and MBSD Rule 4 

(Clearing Fund and Loss Allocation), 

members are required to make deposits 

to the GSD and MBSD Clearing Funds, 

as applicable, with the amount of each 

member’s required deposit being 

determined by FICC in accordance with 

GSD Rule 4 and MBSD Rule 4, as 

applicable (the ‘‘Required Fund 

Deposit’’). 

A member may satisfy its Required 

Fund Deposit with cash or an open 

account indebtedness secured by 

Eligible Clearing Fund Securities.5

Eligible Clearing Fund Securities, 

comprised of certain agency, mortgagebacked, and Treasury securities, are 

valued based on the prior Business 

Day’s closing market price, less a 

haircut, and may be subject to a 

concentration limit.6 Haircuts are used 

to protect FICC and its members from 

price fluctuations, i.e., if FICC is 

required to liquidate collateral of an 

insolvent member and such collateral is 

worth less at the time of liquidation 

than when it is pledged to FICC. 

Concentration limits are intended to 

reduce FICC’s risk by limiting the 

percentage of certain types of Eligible 

Clearing Fund Securities pledged by 

members to secure the Clearing Fund 

deposits. This is because 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 asset type, such 

securities could present additional risk 

to FICC. 

Currently, collateral haircuts 

applicable to relevant security types and 

remaining maturity terms are specified 

as fixed percentages in the Schedule of 

Haircuts for Eligible Clearing Fund 

Securities in the GSD Rules and MBSD 

Rules.7 The sufficiency of collateral 

haircuts is evaluated through use of 

back-tests, stress-tests and market 

observations. To ensure the sufficiency 

of the collateral haircuts, a backtesting 

analysis of members’ collateral deposits 

is conducted daily, and summary 

reviews are completed quarterly, each 

by the FICC market risk group pursuant 

to FICC’s internal market risk 

management policies and procedures. 

FICC performs daily backtesting of 

collateral by comparing the collateral 

haircut for each member in simulated 

liquidations with the member’s actual 

collateral held on deposit at FICC. Any 

exceptions noted are escalated to 

management daily to assess the root 

cause and determine whether further 

analysis and/or review would be 

appropriate. Specifically, if FICC 

determines that a particular security 

may present inherent volatility and/or 

liquidity risks that could likely result in 

an erosion in the value of the security 

exceeding the applicable collateral 

haircut, ad hoc reviews may be 

conducted by risk management 

pursuant to FICC’s internal market risk 

management procedures. On a quarterly 

basis, FICC reviews and identifies 

instances where the simulated losses 

from available historical stress testing 

scenario dates have exceeded the 

collateral haircut values. In addition, 

each quarter, FICC reviews the 

composition of the Eligible Clearing 

Fund Securities that members have 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68805 

pledged to secure their Required Fund 

Deposits in order to assess the 

sufficiency of the collateral haircuts 

applied and whether any haircut 

changes would be needed. 

In addition to collateral haircuts, FICC 

applies concentration limits to certain 

Eligible Clearing Fund Securities. 

Currently, the concentration limits 

applicable to certain Eligible Clearing 

Fund Securities are specified in GSD 

Rule 4, MBSD Rule 4, and the Schedule 

of Haircuts for Eligible Clearing Fund 

Securities in the GSD Rules and MBSD 

Rules. Specifically, Section 3b(b) of GSD 

Rule 4 and Section 3c(b) of MBSD Rule 

4 each provides that no more than 20 

percent of a member’s Required Fund 

Deposit may be in the form of Eligible 

Clearing Fund Agency Securities that 

are of a single issuer and no member 

may post as eligible collateral Eligible 

Clearing Fund Agency Securities of 

which it is the issuer. In addition, the 

Schedule of Haircuts for Eligible 

Clearing Fund Securities in the GSD 

Rules and MBSD Rules provides (i) any 

deposits of Eligible Clearing Fund 

Agency Securities or Eligible Clearing 

Fund Mortgage-Backed Securities in 

excess of 25 percent of a member’s 

Required Fund Deposit will be subject 

to a haircut that is twice the amount of 

the percentage noted in the haircut 

schedule and (ii) a member may deposit 

Eligible Clearing Fund Mortgage-Backed 

Securities of which it is the issuer, 

however such securities will be subject 

to a premium haircut, with the initial 

haircut being 14 percent, and if a 

member also exceeds the 25 percent 

concentration limit, the haircut shall be 

21 percent. 

Changes to the collateral haircuts and 

concentration limits are currently 

subject to FICC’s internal governance 

process and would remain so with 

respect to the haircut schedule changes 

made in accordance with this proposal. 

If FICC determines that, based on the 

analyses that it performs, there is 

insufficient/excessive collateral haircut/ 

concentration due to an identifiable 

cause that affected multiple members 

and such cause would likely persist 

based on FICC’s assessment of market 

conditions, such outcome or result 

could cause FICC to amend the haircuts/ 

concentration limits in the haircut 

schedule. If FICC determines that a 

change to the haircut schedule is 

warranted, its market risk group would 

document the recommendation and 

rationale for the change at the time of 

such determination and obtain approval 

from an executive director or above with 

a notice to the risk management 

committee, in accordance with FICC’s 

internal market risk management 

policies and procedures. Before making 

adjustments to the haircut schedule, 

FICC measures the potential impact of 

such adjustments to ensure any impact 

is both necessary and appropriate. 

