Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44393 

64 11 U.S.C. 101 et seq. 

65See, e.g., 11 U.S.C. 363, 726, and 1129(a)(7). 

66See 11 U.S.C. 363(f). 

67The Wind-down Plan would identify certain 

factors the Board may consider in evaluating 

alternatives, which would include, for example, 

whether DTC could safely stabilize the business and 

protect its value without seeking bankruptcy 

protection, and DTC’s ability to continue to meet its 

regulatory requirements. 

68 17 CFR 240.17Ad–22(e)(3)(ii). 

69 17 CFR 240.17Ad–22(e)(15)(i). 

70 17 CFR 240.17Ad–22(e)(3)(ii). 

71 17 CFR 240.17Ad–22(e)(15)(ii). 

72Supra note 13. 

73 17 CFR 240.17Ad–22(e)(15)(i) and (ii). 

74 12 U.S.C. 5465(e)(1)(I). 

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

2 17 CFR 240.19b–4(n)(1)(i). 

3On December 18, 2017, DTC filed the advance 

notice as proposed rule change SR–DTC–2017–022 

with the Commission pursuant to Section 19(b)(1) 

of the Act and Rule 19b–4 thereunder (‘‘Proposed 

Rule Change’’). 15 U.S.C. 78s(b)(1) and 17 CFR 

240.19b–4, respectively. The Proposed Rule Change 

Continued 

DTC’s business, assets, securities 

inventory, and membership to another 

legal entity with such transfer being 

effected in connection with proceedings 

under Chapter 11 of the U.S. 

Bankruptcy Code.64 After effectuating 

this transfer, DTC would liquidate any 

remaining assets in an orderly manner 

in bankruptcy proceedings. 

Although the Commission is not 

opining on the Wind-down Plan’s 

consistency with the U.S. Bankruptcy 

Code, in reviewing the proposed 

changes, the Commission believes that 

DTC’s intent to use bankruptcy 

proceedings to achieve an orderly 

liquidation of assets after any transfer of 

DTC’s business appears reasonable, in 

light of the provisions of the Bankruptcy 

Code that address the liquidation and 

distribution of a debtor’s property 

among creditors and interest holders.65

Under many circumstances, Section 363 

of the Bankruptcy Code provides for the 

sale of property ‘‘free and clear of any 

interest in such property of an entity 

other than the estate[.]’’ 66 The 

Commission believes that DTC’s 

analysis regarding the applicability of 

these provisions, while not free from 

doubt, presents a reasonable approach 

to liquidation in light of the 

circumstances and the available 

alternatives.67 Therefore, the 

Commission believes that the R&W 

Plan’s Wind-down Plan helps DTC 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to maintain a 

sound risk management framework for 

comprehensively managing legal, credit, 

liquidity, operational, general business, 

investment, custody, and other risks 

that arise in or are borne by DTC, which 

includes a wind-down plan necessitated 

by credit losses, liquidity shortfalls, 

losses from general business risk, or any 

other losses. 

Therefore, the Commission believes 

that the R&W Plan is consistent with 

Rule 17Ad–22(e)(3)(ii) under the Act.68

D. Consistency With Rules 17Ad– 

22(e)(15)(i)–(ii) Under the Act 

Rule 17Ad–22(e)(15)(i) under the Act 

requires a covered clearing agency to 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to identify, 

monitor, and manage its general 

business risk and hold sufficient liquid 

net assets funded by equity to cover 

potential general business losses so that 

the covered clearing agency can 

continue operations and services as a 

going concern if those losses 

materialize, including by determining 

the amount of liquid net assets funded 

by equity based upon its general 

business risk profile and the length of 

time required to achieve a recovery or 

orderly wind-down, as appropriate, of 

its critical operations and services if 

such action is taken.69 Rule 17Ad– 

22(e)(15)(ii) under the Act requires a 

covered clearing agency to establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to identify, 

monitor, and manage its general 

business risk and hold sufficient liquid 

net assets funded by equity to cover 

potential general business losses so that 

the covered clearing agency can 

continue operations and services as a 

going concern if those losses 

materialize, including by holding liquid 

net assets funded by equity equal to the 

greater of either (x) six months of the 

covered clearing agency’s current 

operating expenses, or (y) the amount 

determined by the board of directors to 

be sufficient to ensure a recovery or 

orderly wind-down of critical 

operations and services of the covered 

clearing agency, as contemplated by the 

plans established under Rule 17Ad– 

22(e)(3)(ii) under the Act,70 discussed 

above.71

As discussed above, DTC’s Capital 

Policy is designed to address how DTC 

holds LNA in compliance with these 

requirements,72 while the Wind-down 

Plan would include an analysis to 

estimate the amount of time and cost to 

achieve a recovery or orderly winddown of DTC’s critical operations and 

services, and would provide that the 

Board review and approve this analysis 

and estimation annually. The Winddown Plan also would provide that the 

estimate would be the Recovery/Winddown Capital Requirement under the 

Capital Policy. Under that policy, the 

General Business Risk Capital 

Requirement, which is the amount of 

LNA that DTC plans to hold to cover 

potential general business losses so that 

it can continue operations and services 

as a going concern if those losses 

materialize, is calculated as the greatest 

of three estimated amounts, one of 

which is this Recovery/Wind-down 

Capital Requirement. Therefore, the 

Commission believes that the R&W Plan 

is consistent with Rules 17Ad– 

22(e)(15)(i) and (ii) under the Act.73

III. Conclusion 

It is therefore noticed, pursuant to 

Section 806(e)(1)(I) of the Clearing 

Supervision Act,74 that the Commission 

does not object to advance notice SR– 

DTC–2017–803, as modified by 

Amendment No. 1, and that DTC is 

authorized to implement the proposal as 

of the date of this notice or the date of 

an order by the Commission approving 

proposed rule change SR–DTC–2017– 

021, as modified by Amendment No. 1, 

whichever is later. 

By the Commission. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18867 Filed 8–29–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83950; File No. SR–DTC– 

2017–804] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

No Objection to an Advance Notice, as 

Modified by Amendment No. 1, To 

Amend the Loss Allocation Rules and 

Make Other Changes 

August 27, 2018. 

On December 18, 2017, The 

Depository Trust Company (‘‘DTC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) advance 

notice SR–DTC–2017–804 pursuant to 

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

Dodd-Frank Wall Street Reform and 

Consumer Protection Act entitled the 

Payment, Clearing, and Settlement 

Supervision Act of 2010 (‘‘Clearing 

Supervision Act’’) 1 and Rule 19b– 

4(n)(1)(i) under the Securities Exchange 

Act of 1934 (‘‘Act’’) 2 to amend DTC’s 

application of the Participants Fund, 

loss allocation rules, voluntary 

retirement process for Participants, the 

return of certain deposits to former 

Participants, and make other 

conforming and technical changes.3 The 


amozie on DSK3GDR082PROD with NOTICES1
44394 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

was published in the Federal Register on January 

8, 2018. Securities Exchange Act Release No. 82426 

(January 2, 2018), 83 FR 913 (January 8, 2018) (SR– 

DTC–2017–022). On February 8, 2018, the 

Commission designated a longer period within 

which to approve, disapprove, or institute 

proceedings to determine whether to approve or 

disapprove the Proposed Rule Change. Securities 

Exchange Act Release No. 82670 (February 8, 2018), 

83 FR 6626 (February 14, 2018) (SR–DTC–2017– 

022, SR–FICC–2017–022, SR–NSCC–2017–018). On 

March 20, 2018, the Commission instituted 

proceedings to determine whether to approve or 

disapprove the Proposed Rule Change. Securities 

Exchange Act Release No. 82914 (March 20, 2018), 

83 FR 12978 (March 26, 2018) (SR–DTC–2017–022). 

On June 25, 2018, the Commission designated a 

longer period for Commission action on the 

proceedings to determine whether to approve or 

disapprove the Proposed Rule Change. Securities 

Exchange Act Release No. 83510 (June 25, 2018), 83 

FR 30791 (June 29, 2018) (SR–DTC–2017–022, SR– 

FICC–2017–022, SR–NSCC–2017–018). On June 28, 

2018, DTC filed Amendment No. 1 to the Proposed 

Rule Change, which was published in the Federal 

Register on July 19, 2018. Securities Exchange Act 

Release No. 83629 (July 13, 2018), 83 FR 34246 

(July 19, 2018) (SR–DTC–2017–022). DTC submitted 

a courtesy copy of Amendment No. 1 to the 

Proposed Rule Change through the Commission’s 

electronic public comment letter mechanism. 

Accordingly, Amendment No. 1 to the Proposed 

Rule Change has been publicly available on the 

Commission’s website at https://www.sec.gov/rules/ 

sro/dtc.htm since June 29, 2018. The Commission 

did not receive any comments. The proposal, as set 

forth in both the advance notice and the Proposed 

Rule Change, each as modified by Amendments No. 

1, shall not take effect until all required regulatory 

actions are completed. 

4Securities Exchange Act Release No. 82582 

(January 24, 2018), 83 FR 4297 (January 30, 2018) 

(SR–DTC–2017–804) (‘‘Notice’’). 

5Pursuant to Section 806(e)(1)(H) of the Clearing 

Supervision Act, the Commission may extend the 

review period of an advance notice for an 

additional 60 days, if the changes proposed in the 

advance notice raise novel or complex issues, 

subject to the Commission providing the clearing 

agency with prompt written notice of the extension. 

12 U.S.C. 5465(e)(1)(H). The Commission found that 

the advance notice raised complex issues and, 

accordingly, extended the review period of the 

advance notice for an additional 60 days until April 

17, 2018. See Notice, supra note 4. 

6 12 U.S.C. 5465(e)(1)(D). 

