91000 Federal Register / Vol. 89, No. 222 / Monday, November 18, 2024 / Rules and Regulations 

1 15 U.S.C. 78q–1. 2 12 U.S.C. 5461 et seq. 3 17 CFR 240.17ad–22(e)(3)(ii). 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 240 

[Release No. 34–101446; File No. S7–10– 

23] 

RIN 3235–AN19 

Covered Clearing Agency Resilience 

and Recovery and Orderly Wind-Down 

Plans 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

adopting amendments to certain rules in 

the Covered Clearing Agency Standards 

(‘‘CCA Standards’’) under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

and the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (‘‘DoddFrank Act’’). The amendments 

strengthen existing rules by adding new 

requirements related to the collection of 

intraday margin by a covered clearing 

agency (‘‘CCA’’) and the use of 

substantive inputs in its risk-based 

margin system. The Commission is also 

adopting a new rule to establish 

required elements of a CCA’s recovery 

and orderly wind-down plan (‘‘RWP’’). 

DATES: 

Effective date: January 17, 2025. 

Compliance date: The applicable 

compliance dates are discussed in Part 

III. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Fitzgerald, Assistant Director, 

Matthew Lee, Assistant Director, Jesse 

Capelle, Special Counsel, Adam 

Allogramento, Special Counsel, Haley 

Holliday, Attorney-Adviser, and David 

Li, Senior Financial Analyst, at (202) 

551–5710, Office of Clearance and 

Settlement, Division of Trading and 

Markets; Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–7010. 

SUPPLEMENTARY INFORMATION: Pursuant 

to section 17A of the Exchange Act,1 as 

well as the Payment, Clearing, and 

Settlement Supervision Act (‘‘Clearing 

Supervision Act’’) in Title VIII of the 

Dodd-Frank Act,2 the Commission is 

adopting amendments to 17 CFR 

240.17ad–22(e)(6) and adding new 

§ 240.17ad–26. Below is a table of 

citations to the rules referenced in this 

release, including all rules being 

amended or adopted: 

Commission reference CFR citation (17 CFR) 

Exchange Act: 

Rule 17Ad–22 ................................................................................................... § 240.17ad–22. 

Rule 17Ad–22(e)(3)(ii) ...................................................................................... § 240.17ad–22(e)(3)(ii). 

Rule 17Ad–22(e)(4) .......................................................................................... § 240.17ad–22(e)(4).

Rule 17Ad–22(e)(6) .......................................................................................... § 240.17ad–22(e)(6).

Rule 17Ad–22(e)(6)(ii) ...................................................................................... § 240.17ad–22(e)(6)(ii). 

Rule 17Ad–22(e)(6)(iv) ..................................................................................... § 240.17ad–22(e)(6)(iv). 

Rule 17Ad–22(e)(15) ........................................................................................ § 240.17ad–22(e)(15).

Rule 17Ad–22(e)(15)(ii) .................................................................................... § 240.17ad–22(e)(15)(ii). 

Rule 17Ad–22(e)(23) ........................................................................................ § 240.17ad–22(e)(23).

Rule 17Ad–22(e)(23)(i) ..................................................................................... § 240.17ad–22(e)(23)(i). 

Rule 17Ad–22(e)(23)(ii) .................................................................................... § 240.17ad–22(e)(23)(ii). 

Rule 17Ad–22(e)(23)(iv) ................................................................................... § 240.17ad–22(e)(23)(iv). 

Rule 17Ad–25 ................................................................................................... § 240.17ad–25. 

Rule 17Ad–25(c) ............................................................................................... § 240.17ad–25(c). 

Rule 17Ad–25(i) ................................................................................................ § 240.17ad–25(i).

Rule 17Ad–25(j) ................................................................................................ § 240.17ad–25(j).

Rule 17Ad–26 ................................................................................................... § 240.17ad–26. 

Rule 17Ad–26(a) ............................................................................................... § 240.17ad–26(a). 

Rule 17Ad–26(a)(1) .......................................................................................... § 240.17ad–26(a)(1).

Rule 17Ad–26(a)(2) .......................................................................................... § 240.17ad–26(a)(2).

Rule 17Ad–26(a)(3) .......................................................................................... § 240.17ad–26(a)(3).

Rule 17Ad–26(a)(4) .......................................................................................... § 240.17ad–26(a)(4).

Rule 17Ad–26(a)(5) .......................................................................................... § 240.17ad–26(a)(5).

Rule 17Ad–26(a)(6) .......................................................................................... § 240.17ad–26(a)(6).

Rule 17Ad–26(a)(7) .......................................................................................... § 240.17ad–26(a)(7).

Rule 17Ad–26(a)(8) .......................................................................................... § 240.17ad–26(a)(8).

Rule 17Ad–26(a)(9) .......................................................................................... § 240.17ad–26(a)(9).

Rule 17Ad–26(b) ............................................................................................... § 240.17ad–26(b). 

The amendments to Rule 17Ad– 

22(e)(6)(ii) establish new requirements 

with respect to a CCA’s policies and 

procedures regarding the collection of 

intraday margin, specifically, to (i) 

include a new requirement to monitor 

intraday exposures on an ongoing basis, 

(ii) modify the preexisting reference to 

making intraday calls ‘‘in defined 

circumstances’’ to making intraday calls 

‘‘as frequently as circumstances 

warrant’’ and identifying examples of 

such circumstances, and (iii) require 

that a CCA document when it 

determines not to make an intraday 

margin call pursuant to its written 

policies and procedures required under 

paragraph (e)(6)(ii). The amendments to 

Rule 17Ad–22(e)(6)(iv) establish new 

requirements for a CCA relying upon 

substantive inputs to its risk-based 

margin model, including when such 

substantive inputs are not readily 

available or reliable. 

New Rule 17Ad–26 prescribes 

requirements for the contents of a CCA’s 

RWP. While Rule 17Ad–22(e)(3)(ii) 

currently requires a CCA’s written 

policies and procedures to include the 

CCA’s RWP, Rule 17Ad–22(e)(3)(ii) did 

not include requirements for the content 

of RWPs.3 New Rule 17Ad–26 identifies 

elements that a CCA’s RWP must 

contain, including: (i) elements related 

to planning, including the identification 

and use of scenarios, triggers, tools, 

staffing, and service providers, as 

discussed in Parts II.C.1 through 5; (ii) 

timing and implementation of the plans, 


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4See, e.g., 12 U.S.C. 5464(a)(2); 5472. 

5See Release No. 34–78961 (Sept. 28, 2016), 81 

FR 70786, 70789 (Oct. 13, 2016) (‘‘CCA Standards 

Adopting Release’’), https://www.govinfo.gov/ 

content/pkg/FR-2016-10-13/pdf/2016-23891.pdf; 

see also 15 U.S.C. 78q–1(a)(1)(A) (finding that the 

prompt and accurate clearance and settlement of 

securities transactions, including the transfer of 

record ownership and the safeguarding of securities 

and funds related thereto, are necessary for the 

protection of investors and persons facilitating 

transactions by and acting on behalf of investors). 

CCAs are a subset of clearing agencies registered 

with the Commission. See 17 CFR 240.17ad–22(a) 

(defining ‘‘covered clearing agency’’); see also infra 

note 6 (explaining further the definition of ‘‘covered 

clearing agency’’ and two functions of a CCA). 

6Two functions are that of the central 

counterparty (‘‘CCP’’) and the central securities 

depository (‘‘CSD’’), each of which constitutes a 

financial market infrastructure (‘‘FMI’’). A CCP is a 

clearing agency that interposes itself between the 

counterparties to securities transactions, acting 

functionally as the buyer to every seller and the 

seller to every buyer. 17 CFR 240.17ad–22(a). A 

CSD is a clearing agency that is a securities 

depository as described in section 3(a)(23)(A) of the 

Exchange Act. Id. CCAs are clearing agencies 

registered with the Commission that provide CCP 

or CSD services. See 17 CFR 240.17ad–22(a). 

7CCA Standards Adopting Release, supra note 5, 

at 70792; see also 12 U.S.C. 5461–72 (setting forth 

provisions under the Clearing Supervision Act for 

designating a clearing agency as systemically 

important and imposing risk management standards 

consistent with international standards). 

8CCA Standards Adopting Release, supra note 5, 

at 70793. 

9 Id.; see also Committee on Payment and 

Settlement Systems, International Organization of 

Securities Commissions (‘‘CPMI–IOSCO’’), 

Principles for financial market infrastructures (Apr. 

16, 2012), http://www.bis.org/publ/cpss101a.pdf 

(‘‘PFMI’’) (identifying the risks posed by FMIs, 

including CCPs and CSDs, across 23 discrete 

principles). The Committee on Payment and 

Settlement Systems renamed itself the Committee 

on Payments and Market Infrastructures (‘‘CPMI’’) 

in 2014. 

10CCA Standards Adopting Release, supra note 5, 

at 70788 n.18. 

11Public Law 111–203, 124 Stat. 1376 (2010). 

12E.g., 17 CFR 240.17ad–22; 17 CFR 240.17ad–25; 

see also Release No. 34–9895 (Nov. 16, 2023), 88 

FR 84454 (Dec. 5, 2023) (‘‘CA Governance Adopting 

Release’’), https://www.govinfo.gov/content/pkg/FR2023-12-05/pdf/2023-25807.pdf; Release No. 34– 

88616 (Apr. 9, 2020), 85 FR 28853 (May 14, 2020) 

(‘‘CCA Definition Adopting Release’’), https://

www.govinfo.gov/content/pkg/FR-2020-05-14/pdf/ 

2020-07905.pdf; CCA Standards Adopting Release, 

supra note 5; Release No. 34–68080 (Oct. 22, 2012), 

77 FR 66219 (Nov. 2, 2012), https://

www.govinfo.gov/content/pkg/FR-2012-11-02/pdf/ 

2012-26407.pdf. 

13See infra Part II (discussing the rule 

amendments and new rules in greater detail). In 

addition, when designated as systemically 

important by the FSOC, CCAs are also subject to 

requirements set forth in Title VIII of the DoddFrank Act and rules thereunder. See, e.g., 12 U.S.C. 

5461–72. 

as discussed in Parts II.C.6 and 7; and 

(iii) testing and board approval of the 

plans, as discussed in Parts II.C.8 and 9. 

Definitions included in new Rule 17Ad– 

26 are discussed in Part II.D. 