Through its review, FICC has 

observed that under volatile market 

conditions with elevated frequency and 

magnitude of securities price 

movements, the collateral value of 

Eligible Clearing Fund Securities may 

shift in a relatively short period of time 

and the current haircuts may not 

sufficiently account for the change in 

value. When the erosion in the value of 

the Eligible Clearing Fund Securities 

exceeds the relevant haircuts, FICC is 

exposed to increased risk of potential 

losses associated with liquidating a 

member’s portfolio in the event of a 

member default when the defaulting 

member’s own margin is insufficient to 

satisfy losses to FICC caused by the 

liquidation of that member’s portfolio. 

Similarly, 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 

asset type, such securities could present 

additional risk to FICC. The additional 

risk exposures associated with 

liquidating a member’s portfolio in the 

event of a member default could lead to 

an increase in the likelihood that FICC 

would need to mutualize losses among 

non-defaulting members during the 

liquidation process. However, any 

changes to the haircuts and/or 

concentration limits currently requires a 

proposed rule change to be filed with 

the Commission. In order to provide 

FICC with more flexibility in adjusting 

the haircuts and concentration limits so 

FICC can respond to changing market 

conditions more promptly in order to 

mitigate the additional risk exposure, 

FICC is proposing to remove the GSD 

and MBSD Schedules of Haircuts for 

Eligible Clearing Fund Securities and 

concentration limits from the respective 

Rules, and to publish the haircuts and 

concentration limits in a haircut 

schedule on FICC’s website. 

Specifically, FICC is proposing to 

delete subsections (a), (b) and (c) of 

Section 3b (Special Provisions Relating 

to Deposits of Eligible Clearing Fund 

Securities) in GSD Rule 4 and Section 

3c (Special Provisions Relating to 

Deposits of Eligible Clearing Fund 

Securities) in MBSD Rule 4, 

respectively. 

Currently, subsections (a) and (c) of 

Section 3b in GSD Rule 4 and Section 

3c in MBSD Rule 4, respectively, set out 

certain concentration limits for Eligible 

Clearing Fund Agency Securities and 

Eligible Clearing Fund Mortgage-Backed 

Securities. Subsection (a) provides that 

any deposits of Eligible Clearing Fund 

Agency Securities or Eligible Clearing 

Fund Mortgage-Backed Securities, 

respectively, in excess of 25 percent of 

a member’s Required Fund Deposit will 

be subject to an additional haircut equal 

to twice the percentage as specified in 

the haircut schedule. Subsection (c) 

provides that a member may post as 

eligible collateral Eligible Clearing Fund 

Mortgage-Backed Securities of which it 

is the issuer; however, such collateral 

will be subject to a premium haircut as 

specified in the haircut schedule. The 

same language from subsections (a) and 

(c) is also currently in the respective 

GSD and MBSD haircut schedules. 

Having this language in both the Rules 

and the proposed haircut schedules is 

unnecessary and could potentially 

create confusion for members. As such, 

FICC is proposing to eliminate this 

duplication by deleting subsections (a) 

and (c) from Section 3b in GSD Rule 4 

and Section 3c in MBSD Rule 4, 

respectively, and including this 

language in the proposed haircut 

schedule. 

Subsection (b) of Section 3b in GSD 

Rule 4 and Section 3c in MBSD Rule 4, 

respectively, currently sets out an 

additional concentration limit with 

respect to Eligible Clearing Fund 

Agency Securities. Specifically, 

subsection (b) provides that no more 

than 20 percent of the Required Fund 

Deposit may be in the form of Eligible 

Clearing Fund Agency Securities that 

are of a single issuer and no member 

may post as eligible collateral Eligible 

Clearing Fund Agency Securities of 

which it is the issuer. FICC is proposing 

to delete the language in subsection (b) 

and move it to the proposed haircut 

schedule. For clarity, FICC is also 

proposing to revise the language in the 

proposed haircut schedule to provide 

that no more than 20 percent of a 

member’s Required Fund Deposit may 

be secured by pledged Eligible Clearing 

Fund Agency Securities of a single 

issuer, and no member may pledge 

Eligible Clearing Fund Agency 

Securities of which it is the issuer to 

secure its Required Fund Deposit. 

Furthermore, FICC is proposing to 

add language in Section 3b in GSD Rule 

4 and Section 3c in MBSD Rule 4, 

respectively, that makes it clear that all 

Eligible Clearing Fund Securities 

pledged to secure Clearing Fund 

deposits shall, for collateral valuation 

purposes, be subject to a haircut and 

may be subject to a concentration limit. 