7See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii); see 

Memorandum from the Office of Clearance and 

Settlement Supervision, Division of Trading and 

Markets, titled ‘‘Commission’s Request for 

Additional Information,’’ available at http://

www.sec.gov/rules/sro/dtc-an.shtml. 

8Securities Exchange Act Release No. 83746 (July 

31, 2018), 83 FR 38357 (August 6, 2018) (SR–DTC– 

2017–804) (‘‘Notice of Amendment No. 1’’). DTC 

submitted a courtesy copy of Amendment No. 1 to 

the advance notice through the Commission’s 

electronic public comment letter mechanism. 

Accordingly, Amendment No. 1 to the advance 

notice has been publicly available on the 

Commission’s website at http://www.sec.gov/rules/ 

sro/dtc-an.shtml since June 29, 2018. 

9 12 U.S.C. 5465(e)(1)(E) and (G); see 

Memorandum from the Office of Clearance and 

Settlement Supervision, Division of Trading and 

Markets, titled ‘‘Response to the Commission’s 

Request for Additional Information,’’ available at 

http://www.sec.gov/rules/sro/dtc-an.shtml. 

10Each capitalized term not otherwise defined 

herein has its respective meaning as set forth in the 

Rules, available at http://www.dtcc.com/legal/rulesand-procedures.aspx. 

11 DTCC is a user-owned and user-governed 

holding company and is the parent company of 

DTC, FICC, and NSCC. DTCC operates on a shared 

services model with respect to the DTCC Clearing 

Agencies. Most corporate functions are established 

and managed on an enterprise-wide basis pursuant 

to intercompany agreements under which it is 

generally DTCC that provides a relevant service to 

a DTCC Clearing Agency. 

12See Notice of Amendment No. 1, supra note 8. 

13 DTC states that it maintains a 364-day 

committed revolving line of credit with a syndicate 

of commercial lenders, renewed every year. DTC 

further states that the committed aggregate amount 

of the End-of-Day Credit Facility (currently $1.9 

billion) together with the Participants Fund 

constitute DTC’s liquidity resources for settlement. 

Based on these amounts, DTC sets Net Debit Caps 

that limit settlement obligations. 

14 DTC states that the failure of a Participant to 

satisfy its settlement obligation constitutes a 

liability to DTC. Insofar as DTC undertakes to 

complete settlement among Participants other than 

the Participant that failed to settle, that liability 

may give rise to losses as well. 

15Section 1(f) of Rule 4 defines the term 

‘‘business’’ with respect to DTC as ‘‘the doing of all 

things in connection with or relating to the 

Corporation’s performance of the services specified 

in the first and second paragraphs of Rule 6 or the 

cessation of such services.’’ Supra note 10. 

16 DTC states that, in contrast to NSCC and FICC, 

DTC is not a central counterparty and does not 

guarantee obligations of its membership. DTC states 

that the Participants Fund is a mutualized prefunded liquidity and loss resource. Therefore, in 

contrast to NSCC and FICC, DTC does not have an 

obligation to ‘‘repay’’ the Participants Fund, and the 

application of the Participants Fund does not 

convert to a loss. 

advance notice was published for 

comment in the Federal Register on 

January 30, 2018.4 In that publication, 

the Commission also extended the 

review period of the advance notice for 

an additional 60 days, pursuant to 

Section 806(e)(1)(H) of the Clearing 

Supervision Act.5 On April 10, 2018, 

the Commission required additional 

information from DTC pursuant to 

Section 806(e)(1)(D) of the Clearing 

Supervision Act,6 which tolled the 

Commission’s period of review of the 

advance notice until 60 days from the 

date the information required by the 

Commission was received by the 

Commission.7 On June 28, 2018, DTC 

filed Amendment No. 1 to the advance 

notice to amend and replace in its 

entirety the advance notice as originally 

filed on December 18, 2017.8 On July 6, 

2018, the Commission received a 

response to its request for additional 

information in consideration of the 

advance notice, which, in turn, added a 

further 60 days to the review period 

pursuant to Section 806(e)(1)(E) and (G) 

of the Clearing Supervision Act.9 The 

Commission did not receive any 

comments. This publication serves as 

notice that the Commission does not 

object to the proposed changes set forth 

in the advance notice, as modified by 

Amendment No. 1 (hereinafter, 

‘‘Advance Notice’’). 

I. Description of the Advance Notice 

The Advance Notice consists of 

proposed changes to DTC’s Rules, ByLaws and Organization Certificate of 

DTC (‘‘Rules’’) 10 in order to (1) modify 

the application of the Participants Fund; 

(2) modify the loss allocation process; 

(3) align DTC’s loss allocation rule with 

the three clearing agencies of The 

Depository Trust & Clearing Corporation 

(‘‘DTCC’’)—Fixed Income Clearing 

Corporation (‘‘FICC’’) (including the 

Government Securities Division (‘‘FICC/ 

GSD’’) and the Mortgage-Backed 

Securities Division (‘‘FICC/MBSD’’)), 

National Securities Clearing Corporation 

(‘‘NSCC’’), and DTC (collectively, the 

‘‘DTCC Clearing Agencies’’); 11 (4) 

modify the voluntary retirement 

process; (5) reduce the time within 

which DTC is required to return a 

former Participant’s Actual Participants 

Fund Deposit; and (6) make conforming 

and technical changes. Each of these 

proposed changes is described below. A 

detailed description of the specific rule 

text changes proposed in this Advance 

Notice can be found in the Notice of 

Amendment No. 1.12

A. Application of the Participants Fund 

Under current Section 3 of Rule 4, if 

a Participant is obligated to DTC and 

fails to satisfy any obligation, DTC may, 

in such order and in such amounts as 

DTC shall determine in its sole 

discretion: (1) Apply some or all of the 

Actual Participants Fund Deposit of 

such Participant to such obligation; (2) 

pledge some or all of the shares of 

Preferred Stock of such Participant to its 

lenders as collateral security for a loan 

under the End-of-Day Credit Facility; 13

and/or (3) sell some or all of the shares 

of Preferred Stock of such Participant to 

other Participants (who shall be 

required to purchase such shares pro 

rata their Required Preferred Stock 

Investments at the time of such 

purchase), and apply the proceeds of 

such sale to satisfy such obligation. 

Current Rule 4 provides a single set of 

tools and a common process for the use 

of the Participants Fund for both (1) 

liquidity purposes to complete 

settlement among non-defaulting 

Participants, if one or more Participants 

fails to settle, and (2) the satisfaction of 

losses and liabilities due to Participant 

defaults 14 or non-default losses that are 

incident to the business of DTC.15 For 

both liquidity 16 and loss scenarios, 

current Section 4 of Rule 4 provides that 

an application of the Participants Fund 

would be apportioned among 

Participants ratably in accordance with 

their Required Participants Fund 

Deposits, less any additional amount 


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17Section 2 of Rule 9(A) provides, in part, ‘‘[a]t 

the request of the Corporation, a Participant or 

Pledgee shall immediately furnish the Corporation 

with such assurances as the Corporation shall 

require of the financial ability of the Participant or 

Pledgee to fulfill its commitments and shall 

conform to any conditions which the Corporation 

deems necessary for the protection of the 

Corporation, other Participants or Pledgees, 

including deposits to the Participants Fund . . .’’ 

Supra note 10. Pursuant to the proposed change, 

the additional amount that a Participant is required 

to Deposit to the Participants Fund pursuant to 

Section 2 of Rule 9(A) would be defined as an 

‘‘Additional Participants Fund Deposit.’’ 

18As described above, proposed Rule 4 splits the 

liquidity and loss provisions to more closely align 

to similar loss allocation provisions in NSCC and 

FICC rules. Pursuant to the proposed change, DTC 

would also align, where appropriate, the liquidity 

and loss provisions within proposed Rule 4. DTC 

would retain the existing Rule 4 concepts of 

calculating the ratable share of a Participant, 

charging each non-defaulting Participant a pro rata 

share of an application of the Participants Fund to 

complete settlement, providing notice to 

Participants of such charge, and providing each 

Participant the option to cap its liability for such 

charges by electing to terminate its business with 

DTC. However, pursuant to the proposed change, 

DTC would modify these concepts and certain 

associated processes to more closely align with the 

analogous proposed loss allocation provisions in 

proposed Rule 4 (e.g., Loss Allocation Notice, Loss 

Allocation Termination Notification Period, and 

Loss Allocation Cap). 

19Rule 4, Section 4(a)(1), supra note 10. DTC 

states that it has determined that this option is 

unnecessary because, in practice, DTC would never 

have liability under a Clearing Agency Agreement 

that exceeds the excess assets of the Participant that 

defaulted. 

20 DTC states that this change would provide an 

objective date that is more appropriate for the 

application of the Participants Fund to complete 

settlement, because the ‘‘time the loss or liability 

was discovered’’ would necessarily have to be the 

day the Participants Fund was applied to complete 

settlement. 

that a Participant was required to 

Deposit to the Participants Fund 

pursuant to Section 2 of Rule 9(A).17

Current Section 4 of Rule 4 provides 

that if DTC incurs a loss or liability 

which is not satisfied by charging the 

Participant responsible for causing the 

loss or liability, DTC may, in its sole 

discretion and in such amount as DTC 

would determine, charge the existing 

retained earnings and undivided profits 

of DTC. 

Under the current Rules, after the 

Participants Fund is applied pursuant to 

Section 4, DTC must promptly notify 

each Participant and the Commission of 

the amount applied and the reasons 

therefor. Current Rule 4 further requires 

Participants whose Actual Participants 

Fund Deposits have been ratably 

charged to restore their Required 

Participants Fund Deposits, if such 

charges create a deficiency. Such 

payments are due upon demand. 

Iterative pro rata charges relating to the 

same loss or liability are permitted in 

order to satisfy the loss or liability. 