In developing these final rules, 

Commission staff has consulted with the 

Financial Stability Oversight Council 

(‘‘FSOC’’), the Commodity Futures 

Trading Commission (‘‘CFTC’’), the 

Federal Deposit Insurance Corporation 

(‘‘FDIC’’), and the Board of Governors of 

the Federal Reserve System (‘‘FRB’’).4

The compliance dates for the 

amendments to Rule 17Ad–22(e)(6) and 

new Rule 17Ad–26 are discussed in Part 

III. 

Table of Contents 

I. Introduction 

II. Discussion of Comments Received and 

Final Rules 

A. Collection of Intraday Margin 

1. Proposed Amendment to Rule 17Ad– 

22(e)(6)(ii) 

2. Discussion of Comments 

B. Inputs to Margin System 

1. Proposed Amendment to Rule 17Ad– 

22(e)(6)(iv) 

2. Discussion of Comments 

C. Contents of Recovery and Orderly WindDown Plans 

1. Core Services: Rule 17Ad–26(a)(1) 

2. Service Providers: Rule 17Ad–26(a)(2) 

3. Scenarios: Rule 17Ad–26(a)(3) 

4. Triggers: Rule 17Ad–26(a)(4) 

5. Tools: Rule 17Ad–26(a)(5) 

6. Implementation: Rule 17Ad–26(a)(6) 

7. Notification to Commission: Rule 17Ad– 

26(a)(7) 

8. Testing: Rule 17Ad–26(a)(8) 

9. Board Approval: Rule 17Ad–26(a)(9) 

10. Other Comments 

D. Defined Terms in Rule 17Ad–26 

1. Definition of ‘‘Orderly Wind-Down’’ 

2. Other Defined Terms and Introductory 

Clause 

III. Compliance Date 

IV. Economic Analysis 

A. Introduction 

B. Economic Baseline 

1. Description of Market 

2. Overview of the Existing Regulatory 

Framework 

3. Current Recovery and Orderly WindDown Plans 

4. Current Risk-Based Margin 

C. Consideration of Benefits and Costs as 

Well as the Effects on Efficiency, 

Competition, and Capital Formation 

1. Final Rule 17Ad–26 

2. Amendments to Rule 17Ad–22(e)(6) 

3. Other Compliance Costs 

4. Efficiency, Competition, and Capital 

Formation 

D. Reasonable Alternatives to the Final 

Rule and Amendments 

1. Establish Precise Triggers for 

Implementation of RWPs Across All 

CCAs 

2. Establish Specific Scenarios and 

Analyses 

3. Establish Specific Rules, Policies, 

Procedures, Tools, and Resources 

4. Require the Identification of 

Interconnections and Interdependencies 

5. Establish a Specific Monitoring 

Frequency for Intraday Margin Calls 

6. Adopt Only Certain Elements of Rule 

17Ad–26 

7. Focus Intraday Margin Requirements on 

a Subset of CCAs 

V. Paperwork Reduction Act 

A. Amendments to Rule 17Ad–22(e)(6) 

B. New Rule 17Ad–26 

C. Chart of Total PRA Burdens 

VI. Regulatory Flexibility Act 

A. Clearing Agencies 

B. Certification 

VII. Other Matters 

Statutory Authority 

I. Introduction 

CCAs are an essential part of the 

infrastructure of the U.S. securities 

markets.5 While central clearing and 

other important functions provided by 

clearing agencies benefit the markets 

they serve,6 clearing agencies can pose 

systemic risk to the financial system,7

due in part to the fact that such clearing 

functions concentrate risk in the 

clearing agency.8 Disruption to a 

clearing agency’s operations, or failure 

on the part of a clearing agency to meet 

its obligations, could therefore serve as 

a potential source of contagion, 

resulting in significant costs not only to 

the clearing agency itself or its members 

but also to other market participants and 

the broader U.S. financial system.9 As a 

result, proper management of the risks 

associated with CCAs is necessary to 

help ensure the stability of the U.S. 

securities markets and the broader U.S. 

financial system.10

Whether in normal or stressed market 

conditions, the effective functioning of 

the securities markets requires a 

regulatory framework for CCAs that can 

promote effective risk management, 

help preserve financial stability, and 

help ensure the continuity of critical 

CCP and CSD functions for the markets 

they serve, participants in those 

markets, and investors more generally. 

Since the enactment of the Dodd-Frank 

Act,11 the Commission has adopted a 

series of rules designed to support its 

ongoing supervision and oversight of 

clearing agencies and to help ensure 

that CCAs are robust and resilient under 

normal market conditions and in 

periods of market stress.12 The potential 

for CCAs to spread contagion through 

the financial system, particularly in 

periods of market stress, has 

necessitated that the Commission 

continue to consider and adopt new 

rules over time to improve the 

regulatory framework for CCAs. These 

series of rules help ensure an effective 

regulatory response to evolving risks 

that could threaten the U.S. financial 

system.13

Since the Commission first adopted 

the CCA Standards, supervisory 

authorities, CCAs, and market 

participants have continued to pursue 

further consideration of several topics, 


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14E.g., CPMI–IOSCO, Streamlining Variation 

Margin in Centrally Cleared Markets—Examples of 

Effective Practices (Feb. 14, 2024), https://

www.bis.org/cpmi/publ/d221.pdf; CPMI–IOSCO, 

Transparency and Responsiveness of Initial Margin 

in Centrally Cleared Markets—Review and Policy 

Proposals (Jan. 16, 2024), https://www.bis.org/bcbs/ 

publ/d568.pdf; CPMI–IOSCO, Resilience of Central 

Counterparties (CCPs): Further Guidance on the 

PFMIs (July 2017), https://www.bis.org/cpmi/publ/ 

d163.pdf (‘‘CPMI–IOSCO Resilience Guidance’’). 

15See, e.g., 17 CFR 240.17ad–22(e)(6). 

16See 17 CFR 240.17ad–22(e)(6)(i) (regarding the 

setting of margin levels commensurate with the 

risks and particular attributes of each relevant 

product, portfolio, and market); (e)(6)(iii) (regarding 

the calculating of margin sufficient to cover the 

CCA’s potential future exposure to its participants); 

(e)(6)(vi) (regarding the monitoring and regular 

review, testing, and verification of margin models 

using backtesting and sensitivity analysis). 

17For example, a CCA may require more margin 

to guard against an increased risk of defaults, which 

may occur if, for example, buyers do not carrythrough on paying for a stock that has plummeted 

or sellers do not carry-through on delivering a stock 

that has skyrocketed. See, e.g., Staff Report on 

Equity and Options Market Structure Conditions in 

Early 2021, at 31 (Oct. 14, 2021), https://

www.sec.gov/files/staff-report-equity-optionsmarket-struction-conditions-early-2021.pdf 

(describing how the National Securities Clearing 

Corporation (‘‘NSCC’’) observed unusual volatility 

in certain securities in January 2021 and imposed 

intraday margin calls in response to trading patterns 

in Gamestop Corp. (‘‘GME’’) and other equity 

securities). 18See Release No. 34–97516 (May 17, 2023), 88 

FR 34708, 34708 (May 30, 2023) (‘‘RWP Proposing 

Release’’), https://www.govinfo.gov/content/pkg/FR2023-05-30/pdf/2023-10889.pdf. 

19See infra Parts II.A and B (further discussing 

these amended requirements). 

20See infra Part II.A (further discussing these 

amended requirements). 

21RWP Proposing Release, supra note 18, at 

34714. 

22 Id. at 34715. 

23See, e.g., 17 CFR 240.17ad–22(e)(4)(i), (ii) 

(establishing requirements related to maintaining 

financial resources at the minimum to enable a CCA 

to cover a wide range of foreseeable stress scenarios 

that include, but are not limited to, the default of 

the one or two participant families that would 

potentially cause the largest aggregate credit 

exposure for the CCA in extreme but plausible 

market conditions). 

24Financial Stability Board (‘‘FSB’’), Central 

Counterparty Financial Resources for Recovery and 

Resolution (Mar. 10, 2022), https://www.fsb.org/wpcontent/uploads/P090322.pdf (‘‘FSB Analysis’’). 

25See, e.g., CPMI–IOSCO, Recovery of financial 

market infrastructures (rev. July 2017), at 2.4, 

https://www.bis.org/cpmi/publ/d162.pdf 

(explaining considerations related to CCP recovery 

in circumstances where the CCP’s prefunded 

financial resources have been depleted) (‘‘CPMI– 

IOSCO Recovery Guidance’’). 

26The RWP Proposing Release discusses in 

greater detail the relationship between RWPs 

implemented by CCAs and the considerations 

related to orderly resolution of financial companies 

including the collection of margin 

generally, the collection of intraday 

margin specifically, the potential effects 

of such margin collection on market 

liquidity, and the need for some 

transparency into the margin collection 

process so that market participants that 

use or rely on CCAs for risk 

management functions can monitor and 

manage their own financial and other 

risks.14

Although the CCA Standards adopted 

in 2016 included several provisions 

directed to a CCA’s margin system 

generally,15 and specifically the 

modeling of financial risk and the 

collection of margin within it,16 the 

Commission has identified two areas of 

focus that support strengthening these 

pre-existing rules: (i) ensuring effective 

monitoring of intraday exposures and 

specifying particular circumstances for 

collection of margin intraday, and (ii) 

ensuring that CCAs have effective tools 

for margin modelling even when inputs 

to the margin system become unreliable 

or unavailable. Ongoing monitoring by 

the CCA is necessary to help ensure that 

a CCA collects sufficient margin to 

cover its exposures throughout the day, 

as portfolios and positions may change 

after margin is collected at the start of 

the day. This requirement should help 

ensure that the CCAs have the 

appropriate policies and procedures to 

address market events featuring large 

intraday price and position changes, 

such as the events in the equity and 

options markets in early 2021.17 In 

addition, establishing backup 

procedures if a substantive input to a 

margin model is unavailable or 

unreliable is especially relevant to 

ensuring that a CCA can continue to 

meet its regulatory obligations and 

calculate margin appropriately. 