The proposed language would provide 

that FICC shall determine the applicable 

haircuts and any concentration limits 

from time to time in accordance with its 

internal policy and governance process, 


lotter on DSK11XQN23PROD with NOTICES1
68806 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

8Pursuant 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. 12 U.S.C. 5465(e)(1) and 

17 CFR 240.19b–4(n)(1)(i). 

9 DTC also allows its participants to pledge 

eligible collateral as a portion of the participant 

fund; however, instead of being in the DTC 

rulebook, the collateral haircut schedules are 

published periodically by Important Notice to DTC 

participants. 

10The 29 backtesting deficiencies represent a sum 

total of approximately $9.4 million across four days 

during the impact study period, less than 0.1% of 

the total collateral value at FICC on each of those 

days. 

based on factors determined to be 

relevant by FICC, which may include, 

for example, backtesting results and 

FICC’s assessment of market conditions, 

in order to set appropriately 

conservative haircuts and/or 

concentration limits for the Eligible 

Clearing Fund Securities and minimize 

backtesting deficiency occurrences. The 

proposed language would also provide 

that the haircuts and any concentration 

limits prescribed by FICC shall be set 

forth in a haircut schedule that is 

published on FICC’s website. 

Furthermore, the proposed language 

would make it clear that it shall be the 

member’s responsibility to retrieve the 

haircut schedule, and FICC would 

provide members with at a minimum 

one Business Day’s advance notice of 

any change in the haircut schedule. 

Lastly, FICC is proposing to delete a 

sentence from Section 3b in GSD Rule 

4 and Section 3c in MBSD Rule 4, 

respectively, that references haircuts set 

forth in the Rules, and add a general 

reference to applicable haircuts so that 

it is clear to members that the valuation 

of Eligible Clearing Fund Securities is 

subject to applicable haircuts. 

FICC believes that the proposed 

change to move the haircuts and 

concentration limits from the Rules to 

the website would enable FICC to adjust 

the haircuts and concentration limits 

without undergoing a rule filing 

process.8 By being able to make 

appropriate and timely adjustments to 

the haircuts and concentration limits, 

FICC would have the flexibility to 

respond to changing market conditions 

more promptly. Having the flexibility to 

respond to changing market conditions 

more promptly would in turn help 

better ensure that FICC collects 

sufficient margin from members as well 

as risk manages its credit exposures to 

its members. The proposed change 

would also align FICC with the manner 

in which its affiliate, The Depository 

Trust Company (‘‘DTC’’), provides 

haircut schedules to participants.9

Concurrent with moving the haircuts 

and concentration limits from the Rules 

to the website, FICC is also proposing to 

reconfigure the categories relating to 

Treasury securities haircuts by moving 

the Treasury Inflation-Protected 

Securities (‘‘TIPS’’) to a separate 

category and increasing the haircut 

levels for TIPS. The proposed change to 

TIPS is reflected in Exhibit 3c to this 

filing. TIPS are a type of Treasury 

security issued by the U.S. government 

that are indexed to inflation such that 

the principal value of the security rises 

as inflation rises. 

In connection with FICC’s 

assessments of its collateral haircuts, 

FICC employs daily backtesting to 

determine the adequacy of each 

member’s collateral haircuts. FICC 

compares the collateral haircuts for each 

member with the simulated liquidation 

gains/losses using the actual positions 

in the member’s portfolio, and the 

actual historical security returns. A 

backtesting deficiency occurs when a 

member’s collateral haircuts would not 

have been adequate to cover the 

simulated liquidation losses. 

In connection with such assessments, 

FICC has determined that in periods 

where the inflation rate fluctuates, the 

current haircut levels for TIPS have 

been inadequate to address the 

fluctuations from time to time. This is 

because TIPS are indexed to the 

inflation rate, and prices on TIPS move 

inversely to their yields, e.g., when the 

inflation rate increases, prices on TIPS 

decrease. When the decline in market 

value of TIPS exceeds the haircut for 

TIPS, FICC would be exposed to 

potential liquidation losses. 

Specifically, during the period from 

September 1, 2021 to August 31, 2022, 

with TIPS comprising less than 10 

percent of the total collateral value 

across the GSD and MBSD divisions at 

FICC, FICC has observed 29 backtesting 

deficiencies at FICC,10 26 at GSD and 3 

at MBSD, where the collateral value that 

FICC attributed to the TIPS that were 

posted by members as margin (inclusive 

of the applicable current haircuts) was 

insufficient to cover the liquidation of 

such securities by FICC without 

incurring a loss. Accordingly, FICC is 

proposing to reconfigure and modify the 

haircut information that would be 

posted on FICC’s website to ensure that 

the haircut levels would be 

commensurate with the particular risk 

attributes of TIPS. 