Rule 4 currently provides that a 

Participant may, within 10 Business 

Days after receipt of notice of any pro 

rata charge, notify DTC of its election to 

terminate its business with DTC, and 

the exposure of the terminating 

Participant for pro rata charges would 

be capped at the greater of (1) the 

amount of its Aggregate Required 

Deposit and Investment, as fixed 

immediately prior to the time of the first 

pro rata charge, plus 100 percent of the 

amount thereof, or (2) the amount of all 

prior pro rata charges attributable to the 

same loss or liability with respect to 

which the Participant has not timely 

exercised its right to terminate. 

Proposed Section 3 of Rule 4 would 

provide that a Participant Default occurs 

when a Participant becomes a 

Defaulting Participant pursuant to Rule 

9(B) or is otherwise obligated to DTC 

pursuant to the Rules and Procedures, 

and fails to satisfy any such obligation. 

The proposal would clarify that DTC 

would apply some or all of the Actual 

Participants Fund Deposit of a 

Defaulting Participant to its obligation 

to satisfy the Participant Default, to the 

extent necessary to eliminate such 

obligation. If such application would be 

insufficient to satisfy such obligation, 

DTC may, in its sole discretion, to the 

extent necessary to satisfy such 

obligation (1) pledge some or all of the 

shares of Preferred Stock of such 

Participant to its lenders as collateral 

security for a loan under the End-of-Day 

Credit Facility, and apply the proceeds 

of such loan to satisfy such obligation; 

and/or (2) sell some or all of the shares 

of Preferred Stock of such Participant to 

other Participants (who shall be 

required to purchase such shares pro 

rata their Required Preferred Stock 

Investments at the time of such 

purchase), and apply the proceeds of 

such sale to satisfy such obligation. 

The proposed change would also 

amend and add provisions to separate 

use of the Participants Fund as a 

liquidity resource to complete 

settlement, reflected in proposed 

Section 4 of Rule 4, and for loss 

allocation, reflected in proposed Section 

5 of Rule 4. DTC states that the 

proposed changes reinforce the 

distinction between the mechanisms to 

complete settlement on a Business Day, 

and to mutualize losses that may result 

from a failure to settle or other lossgenerating events. DTC also states that 

the change would more closely align the 

loss allocation provisions of proposed 

Section 5 of Rule 4 to similar provisions 

of the NSCC and FICC rules, to the 

extent appropriate. 

Proposed Section 4 would address the 

situation of a Defaulting Participant 

failure to settle if the application of the 

Actual Participants Fund Deposit of that 

Defaulting Participant, pursuant to 

proposed Section 3, is not sufficient to 

complete settlement among Participants 

other than the Defaulting Participant 

(each, a ‘‘non-defaulting Participant’’).18

Proposed Section 4 would expressly 

state that the Participants Fund shall 

constitute a liquidity resource which 

may be applied by DTC, in such 

amounts as it may determine, in its sole 

discretion, to fund settlement among 

non-defaulting Participants in the event 

of the failure of a Defaulting Participant 

to satisfy its settlement obligation on 

any Business Day. Such an application 

of the Participants Fund would be 

charged ratably to the Actual 

Participants Fund Deposits of the nondefaulting Participants on that Business 

Day. In connection with the use of the 

Participants Fund as a liquidity resource 

to complete settlement when a 

Participant fails to settle, the proposed 

rule would introduce the term ‘‘pro rata 

settlement charge,’’ in order to 

distinguish application of the 

Participants Fund to fund settlement 

from pro rata loss allocation charges that 

would be established in proposed 

Section 5 of Rule 4. 

The pro rata settlement charge for 

each non-defaulting Participant would 

be based on the ratio of its Required 

Participants Fund Deposit to the sum of 

the Required Participants Fund Deposits 

of all such Participants on that Business 

Day (excluding any Additional 

Participants Fund Deposits in both the 

numerator and denominator of such 

ratio). The calculation of each nondefaulting Participant’s pro rata 

settlement charge would be similar to 

the current Section 4 calculation of a 

pro rata charge except that it would not 

include the current distinction for 

common members of another clearing 

agency pursuant to a Clearing Agency 

Agreement.19 DTC states that it would 

be based on the Required Participants 

Fund Deposits as fixed on the Business 

Day of the application of the 

Participants Fund, as opposed to the 

current language ‘‘at the time the loss or 

liability was discovered.’’ 20 The 

proposed change would require DTC, 

following the application of the 

Participants Fund to complete 

settlement, to notify each Participant 

and the Commission of the charge and 

the reasons therefor (‘‘Settlement Charge 

Notice’’). 

The proposed change would provide 

each non-defaulting Participant an 

opportunity to elect to terminate its 

business with DTC and thereby cap its 

exposure to further pro rata settlement 


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44396 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

21 DTC states a five Business Day period would 

be sufficient for a Participant to decide whether to 

give notice to terminate its business with DTC in 

response to a settlement charge. In addition, a five 

Business Day pro rata settlement charge notification 

period would conform to the proposed loss 

allocation notification period in this proposed 

change and in the proposed changes for NSCC and 

FICC. See infra note 34. 

22 DTC states that setting the start date of the 

notification period to an objective date would 

enhance transparency and provide a common 

timeframe to all affected Participants. 

23Current Section 8 of Rule 4 provides for a cap 

that is equal to the greater of (a) the amount of its 

Aggregate Required Deposit and Investment, as 

fixed immediately prior to the time of the first pro 

rata charge, plus 100 percent of the amount thereof, 

or (b) the amount of all prior pro rata charges 

attributable to the same loss or liability with respect 

to which the Participant has not timely exercised 

its right to limit its obligation as provided above. 

Supra note 10. The alternative limit in clause (b) 

would be eliminated in proposed Section 8(a) in 

favor of a single defined standard. 

24 DTC states that proposed Sections 3, 4 and 5 

of Rule 4 together relate, in whole or in part, to 

what may happen when there is a Participant 

Default. Proposed Section 3 is designed to be the 

basic provision of remedies if a Participant fails to 

satisfy an obligation to DTC. Proposed Section 4 is 

designed to be a specific remedy for a failure to 

settle by a Defaulting Participant (i.e., a specific 

type of Participant Default). Proposed Section 5 is 

designed to be a remedial provision for a 

Participant Default when, additionally, DTC ceases 

to act for the Participant and there are remaining 

losses or liabilities. DTC states that if a Participant 

Default occurs, the application of proposed Section 

3 would be required, while the application of 

proposed Section 4 would be at the discretion of 

DTC. Whether or not proposed Section 4 has been 

applied, once there is a loss due to a Participant 

Default and DTC ceases to act for the Participant, 

proposed Section 5 would apply. 

25The proposed change would not apply the 

Corporate Contribution if the Participants Fund is 

used with respect to a pro rata settlement charge. 

However, if, after a Participant Default, the 

proceeds of the sale of the Collateral of the 

Participant are insufficient to repay the lenders 

under the End-of-Day Credit Facility, and DTC has 

ceased to act for the Participant, the shortfall would 

be a loss arising from a Default Loss Event, the 

Corporate Contribution would be applied. 

26 DTC calculates its General Business Risk 

Capital Requirement as the amount equal to the 

greatest of (1) an amount determined based on its 

general business profile, (2) an amount determined 

based on the time estimated to execute a recovery 

or orderly wind-down of DTC’s critical operations, 

and (3) an amount determined based on an analysis 

of DTC’s estimated operating expenses for a six 

month period. 

27See Securities Exchange Act Release No. 81105 

(July 7, 2017), 82 FR 32399 (July 13, 2017) (SR– 

DTC–2017–003, SR–NSCC–2017–004, SR–FICC– 

2017–007). 

28 17 CFR 240.17Ad–22(e)(15). 

charges. As proposed, Participants 

would have five Business Days 21 from 

the issuance of the first Loss Allocation 

Notice in any round to decide whether 

to terminate its business with DTC, and 

thereby benefit from its Settlement 

Charge Cap. In addition, the proposal 

would change the beginning date of 

such notification period from the receipt 

of the notice to the date of the issuance 

of the Settlement Charge Notice.22 A 

Participant that elects to terminate its 

business with DTC would, subject to its 

cap, remain responsible for (1) its pro 

rata settlement charge that was the 

subject of the Settlement Charge Notice, 

and (2) all other pro rata settlement 

charges until the Participant 

Termination Date. The proposed cap on 

pro rata settlement charges of a 

Participant that has timely notified DTC 

of its election to terminate its business 

with DTC would be the amount of its 

Aggregate Required Deposit and 

Investment, as fixed on the day of the 

pro rata settlement charge that was the 

subject of the Settlement Charge Notice, 

plus 100 percent of the amount thereof 

(‘‘Settlement Charge Cap’’). The 

proposed Settlement Charge Cap would 

be no greater than the current cap.23

DTC states that the pro rata 

application of the Actual Participants 

Fund Deposits of non-defaulting 

Participants to complete settlement 

when there is a Participant Default is 

not the allocation of a loss. A pro rata 

settlement charge would relate solely to 

the completion of settlement. The 

proposed loss allocation concepts 

described below would not apply to pro 

rata settlement charges.24

B. Changes to the Loss Allocation 

Process 

DTC’s current loss allocation rules 

address the use of the Participants Fund 

for both liquidity purposes to complete 

settlement among non-defaulting 

Participants, and for the satisfaction of 

losses and liabilities due to Participant 

defaults or certain other losses or 

liabilities incident to the business of 

DTC, together. For both liquidity and 

loss scenarios, current Section 4 of Rule 

4 provides that DTC may apply some or 

all of the Actual Participants Fund 

Deposits of all other Participants, and/ 

or charge the existing retained earnings 

and undivided profits of DTC. 