Accordingly, in the RWP Proposing 

Release,18 the Commission proposed 

new requirements to ensure that CCAs 

monitor intraday margin on an ongoing 

basis and to facilitate intraday margin 

collection not only in ‘‘defined’’ 

circumstances but as frequently as 

circumstances warrant.19 The 

Commission also defined two 

circumstances in which a CCA should 

have policies and procedures for 

applying intraday margin: (i) when 

specific risk thresholds have been 

breached, and (ii) when the products 

cleared or markets served display 

elevated volatility.20 As the Commission 

explained in the RWP Proposing 

Release, these requirements would help 

ensure that the CCA has an effective 

process for monitoring margin and 

avoiding circumstances in which a 

participant becomes under-margined, 

which undermines the ability of a CCA 

to mitigate risk.21 In addition, with 

respect to the inputs into a CCA’s 

margin system, the Commission 

proposed to expand existing 

requirements requiring timely and 

reliable price data beyond that limited 

topic to also encompass other 

substantive inputs to a CCA’s risk-based 

margin system, to help ensure that 

mechanisms are in place to calculate 

margin during periods where inputs 

become unavailable, such as if a data 

feed becomes interrupted or 

corrupted.22 In Parts II.A and B, the 

Commission discusses these new 

requirements in greater detail, in 

addition to addressing the comments 

received on the proposed rules. 

Importantly, to be resilient in times of 

market stress, a CCA will need to 

monitor intraday risk on an ongoing 

basis and use timely and accurate data 

inputs to its margin system. Each helps 

ensure that a CCA can, in turn, calculate 

and collect margin in a timely manner, 

managing its exposures to its 

participants throughout the day. In 

times of rapidly evolving or stressed 

market conditions, a CCA must be able 

to monitor risk and collect margin while 

also effectively analyzing the potential 

impact of any intraday collections on 

market liquidity and financial stability. 

Even a robust and resilient CCA may 

face stressed market conditions or other 

events so extreme that the resources it 

has reserved for potential loss scenarios 

will prove insufficient. For example, 

depending on the markets they serve, 

CCAs may hold financial resources 

sufficient to withstand the default of the 

one or two largest participant families 

from among their clearing 

participants.23 Such CCAs may not have 

sufficient prefunded resources to 

withstand defaults beyond these,24 and 

would, in such a circumstance, be 

charged with allocating losses among 

their non-defaulting participants to 

close out the portfolios of its defaulting 

participants.25 CCAs may also find that 

stressed market conditions lead to 

liquidity shortfalls or that certain events 

drain other capital sources that impair 

the functioning of the CCA. 

Accordingly, to help preserve financial 

stability and ensure the continuity of 

critical CCP and CSD functions in 

periods of extreme stress, a resilient 

CCA still needs to plan effectively to 

replenish financial resources when 

depleted, address and allocate losses 

when they accrue, and, if the CCA is 

unable to allocate losses and replenish 

depleted resources, implement an 

orderly wind-down and cessation or 

transfer of its business. If a CCA is 

unable to take these steps in a 

transparent, orderly, and effective way, 

it will serve as a source of contagion, 

resulting in the potential for significant 

costs not only to the CCA itself or its 

clearing members but also to other 

market participants and the broader U.S. 

financial system.26


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by the FDIC pursuant to Title II of the Dodd-Frank 

Act. RWP Proposing Release, supra note 18, at 

34712. 

27See 17 CFR 240.17ad–22(e)(3)(ii) (requiring 

‘‘plans for the recovery and orderly wind-down of 

the CCA necessitated by credit losses, liquidity 

shortfalls, losses from general business risk, or any 

other losses’’). 

28RWP Proposing Release, supra note 18, at 

34709 (citing CCA Standards Adopting Release, 

supra note 5, at 70808–09). 

29E.g., CPMI–IOSCO Recovery Guidance, supra 

note 25; FSB Analysis, supra note 24; FSB, 

Financial Resources and Tools for Central 

Counterparty Resolution (Apr. 25, 2024), https://

www.fsb.org/wp-content/uploads/P250424-1.pdf 

(‘‘FSB Guidance’’). 

30See RWP Proposing Release, supra note 18, at 

34715–16. 

31See infra Parts II.C.1 and 2 (discussing critical 

services and service providers, respectively). 

32See infra Parts II.C.3 and 4 (discussing 

scenarios and triggers, respectively). 

33See infra Part II.C.5 (discussing tools). 

34See infra Part II.C.6 (discussing requirements 

related to implementation). 

35See infra Part II.C.7 (discussing notification to 

the Commission). 

36See infra Part II.C.8 (discussing the testing 

requirement). 

37See infra Part II.C.9 (discussing board review 

and approval of the RWP and material changes 

thereto, including material changes to the covered 

clearing agency’s operations that would 

significantly affect the viability or execution of the 

RWP). 

38RWP Proposing Release, supra note 18, at 

34709. 

39See id. at 34711. 

40 Id. at 34712. In April, the FSB published 

guidance describing the existing set of financial 

resources and tools available for use by resolution 

authorities (such as the FDIC), in a CCP resolution. 

FSB Guidance, supra note 29. The FSB Guidance 

is relevant to some of the comments received on 

proposed Rule 17Ad–26, as discussed further in 

Part II. 

41Comments received are available on the 

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

comments/s7-10-23/s71023.htm. 

42 Derivatives Clearing Organizations Recovery 

and Order Wind-Down Plans, Information for 

Resolution Sharing (July 3, 2023), 88 FR 48968, 

48972–73 (July 28, 2023), https://www.govinfo.gov/ 

content/pkg/FR-2023-07-28/pdf/2023-14457.pdf. 

43Commission staff communicates with the CFTC 

staff regularly on topics of mutual interest for their 

respective registrants, including RWPs, and has 

consulted with CFTC staff regarding RWPs. 

44RWP Proposing Release, supra note 18, at 

34713. 

Although the CCA Standards adopted 

in 2016 included a requirement for 

CCAs to have policies and procedures 

that provide for plans for recovery and 

orderly wind-down, the Commission 

did not include in the rule the specific 

elements to be required as part of such 

plans.27 The Commission stated that, 

given the nature of recovery and 

resolution planning, the RWP would 

likely reflect the specific characteristics 

of the CCA (e.g., its ownership, 

organizational, and operational 

structures, as well as its size, systemic 

importance, global reach, and/or the 

risks inherent in the products it 

clears).28 Since that time, each CCA has 

developed an RWP pursuant to the 

requirement for such plans in Rule 

17Ad–22. In addition, the Commission 

has, through its supervisory process and 

through its participation in the ongoing 

consideration of issues regarding CCP 

recovery and resolution,29 identified 

several elements that should be 

included in any RWP regardless of the 

market served or the products cleared, 

to help ensure that planning is effective, 

thoughtful, and thorough. 

Accordingly, in the RWP Proposing 

Release,30 the Commission proposed 

new requirements directed to 

establishing specific elements of all 

RWPs across CCAs, including: 

requirements to identify critical systems 

and service providers and related 

staffing that would support these 

functions, to be maintained in a 

recovery or wind-down scenario; 31 the 

identification and analysis of scenarios 

and triggers that could necessitate 

implementation of a recovery or winddown; 32 the identification and analysis 

of which tools would be appropriate in 

certain scenarios in order to facilitate 

recovery or an orderly wind-down; 33

requirements for effecting 

implementation of the plan; 34

notification to the Commission; 35

robust annual testing with participants 

and key stakeholders, as appropriate; 36

and provisions for board review and 

approval of the plan and any material 

changes thereto.37 As discussed in the 

RWP Proposing Release, these new 

requirements draw from existing 

practices at CCAs.38 In Parts II.C and D, 

the Commission discusses in greater 

detail these new requirements, codified 

in new Rule 17Ad–26, in addition to 

addressing the comments received on 

the proposed rules. New Rule 17Ad–26 

promotes three important objectives: (i) 

bolstering the existing RWPs at CCAs; 

(ii) codifying some existing RWP 

elements to ensure that these elements 

remain in the plans over time; and (iii) 

establishing that the RWP of any new 

CCA would contain each of the 

elements specified in the rule.39 By 

advancing these objectives, new Rule 

17Ad–26 helps ensure that, in times of 

extreme market stress, the recovery or 

wind-down of a CCA can preserve 

financial stability and ensure the 

continuity of critical CCP or CSD 

functions.40

The Commission received comments 

on the RWP Proposing Release from 

CCAs, industry groups (representing 

both clearing agencies and their 

participants), other market participants, 

academics, individual investors, and 

other interested parties.41 Commenters 

were generally supportive of the 

proposal, though some commenters also 

expressed concerns regarding specific 

elements of the proposed rules. In Part 

II, the Commission discusses these 

comments in detail and the 

modifications made to the final rules to 

address comments received. As 

discussed further in Part II, the 

Commission is adopting each of the 

proposed rules, some substantially as 

proposed and others with certain 

modifications. 

In addition, and separate from the 

Commission’s proposed rules for CCAs, 

the CFTC also has proposed rules 

directed to the RWPs of systemically 

important derivatives clearing 

organizations (‘‘SIDCOs’’) under the 

Commodity Exchange Act.42 Like the 

Commission’s final rules for CCAs 

adopted in this release, the CFTC’s 

proposed rules are intended to codify 

certain common elements of RWPs 

across SIDCOs. With respect to some 

elements of final Rule 17Ad–26, the 

Commission has taken a different 

approach from the CFTC’s proposed 

rule. For example, given the range of 

products cleared and markets served 

across CCAs, the Commission has not 

included in Rule 17Ad–26 requirements 

for scenarios at the same level of 

granularity as the CFTC. Nonetheless, 

the final Rule 17Ad–26 and the CFTC’s 

proposal are aligned in their objectives 

and promote substantially similar 

outcomes. The differing approaches are 

discussed further in Part II.C.10.43

II. Discussion of Comments Received 

and Final Rules 

A. Collection of Intraday Margin 

1. Proposed Amendment to Rule 17Ad– 

22(e)(6)(ii) 

The RWP Proposing Release proposed 

to strengthen the preexisting 

requirements in Rule 17Ad–22(e)(6)(ii) 

for a CCA to have policies and 

procedures reasonably designed to cover 

its credit exposures to its participants by 

establishing a risk-based margin system 

that, among other things, includes the 

operational capacity to make intraday 

margin calls in defined circumstances.44

Specifically, the proposed amendments 

to Rule 17Ad–22(e)(6)(ii) required a 

CCA that provides CCP services to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to cover its credit 

exposures to establish a risk-based 

margin system that, among other things, 

includes the authority and operational 

capacity to (i) monitor intraday 

exposure on an ongoing basis, and (ii) 

to make intraday margin calls as 


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45 Id. at 34712–14. The preexisting requirement in 

Rule 17Ad–22(e)(6)(ii) to establish written policies 

and procedures that provide for marking participant 

positions to market and collecting margin, 

including variation margin or equivalent charges if 

relevant, at least daily, would be unchanged under 

the amendments being adopted in this release. 