Specifically, FICC would list TIPS of 

various maturity groupings in a separate 

category from Treasury bills, notes and 

bonds. In addition, FICC would change 

the haircut level applicable for TIPS as 

follows: 

Maturity Current 

% 

Proposed 

% 

TIPS ................................................. Zero to 1 year ............................................................................................ 2.0 2.0 

1 year to 2 years ....................................................................................... 2.0 3.0 

2 years to 5 years ..................................................................................... 3.0 5.0 

5 years to 10 years ................................................................................... 4.0 7.0 

10 years to 15 years ................................................................................. 6.0 7.0 

15 years or greater .................................................................................... 6.0 10.0 

In determining the appropriate 

haircut levels for TIPS, FICC conducted 

a review of TIPS haircuts at other 

registered clearing agencies and foreign 

central counterparty clearing houses 

(‘‘CCPs’’) to compare FICC’s current 

TIPS haircuts with that required by 

registered clearing agencies and foreign 

CCPs when TIPS are deposited to their 

clearing funds, or the equivalent thereof. 

The results of the review and 

comparison indicated that FICC’s 

current haircut levels for TIPS are 

generally lower than the TIPS haircuts 

required by other clearing agencies and 

foreign CCPs, particularly with respect 

to maturity ranges of 10 years or longer. 

While the TIPS haircut requirement at 

such other entities is not dispositive as 

to the risk borne by FICC or the proper 

TIPS haircut levels to offset such risk, 

it is indicative of the TIPS haircuts 

being applied to users of other similarly 

situated entities in order to use the 

services of the clearing agencies and 

foreign CCPs and the impact to such 

users. The chart below shows the 

haircut that participants of other 

clearing agencies and foreign CCPs are 

currently subject to when using TIPS to 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68807 

11See ICE Clear U.S. Acceptable Collateral and 

Haircuts, available at www.theice.com/publicdocs/ 

clear_us/ICUS_Collateral_Information.pdf. 

12See LCH LTD-Margin Collateral Haircut 

Schedule, available at www.lch.com/system/files/ 

media_root/Collateral/Acceptable%20

Collateral%20Haircuts%20LCH%20Ltd_0.pdf. 

13See CME Group Acceptable Performance Bond 

Collateral for Base Guaranty Fund Products, 

available at www.cmegroup.com/clearing/files/ 

acceptable-collateral-futures-options-selectforwards.pdf. 

14See OCC Collateral Haircut Schedule, available 

at www.theocc.com/clearance-and-settlement/ 

acceptable-collateral-haircuts. 15 15 U.S.C. 78q–1(b)(3)(F). 

16 17 CFR 240.17Ad–22(e)(4)(i), (e)(5), (e)(6)(i), 

and (e)(6)(v). 

17 15 U.S.C. 78q–1(b)(3)(F). 

meet their margin requirements, as compared with the existing TIPS haircut 

required at FICC. 

FICC is not proposing any changes to 

the concentration limits at this time. 

Impact Study 

FICC conducted an impact study for 

the period from September 1, 2021 

through August 31, 2022 (‘‘Impact 

Study’’). The results of the Impact Study 

indicate that, if the haircut changes for 

TIPS had been in place, all 29 

backtesting deficiencies would have 

been eliminated. 

If the proposed haircut adjustments 

had been in place during the Impact 

Study period, the changes would have 

resulted in an aggregate average daily 

increase for all members of $40.75 

million (approximately 0.15%) in the 

Clearing Fund for GSD and an aggregate 

average daily increase of $16.60 million 

(approximately 0.14%) in the Clearing 

Fund for MBSD. The three largest daily 

average dollar increases to GSD 

Members would be $11.1 million 

(approximately 0.91%), $8.3 million 

(approximately 1.07%) and $4.3 million 

(approximately 1.26%). The three 

largest daily average percentage 

increases for GSD Members would be 

1.78%, 1.76% and 1.29%. The three 

largest daily average dollar increases to 

MBSD would be $4.08 million 

(approximately 0.30%), $4.04 million 

(approximately 0.46%) and $3.99 

million (approximately 0.51%). The 

three largest daily average percentage 

increases for MBSD Members would be 

1.35%, 0.71% and 0.51%. During the 

Impact Study period, 33 of 132 GSD 

Members and 11 of 80 MBSD Members 

would have experienced an increase in 

their respective Clearing Fund deposits 

had the proposed changes been in place. 

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 this proposal is 

consistent with the requirements of the 

Act, and the rules and regulations 

thereunder applicable to a registered 

clearing agency. Specifically, FICC 

believes that the proposed changes 

described above are consistent with 

Section 17A(b)(3)(F) of the Act,15 and 

Rules 17Ad–22(e)(4)(i), (e)(5), (e)(6)(i), 

and (e)(6)(v), each promulgated under 

the Act,16 for the reasons described 

below. 

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

requires, in part, that the rules of a 

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.17 As described 

above, FICC believes the proposed 

changes to move the collateral haircuts 

and concentration limits from the Rules 

to the website would provide FICC with 

more flexibility to respond to changing 

market conditions because adjustments 

to the haircuts and concentration limits 

would no longer require a rule change. 