Currently, if DTC applies the Actual 

Participants Fund Deposits, any loss or 

liability will be apportioned among 

Participants ratably in accordance with 

their Required Participants Fund 

Deposits, less any additional amount 

that a Participant was required to 

Deposit to the Participants Fund 

pursuant to Section 2 of Rule 9(A). 

Current Section 4 of Rule 4 provides 

that if there is an unsatisfied loss or 

liability, DTC may, in its sole discretion, 

charge the existing retained earnings 

and undivided profits of DTC. 

DTC proposes to change the manner 

in which each of the aspects of the loss 

allocation process described above 

would be employed. The proposal 

would clarify or adjust certain elements, 

and introduce certain new loss 

allocation concepts, as further discussed 

below. In addition, the proposal would 

address the loss allocation process as it 

relates to losses arising from or relating 

to multiple default or non-default events 

in a short period of time, also as 

described below. 

DTC proposes five key changes to 

enhance DTC’s loss allocation process. 

Specifically, DTC proposes to make 

changes regarding (1) the Corporate 

Contribution, (2) the Event Period, (3) 

the loss allocation round and notice, (4) 

the loss allocation termination notice 

and cap, and (5) the governance around 

non-default losses, each of which is 

discussed below. 

(1) Corporate Contribution 

Current Section 4 of Rule 4 provides 

that if there is an unsatisfied loss or 

liability, DTC may, in its sole discretion 

and in such amount as DTC would 

determine, charge the existing retained 

earnings and undivided profits of DTC. 

Under the proposed change, DTC would 

replace the discretionary application of 

an unspecified amount of retained 

earnings and undivided profits with a 

mandatory, defined Corporate 

Contribution. The proposed Corporate 

Contribution would apply to losses and 

liabilities that are incurred by DTC with 

respect to an Event Period, whether 

arising from a Default Loss Event or 

Declared Non-Default Loss Event, before 

the allocation of losses to Participants.25

The proposed Corporate Contribution 

would be defined to be an amount equal 

to 50 percent of DTC’s General Business 

Risk Capital Requirement.26 DTC’s 

General Business Risk Capital 

Requirement, as defined in DTC’s 

Clearing Agency Policy on Capital 

Requirements,27 is, at a minimum, equal 

to the regulatory capital that DTC is 

required to maintain in compliance with 

Rule 17Ad–22(e)(15) under the Act.28

The proposed Corporate Contribution 

would be held in addition to DTC’s 

General Business Risk Capital 

Requirement. Proposed Rule 4 also 

would further clarify that DTC can 

voluntarily apply amounts greater than 

the Corporate Contribution against any 

loss or liability (including non-default 

losses) of DTC, if the Board of Directors, 

in its sole discretion, believes such to be 

appropriate under the factual situation 

existing at the time. As proposed, if the 

Corporate Contribution is fully or 

partially used against a loss or liability 

relating to an Event Period, the 

Corporate Contribution would be 

reduced to the remaining unused 

amount, if any, during the following 250 


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29 DTC states that 250 Business Days would be a 

reasonable estimate of the time frame that DTC 

would be required to replenish the Corporate 

Contribution by equity in accordance with DTC’s 

Clearing Agency Policy on Capital Requirements, 

including a conservative additional period to 

account for any potential delays and/or unknown 

exigencies in times of distress. 

30 DTC states that having a 10 Business Day Event 

Period would provide a reasonable period of time 

to encompass potential sequential Default Loss 

Events and/or Declared Non-Default Loss Events 

that are likely to be closely linked to an initial event 

and/or a severe market dislocation episode, while 

still providing appropriate certainty for Participants 

concerning their maximum exposure to allocated 

losses with respect to such events. 

31Each Participant that is a Participant on the 

first day of an Event Period would be obligated to 

pay its pro rata share of losses and liabilities arising 

out of or relating to each Default Loss Event (other 

than a Default Loss Event with respect to which it 

is the CTA Participant) and each Declared NonDefault Loss Event occurring during the Event 

Period. 

32See supra note 19. 

33 DTC states that this change would provide an 

objective date that is appropriate for the new 

proposed loss allocation process, which would be 

designed to allocate aggregate losses relating to an 

Event Period, rather than one loss at a time. 

34Current Section 8 of Rule 4 provides that the 

time period for a Participant to give notice of its 

election to terminate its business with DTC in 

respect of a pro rata charge is 10 Business Days after 

receiving notice of a pro rata charge. DTC states that 

it is appropriate to shorten such time period from 

10 Business Days to five Business Days because 

DTC needs timely notice of which Participants 

would not be terminating their business with DTC 

for the purpose of calculating the loss allocation for 

any subsequent round. DTC states that five Business 

Days would provide Participants with sufficient 

time to decide whether to cap their loss allocation 

obligations by terminating their business with DTC. 

Business Days in order to permit DTC to 

replenish the Corporate Contribution.29

Under the proposal, Participants would 

receive notice of any such reduction to 

the Corporate Contribution. 

(2) Event Period 

DTC states that in order to clearly 

define the obligations of DTC and its 

Participants regarding loss allocation 

and to balance the need to manage the 

risk of sequential loss events against 

Participants’ need for certainty 

concerning their maximum loss 

allocation exposures, DTC proposes to 

introduce the concept of an Event 

Period to the Rules to address the losses 

and liabilities that may arise from or 

relate to multiple Default Loss Events 

and/or Declared Non-Default Loss 

Events that arise in quick succession. 

Specifically, the proposal would group 

Default Loss Events and Declared NonDefault Loss Events occurring within a 

period of 10 Business Days (‘‘Event 

Period’’) for purposes of allocating 

losses to Participants in one or more 

rounds, subject to the limits of loss 

allocation as explained below.30

In the case of a loss or liability arising 

from or relating to a Default Loss Event, 

an Event Period would begin on the day 

on which DTC notifies Participants that 

it has ceased to act for a Participant (or 

the next Business Day, if such day is not 

a Business Day). In the case of a 

Declared Non-Default Loss Event, an 

Event Period would begin on the day 

that DTC notifies Participants of the 

Declared Non-Default Loss Event (or the 

next Business Day, if such day is not a 

Business Day). If a subsequent Default 

Loss Event or Declared Non-Default 

Loss Event occurs during an Event 

Period, any losses or liabilities arising 

out of or relating to any such subsequent 

event would be resolved as losses or 

liabilities that are part of the same Event 

Period, without extending the duration 

of such Event Period. An Event Period 

may include both Default Loss Events 

and Declared Non-Default Loss Events, 

and there would not be separate Event 

Periods for Default Loss Events or 

Declared Non-Default Loss Events 

occurring during overlapping 10 

Business Day periods. The amount of 

losses that may be allocated by DTC, 

subject to the required Corporate 

Contribution, and to which a Loss 

Allocation Cap would apply for any 

Participant that elects to terminate its 

business with DTC in respect of a loss 

allocation round, would include any 

and all losses from any Default Loss 

Events and any Declared Non-Default 

Loss Events during the Event Period, 

regardless of the amount of time, during 

or after the Event Period, required for 

such losses to be crystallized and 

allocated.31

DTC states that in order to enhance 

clarity, the proposed change would 

define ‘‘Default Loss Event’’ as the 

determination by DTC to cease to act for 

a Participant (‘‘CTA Participant’’) 

pursuant to Rule 10, Rule 11, or Rule 12. 

The proposed change also would define 

‘‘Declared Non-Default Loss Event’’ as 

the determination by the Board of 

Directors that a loss or liability incident 

to the clearance and settlement business 

of DTC may be a significant and 

substantial loss or liability that may 

materially impair the ability of DTC to 

provide clearance and settlement 

services in an orderly manner and will 

potentially generate losses to be 

mutualized among Participants in order 

to ensure that DTC may continue to 

offer its services in an orderly manner. 

(3) Loss Allocation Round and Loss 

Allocation Notice 

Under the proposal, a loss allocation 

‘‘round’’ would mean a series of loss 

allocations relating to an Event Period, 

the aggregate amount of which is 

limited by the sum of the Loss 

Allocation Caps of affected Participants 

(a ‘‘round cap’’). When the aggregate 

amount of losses allocated in a round 

equals the round cap, any additional 

losses relating to the applicable Event 

Period would be allocated in one or 

more subsequent rounds, in each case 

subject to a round cap for that round. 

DTC may continue the loss allocation 

process in successive rounds until all 

losses from the Event Period are 

allocated among Participants that have 

not submitted a Termination Notice in 

accordance with proposed Section 6(b) 

of Rule 4. 

Each loss allocation would be 

communicated to Participants by the 

issuance of a notice that advises each 

Participant of the amount being 

allocated to it (‘‘Loss Allocation 

Notice’’). The calculation of each 

Participant’s pro rata allocation charge 

would be similar to the current Section 

4 calculation of a pro rata charge except 

that it would not include the current 

distinction for common members of 

another clearing agency pursuant to a 

Clearing Agency Agreement.32 In 

addition, it would be based on the 

Required Participants Fund Deposits as 

fixed on the first day of the Event 

Period, as opposed to the current 

language ‘‘at the time the loss or liability 

was discovered.’’ 33

Each Loss Allocation Notice would 

specify the relevant Event Period and 

the round to which it relates. Multiple 

Loss Allocation Notices may be issued 

with respect to each round, up to the 

round cap. The first Loss Allocation 

Notice in any first, second, or 

subsequent round would expressly state 

that such Loss Allocation Notice reflects 

the beginning of the first, second, or 

subsequent round, as the case may be, 

and that each Participant in that round 

has five Business Days 34 from the 

issuance of such first Loss Allocation 

Notice for the round (such period, a 

‘‘Loss Allocation Termination 

Notification Period’’) to notify DTC of 

its election to terminate its business 

with DTC (such notification, whether 

with respect to a Settlement Charge 

Notice or Loss Allocation Notice, a 

‘‘Termination Notice’’) pursuant to 

proposed Section 8(b) of Rule 4, and 

thereby benefit from its Loss Allocation 

Cap. In other words, the proposed 

change would link the Loss Allocation 

Cap to a round in order to provide 

Participants the option to limit their loss 

allocation exposure at the beginning of 

each round. After a first round of loss 

allocations with respect to an Event 

Period, only Participants that have not 


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44398 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

35 DTC states that allowing Participants two 

Business Days to satisfy their loss allocation 

obligations would provide Participants sufficient 

notice to arrange funding, if necessary, while 

allowing DTC to address losses in a timely manner. 