46 Id. at 34713. 

47 Id. 

48 Id. 

49 Id. 

50 Id.; see also CPMI–IOSCO Resilience Guidance, 

supra note 14, at 5.2.2 (discussing how a CCP 

addresses intraday exposure in its margin system 

and stating that ‘‘a CCP faces the risk that its 

exposure to its participants can change rapidly as 

a result of intraday changes in prices, positions, or 

both; ie [sic], adverse price movements, as well as 

participants building larger positions through new 

trading (and settlement of maturing trades). For the 

purposes of addressing these and other forms of risk 

that may arise intraday, a CCP should address and 

monitor on an ongoing basis how such risks affect 

all components of its margin system, including 

initial margin, variation margin and add-on 

charges.’’). 51RWP Proposing Release, supra note 18, at 

34713. The Commission also explained that a CCA 

‘‘generally should consider whether its intraday 

monitoring considers how participants’ exposures 

would affect all risks faced by the CCA, including 

those that may already by contemplated by 

variation margin, initial margin, or add-on charges.’’ 

Id. 52 Id. 53Letter from Megan Malone Cohen, Corporate 

Secretary, General Counsel, The Options Clearing 

Corporation (July 17, 2023) at 3 (‘‘OCC’’); Letter 

from Timothy Cuddihy, Managing Director, Group 

Chief Risk Officer, Depository Trust & Clearing 

Corporation (July 17, 2023) at 3 (‘‘DTCC’’); Letter 

from Ullrich Karl, Head of Clearing Services, 

International Swaps and Derivatives Association, 

and Jacqueline Mesa, Senior Vice President, Futures 

Industry Association (July 17, 2023) at 6 (‘‘The 

Associations’’); Letter from Stephen W. Hall, Legal 

Director and Securities Specialist, Better Markets, 

Inc. (July 17, 2023) at 7 (‘‘Better Markets’’); Letter 

from Chris Edmonds, Chief Development Officer, 

Intercontinental Exchange (July 19, 2023) at 2 

(‘‘ICE’’); see also Letter from Sarah Bessin, Deputy 

General Counsel, Investment Company Institute 

(Sept. 26, 2023) at 10 (‘‘ICI’’) (generally supporting 

the Commission’s proposed amendments). 

54OCC at 3; Letter from Global Association of 

Central Counterparties (July 17, 2023) at 2 

(‘‘CCP12’’); DTCC at 3; see also ICE at 2 (stating that 

clearing agencies should continue to have the 

flexibility to determine the appropriate timeframe 

for intraday monitoring). 

55CCP12 at 2. 

56See The Associations at 6. 

57 Id. at 6. 

58 Id. 

59The Commission is adding paragraph divisions 

to Rule 17Ad–22(e)(6)(ii) to better delineate the 

sections of the rule, for clarity. The portion of the 

rule text regarding monitoring intraday exposure 

would be Rule 17Ad–22(e)(6)(ii)(B). The 

Commission is also adding ‘‘(A)’’ before the portion 

of the rule that relates to marking participant 

positions to market and collecting margin at least 

daily and changing the punctuation at the end of 

that section to a semi-colon, as opposed to a 

comma. The Commission is also revising the 

punctuation at the end of Rule 17Ad–22(e)(6)(ii)(B) 

to a semicolon, as opposed to a comma. 

60RWP Proposing Release, supra note 18, at 

34713. 

61 Id. 

62See, e.g., Release No. 34–99149 (Dec. 13, 2023), 

89 FR 2714, 2782 (Jan. 16, 2024) (‘‘Treasury 

Clearing Adopting Release’’), govinfo.gov/content/ 

pkg/FR-2024-01-16/pdf/2023-27860.pdf (‘‘Today, 

[proprietary trading firms] actively buy and sell 

large volumes of U.S. Treasury securities on an 

intraday basis using high-speed and other 

algorithmic trading strategies.’’); James C. 

Harkrader & Daniel J. Weitz, FEDS Notes: How Do 

Principal Trading Firms and Dealers Trade around 

FOMC Statement Releases? (Dec. 31, 2020), https:// 

www.federalreserve.gov/econres/notes/feds-notes/ 

how-do-principal-trading-firms-and-dealers-tradearound-fomc-statement-releases-20201231.html. 

frequently as circumstances warrant, 

including when risk thresholds 

specified by the CCA are breached or 

when the products cleared or markets 

served display elevated volatility.45

2. Discussion of Comments 

a. Monitoring Intraday Exposure on an 

Ongoing Basis: Rule 17Ad– 

22(e)(6)(ii)(B) 

When adopted in 2016, preexisting 

Rule 17Ad–22(e)(6)(ii) included the 

requirement that CCAs have the 

authority and operational capacity to 

make intraday margin calls.46 In the 

RWP Proposing Release, the 

Commission stated that the ‘‘operational 

capacity’’ to make intraday margin calls 

‘‘includes the ability to monitor intraday 

exposure; otherwise, it would be 

impossible for a CCA to make 

appropriate intraday margin calls if it 

were not monitoring its intraday 

exposure.’’ 47 Therefore, as originally 

adopted, Rule 17Ad–22(e)(6)(ii) 

required a CCA to have some ability to 

monitor for intraday exposure and make 

intraday margin calls but did not 

include a specific requirement to 

monitor for intraday exposure or 

regarding the frequency at which to 

monitor intraday exposures.48

In the RWP Proposing Release, the 

Commission stated its continued belief, 

consistent with its statements when 

adopting the CCA Standards, that it is 

essential that a CCA monitor its intraday 

exposures because the CCA faces a risk 

that a CCA’s exposure to its participants 

can change rapidly because of intraday 

changes in prices, positions, or both.49

The Commission further stated that a 

requirement that such monitoring occur 

on an ongoing basis would contribute to 

ensuring that the CCA is sufficiently 

informed and situated to take 

appropriate actions to manage any 

intraday exposure that arises.50 The 

Commission also stated that being able 

to monitor, on an ongoing basis, any 

decrease in the margin coverage (as 

compared to the changes in intraday 

credit exposures in its participants’ 

portfolios) should help a CCA ensure 

that it is able to collect margin sufficient 

to cover its participants’ exposures.51

The Commission further stated that this 

requirement to monitor intraday 

exposure on an ongoing basis should 

provide each CCA with some flexibility 

to determine what monitoring frequency 

is appropriate in the market served by 

the CCA. Therefore, the Commission did 

not specify a particular time period or 

frequency for monitoring on an ongoing 

basis because a CCA ‘‘should be able to 

tailor its monitoring to the particular 

products cleared and markets 

served.’’ 52

Commenters generally recognized the 

importance of monitoring intraday 

exposure.53 Several commenters agreed 

with the approach in the proposal not 

to prescribe a particular monitoring 

frequency that would constitute an 

‘‘ongoing basis,’’ because of the need for 

a CCA to be able to tailor its monitoring 

to the particular products cleared and 

markets served.54 For example, one 

such commenter stated that, rather than 

the Commission prescribing a 

monitoring frequency, a CCA’s 

monitoring ‘‘should align with each 

[CCA’s] scheduled settlement, initial 

margin, and variation margin practices 

to support financial stability in both 

normal and volatile market 

conditions.’’ 55

By contrast, one commenter stated 

that the Commission should prescribe 

some particular universal, minimum 

monitoring frequency (i.e., establishing 

a maximum time between instances of 

a CCA’s intraday monitoring of its credit 

exposures).56 This commenter 

acknowledged the benefit that would 

arise from deferring ongoing monitoring 

assessments to a CCA, but supported 

that the Commission include a 

universal, minimum monitoring 

frequency in this requirement.57

Specifically, this commenter stated that 

‘‘every 15 minutes should be the 

absolute minimum’’ for frequency of 

monitoring intraday exposures related 

to any possible intraday margin 

collection.58

The Commission is adopting the 

requirement to monitor intraday 

exposures on an ongoing basis as 

proposed.59 As stated in the RWP 

Proposing Release, a CCA should be 

able to tailor its risk monitoring to the 

particular products cleared and the 

markets served.60 Accordingly, the 

proposed requirement to monitor 

intraday exposures on an ongoing basis 

is designed to allow a CCA to determine 

what monitoring frequency is 

appropriate for its particular market.61

A CCA needs this flexibility because 

‘‘more frequent monitoring may be 

necessary for a CCA that operates in 

markets where intraday trading may be 

more prevalent’’ (such as, for example, 

in the U.S. Treasury market),62 or 


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63RWP Proposing Release, supra note 18, at 

34713. 

64These risks could include those that ‘‘may 

already be contemplated by variation margin, initial 

margin, or add-on charges.’’ Id. 

65See infra note 84 and accompanying text. 

66See, e.g., CPMI–IOSCO Resilience Guidance, 

supra note 14, at 5.2.22. 

67 17 CFR 240.17ad–22(e)(6)(ii). 

68 Id.; see also RWP Proposing Release, supra note 

18, at 34713. 

69RWP Proposing Release, supra note 18, at 

34713–14. 

70See The Associations; Better Markets; ICI; 

Letter from Thomas F. Price, Managing Director, 

Technology, Operations, and Business Continuity, 

SIFMA, and William C. Thum, Managing Director 

and Associate General Counsel, SIFMA Asset 

Management Group (Sept. 26, 2023) (‘‘SIFMA’’). 

71 ICI at 10–11; Letter from John P. Davidson (June 

5, 2023) at 2, 9 (‘‘Davidson’’) (stating that intraday 

financial flows should be mandatory at a fixed 

scheduled time and at the same time across all 

linked CCPs, but also acknowledging ‘‘the 

occasional need for an additional set of intraday 

cash and collateral movements in cases of truly 

extreme market moves’’). 

72SIFMA at 8. 

73 Id. 

74For example, if a CCA schedules intraday 

margin collection at noon every day, there may be 

instances when thresholds are triggered after that 

scheduled time, and the CCA would then make an 

unscheduled margin call to avoid significant 

exposure being carried overnight. 

alternatively where a CCA’s ‘‘intraday 

exposures may tend to be larger because 

of specific features, such as the 

settlement process.’’ 63

In response to the commenter seeking 

a required mandatory minimum 

frequency for intraday monitoring, the 

Commission does not agree that such a 

requirement is necessary. Previously, 

the Commission stated that a CCA 

generally should consider whether its 

policies and procedures for intraday 

monitoring address how participants’ 

exposures would affect financial risks 

faced by the CCA.64 For example, some 

CCA margin methodologies may be 

designed to account for some intraday 

price and position changes, which could 

have an impact on the appropriate 

intraday monitoring frequency. 