By being able to make appropriate and 

timely adjustments to the haircuts and 

concentration limits, FICC would have 

the flexibility to respond to changing 

market conditions more promptly. FICC 

believes that having this additional 

flexibility to respond to changing 

market conditions more promptly 

would help better ensure that FICC (i) 

collects sufficient margin from members 

to cover the risk exposures that FICC 

may face in liquidating members’ 

portfolios and (ii) minimizes exposures 

from members with large collateral 

positions in a particular group of 

securities with a similar risk profile or 

in a particular asset type, such that, in 

the event of a member default, FICC’s 


lotter on DSK11XQN23PROD with NOTICES1EN04OC23.014</GPH>

TIPS Remaining FICC Current ICE11 LCH12 CME13 occ14 

Maturity (Years) Collateral Haircut 

<1 2.00% 2.00% 1.00% 

0.63% 0.50% 

1 

2.00% 

2 3.50% 2.00% 

2.38% 

3 2.00% 

3.00% 

5 5.00% 3.00% 

3.00% 

7 

4.00% 6.75% 4.50% 3.50% 

10 4.75% 

15 

11.25% 

20 6.00% 10.75% 8.00% 5.00% 

30 16.00% 
68808 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

18 Id. 

19 Id. 

20 Id. 

21 17 CFR 240.17Ad–22(e)(4)(i). 22 Id. 

23 Id. 

24 17 CFR 240.17Ad–22(e)(5). 

25 Id. 

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 move the collateral 

haircuts and concentration limits from 

the Rules to the website 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.18

FICC also believes the proposed 

changes to move TIPS haircuts into a 

separate category and raise the haircut 

levels for TIPS would help ensure that 

the haircut levels for TIPS would be 

commensurate with the particular risk 

attributes of TIPS. FICC has determined 

that in periods where the inflation rate 

fluctuates, the current haircut levels for 

TIPS have been inadequate to address 

the fluctuations from time to time, and 

more conservative haircuts for TIPS are 

warranted. Having haircut levels for 

TIPS that are commensurate with the 

particular risk attributes of TIPS would 

enable FICC to collect sufficient margin 

from members to cover the risk 

exposures 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 move TIPS 

haircuts into a separate category and 

raise the haircut levels for TIPS 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.19

FICC believes that the proposed 

clarifying changes would help to ensure 

that the Rules are clear to members. 

When members better understand their 

rights and obligations regarding the 

Rules, members are more likely to act in 

accordance with the Rules, which FICC 

believes would promote the prompt and 

accurate clearance and settlement of 

securities transactions. As such, FICC 

believes that the proposed clarifying 

changes would be consistent with 

Section 17A(b)(3)(F) of the Act.20

Rule 17Ad–22(e)(4)(i) under the Act 21

requires a covered clearing agency to 

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 exposures arising from its 

payment, clearing, and settlement 

processes by maintaining sufficient 

financial resources to cover its credit 

exposure to each participant fully with 

a high degree of confidence. As 

described above, FICC believes the 

proposed changes to move the collateral 

haircuts and concentration limits from 

the Rules to the website would provide 

FICC with more flexibility to respond to 

changing market conditions because 

adjustments to the haircuts and 

concentration limits would no longer 

require a rule change. By being able to 

make appropriate and timely 

adjustments to the haircuts and 

concentration limits, FICC would have 

the flexibility to respond to changing 

market conditions more promptly. FICC 

believes that having this additional 

flexibility to respond to changing 

market conditions more promptly 

would help ensure that FICC (i) collects 

sufficient margin from members to cover 

the risk exposures that FICC may face in 

liquidating members’ portfolios and (ii) 

minimizes exposures from members 

with large collateral positions in a 

particular group of securities with a 

similar risk profile or in a particular 

asset type, such that, in the event of a 

member default, FICC’s operations 

would not be disrupted, and nondefaulting members would not be 

exposed to losses they cannot anticipate 

or control. In this way, the proposed 

rule change to move the collateral 

haircuts and concentration limits from 

the Rules to the website would help 

ensure that FICC maintains sufficient 

financial resources to cover its credit 

exposure to each participant fully with 

a high degree of confidence, consistent 

with the requirements of Rule 17Ad– 

22(e)(4)(i) under the Act.22

FICC also believes the proposed 

changes to move TIPS haircuts into a 

separate category and raise the haircut 

levels for TIPS would help ensure that 

the haircut levels for TIPS would be 

commensurate with the particular risk 

attributes of TIPS. FICC has determined 

that in periods where the inflation rate 

fluctuates, the current haircut levels for 

TIPS have been inadequate to address 

the fluctuations from time to time and 

more conservative haircuts for TIPS are 

warranted. Ensuring that the haircut 

levels for TIPS are commensurate with 

the particular risk attributes of TIPS 

would in turn help ensure that FICC 

requires members to maintain sufficient 

margin to cover the credit exposures 

that FICC may face related to its ability 

to liquidate members’ portfolios in the 

event of a member default. In this way, 

the proposed rule change to move TIPS 

haircuts into a separate category and 

raise the haircut levels for TIPS would 

help ensure that FICC maintains 

sufficient financial resources to cover its 

credit exposure to each participant fully 

with a high degree of confidence, 

consistent with the requirements of Rule 

17Ad–22(e)(4)(i) under the Act.23

Rule 17Ad–22(e)(5) under the Act 24

requires, in part, a covered clearing 

agency to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

set and enforce appropriately 

conservative haircuts and concentration 

limits if the covered clearing agency 

requires collateral to manage its or its 

participants’ credit exposure. As 

described above, FICC believes the 

proposed changes to move the collateral 

haircuts and concentration limits from 

the Rules to the website would provide 

FICC with more flexibility to respond to 

changing market conditions because 

adjustments to the haircuts and 

concentration limits would no longer 

require a rule change. By being able to 

make appropriate and timely 

adjustments to the haircuts and 

concentration limits, FICC would have 

the flexibility to respond to changing 

market conditions more promptly. FICC 

believes that having this additional 

flexibility to respond to changing 

market conditions more promptly 

would help better ensure that FICC (i) 