36Under the proposal, a Participant would only 

have the opportunity to terminate after the first Loss 

Allocation Notice in any round, and not after each 

Loss Allocation Notice in any round. 

37The alternative limit in clause (b) would be 

eliminated in proposed Section 8(b) in favor of a 

single defined standard. See supra note 23. 

38Non-default losses may arise from events such 

as damage to physical assets, a cyber-attack, or 

custody and investment losses. 

39Section 1 of Rule 2 provides, in relevant part, 

that ‘‘[a] Participant may terminate its business with 

the Corporation by notifying the Corporation as 

provided in Sections 7 or 8 of Rule 4 or, if for a 

reason other than those specified in said Sections 

7 and 8, by notifying the Corporation thereof; the 

Participant shall, upon receipt of such notice by the 

Corporation, cease to be a Participant. In the event 

that a Participant shall cease to be a Participant, the 

Corporation shall thereupon cease to make its 

services available to the Participant, except that the 

Corporation may perform services on behalf of the 

Participant or its successor in interest necessary to 

terminate the business of the Participant or its 

successor with the Corporation, and the Participant 

or its successor shall pay to the Corporation the fees 

and charges provided by these Rules with respect 

to services performed by the Corporation 

subsequent to the time when the Participant ceases 

to be a Participant.’’ Supra note 10. DTC is 

proposing to modify the provision to clarify that the 

termination would be subject to proposed Section 

6 of Rule 4. 

submitted a Termination Notice, in 

accordance with proposed Section 8(b) 

of Rule 4, would be subject to further 

loss allocation with respect to that Event 

Period. 

DTC’s current loss allocation 

provisions provide that if a charge is 

made against a Participant’s Actual 

Participants Fund Deposits, and as 

result thereof the Participant’s deposit is 

less than its Required Participants Fund 

Deposit, the Participant will, upon 

demand by DTC, be required to 

replenish its deposit to eliminate the 

deficiency within such time as DTC 

shall require. Under the proposal, 

Participants would receive two Business 

Days’ notice of a loss allocation, and be 

required to pay the requisite amount no 

later than the second Business Day 

following the issuance of such notice.35

(4) Termination Notice and Loss 

Allocation Cap 

DTC’s current Rules provide that a 

Participant may terminate its business 

with DTC by notifying DTC. DTC 

proposes to enhance the termination 

procedure to clarify and align with the 

rules of NSCC and FICC, where 

appropriate. As proposed, Participants 

would have five Business Days from the 

issuance of the first Loss Allocation 

Notice in any round to decide whether 

to terminate its business with DTC, and 

thereby benefit from its Loss Allocation 

Cap. The start of each round 36 would 

allow a Participant the opportunity to 

notify DTC of its election to terminate 

its business with DTC after satisfaction 

of the losses allocated in such round. In 

addition, DTC would also change the 

beginning date of such notification 

period from the receipt of the notice to 

the date of the issuance of the first Loss 

Allocation Notice for any round. 

Pursuant to the proposed change, a 

Participant would be able to elect to 

terminate its membership by following 

the requirements in proposed Section 

8(b) of Rule 4: (1) Specify in its 

Termination Notice an effective date of 

termination (‘‘Participant Termination 

Date’’), which date shall be no later than 

10 Business Days following the last day 

of the applicable Loss Allocation 

Termination Notification Period; (2) 

cease all activities and use of DTC’s 

services other than activities and 

services necessary to terminate the 

business of the Participant with DTC; 

and (3) ensure that all activities and use 

of DTC services by such Participant 

cease on or prior to the Participant 

Termination Date. 

Under the current Rules, the exposure 

of the terminating Participant for pro 

rata charges would be capped at the 

greater of (1) the amount of its Aggregate 

Required Deposit and Investment, as 

fixed immediately prior to the time of 

the first pro rata charge, plus 100 

percent of the amount thereof, or (2) the 

amount of all prior pro rata charges 

attributable to the same loss or liability 

with respect to which the Participant 

has not timely exercised its right to 

terminate. Under the proposal, if a 

Participant timely provides notice of its 

election to terminate its business with 

DTC as provided in proposed Section 

8(b) of Rule 4, its maximum payment 

obligation with respect to any loss 

allocation round would be the amount 

of its Aggregate Required Deposit and 

Investment, as fixed on the first day of 

the Event Period, plus 100 percent of 

the amount thereof (‘‘Loss Allocation 

Cap’’).37 DTC may retain the entire 

Actual Participants Fund Deposit of a 

Participant subject to loss allocation, up 

to the Participant’s Loss Allocation Cap. 

If a Participant’s Loss Allocation Cap 

exceeds the Participant’s then-current 

Required Participants Fund Deposit, the 

Participant would still be required to 

pay for the excess amount. 

Specifically, the first round and each 

subsequent round of loss allocation 

would allocate losses up to a round cap 

of the aggregate of all Loss Allocation 

Caps of those Participants included in 

the round. If a Participant provides 

notice of its election to terminate its 

business with DTC, it would be subject 

to loss allocation in that round, up to its 

Loss Allocation Cap. If the first round of 

loss allocation does not fully cover 

DTC’s losses, a second round will be 

noticed to those Participants that did 

not elect to terminate in the previous 

round; however, the amount of any 

second or subsequent round cap may 

differ from the first or preceding round 

cap because there may be fewer 

Participants in a second or subsequent 

round if Participants elect to terminate 

their business with DTC as provided in 

proposed Section 8(b) of Rule 4 

following the first Loss Allocation 

Notice in any round. 

(5) Declared Non-Default Loss Event 

The Rules currently permit DTC to 

apply the Participants Fund to nondefault losses,38 provided that such loss 

or liability is incident to the business of 

DTC. DTC proposes to enhance the 

governance around non-default losses 

that would trigger loss allocation to 

Participants by specifying that the Board 

of Directors would have to determine 

that there is a non-default loss that may 

be a significant and substantial loss or 

liability that may materially impair the 

ability of DTC to provide clearance and 

settlement services in an orderly 

manner and would potentially generate 

losses to be mutualized among the 

Participants in order to ensure that DTC 

may continue to offer clearance and 

settlement services in an orderly 

manner. The proposed change would 

provide that DTC would then be 

required to promptly notify Participants 

of this determination, which would be 

referred to as a ‘‘Declared Non-Default 

Loss Event.’’ In addition, DTC proposes 

to specify that (1) the Corporate 

Contribution would apply to losses or 

liabilities arising from a Default Loss 

Event or a Declared Non-Default Loss 

Event, and (2) the loss allocation 

process would be applied in the same 

manner regardless of whether a loss 

arises from a Default Loss Event or a 

Declared Non-Default Loss Event. 

C. Voluntary Retirement Process 

Section 1 of Rule 2 provides that a 

Participant may terminate its business 

with DTC by notifying DTC in the 

appropriate manner.39 To provide 

additional transparency to Participants 

with respect to the voluntary retirement 

of a Participant, and to align, where 

appropriate, with the proposed rule 

changes of NSCC and FICC with respect 

to voluntary termination, DTC is 

proposing to add proposed Section 6(a) 

to Rule 4, which would be titled, ‘‘Upon 

Any Voluntary Retirement.’’ Proposed 


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Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44399 

40Typically, a Participant would ultimately 

submit a notice after having ceased its transactions 

and transferred all securities out of its Account. 

41See 12 U.S.C. 5461(b). 

42 12 U.S.C. 5464(a)(2). 

43 12 U.S.C. 5464(b). 

44 12 U.S.C. 5464(a)(2). 

45 15 U.S.C. 78q–1. 

46 17 CFR 240.17Ad–22. 

47 Id. 

Section 6(a) of Rule 4 would (1) clarify 

the requirements for a Participant that 

wants to voluntarily terminate its 

business with DTC, and (2) address the 

situation where a Participant submits a 

Voluntary Retirement Notice and 

subsequently receives a Settlement 

Charge Notice or the first Loss 

Allocation Notice in a round on or prior 

to the Voluntary Retirement Date. 

Specifically, DTC is proposing that if 

a Participant elects to terminate its 

business with DTC pursuant to Section 

1 of Rule 2 for reasons other than those 

specified in proposed Section 8 (a 

‘‘Voluntary Retirement’’), the 

Participant would be required to: (1) 

Provide a written notice of such 

termination to DTC (‘‘Voluntary 

Retirement Notice’’), as provided for in 

Section 1 of Rule 2; (2) specify in the 

Voluntary Retirement Notice a desired 

date for the termination of its business 

with DTC (‘‘Voluntary Retirement 

Date’’); (3) cease all activities and use of 

DTC services other than activities and 

services necessary to terminate the 

business of the Participant with DTC; 

and (4) ensure that all activities and use 

of DTC services by the Participant cease 

on or prior to the Voluntary Retirement 

Date.40 Proposed Section 6(a) of Rule 4 

would provide that if the Participant 

fails to comply with the requirements of 

proposed Section 6(a), its Voluntary 

Retirement Notice would be deemed 

void. 

Further, proposed Section 6(a) of Rule 

4 would provide that if a Participant 

submits a Voluntary Retirement Notice 

and subsequently receives a Settlement 

Charge Notice or the first Loss 

Allocation Notice in a round on or prior 

to the Voluntary Retirement Date, such 

Participant must timely submit a 

Termination Notice in order to benefit 

from its Settlement Charge Cap or Loss 

Allocation Cap, as the case may be. In 

such a case, the Termination Notice 

would supersede and void the pending 

Voluntary Retirement Notice submitted 

by the Participant. 