Therefore, the Commission is not 

adopting a minimum monitoring 

frequency. The Commission, however, 

would be able to consider whether a 

particular CCA’s intraday monitoring 

frequency is reasonably designed to 

meet this requirement within the 

proposed rule change process when 

changes thereto are filed as a proposed 

rule change, including what the CCA 

has identified as the appropriate 

ongoing basis for the products cleared 

and the markets served and in light of 

the entirety of the CCA’s margin 

methodology (that is, whether it has 

other components which account for 

some intraday price and position 

changes).65 More generally, whether a 

CCA has established, implemented, 

maintained and enforced written 

policies and procedures reasonably 

designed to comply with Rule 17Ad– 

22(e) is subject to examination. 

When designing its intraday margin 

monitoring, a CCA generally should 

consider whether its monitoring 

encompasses all aspects of intraday 

exposures, including how such 

exposures affect all components of a 

CCA’s margin model, including initial 

margin, variation margin, and add-on 

charges.66 A CCA also generally should 

consider whether its basis to recalculate 

margin intraday accounts for both 

position changes and price volatility. 

b. Circumstances for Intraday Margin 

Calls 

Preexisting Rule 17Ad–22(e)(6)(ii) 

also required that a CCA’s written 

policies and procedures be reasonably 

designed to include the authority and 

operational capacity to make intraday 

margin calls ‘‘in defined 

circumstances.’’ 67 However, preexisting 

Rule 17Ad–22(e)(6)(ii) did not define 

what constitutes ‘‘defined 

circumstances.’’ 68 In proposing the 

requirement regarding collecting 

intraday margin as frequently as 

‘‘circumstances warrant,’’ the 

Commission stated that the proposed 

requirement would build upon and 

expand this preexisting requirement 

(i.e., to have the authority and 

operational capacity to make intraday 

margin calls in ‘‘defined 

circumstances’’). Specifically, the 

proposed requirement would identify 

two particular circumstances: (1) when 

risk thresholds specified by the CCA are 

breached or (2) when the products 

cleared or markets served display 

elevated volatility. The proposed 

requirement would also continue to 

provide flexibility to CCAs to make 

intraday margin calls as frequently as 

circumstances warrant.69

Commenters generally agreed with the 

need for thresholds regarding when a 

CCA would make intraday margin calls. 

However, commenters raised several 

concerns which are addressed below.70

i. Scheduled vs. Unscheduled Intraday 

Calls 

Several commenters suggested that 

intraday margin calls generally should 

be scheduled, with unscheduled 

intraday margin calls limited to extreme 

circumstances.71 One such commenter 

specified that scheduled intraday 

margin calls should be at the same time 

every day, in the early afternoon.72 This 

commenter explained that the 

unpredictability of unscheduled 

intraday margin calls may require a 

fund (which is a participant in a CCA) 

to keep a portion of its assets in loweryielding, highly liquid assets.73

In response to these comments 

seeking additional requirements for 

scheduled intraday margin calls and to 

limit unscheduled intraday margin 

calls, the Commission recognizes that 

scheduled intraday margin calls provide 

certainty for market participants about 

when resources will be needed. 

However, there may be circumstances 

that arise intraday, such as in times of 

elevated volatility or significant position 

changes, where a CCA needs to manage 

its exposure to a participant through an 

unscheduled margin call.74 In such 

circumstances, scheduled intraday 

margin calls may not be sufficient to 

ensure that a CCA collects margin to 

cover its exposure to its participants. To 

ensure strong risk management in such 

circumstances, CCAs need to have the 

ability to make unscheduled intraday 

margin calls. It would not be 

appropriate to mandate that CCAs only 

make scheduled intraday margin calls, 

and, therefore, the Commission is not 

adopting such a requirement to require 

scheduled intraday margin calls. 

However, the Commission 

understands the need for market 

participants to plan for the potential 

resources needed to meet intraday 

margin calls. To that end, the amended 

Rule 17Ad–22(e)(6)(ii)(C) states that a 

CCA must establish policies and 

procedures regarding at least two 

particular circumstances in which a 

CCA would make intraday margin calls, 

that is, when risk thresholds specified 

by the CCA are breached and when 

products cleared or markets served 

display elevated volatility, as discussed 

in Part II.A.2.b infra. For example, a 

CCA could specify that its risk threshold 

is breached when the difference 

between a member’s start of day margin 

and a calculation of its intraday margin 

based on its new positions exceeds a 

predetermined percentage or dollar 

amount. Thus, market participants 

should be able to plan for their potential 

resource needs to meet intraday margin 

calls because, as discussed in Part 

II.A.2.b.ii infra, a CCA is required to 

have certain transparency around its 

margin model. This transparency will 

allow a market participant to 

understand those specified 

circumstances in which a CCA would 

make intraday margin calls and would 

therefore allow the market participant to 

make arrangements for additional 

liquidity in such circumstances, such 


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75The Associations at 2; Better Markets at 8; ICI 

at 10–11; SIFMA at 9. 

76The Associations at 2–3 (requesting ‘‘clear and 

transparent policies with regards to the conditions 

under which a [CCA] might call intraday margin’’); 

Better Markets at 8 (requesting ‘‘full transparency 

for triggers of intraday margin calls’’); SIFMA at 9 

(requesting ‘‘published triggers and thresholds to 

calculate both start of day and intraday margin 

requirements’’); ICI at 11 (requesting a CCA 

‘‘communicate to market participants the thresholds 

that would trigger both scheduled and ad hoc [sic] 

intraday margin calls’’). 

77The Commission is adding paragraph divisions 

to Rule 17Ad–22(e)(6)(ii) to better delineate the 

sections of the rule, for clarity. The portion of the 

rule text regarding the authority and operational 

capacity to make intraday margin calls is in Rule 

17Ad–22(e)(6)(ii)(C). 

78This framework is not required to foreclose or 

prohibit the use of any discretion in such 

determinations, as discussed further in Part 

II.A.2.b.iii, infra. 

79See infra notes 81–100 and accompanying text 

(discussing several Commission requirements that 

promote disclosure and transparency). 

80RWP Proposing Release, supra note 18, at 

34714. 

81 15 U.S.C. 78c(a)(26) (‘‘The term ‘self-regulatory 

organization’ means any [. . .] registered clearing 

agency’’). 

82See, e.g., infra note 87 (discussing such changes 

that previously have been considered by the 

Commission); infra note 119 (describing 

Commission rules that promote transparency 

regarding margin practices at registered clearing 

agencies). 

83 17 CFR 240.19b–4(a)(6)(i) (defining ‘‘stated 

policy, practice, or interpretation’’ to include, inter 

alia, ‘‘[a]ny material aspect of the operation of the 

facilities of the self-regulatory organization’’). 

Additionally, Rule 19b–4 would also apply to 

certain statements that a CCA issues concerning its 

margin methodology. Specifically, this rule would 

cover any CCA statement ‘‘made generally available 

to the membership of [. . . the CCA] that 

establishes or changes any standard, limit, or 

guideline, with respect to: (a) the rights, obligations, 

and privileges of its membership; or (b) the 

meaning, administration, or enforcement of an 

existing rule.’’ 17 CFR 240.19b–4(a)(6)(ii). 

84 15 U.S.C. 78s(b)(1) (requiring each SRO to ‘‘file 

with the Commission, in accordance with such 

rules as the Commission may prescribe, copies of 

any proposed rule or any proposed change in, 

addition to, or deletion from the rules of such selfregulatory organization’’); see also 17 CFR 240.19b– 

4. In addition, a stated policy, practice, or 

interpretation of an SRO (e.g., written policies and 

procedures) would generally be deemed to be a 

proposed rule change. See 17 CFR 240.19b–4(c). 

as, for example, securing additional 

financing to cover such margin calls. 

ii. Need for Clear Thresholds and 

Transparency 

Commenters also requested that the 

Commission revise the proposal to 

mandate that a CCA define its criteria 

for any unscheduled intraday margin 

call in advance of any unscheduled 

intraday margin call and to require 

additional disclosures regarding 

intraday margin calls.75 These 

commenters stated that requiring clear 

and transparent policies regarding the 

conditions under which a CCA might 

make an intraday margin call, both on 

a scheduled and unscheduled basis, 

would enhance participants’ ability to 

prepare for these margin calls and 

understand any potential demands on 

their liquidity arising from such a call.76

The Commission agrees with the 

commenters that it is essential that a 

CCA determine and clearly 

communicate ex ante in what 

circumstances it would make both 

scheduled and ad hoc intraday margin 

calls. However, as discussed further 

below, CCAs already are subject to such 

requirements in preexisting Rule 17Ad– 

22(e)(6)(ii) and (e)(23) and 17 CFR 

240.19b–4 (‘‘Rule 19b–4’’). Further, by 

specifying two instances in which CCAs 

must establish, implement, maintain 

and enforce policies and procedures to 

collect intraday margin, the 

amendments being adopted in this 

release will identify for clearing 

participants conditions under which a 

CCA would make an intraday margin 

call.77

First, with respect to the commenters’ 

request to require that CCAs determine 

the circumstances for intraday margin 

calls, a CCA already is required, under 

preexisting Rule 17Ad–22(e)(6)(ii), to 

have certain policies and procedures 

regarding intraday margin. These 

policies and procedures are the 

framework that a CCA uses when 

determining whether to make intraday 

margin calls, and these policies and 

procedures must identify the 

circumstances in which a CCA would 

make intraday margin calls.78 This 

requirement will be strengthened by the 

amendments adopted in this release, 

which provide more specificity that the 

CCA must have policies and procedures 

to be able to make intraday margin calls 

as frequently as circumstances warrant 

and in two particular circumstances 

identified in the rule. Specifically, the 

amendments to preexisting Rule 17Ad– 

22(e)(6)(ii) require that a CCA have 

written policies and procedures to cover 

its credit exposures to its participants by 

establishing a risk-based margin system, 

which, among other things, includes the 

authority and operational capacity to 

make intraday margin calls ‘‘as 

frequently as circumstances warrant’’ 