collects sufficient margin from members 

to cover the risk exposures that FICC 

may face in liquidating members’ 

portfolios and (ii) minimizes exposures 

from members with large collateral 

positions in a particular group of 

securities with a similar risk profile or 

in a particular asset type, 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. Specifically, FICC would 

have the ability to promptly set and 

enforce conservative collateral haircuts 

and concentration limits that are 

reflective of the current market 

conditions. In this way, the proposed 

changes to move the collateral haircuts 

and concentration limits from the Rules 

to the website would help FICC set and 

enforce appropriately conservative 

collateral haircuts and concentration 

limits, consistent with the requirements 

of Rule 17Ad–22(e)(5) under the Act.25

FICC also believes the proposed 

changes to move TIPS haircuts into a 

separate category and raise the haircut 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68809 

26 Id. 

27 17 CFR 240.17Ad–22(e)(6)(i). 

28 Id. 

29 Id. 

30 17 CFR 240.17Ad–22(e)(6)(v). 

31 Id. 

32 Id. 

33 15 U.S.C. 78q–1(b)(3)(I). 

levels for TIPS would help ensure that 

the haircut levels for TIPS would be 

commensurate with the particular risk 

attributes of TIPS. FICC has determined 

that in periods where the inflation rate 

fluctuates, the current haircut levels for 

TIPS have been inadequate to address 

the fluctuations from time to time and 

more conservative haircuts for TIPS are 

warranted. Specifically, FICC would 

have the ability to set and enforce 

conservative collateral haircuts that are 

commensurate with the particular risk 

attributes of TIPS. In this way, the 

proposed changes to move TIPS haircuts 

into a separate category and raise the 

haircut levels for TIPS would help FICC 

set and enforce appropriately 

conservative collateral haircuts, 

consistent with the requirements of Rule 

17Ad–22(e)(5) under the Act.26

Rule 17Ad–22(e)(6)(i) under the Act 27

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 to move the collateral haircuts 

and concentration limits from the Rules 

to the website would provide FICC with 

more flexibility to respond to changing 

market conditions because FICC would 

be able to make appropriate adjustments 

to the haircuts and concentration limits 

without a rule change. By being able to 

make appropriate and timely 

adjustments to the haircuts and 

concentration limits, FICC would have 

the flexibility to respond to changing 

market conditions more promptly. FICC 

believes that having this additional 

flexibility to respond to changing 

market conditions more promptly 

would enable FICC to better risk manage 

its credit exposure to its members by (i) 

collecting sufficient margin from 

members to cover the risk exposures 

that FICC may face in liquidating 

members’ portfolios and (ii) minimizing 

exposures from members with large 

collateral positions in a particular group 

of securities with a similar risk profile 

or in a particular asset type, thus 

allowing FICC 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.28

FICC also believes the proposed 

changes to move TIPS haircuts into a 

separate category and raise the haircut 

levels for TIPS would help ensure that 

the haircut levels for TIPS would be 

commensurate with the particular risk 

attributes of TIPS. FICC has determined 

that in periods where the inflation rate 

fluctuates, the current haircut levels for 

TIPS have been inadequate to address 

the fluctuations from time to time and 

more conservative haircuts for TIPS are 

warranted. Ensuring that the haircut 

levels for TIPS are commensurate with 

the particular risk attributes of TIPS 

would allow FICC 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.29

Rule 17Ad–22(e)(6)(v) under the 

Act 30 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, uses an appropriate 

method for measuring credit exposure 

that accounts for relevant product risk 

factors and portfolio effects across 

products. FICC believes that the 

proposed changes to move the collateral 

haircuts and concentration limits from 

the Rules to the website would provide 

FICC with more flexibility to respond to 

changing market conditions more 

promptly because FICC would be able to 

make appropriate adjustments to the 

haircuts and concentration limits 

without a rule change. Having this 

additional flexibility would enable FICC 

to better risk manage its credit exposure 

to its members because FICC would 

then be able to make appropriate and 

timely adjustments to the haircuts and 

concentration limits, as described 

above. Being able to adjust the haircuts 

and concentration limits appropriately 

and timely would allow FICC to better 

risk manage its credit exposure to its 

members by (i) collecting sufficient 

margin from members to cover the risk 

exposures that FICC may face in 

liquidating members’ portfolios and (ii) 

minimizing exposures from members 

with large collateral positions in a 

particular group of securities with a 

similar risk profile or in a particular 

asset type, thus producing margin levels 

commensurate with relevant product 

risk factors and portfolio effects across 

products. Therefore, FICC believes this 

proposed change is consistent with Rule 

17Ad–22(e)(6)(v) under the Act.31

FICC also believes the proposed 

changes to move TIPS haircuts into a 

separate category and raise the haircut 

levels for TIPS would help ensure that 

the haircut levels for TIPS would be 

commensurate with the particular risk 

attributes of TIPS. Specifically, as 

proposed, FICC would have collateral 

haircuts that are commensurate with the 

particular risk attributes of TIPS. 