D. Accelerated Return of Former 

Participant’s Clearing Fund Deposit 

Current Rule 4 provides that after 

three months from when a Person has 

ceased to be a Participant, DTC shall 

return to such Person (or its successor 

in interest or legal representative) the 

amount of the Actual Participants Fund 

Deposit of the former Participant plus 

accrued and unpaid interest to the date 

of such payment (including any amount 

added to the Actual Participants Fund 

Deposit of the former Participant 

through the sale of the Participant’s 

Preferred Stock), provided that DTC 

receives such indemnities and 

guarantees as DTC deems satisfactory 

with respect to the matured and 

contingent obligations of the former 

Participant to DTC. Otherwise, within 

four years after a Person has ceased to 

be a Participant, DTC shall return to 

such Person (or its successor in interest 

or legal representative) the amount of 

the Actual Participants Fund Deposit of 

the former Participant plus accrued and 

unpaid interest to the date of such 

payment, except that DTC may offset 

against such payment the amount of any 

known loss or liability to DTC arising 

out of or related to the obligations of the 

former Participant to DTC. 

DTC proposes to reduce the time, after 

a Participant ceases to be a Participant, 

at which DTC would be required to 

return the amount of the Actual 

Participants Fund Deposit of the former 

Participant plus accrued and unpaid 

interest, whether the Participant ceases 

to be such because it elected to 

terminate its business with DTC in 

response to a Settlement Charge Notice 

or Loss Allocation Notice or otherwise. 

Pursuant to the proposed change, the 

time period would be reduced from four 

years to two years. All other 

requirements relating to the return of 

the Actual Participants Fund Deposit 

would remain the same. 

DTC states that the four year retention 

period was implemented at a time when 

there were more deposits and 

processing of physical certificates, as 

well as added risks related to manual 

processing, and related claims could 

surface many years after an alleged 

event. DTC states that the change to two 

years is appropriate because, currently, 

as DTC and the industry continue to 

move toward automation and 

dematerialization, claims typically 

surface more quickly. Therefore, DTC 

states that a shorter retention period of 

two years would be sufficient to 

maintain a reasonable level of coverage 

for possible claims arising in connection 

with the activities of a former 

Participant, while allowing DTC to 

provide some relief to former 

Participants by returning their Actual 

Participants Fund Deposits more 

quickly. 

E. Conforming and Technical Changes 

DTC proposes to make various 

conforming and technical changes 

necessary to harmonize the remaining 

current Rules with the proposed 

changes. Such changes include, but are 

not limited to, (1) inserting, deleting, or 

changing various terms, sentences, or 

headings for clarity and consistency; (2) 

consolidating certain sections of the 

Rules for clarity; and (3) amending Rule 

1 (Definitions; Governing Law) to add 

cross-references to proposed terms that 

would be defined in Rule 4. 

II. Discussion and Commission 

Findings 

Although the Clearing Supervision 

Act does not specify a standard of 

review for an advance notice, its stated 

purpose is instructive: To mitigate 

systemic risk in the financial system 

and promote financial stability by, 

among other things, promoting uniform 

risk management standards for 

systemically important financial market 

utilities and strengthening the liquidity 

of systemically important financial 

market utilities.41

Section 805(a)(2) of the Clearing 

Supervision Act 42 authorizes the 

Commission to prescribe risk 

management standards for the payment, 

clearing and settlement activities of 

designated clearing entities engaged in 

designated activities for which the 

Commission is the supervisory agency. 

Section 805(b) of the Clearing 

Supervision Act 43 provides the 

following objectives and principles for 

the Commission’s risk management 

standards prescribed under Section 

805(a): 

• To promote robust risk 

management; 

• to promote safety and soundness; 

• to reduce systemic risks; and 

• to support the stability of the 

broader financial system. 

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act 44 and Section 17A of the Act 45

(‘‘Rule 17Ad–22’’).46 Rule 17Ad–22 

requires registered clearing agencies to 

establish, implement, maintain, and 

enforce written policies and procedures 

that are reasonably designed to meet 

certain minimum requirements for their 

operations and risk management 

practices on an ongoing basis.47

Therefore, it is appropriate for the 

Commission to review proposed 

changes in advance notices against the 

objectives and principles of these risk 

management standards as described in 

Section 805(b) of the Clearing 


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44400 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

48 12 U.S.C. 5464(b). 

49 17 CFR 240.17Ad–22. 50See infra note 52. 

Supervision Act 48 and against Rule 

17Ad–22.49

A. Consistency With Section 805(b) of 

the Clearing Supervision Act 

The Commission believes that the 

proposed changes in the Advance 

Notice are designed to help DTC 

promote robust risk management, 

promote safety and soundness, reduce 

systemic risks, and support the stability 

of the broader financial system as 

discussed below. 

The proposal would clarify that if a 

Participant fails to satisfy its obligations, 

such Participant’s Actual Participants 

Fund Deposit would be used to 

eliminate any unpaid obligations of that 

Participant to DTC, as described above. 

Further, the proposal would modify the 

application of the Participants Fund, 

and clarify that the Participants Fund 

may be used (1) as a liquidity resource 

for DTC to fund settlement among nondefaulting Participants, and (2) to satisfy 

losses and liabilities of DTC in the loss 

allocation process. In addition, the 

proposal would add the term 

‘‘Participant Default’’ to current Section 

3 to clarify that proposed Section 3 

would apply when there is a failure of 

a Participant to satisfy any obligation to 

DTC. The proposal would expressly 

provide for the application of the Actual 

Participants Fund Deposit of the 

defaulting Participant to satisfy its 

unpaid obligations. The proposal would 

explicitly state that the Participants 

Fund shall constitute a liquidity 

resource which may be applied by DTC 

to fund settlement among nondefaulting Participants in the event of 

the failure of a Defaulting Participant to 

satisfy its settlement obligation. In 

addition, the proposal would provide 

two separate procedures to charge the 

Participants Fund: One to use it as a 

liquidity resource and another to pay for 

allocated losses. 

The proposal is designed to give 

authority explicitly to DTC to use the 

Participants Fund as a liquidity resource 

to fund settlement among nondefaulting Participants. With such clear 

authority to use the Participants Fund as 

a liquidity resource, DTC would have 

additional liquidity during a stress 

event, and thus be better able to manage 

its liquidity risks stemming from a 

Defaulting Participant. This access to 

liquidity during a stress event would 

help mitigate any risk to settlement 

finality due to DTC having insufficient 

funds to meet all its payment 

obligations to its Participants. As such, 

access to this liquidity would help to 

strengthen liquidity of DTC, which is 

designated as systemically important,50

and thereby support the stability of the 

broader financial system. Moreover, the 

Commission believes that these changes 

provide clarity to the application of the 

Participants Fund and would enable 

DTC and Participants to better 

anticipate and prepare for their 

potential exposures, which, in turn, 

would allow them to better manage their 

risk, thereby promoting robust risk 

management as well as safety and 

soundness. 

In addition to the changes to the 

Participant Fund application, DTC 

proposes to make the following changes 

to its loss allocation process. First, DTC 

would establish a mandatory Corporate 

Contribution to be applied to DTC’s 

losses and liabilities. The proposed 

Corporate Contribution would be 

defined to be an amount equal to 50 

percent of DTC’s General Business Risk 

Capital Requirement. The proposed 

changes also would clarify that the 

proposed Corporate Contribution would 

apply to both Default Loss Events and 

Declared Non-Default Loss Events. 

Moreover, the proposal specifies that if 

the Corporate Contribution is applied to 

a loss or liability relating to an Event 

Period, then for any subsequent Event 

Periods that occur during the 250 

business days thereafter, the Corporate 

Contribution would be reduced to the 

remaining, unused portion of the 

Corporate Contribution. The 

Commission believes that these changes 

set clear expectations about how and 

when DTC’s Corporate Contribution 

would be applied to help address a loss, 

and allow DTC to better anticipate and 

prepare for potential exposures that may 

arise during an Event Period. 

Second, as described above, DTC 

proposes to introduce the concept of an 

Event Period, which would group 

Default Loss Events and Declared NonDefault Loss Events occurring within a 

period of 10 Business Days for purposes 

of allocating losses to Participants in 

one or more rounds. Under the current 

Rules, every time DTC incurs a loss or 

liability, DTC will initiate its current 

loss allocation process by applying its 

retained earnings and allocating losses. 

The current Rules do not contemplate a 

situation where loss events occur in 

quick succession. Accordingly, even if 

multiple losses occur within a short 

period, the current Rules dictate that 

DTC start the loss allocation process 

separately for each loss event. Having 

multiple loss allocation calculations and 

notices from DTC and Termination 

Notices from Participants after multiple 

sequential loss events could cause 

operational risk to DTC, since multiple 

notices may cause confusion at a time 

of significant stress. 

The Commission believes that the 

proposed change to introduce an Event 

Period would improve upon the current 

loss allocation process described 

immediately above. Specifically, the 

introduction of an Event Period would 

provide a more defined and transparent 

structure than the current loss allocation 

process. Such an improved structure 

should enable both DTC and each 

Participant to more effectively manage 

the risks and potential financial 

obligations presented by sequential 

Default Loss Events and/or Declared 

Non-Default Loss Events that are likely 

to arise in quick succession, and could 

be closely linked to an initial event and/ 

or market dislocation episode. In other 

words, the proposed Event Period 

structure should help clarify and define 

for both DTC and Participants how DTC 

would initiate a single defined loss 

allocation process to cover all loss 

events within 10 Business Days. As a 

result, all loss allocation calculation and 

notices from DTC and potential 

Termination Notices from Participants 

would be tied back to one Event Period 

instead of each individual loss event. 