including in two particular situations: 

when risk thresholds specified by the 

CCA are breached and in times of 

elevated volatility. This requirement 

should ensure that the CCA develops ex 

ante policies and procedures to 

determine risk thresholds for intraday 

margin and when it considers volatility 

to be elevated above typical levels in a 

manner specific to the products cleared 

and the markets served. Because these 

amendments would identify specific 

circumstances in which a CCA must 

have the authority and operational 

capacity to make intraday margin calls 

which would be part of a CCA’s overall 

disclosure requirements regarding its 

margin methodology, as discussed 

further below,79 these amendments 

should improve participants’ ability to 

understand when they may be subject to 

additional margin calls. This improved 

understanding should further allow 

participants to be better able to prepare 

to provide additional financial resources 

in anticipation of additional margin 

calls.80

Second, with regard to the 

commenters’ request to clearly 

communicate ex ante the circumstances 

in which a CCA would make intraday 

margin calls, the Commission agrees 

that such ex ante transparency is 

essential for a CCA’s participants, but 

disagrees that any additional 

requirements are necessary to achieve 

such transparency. A CCA’s participants 

already have such transparency for 

several reasons. As a registered clearing 

agency, a CCA is a self-regulatory 

organization (‘‘SRO’’) under the 

Exchange Act,81 subject to the 

provisions of section 19(b) of the 

Exchange Act which requires public 

notice and an opportunity for public 

comment on any rule changes that an 

SRO seeks to adopt.82 In addition, a 

CCA potentially is a ‘‘designated 

financial market utility’’ (alternatively, a 

‘‘systemically important financial 

market utility’’ or ‘‘SIFMU’’) subject to 

section 806(e) of the Dodd-Frank Act 

regarding advance notice of material 

changes to its rules, procedures, or 

operations that could materially affect 

the nature or level of risks presented. 

Further, the CCA Standards impose 

requirements related to transparency 

and disclosure to its participants. 

A CCA’s margin methodology, which 

would include, among other things, the 

criteria used to determine whether to 

make intraday margin calls, constitutes 

a material aspect of its operations, 

meaning that it is part of a CCA’s stated 

policies, practices, or interpretations 

under Exchange Act Rule 19b–4.83 As 

such, a CCA’s margin methodology is 

subject to the filing obligations 

applicable to SROs under section 19(b) 

of the Exchange Act regarding any 

proposed rule or proposed change to its 

rules.84 The proposed rule filing process 

provides transparency into an SRO’s 

proposed changes, through notice and 

comment. An SRO is obligated to file its 

proposed rule changes in a manner 

consistent with the requirements in 

Form 19b–4, which is intended to elicit 

information necessary for the public to 


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85See General Instructions for Form 19b–4, at 

Instruction B, https://www.sec.gov/files/form-19b4- 

general-instructions.pdf. The Form 19b–4 specifies 

the contents that must be included in a proposed 

rule change filing includes, among other items, a 

statement of purpose for the proposed rule change, 

which describes the reasons for adopting the 

proposed rule change, any problems the proposed 

rule change is intended to address, the manner in 

which the proposed rule change will operate to 

resolve those problems, the manner in which the 

proposed rule change will affect various persons 

(e.g., brokers, dealers, issuers, and investors), and 

any significant problems known to the SRO that 

persons affected are likely to have in complying 

with the proposed rule change. Id. at Information 

to Be Included in the Completed Form, Item 3(a). 

The SRO must also include in its proposed rule 

change the complete text of the proposed rule. Id. 

at Information to Be Included in the Completed 

Form, Item 1(a). The SRO may request confidential 

treatment of any portion of its filing, see 17 CFR 

240.24b–2, but it would still have to comply with 

the requirements of Form 19b–4 with respect to 

describing the contents of the proposed rule change 

for public comment. 

86See RWP Proposing Release, supra note 18, at 

34711. 

87See, e.g., Notice of Filing of Amendment No. 

1 and Order Granting Accelerated Approval of a 

Proposed Rule Change, as Modified by Amendment 

No. 1, To Implement Changes to the Required Fund 

Deposit Calculation in the GSD Rulebook, Release 

No. 34–83362 (June 1, 2018), 83 FR 26514 (June 7, 

2018) (File No. SR–FICC–2018–001) (approving 

proposed rule change to provide transparency with 

respect to GSD’s existing authority under GSD Rule 

4 to calculate and assess intraday margin amounts, 

by identifying the three criteria that GSD uses to 

calculate the intraday amount due ((i) the dollar 

threshold, which evaluates whether a member’s 

intraday VaR Charge equals or exceeds a set dollar 

amount when compared to the VaR Charge that was 

included in the most recent margin collection: (ii) 

the percentage threshold, which evaluates whether 

the intraday VaR Charge equals or exceeds a 

percentage increase of the VaR Charge that was 

included in the most recent collection; and (iii) the 

coverage target, which evaluates whether a member 

is experiencing backtesting results below a 99% 

confidence level), and stating that FICC assesses 

intraday margin when all three criteria are breached 

and, under certain market conditions when the 

thresholds in (i) and (ii) are breached); FICC 

Important Notice GOV1244–22 (Apr. 11, 2022) 

(stating that, consistent with its Rule 4 authority, 

GSD will assess an Intraday Supplement Fund 

Deposit on a Netting Member if (i) a change in the 

Netting Member’s Intraday VaR Charge equals or 

exceeds $1 million when compared to its most 

recent VaR Charge calculation, (ii) the Netting 

Member’s Intraday VaR Charge equals or exceeds 

100% of its most recent VaR Charge calculation, 

and (iii) the Netting Member’s backtesting coverage 

is below 100%. Additionally, Netting Members who 

breached the thresholds for (i) and (ii) and have 

fewer than 100 trading days in a rolling 12-month 

period will be assessed an Intraday Supplemental 

Fund Deposit regardless of their backtesting 

coverage); Order Approving Proposed Rule Change 

to Adopt Intraday Volatility Charge and Eliminate 

Intraday Backtesting Charge, Release No. 34–97129 

(Mar. 13, 2023), 88 FR 16681 (Mar. 20, 2023) (File 

No. SR–NSCC–2022–009) (adopting an intraday 

volatility charge as part of NSCC’s margin 

methodology that would increase the margin 

collected from members whose trading portfolios 

experience large and unexpected intraday 

volatility). 

88Specifically, the Clearing Supervision Act 

provides for the enhanced regulation of a CCA that 

qualifies as a ‘‘financial market utility’’ that the 

FSOC designates as ‘‘systemically important’’ (a 

‘‘designated financial market utility’’). See 12 U.S.C. 

5462(6)(A) (defining a ‘‘financial market utility’’ to 

include ‘‘any person that manages or operates a 

multilateral system or the purpose of transferring, 

clearing, or settling payments, securities or other 

financial transactions among financial institutions 

or between financial institutions and the person’’) 

and 12 U.S.C. 5462(4)(defining a ‘‘designated 

financial market utility’’ to mean ‘‘a financial 

market utility’’ that FSOC has designated as 

‘‘systemically important’’); see also 12 U.S.C. 5463 

(discussing FSOC’s ability to designate entities as 

‘‘systemically important’’). On July 18, 2012, FSOC 

designated four CCAs as systemically important 

financial market utilities: The Depository Trust 

Company (‘‘DTC’’); Fixed Income Clearing 

Corporation (‘‘FICC’’); National Securities Clearing 

Corporation (‘‘NSCC’’); and The Options Clearing 

Corporation (‘‘OCC’’). FSOC, 2012 Annual Report: 

Appendix A: Designation of Systemically Important 

Financial Market Utilities (July 18, 2012), https://

home.treasury.gov/system/files/261/2012-AnnualReport.pdf. 

89See 12 U.S.C. 5461 et seq. 

90The Clearing Supervision Act defines a 

‘‘designated clearing entity’’ to include a 

‘‘designated financial market utility’’ that is a 

clearing agency registered with the Commission (of 

which a CCA is a subset). See 12 U.S.C. 5462(3). 

The Clearing Supervision Act defines the 

Commission as the ‘‘Supervisory Agency’’ for the 

four designated clearing agencies that are CCAs (i.e., 

DTC, NSCC, FICC, and OCC). See 12 U.S.C. 

5462(8)(A)(i). The Commission published a final 

rule concerning the filing and publication of 

advance notices for designated clearing agencies in 

2012. See 17 CFR 240.19b–4(n); Release No. 34– 

67286 (June 28, 2012), 77 FR 41602 (July 13, 2012) 

(File No. S7–44–10) (‘‘Filing of Advance Notices’’), 

https://www.govinfo.gov/content/pkg/FR-2012-07- 

13/pdf/2012-16233.pdf. 

91 17 CFR 240.19b–4(n)(2)(i), (ii). 

92See Filing of Advance Notices, supra note 90, 

at 41620. 

93 17 CFR 240.17ad–22(e)(23)(i). 

provide meaningful comment on the 

proposed rule change and for the 

Commission to determine whether the 

proposed rule change is consistent with 

the requirements of the Exchange Act 

and the rules and regulations 

thereunder.85 The Commission then 

publishes all proposed rule changes for 

comment. In this way, the rule filing 

process promotes transparency to 

market participants and the public by 

ensuring notice is provided regarding a 

CCA’s new initiatives or changes to 

governance, operations, and risk 

management.86 With respect to a CCA’s 

margin methodology, the rule filing 

process should provide transparency 

about how and when a CCA would 

calculate margin, including on an 

intraday basis, which is consistent with 

the requirements sought by commenters. 

The Commission has considered 

numerous proposed rule changes 

regarding CCAs’ margin methodologies. 

Notably, these proposed rule changes 

have addressed CCAs’ intraday margin 

policies and procedures, and these 

proposed rule changes have identified 

thresholds and criteria that a CCA 

would use in determining whether to 

make an intraday margin call, similar to 

what the commenters have requested.87

The notice and comment process 

provided by section 19(b) of the 

Exchange Act therefore provides for 

transparency into a CCA’s margin 

methodology, including input from 

participants. 