Ensuring that the haircut levels for TIPS 

are commensurate with the particular 

risk attributes of TIPS would allow FICC 

to produce margin levels commensurate 

with relevant product risk factors and 

portfolio effects across products. 

Therefore, FICC believes this proposed 

change is consistent with Rule 17Ad– 

22(e)(6)(v) under the Act.32

(B) Clearing Agency’s Statement on 

Burden on Competition 

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

requires that the rules of FICC do not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.33 FICC does 

not believe the proposed rule changes to 

move the haircuts and concentration 

limits from the Rules to the website 

would impose a burden on competition. 

These proposed changes are designed to 

enable FICC to timely respond to 

increases in market volatility with 

haircut requirements and concentration 

limits that are more reflective of the 

current credit exposures to FICC. As 

discussed above, these proposed 

changes would allow FICC to better risk 

manage its credit exposure to its 

members by (i) collecting sufficient 

margin from members to cover the risk 

exposures that FICC may face in 

liquidating members’ portfolios and (ii) 

minimizing exposures from members 

with large collateral positions in a 

particular group of securities with a 

similar risk profile or in a particular 

asset type, such that, in the event of a 

member default, FICC’s operations 

would not be disrupted, and nondefaulting members would not be 

exposed to losses they cannot anticipate 

or control. These proposed changes 

would not unfairly inhibit access to 

FICC’s services, or disadvantage or favor 

any particular member in relationship to 

another member. The proposed changes 

would allow FICC to adjust the haircuts 


lotter on DSK11XQN23PROD with NOTICES1
68810 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

34 Id. 

35 15 U.S.C. 78q–1(b)(3)(F). 

36 17 CFR 240.17Ad–22(e)(4)(i). 

37 17 CFR 240.17Ad–22(e)(5). 

38 17 CFR 240.17Ad–22(e)(6)(i) and (e)(6)(v). 39 15 U.S.C. 78q–1(b)(3)(F). 

and concentration limits more promptly 

and would not otherwise affect 

members’ access to FICC’s services. In 

addition, any changes to the haircuts or 

concentration limits would be directly 

related to the perceived risk related to 

members’ collateral based on back-tests, 

stress-tests and market observations, 

and would be applied uniformly to all 

members. Accordingly, FICC believes 

that these proposed changes would not 

impose any burden or have any impact 

on competition. 

Similarly, FICC does not believe the 

proposed rule changes to move TIPS 

haircuts into a separate category would 

impose a burden on competition. These 

proposed changes are designed to 

improve the clarity and presentation of 

the haircut information. These proposed 

changes would not unfairly inhibit 

access to FICC’s services or 

disadvantage or favor any particular 

member in relationship to another 

member, and the changes would be 

applied uniformly to all members. 

Accordingly, FICC believes that these 

proposed changes would not impose 

any burden or have any impact on 

competition. 

FICC believes the proposed changes to 

raise certain TIPS haircut levels may 

have an impact on competition because 

these changes could result in members’ 

Eligible Clearing Fund Securities being 

subject to higher haircuts than they 

would have been under the current GSD 

and MBSD Schedules of Haircuts for 

Eligible Clearing Fund Securities. FICC 

believes that the proposed change could 

burden competition by potentially 

increasing these members’ operating 

costs by requiring members who are 

using TIPS as collateral to pledge 

additional collateral. Nonetheless, FICC 

believes any burden on competition 

imposed by the proposed changes 

would not be significant and, regardless 

of whether such burden on competition 

could be deemed significant, would be 

necessary and appropriate, as permitted 

by Section 17A(b)(3)(I) of the Act for the 

reasons described in this filing and 

further below.34

FICC believes any burden on 

competition presented by the proposed 

changes to the TIPS haircut levels 

would not be significant. As discussed 

above, if the proposed changes to the 

TIPS haircut levels had been in place 

during the Impact Study period, the 

three largest daily average dollar 

increases to GSD Members would have 

been $11.1 million (approximately 

0.91%), $8.3 million (approximately 

1.07%), and $4.3 million 

(approximately 1.26%); and the three 

largest daily average dollar increases to 

MBSD Members would have been $4.08 

million (approximately 0.30%), $4.04 

million (approximately 0.46%), and 

$3.99 million (approximately 0.51%). In 

addition, FICC believes that the 

proposed changes to the TIPS haircut 

levels are comparable with what is 

being required of users of other similar 

registered clearing agencies and foreign 

CCPs when posting TIPS as collateral. 