Third, as described above, the 

proposal would improve upon the 

approach laid out in DTC’s current 

Rules by providing for a loss allocation 

round, a Loss Allocation Notice process, 

a Termination Notice process, and a 

Loss Allocation Cap. A loss allocation 

round would be a series of loss 

allocations relating to an Event Period, 

the aggregate amount of which would be 

limited by the round cap. When the 

losses allocated in a round equals the 

round cap, any additional losses relating 

to the Event Period would be allocated 

in subsequent rounds until all losses 

from the Event Period are allocated 

among Participants. Each loss allocation 

would be communicated to Participants 

by the issuance of a Loss Allocation 

Notice. Each Participant in a loss 

allocation round would have five 

Business Days from the issuance of such 

first Loss Allocation Notice for the 

round to notify DTC of its election to 

terminate its business with DTC, and 

thereby benefit from its Loss Allocation 

Cap. The Loss Allocation Cap of a 

Participant would be the amount of its 

Aggregate Required Deposit and 

Investment, as fixed on the first day of 

the Event Period, plus 100 percent of 

the amount thereof. Participants would 

have two Business Days after DTC 

issues a first round Loss Allocation 

Notice to pay the amount specified in 

such notice. 


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Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44401 

The Commission believes that the 

changes to (1) establish a specific Event 

Period, (2) continue the loss allocation 

process in successive rounds, (3) clearly 

communicate with its Participants 

regarding their loss allocation 

obligations, and (4) effectively identify 

continuing Participants for the purpose 

of calculating loss allocation obligations 

in successive rounds, are designed to 

make DTC’s loss allocation process 

more certain. In addition, the changes 

are designed to provide Participants 

with a clear set of procedures that 

operate within the proposed loss 

allocation structure, and provide 

increased predictability and certainty 

regarding Participants’ exposures and 

obligations. Furthermore, by grouping 

all loss events within 10 Business Days, 

the loss allocation process relating to 

multiple loss events can be streamlined. 

With enhanced certainty, predictability, 

and efficiency, DTC would then be able 

to better manage its risks from loss 

events occurring in quick succession, 

and Participants would be able to better 

manage their risks by deciding whether 

and when to withdraw from 

membership and limit their exposures 

to DTC. Furthermore, the proposed 

changes are designed to reduce liquidity 

risk to Participants by providing a twoday window to arrange funding to pay 

for loss allocation, while still allowing 

DTC to address losses in a timely 

manner. 

Fourth, as described above, DTC 

proposes to clarify the governance 

around Declared Non-Default Loss 

Events by providing that the Board of 

Directors would have to determine that 

there is a non-default loss that may be 

a significant and substantial loss or 

liability that may materially impair the 

ability of DTC to provide its services in 

an orderly manner. DTC also proposes 

to provide that DTC would then be 

required to promptly notify Participants 

of this determination and start the loss 

allocation process concerning the loss 

stemming from a Declared Non-Default 

Loss Event. 

The Commission believes that the 

immediately above described changes 

should provide an orderly and 

transparent procedure to allocate a nondefault loss by requiring the Board of 

Directors to make a definitive decision 

to announce an occurrence of a Declared 

Non-Default Loss Event, and requiring 

DTC to provide a notice to Participants 

of such decision. The Commission 

further believes that an orderly and 

transparent procedure should result in a 

risk management process at DTC that is 

more robust as a result of enhanced 

governance around DTC’s response to 

non-default losses, thereby promoting 

safety and soundness. 

Collectively, the Commission believes 

that the proposed changes to DTC’s loss 

allocation process would provide 

greater transparency, certainty, and 

efficiency to both DTC and Participants 

regarding the amount of resources and 

the instances in which DTC would 

apply such resources to address risks 

arising from Default Loss Events and 

Declared Non-Default Loss Events, 

which could occur in quick succession. 

The Commission believes that such 

transparency, certainty, and efficiency 

would allow better predictability to DTC 

and its Participants regarding their 

exposures, and in turn, would allow a 

risk management process at DTC and its 

Participants that is more robust in 

response to such events and would 

improve their ability to continue to 

operate and recover in a safe and sound 

manner during such events. Therefore, 

the Commission believes that the 

proposal promotes robust risk 

management as well as safety and 

soundness. 

In addition to the key changes 

discussed above, DTC proposes to 

provide additional transparency to 

Participants with respect to voluntary 

retirement. In particular, the proposal 

provides that if a Participant submits a 

Voluntary Retirement Notice and 

subsequently receives a Settlement 

Charge Notice of the first Loss 

Allocation Notice in a round on or prior 

to the Voluntary Retirement Date, such 

Participant must timely submit a 

Termination Notice in order to benefit 

from its Settlement Charge Cap or Loss 

Allocation Cap, as the case may be. This 

proposed change helps to eliminate 

uncertainty as to the obligations of a 

Participant that submits a termination 

notice to DTC pursuant to the current 

Rules, and later receives a Settlement 

Charge Notice or a Loss Allocation 

Notice pursuant to the proposed Rules. 

Accordingly, the Commission believes 

that the proposal is designed to promote 

robust risk management by eliminating 

such uncertainty by providing a clear 

termination process, which, in turn 

should promote safety and soundness 

by enabling better management 

obligations to DTC. 

Furthermore, the proposed changes 

would align the loss allocation rules of 

the DTCC Clearing Agencies to the 

extent practicable and appropriate. The 

alignment is designed to help provide 

consistent treatment for firms that are 

participants of multiple DTCC Clearing 

Agencies. The Commission believes that 

providing consistent treatment through 

consistent procedures among the DTCC 

Clearing Agencies would help firms that 

participate in multiple DTCC Clearing 

Agencies from encountering 

unnecessary complexities and confusion 

stemming from differences in 

procedures regarding loss allocation 

processes, particularly at times of 

significant stress. Accordingly, the 

Commission believes that the change is 

designed to reduce systemic risk and 

support the stability of the broader 

financial system. 

Also, DTC proposes to reduce the 

time within which DTC is required to 

return the Actual Participants Fund 

Deposit of a former Participant from 

four years to two years. The 

Commission believes that this reduction 

in time would enable firms that have 

exited DTC to have access to their funds 

sooner than under the current Rules. 

While acknowledging that the reduction 

in time could lesson DTC’s flexibility in 

liquidity management for the period 

between two years and four years, the 

Commission believes that DTC’s 

procedures would continue to protect 

DTC and its clearance and settlement 

services because the rule would 

maintain the provisions that DTC (1) 

may offset the return of funds against 

the amount of any loss or liability of 

DTC arising out of or relating to the 

obligations of the former Participant, 

and (2) could retain the funds for up to 

two years. Therefore, DTC could 

maintain a necessary level of coverage 

for possible claims arising in connection 

with the DTC activities of a former 

Participant. Accordingly, the 

Commission believes that the proposed 

changes to accelerate the return of a 

former Participant’s Actual Participants 

Fund Deposit are designed to reduce the 

systemic risks by reducing financial 

risks for participants of multiple DTCC 

Clearing Agencies, and in turn, support 

the stability of the broader financial 

system. 

Finally, DTC proposes to make 

conforming and technical changes 

necessary to harmonize the current 

Rules with the proposed changes. The 

Commission believes that these changes 

are designed to provide clear and 

coherent Rules concerning loss 

allocation process to DTC and its 

Participants. The Commission further 

believes that clear and coherent Rules 

should help enhance the ability of DTC 

and Participants to more effectively plan 

for, manage, and address the risks and 

financial obligations that loss events 

present to DTC and its Participants. 

Accordingly, the Commission believes 

that the conforming and technical 

changes are designed to promote robust 

risk management. 

Therefore, for all of the reasons stated 

above, the Commission believes that the 


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44402 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

51 12 U.S.C. 5464(b). 

52A ‘‘covered clearing agency’’ means, among 

other things, a clearing agency registered with the 

Commission under Section 17A of the Exchange 

Act (15 U.S.C. 78q–1 et seq.) that is designated 

systemically important by the Financial Stability 

Oversight Counsel (‘‘FSOC’’) pursuant to the 

Clearing Supervision Act (12 U.S.C. 5461 et seq.). 

See 17 CFR 240.17Ad–22(a)(5) and (6). On July 18, 

2012, FSOC designated DTC as systemically 

important. U.S. Department of the Treasury, ‘‘FSOC 

Makes First Designations in Effort to Protect Against 

Future Financial Crises,’’ available at https://

www.treasury.gov/press-center/press-releases/ 

Pages/tg1645.aspx. Therefore, DTC is a covered 

clearing agency. 

53 17 CFR 240.17Ad–22(e)(4)(viii). 

54 Id. 

55 240.17Ad–22(e)(7)(i). 

56 Id. 

57 240.17Ad–22(e)(13). 

58 Id. 

59 17 CFR 240.17Ad–22(e)(23)(i). 

60 17 CFR 240.17Ad–22(e)(23)(ii). 

changes proposed in the Advance 

Notice are consistent with the objectives 

and principles of Section 805(b) of the 

Clearing Supervision Act.51

B. Consistency With Rule 17Ad– 

22(e)(4)(viii) 

Rule 17Ad–22(e)(4)(viii) under the 

Act requires, in part, that a covered 

clearing agency 52 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 addressing 

allocation of credit losses the covered 

clearing agency may face if its collateral 

and other resources are insufficient to 

fully cover its credit exposures.53

As described above, the proposal 

would revise the loss allocation process 

to address how DTC would manage loss 

events, including Defaulting Loss 

Events. Under the proposal, if losses 

arise out of or relate to a Defaulting Loss 

Event, DTC would first apply its 

Corporate Contribution. If such funds 

prove insufficient, the proposal 

provides for allocating the remaining 

losses to the remaining Participants 

through the proposed process. 