In addition, when a CCA is a 

SIFMU,88 it is also subject to the 

regulatory framework of the Clearing 

Supervision Act.89 Once designated by 

FSOC, CCAs that are SIFMUs are 

required to publicly file 60-days 

advance notice with the Commission of 

changes to rules, procedures, and 

operations that could materially affect 

the nature or level of risk presented by 

the designated clearing agency 

(‘‘advance notice’’), and, pursuant to the 

Commission’s rules, the Commission 

shall provide for prompt publication of 

such an advance notice, and then the 

public has the opportunity to comment 

on such an advance notice.90 Rule 19b– 

4(n) defines the term ‘‘materially affect 

the nature or level of risk presented’’ to 

mean matters as to which there is a 

reasonable possibility that the change 

could affect the performance of essential 

clearing and settlement functions or the 

overall nature or level of risk presented 

by the designated clearing agency, and 

it further provides examples of such 

potential changes as including, among 

other things, changes that could 

materially affect risk management or 

financial resources of the designated 

clearing agency.91 When adopting this 

requirement, the Commission identified 

changes to the ‘‘methods for making 

margin calculations’’ as among the 

additional examples of such matters.92

Therefore, any changes to the intraday 

margin policies and procedures of a 

CCA that has been designated as a 

SIFMU could also be subject to the 

advance notice process if the changes 

constitute a material change to the 

nature or level of risk presented by the 

CCA, and the advance notice process 

would bring additional transparency 

into such changes. 

Moreover, under the CCA Standards, 

a CCA is obligated to establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to provide for 

publicly disclosing all relevant rules 

and material procedures, including key 

aspects of its default rules and 

procedures.93 Such public disclosures 

generally should include a discussion of 

a CCA’s margin methodology, which 

could include how the CCA determines 

intraday margin, and they should, in 

turn, allow a market participant to 

understand how a CCA calculates 

margin, including any margin add-ons 


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94 17 CFR 240.17ad–22(e)(23)(ii). 

95 17 CFR 240.17ad–22(e)(23)(iv). 

96See DTC, Disclosure Framework for Covered 

Clearing Agencies and Financial Market 

Infrastructure (Mar. 2024), https://www.dtcc.com/-/ 

media/Files/Downloads/legal/policy-andcompliance/DTC-Disclosure-Framework-2024- 

Q1.pdf; FICC, Disclosure Framework for Covered 

Clearing Agencies and Financial Market 

Infrastructure (Mar. 2024), https://www.dtcc.com/-/ 

media/Files/Downloads/legal/policy-andcompliance/FICC-Disclosure-Framework-Q1- 

2024.pdf; ICE, Disclosure Framework (July 31, 

2023), https://www.ice.com/publicdocs/clear_

credit/ICEClearCredit_DisclosureFramework.pdf; 

LCH, Comprehensive Disclosure (July 31, 2024), 

https://www.lch.com/system/files/media_root/ 

LCH%20SA%20-%20Comprehensive%20

Disclosure%20as%20required%20by%20SEC%20

Rule%2017Ad-22%28e%29%2823%29_

2022%20Q2_2024.pdf; NSCC, Disclosure 

Framework for Covered Clearing Agencies and 

Financial Market Infrastructure (Mar. 2024), https:// 

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

policy-and-compliance/NSCC-DisclosureFramework-Q1-2024.pdf; OCC, Disclosure 

Framework for Financial Market Infrastructures 

(July 25, 2024), https://www.theocc.com/getmedia/ 

4664dece-7172-42a5-8f55-5982f358b696/pfmidisclosures.pdf. 

97See id. 

98See, e.g., https://www.theocc.com/riskmanagement/margin-methodology; https://

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

policy-and-compliance/GSD-Clearing-FundMethodology-Overview.pdf. 

99https://www.dtcc.com/managing-risk/stresstesting-and-liquidity-risk-management/ccfl-publiccalculator. 

100See supra note 80 and accompanying text. 

101SIFMA at 9. This commenter also suggested 

that the Commission should require that a CCA 

provide the Commission (and to the extent possible, 

its clearing participants) with an explanation for 

any discretionary intraday margin calls. Id. at 10. 

102See DTCC; ICE; OCC; CCP12. 

103 DTCC at 4 (requesting additional clarity 

regarding a CCA’s discretion and flexibility and 

stating that a CCA must maintain the discretion and 

flexibility to determine if intraday margin calls are 

required based on the totality of all circumstances 

the CCA may consider relevant and appropriate); 

ICE at 2 (stating that a CCA should be allowed the 

discretion on when and how to use its authority to 

make intraday margin calls under the particular 

circumstances); OCC at 4 (seeking explicit 

confirmation that a CCA may ‘‘exercise judgment 

when determining whether and when to actually 

make intraday margin calls, based on all relevant 

circumstances and using predefined criteria); 

and cross-margin arrangements with 

other clearing agencies. In addition, 

under Rule 17Ad–22(e)(23)(ii), these 

policies and procedures must provide 

sufficient information to enable 

participants to identify and evaluate the 

risks, fees, and other material costs they 

incur by participating in the CCA.94

Rule 17Ad–22(e)(23)(iv) also requires 

that a CCA produce a comprehensive 

public disclosure that describes its 

material rules, policies, and procedures 

regarding its legal, governance, risk 

management, and operating framework 

(a ‘‘Disclosure Framework’’), accurate in 

all material respects at the time of 

publication, that includes, among other 

things, a standard-by-standard summary 

narrative for each applicable standard 

set forth in paragraphs (e)(1) through 

(23) of the CCA Standards with 

sufficient detail and context to enable a 

reader to understand the CCA’s 

approach to controlling the risks and 

addressing the requirement in each 

standard.95 Therefore, a CCA must issue 

a public document addressing each of 

the CCA Standards, including those 

with respect to margin under Rule 

17Ad–22(e)(6).96 A CCA generally 

should consider whether its disclosures 

regarding its margin methodology, 

through its Disclosure Framework and/ 

or other publicly available documents, 

allows participants to understand how 

the model reacts to market conditions 

and to assess with some reasonable 

degree of certainty whether it will be 

subject to a margin call and in what 

amount. In addition, a CCA generally 

should consider whether it could 

provide a public-facing margin 

calculator to allow its participants, and 

market participants more generally, to 

understand the potential amount of any 

intraday margin calls on their portfolios, 

including with respect to add-on 

charges and any applicable cross-margin 

arrangements. 

In light of the existing requirements 

with respect to transparency in the SRO 

rule filing process, the advance notice 

process, and Rule 17Ad–22(e)(23), the 

Commission does not believe additional 

mandatory disclosures are necessary at 

this time. For example, every CCAs’ 

Disclosure Framework discusses the 

CCAs’ margin methodologies.97 Several 

CCAs have published documents further 

outlining their margin methodologies, 

including the formulas used in 

calculating margin.98 A CCA generally 

should consider whether it provides 

such information, i.e., the formulas used 

in calculating margin, to market 

participants, such that a market 

participant could make such 

calculations on its own. Finally, at least 

one CCA has developed a public 

calculator to provide market 

participants with the ability to calculate 

potential margin obligations on a 

simulated portfolio, for given positions 

and market value, using its Value at 

Risk methodology.99 Although not a 

substitute for a market participant’s 

ability to understand a CCA’s margin 

methodology on its own, such a public 

calculator is a helpful tool for 

determining how a CCA’s margin 

methodology operates, particularly if 

the calculator is able to provide 

information related to add-on charges 

and any applicable cross-margin 

arrangements. A CCA generally should 

consider whether it sufficiently 

identifies in its Disclosure Frameworks 

and any other documentation that it 

makes available the circumstances 

required under the amendments 

adopted to Rule 17Ad–22(e)(6)(ii) 

regarding when a CCA must collect 

intraday margin. Commenters requested 

that the Commission require a CCA’s 

intraday margin model to be transparent 

such that a CCA’s participants could 

anticipate a CCA’s future intraday 

margin calls.100 As discussed above, a 

CCA should generally consider whether 

it sufficiently identifies when Rule 

17Ad–22(e)(6)(ii) would require an 

intraday margin call. Such transparency 

could improve the ability of a CCA’s 

participants to understand when 

participants may be subject to 

additional margin calls. However, 

participants cannot expect to be able to 

predict every intraday margin call with 

complete certainty, and being able to do 

so may create moral hazard that would 

undermine the CCA’s ability to manage 

risk effectively. 

Finally, one commenter stated that 

CCAs should proactively engage with 

clearing members ahead of applying 

intraday margin calls to alleviate the 

potential liquidity risk for clearing 

members.101 The Commission 

acknowledges that it could be helpful 

for a CCA to engage with its clearing 

members regarding potential upcoming 

intraday margin calls. Given the 

potentially fluid nature of 

circumstances necessitating the need for 

an intraday margin call and the 

possibility that such engagement would 

not be possible in a time of market 

stress, imposing such engagement as an 

obligation would not be appropriate. 

However, a CCA generally should 

consider whether its written policies 

and procedures provide for engagement 

with a CCA ahead of applying an 

intraday margin call, as circumstances 

permit. 

iii. Determinations by CCAs To Collect 

Intraday Margin 

Several commenters addressed the 

role of discretion in the proposed 

requirement for a CCA to have the 

authority and operational capacity to 

make intraday margin calls as frequently 

as circumstances warrant, including 

when risk thresholds specified by the 

CCA are breached or when the products 

cleared or markets served display 

elevated volatility.102 Specifically, 

while generally supportive of the 

proposal, several commenters sought 

confirmation that a CCA could use 

discretion when deciding to issue 

intraday margin calls.103 These 


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CCP12 at 2 (supporting the proposed approach to 

intraday margin, but also stating that a CCA needs 

the ability to exercise discretion when issuing 

intraday margin calls, including the ability to tailor 

[its] intraday margin call processes to the 

characteristics of the market it clears (e.g., market 

structure)); see also Davidson at 11. But see id. at 

9 (explaining that a CCA would only have an 

‘‘occasional need’’ for an unscheduled intraday 

margin call’’ for only ‘‘truly extreme market 

moves’’); and 10 (warning that unfettered issuances 

of intraday margin calls could become ‘‘liquidity 

sinks’’ and ‘‘absorb[ ] liquidity like a giant sponge’’). 

104 DTCC at 4 (stating discretion is necessary 

when considering issuing an intraday market call to 

consider various factors, such as persistent 

exposure to a participant during normal market 

conditions, general market conditions, and any 

possible procyclical effects a margin collection may 

trigger); ICE at 2 (stating that discretion is needed 

for a CCA to consider the procyclical effects of any 

possible intraday margin call, such as ‘‘exacerbating 

credit and liquidity concerns with clearing 

members,’’ or ‘‘in extreme cases[,] causing market 

participant defaults); OCC at 4 (stating that, among 

other things, a CCA’s discretion should include 

considerations related to anti-procyclicality (by 

maximizing predictability of liquidity demands) 

and financial market stability); CCP12 at 2 (stating 

that this discretion would allow a CCA to consider 

any potential intraday margin call’s ‘‘negative 

procyclical effects’’ and/or ‘‘impacts to the stability 

of the financial system’’). 