FICC believes any burden on 

competition that may be imposed by the 

proposed changes to the TIPS haircut 

levels would be necessary because, as 

described above, the proposed changes 

would help ensure that the collateral 

values attributed to TIPS would be 

commensurate with the particular risk 

attributes of TIPS. Making sure proper 

collateral values are attributed to TIPS 

that are used as margin would thus help 

better ensure that FICC collects 

sufficient margin from members and 

thereby 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.35

In addition, FICC believes the 

proposed changes to the TIPS haircut 

levels are necessary to support FICC’s 

compliance with Rules 17Ad–22(e)(4)(i), 

(e)(5), (e)(6)(i), and (e)(6)(v) under the 

Act. Specifically, as described above, 

FICC believes these proposed changes 

would ensure that the haircut levels for 

TIPS are commensurate with the 

particular risk attributes of TIPS. Having 

haircut levels for TIPS that are 

commensurate with the particular risk 

attributes of TIPS would ensure proper 

collateral valuation for TIPS used as 

margin. Ensuring proper collateral 

valuation for TIPS used as margin 

would help FICC better measure, 

monitor, and manage its credit 

exposures to participants and those 

exposures arising from its payment, 

clearing, and settlement processes, 

consistent with the requirements of Rule 

17Ad–22(e)(4)(i) under the Act.36

Ensuring proper collateral valuation for 

TIPS used as margin would also allow 

FICC to set and enforce appropriately 

conservative collateral haircuts, 

consistent with the requirements of Rule 

17Ad–22(e)(5) under the Act.37 It would 

also help FICC cover its credit 

exposures to its participants, consistent 

with the requirements of Rules 17Ad– 

22(e)(6)(i) and (e)(6)(v) under the Act.38

FICC also believes that any burden on 

competition that may be imposed by the 

proposed changes to the TIPS haircut 

levels would be appropriate in 

furtherance of the Act because these 

proposed changes have been specifically 

designed to assure the safeguarding of 

securities and funds which are in the 

custody and control of FICC or for 

which it is responsible, as required by 

Section 17A(b)(3)(F) of the Act.39 As 

described above, FICC believes these 

proposed changes would help better 

ensure that FICC collects sufficient 

margin from members, thus enabling 

FICC to produce margin levels more 

commensurate with the risks it faces as 

a central counterparty. Accordingly, 

FICC believes these proposed changes 

are appropriately designed to meet its 

risk management goals and regulatory 

obligations. 

FICC does not believe the proposed 

clarifying changes to the Rules would 

impact competition. These changes 

would help to ensure that the Rules 

remain clear. In addition, the changes 

would facilitate members’ 

understanding of the Rules and their 

obligations thereunder. These changes 

would not affect FICC’s operations or 

the rights and obligations of the 

membership. As such, FICC believes the 

proposed clarifying changes 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 additional 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 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68811 

40 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

tradingandmarkets@sec.gov or 202– 

551–5777. 

FICC reserves the right to not respond 

to any comments received. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FICC–2023–014 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–2023–014. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of 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–2023–014 and 

should be submitted on or before 

October 25, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.40

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21938 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98665; File No. SR–NYSE– 

2023–09] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Amend the NYSE Listed Company 

Manual To Adopt Listing Standards for 

Natural Asset Companies 

September 29, 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 

September 27, 2023, New York Stock 

Exchange LLC (the ‘‘Exchange’’ or 

‘‘NYSE’’) 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 selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

NYSE Listed Company Manual 

(‘‘Manual’’) to adopt a new listing 

standard for the listing of Natural Asset 

Companies. The proposed rule change is 

available on the Exchange’s website at 

www.nyse.com, at the principal office of 

the Exchange, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt a 

new subsection of Section 102 of the 

Manual (to be designated Section 

102.09) to permit the listing of common 

equity securities of Natural Asset 

Companies (or ‘‘NACs’’). 

For purposes of proposed Section 

102.09, a NAC is a corporation whose 

primary purpose is to actively manage, 

maintain, restore (as applicable), and 

grow the value of natural assets and 

their production of ecosystem services. 

In addition, where doing so is consistent 

with the company’s primary purpose, 

the company will seek to conduct 

sustainable revenue-generating 

operations. Sustainable operations are 

those activities that do not cause any 

material adverse impact on the 

condition of the natural assets under a 

NAC’s control and that seek to replenish 

the natural resources being used. The 

NAC may also engage in other activities 

that support community well-being, 

provided such activities are sustainable. 

Introduction to NACs 

The value of nature to life on earth is 

readily apparent. Healthy ecosystems 

produce clean air and water, foster 

biodiversity, regulate the climate, and 

provide the food on which our existence 

depends. For purposes of this proposal, 

the term ‘‘ecosystem’’ refers to specific 

entities (structures, functions, and 

components of the natural world) that 

produce ecosystem services. These and 

other benefits derived from ecosystems 

are called ecosystem services, and in 

aggregate, economists estimate their 

value at more than US$100 trillion 


lotter on DSK11XQN23PROD with NOTICES1