Accordingly, the Commission believes 

that the proposal is reasonably designed 

to manage DTC’s credit exposures to its 

Participants, by addressing allocation of 

credit losses. 

Therefore, the Commission believes 

that DTC’s proposal is consistent with 

Rule 17Ad–22(e)(4)(viii) under the 

Act.54

C. Consistency With Rule 17Ad– 

22(e)(7)(i) 

Rule 17Ad–22(e)(7)(i) under the Act 

requires, in part, that a covered clearing 

agency establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to 

effectively measure, monitor, and 

manage the liquidity risk that arises in 

or is borne by the covered clearing 

agency, including measuring, 

monitoring, and managing its settlement 

and funding flows on an ongoing and 

timely basis, and its use of intraday 

liquidity, by maintaining sufficient 

liquid resources to effect same-day 

settlement of payment obligations with 

a high degree of confidence under a 

wide range of foreseeable stress 

scenarios.55

As described above, the proposal 

would clarify that the Participants Fund 

may be used as a liquidity resource 

which may be applied by DTC to fund 

settlement among non-defaulting 

Participants. In addition, the proposal 

would provide a separate procedure to 

charge the Participants Fund to use it as 

a liquidity resource. The proposed 

change is designed to help DTC manage 

its settlement and funding flows on a 

more timely basis and better effect same 

day settlement of payment obligations 

in certain foreseeable stress scenarios. 

Therefore, the Commission believes 

that the proposal is reasonably designed 

to help DTC effectively manage liquidity 

risk in a timely manner to complete 

settlement, and accordingly is 

consistent with Rule 17Ad–22(e)(7)(i).56

D. Consistency With Rule 17Ad– 

22(e)(13) 

Rule 17Ad–22(e)(13) under the Act 

requires, in part, that a covered clearing 

agency establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to 

ensure the covered clearing agency has 

the authority to take timely action to 

contain losses and liquidity demands 

and continue to meet its obligations.57

As described above, the proposal 

would establish a more detailed and 

structured loss allocation process by (1) 

applying a defined and mandatory 

Corporate Contribution to a loss; (2) 

introducing an Event Period; (3) 

introducing a loss allocation round and 

notice process; (4) modifying the 

termination process and the cap of 

terminating Participant’s loss allocation 

exposure; and (5) providing the 

governance around a non-default loss. 

The Commission believes that each of 

these proposed changes helps establish 

a more transparent and clear loss 

allocation process and authority of DTC 

to take certain actions, such as 

announcing a Declared Non-Default 

Loss Event, within the loss allocation 

process. Further, having a more 

transparent and clear loss allocation 

process as proposed would provide 

clear authority to DTC to allocate losses 

from Default Loss Events and Declared 

Non-Default Loss Events and take timely 

actions to contain losses, and continue 

to meet its clearance and settlement 

obligations. 

Therefore, the Commission believes 

that DTC’s proposal is consistent with 

Rule 17Ad–22(e)(13) under the Act.58

E. Consistency With Rule 17Ad– 

22(e)(23)(i) and (ii) 

Rule 17Ad–22(e)(23)(i) under the Act 

requires that a covered clearing agency 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to publicly disclose 

all relevant rules and material 

procedures, including key aspects of its 

default rules and procedures.59 Rule 

17Ad–22(e)(23)(ii) under the Act 

requires that a covered clearing agency 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to provide 

sufficient information to enable 

participants to identify and evaluate the 

risks, fees, and other material costs they 

incur by participating in the covered 

clearing agency.60

As described above, the proposal 

would publicly disclose how DTC’s 

Corporate Contribution would be 

calculated and applied. In addition, the 

proposal would establish and publicly 

disclose a detailed procedure in the 

Rules for loss allocation. More 

specifically, the proposed changes 

would establish an Event Period, loss 

allocation rounds, a termination process 

followed by a settlement charge process 

or loss allocation process, and a Loss 

Allocation Cap that would apply to 

Participants after termination. 

Additionally, the proposal would align 

the loss allocation rules across the 

DTCC Clearing Agencies, to help 

provide consistent treatment, and clarify 

that non-default losses would trigger 

loss allocation to Participants. The 

proposal would also provide for and 

make known to members the procedures 

to trigger a loss allocation procedure, 

contribute DTC’s Corporate 

Contribution, allocate losses, and 

withdraw and limit Participant’s loss 

exposure. Accordingly, the Commission 

believes that the proposal is reasonably 

designed to (1) publicly disclose all 

relevant rules and material procedures 

concerning key aspects of DTC’s default 

rules and procedures, and (2) provide 

sufficient information to enable 

Participants to identify and evaluate the 

risks by participating in DTC. 


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Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44403 

61 17 CFR 240.17Ad–22(e)(23)(i) and (ii). 

62 12 U.S.C. 5465(e)(1)(I). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 83596 

(July 5, 2018), 83 FR 32162. 

4 15 U.S.C. 78s(b)(2). 

5 Id. 

6 17 CFR 200.30–3(a)(31). 

Therefore, the Commission believes 

that DTC’s proposal is consistent with 

Rules 17Ad–22(e)(23)(i) and (ii) under 

the Act.61

III. Conclusion 

It is therefore noticed, pursuant to 

Section 806(e)(1)(I) of the Clearing 

Supervision Act,62 that the Commission 

does not object to advance notice SR– 

DTC–2017–804, as modified by 

Amendment No. 1, and that DTC is 

authorized to implement the proposal as 

of the date of this notice or the date of 

an order by the Commission approving 

proposed rule change SR–DTC–2017– 

022, as modified by Amendment No. 1, 

whichever is later. 

By the Commission. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18864 Filed 8–29–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83938; File No. SR– 

CboeBZX–2018–047] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of 

Designation of a Longer Period for 

Commission Action on a Proposed 

Rule Change To Amend BZX Rule 14.8, 

General Listings Requirements—Tier I, 

To Adopt Listing Standards for ClosedEnd Funds 

August 24, 2018. 

On June 21, 2018, Cboe BZX 

Exchange, Inc. (‘‘BZX’’) 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 change to 

amend BZX Rule 14.8, titled ‘‘General 

Listings Requirements—Tier I,’’ in order 

to adopt listing standards for closed-end 

funds. The proposed rule change was 

published for comment in the Federal 

Register on July 11, 2018.3 The 

Commission has received no comment 

letters on the proposed rule change. 

Section 19(b)(2) of the Act 4 provides 

that, within 45 days of the publication 

of notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. The 45th day after 

publication of the notice for this 

proposed rule change is August 25, 

2018. The Commission is extending this 

45-day time period. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to take action on the 

proposed rule change so that it has 

sufficient time to consider the proposed 

rule change. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,5 designates October 

9, 2018, as the date by which the 

Commission shall either approve or 

disapprove or institute proceedings to 

determine whether to disapprove the 

proposed rule change (File Number SR– 

CboeBZX–2018–047). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18783 Filed 8–29–18; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice 10508] 

60-Day Notice of Proposed Information 

Collection: Special Immigrant Visa 

Supervisor Locator 

ACTION: Notice of request for public 

comment. 

SUMMARY: The Department of State is 

seeking Office of Management and 

Budget (OMB) approval for the 

information collection described below. 

In accordance with the Paperwork 

Reduction Act of 1995, we are 

requesting comments on this collection 

from all interested individuals and 

organizations. The purpose of this 

notice is to allow 60 days for public 

comment preceding submission of the 

collection to OMB. 

DATES: The Department will accept 

comments from the public up to October 

29, 2018. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Web: Persons with access to the 

internet may comment on this notice by 

going to www.Regulations.gov. You can 

search for the document by entering 

‘‘Docket Number: DOS–2018–0033’’ in 

the Search field. Then click the 

‘‘Comment Now’’ button and complete 

the comment form. 

• Email: PRA_BurdenComments@

state.gov. 

You must include the DS form 

number (if applicable), information 

collection title, and the OMB control 

number in any correspondence. 

SUPPLEMENTARY INFORMATION: 

• Title of Information Collection: 

Special Immigrant Visa Supervisor 

Locator. 

• OMB Control Number: 1405–0144. 

• Type of Request: Revision of a 

Currently Approved Collection. 

• Originating Office: CA/VO/L/R. 

• Form Number: DS–158. 

• Respondents: Special Immigrant 

Visa Applicants. 

• Estimated Number of Respondents: 

150. 

• Estimated Number of Responses: 

150. 

• Average Time per Response: 1 hour. 

• Total Estimated Burden Time: 150 

hours. 

• Frequency: Once per application. 

• Obligation to Respond: Required to 

Obtain or Retain a Benefit. 

We are soliciting public comments to 

permit the Department to: 

• Evaluate whether the proposed 

information collection is necessary for 

the proper functions of the Department. 

• Evaluate the accuracy of our 

estimate of the time and cost burden for 

this proposed collection, including the 

validity of the methodology and 

assumptions used. 

• Enhance the quality, utility, and 

clarity of the information to be 

collected. 

• Minimize the reporting burden on 

those who are to respond, including the 

use of automated collection techniques 

or other forms of information 

technology. 

Please note that comments submitted 

in response to this Notice are public 

record. Before including any detailed 

personal information, you should be 

aware that your comments as submitted, 

including your personal information, 

will be available for public review. 

Abstract of Proposed Collection 

Department of State uses Form DS– 

158 (Special Immigrant Visa Supervisor 

Locator) in order to assist applicants for 

special immigrant visa (SIV) applicants 

under section 602(b) of the Afghan 

Allies Protection Act of 2009 (Pub. L. 

111–8), in attempting to locate an 

applicant’s prior Department of Defense 

(DoD) supervisor. The information 


amozie on DSK3GDR082PROD with NOTICES1