105PFMI, supra note 9, at 47; see also Committee 

on the Global Financial System, The role of margin 

requirements and haircuts in procyclicality (Mar. 

23, 2010) at 8 (defining procyclicality as ‘‘the 

mutually reinforcing interactions between the 

financial and real sectors of the economy that tend 

to amplify business cycle fluctuations and cause or 

exacerbate financial instability’’), https://

www.bis.org/publ/cgfs36.pdf. 

106See infra Part IV.C.2.a (discussing the 

relationship between procyclicality and intraday 

margin calls). 

107 Id. 

108See supra note 83 and accompanying text. 

109 Id. 

110See supra Part II.A.2.ii (discussing elevated 

volatility under Rule 17Ad–22(e)(6)(ii) as when a 

CCA considers volatility to be elevated above 

typical levels in a manner specific to the products 

cleared and the markets served); contra CCA 

Standards Adopting Release, supra note 5, at 70815 

(stating that what would constitute ‘‘high volatility 

[. . .] may vary across asset classes’’). 

111As discussed above, supra note 101, one 

commenter sought for the Commission to require 

disclosure to the Commission and, if practicable, a 

CCA’s participants, of the explanation for any 

‘‘discretionary’’ intraday margin calls. SIFMA at 10. 

However, such disclosure is not necessary because 

these policies and procedures should clearly 

indicate when the CCA would make an intraday 

margin call. By contrast, the Commission is 

requiring that a CCA document when it determines 

not to make an intraday margin call when its 

policies and procedures would otherwise indicate 

as such. See infra note 118 and accompanying text. 

112The Commission is making several clarifying 

changes to Rule 17Ad–22(e)(6)(ii)(C): (1) 

capitalizing the first word of the rule text to read 

‘‘Monitors’’; (2) adding after the word ‘‘including’’ 

the language ‘‘in the following circumstances’’, 

followed by a semi-colon; (3) adding (1) and (2) to 

separate the two circumstances described in the 

rule text; and (4) adding the word ‘‘and’’ following 

the text of the rule. 

113See supra note 17 and accompanying text 

(further discussing the response to heightened 

volatility in GME and other equity securities). 

114SIFMA at 8–9. 

115 17 CFR 240.17ad–22(e)(6)(i), (iii). 

commenters stated that such discretion 

was necessary to allow the CCA to 

consider the potential procyclical 

impacts of an intraday margin call and/ 

or any financial stability impacts.104 In 

this context, procyclicality refers to 

‘‘changes in risk-management practices 

that are positively correlated with 

market, business, or credit cycle 

fluctuations and cause or exacerbate 

financial instability.’’ 105 For example, 

margin calls during periods of declining 

asset prices may cause participants to 

sell assets, putting further negative 

pressure on asset prices and the 

market.106 Such events could negatively 

affect other CCA participants, as well as 

other CCAs and their markets.107

As discussed above, a CCA’s margin 

methodology includes the criteria that a 

CCA uses to determine whether to make 

intraday margin calls.108 Because a 

CCA’s margin methodology constitutes 

aspects of the CCA’s stated policies, 

practices, or interpretations under Rule 

19b–4, a CCA is required to file a 

proposed rule change when the CCA 

revises its margin methodology 

(including, for example, revisions 

related to how its risk management 

concerns may affect a CCA’s 

determination to issue an intraday 

margin call).109 In such a filing, the CCA 

would describe how any such revisions 

are consistent with the requirements of 

Exchange Act and the rules thereunder, 

including Rule 17Ad–22(e)(6). 

The Commission agrees with these 

commenters that a CCA’s policies and 

procedures regarding intraday margin 

generally should be, under Rule 17Ad– 

22(e)(6)(ii), reasonably designed to 

address such risk management 

concerns, such as procyclicality. The 

Commission confirms that a CCA’s 

consideration of such concerns (and 

more generally, of a CCA’s 

understanding of its participants’ 

activity and overall market conditions) 

in its policies and procedures regarding 

intraday margin (including a CCA’s 

decision to collect or not collect margin 

in response to such consideration) is 

permissible and consistent with the 

requirements of both preexisting Rule 

17Ad–22(e)(6)(ii) and the amendments 

being adopted in this release. The 

requirement to adopt policies and 

procedures that include the authority 

and operational capacity to make 

intraday margin calls as frequently as 

circumstances warrant, including when 

risk thresholds specified by the CCA are 

breached or when the products cleared 

or markets served display elevated 

volatility,110 should ensure that a CCA 

establishes the criteria and thresholds 

that it would consider when 

determining whether to make an 

intraday margin call. Such criteria are 

subject to the transparency and 

disclosure requirements discussed 

above in Part II.A.2.b.ii, and as an SRO, 

a CCA is obligated to follow its own 

rules. But the CCA’s criteria and 

thresholds are not required to be 

inflexible or self-executing. A CCA 

generally should consider how its 

policies and procedures specify what 

factors the CCA would consider when 

determining when to make an intraday 

margin call when thresholds are 

breached or there is elevated 

volatility.111

The Commission is adopting this 

requirement as proposed.112 A CCA’s 

determination to issue intraday margin 

calls, consistent with its ex ante policies 

and procedures, should improve risk 

management outcomes by enabling a 

CCA to apply its risk management 

expertise to changing intraday 

circumstances, such as the extreme 

price volatility or significant position 

changes recently experienced in January 

2021.113 A CCA should be better 

positioned to respond to a market event 

more effectively by developing policies 

and procedures that provide a clear 

framework for the timing and collection 

of intraday margin, but that also allows 

for the CCA to use its expertise (in 

specific products and markets) to 

analyze the particular facts and 

circumstances related to the market 

event and the affected market 

participants. 

Commenters observed the importance 

of avoiding procyclicality in margin 

calls generally and the importance of 

considering the impact an intraday 

margin call may have on a CCA’s 

participant.114 The Commission agrees 

that a CCA generally should consider 

these issues when determining whether 

to issue an intraday margin call, 

consistent with the applicable 

regulatory requirement to consider, and 

produce margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market, and to calculate margin 

sufficient to cover its potential future 

exposure to participants in the interval 

between the last margin collection and 

the close out of positions following a 

participant default.115

Therefore, in this analysis, a CCA 

generally should consider, consistent 

with its policies and procedures, how 

its approach to intraday margin aligns 

with broader systemic objectives, such 

as minimizing potential procyclical 

effects and avoiding liquidity drains on 


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116See infra notes 559–563 and accompanying 

text (further discussing the economic impact of 

procyclical margin calls and considerations that a 

CCA may undertake in evaluating when to make or 

not make a call). 117SIFMA at 9, 10. 

118See supra note 111. 

119 17 CFR 240.17ad–25(j). 

120SIFMA at 9. The Commission understands this 

commenter to be referring to the difference between 

initial margin, which is typically collected to cover 

potential changes in the value of each participant’s 

position (that is, potential future exposure) over the 

appropriate close-out period in the event that the 

participant defaults, as compared to variation 

margin, which is collected and paid out to reflect 

current exposures resulting from actual changes in 

market prices and is typically calculated by 

marking open positions to current market prices. 

See, e.g., PFMI, supra note 9, at 51. The commenter 

stated that an intraday call should clearly separate 

the initial margin and variation margin components 

of such a call. SIFMA at 9. 

121See, e.g., CPMI–IOSCO Resilience Guidance, 

supra note 14, sec. 5.2.22 (‘‘A CCP faces the risk 

that its exposure to its participants can change 

rapidly as a result of intraday changes in prices, 

positions, or both; ie adverse price movements, as 

well as participants building larger positions 

through new trading (and settlement of maturing 

trades). For the purposes of addressing these and 

other forms of risk that may arise intraday, a CCP 

should address and monitor on an ongoing basis 

how such risks affect all components of its margin 

system . . .’’). 

122SIFMA at 9. 

123 Id. at 7–8, 10; Davidson at 2, 11 (stating that 

such a bidirectional flow would allow the 

participants to avoid ‘‘unnecessary liquidity timing 

gaps’’); see also The Associations at 2 (requesting 

prompt return of margin to clearing members and 

clients to alleviate liquidity constraints). 

its participants. For example, a CCA 

may choose not to issue an intraday 

margin call triggered by the thresholds 

set forth in its policies and procedures 

(i.e., when risk thresholds specified by 

the CCA are breached or when the 

products cleared or markets served 

display elevated volatility) if, in the 

CCA’s judgment, the intraday call is not 

required to effectively manage the risks 

posed to the CCA. A CCA’s decision not 

to issue an intraday margin call could, 

therefore, avoid unnecessarily 

worsening market conditions by 

fostering procyclicality, and drawing on 

its members’ capital more than needed 

(i.e., avoiding ‘‘liquidity sinks’’).116

A commenter also stated that the 

Commission should require that a CCA 

provide to the Commission, and to the 

extent possible, its clearing members, an 

explanation of the reasons for 

discretionary intraday margin calls 

because such explanation would allow 

for an evaluation of whether the need to 

make such a call might have been 

averted by improved procedures.117 The 

Commission does not agree that, as the 

commenter suggests, an obligation to 

provide an explanation and disclosure 

is necessary when a CCA makes an 

intraday margin call, because its 

policies and procedures already must 

identify and document the 

circumstances in which such a call 

would be made. However, a CCA should 

be subject to an obligation to document 

when it, consistent with its policies and 

procedures, determines not to make an 

intraday margin call in circumstances 

identified in such policies and 

procedures. A requirement to document 

when a CCA determines not to make 

such an intraday margin call, pursuant 

to its written policies and procedures, is 

broadly consistent with the goal 

identified by the commenter: that the 

CCA should be able to evaluate the 

implementation of its policies and 

procedures with respect to intraday 

margin. By keeping a record of such 

instances in which a CCA determines 

not to make an intraday margin call, 

pursuant to its written policies and 

procedures, it should be easier for a 

CCA to review its determination not to 

make an intraday margin call and to 

determine whether a breach of the 

thresholds that triggered an intraday call 

could have been averted by changed 

procedures. It also should better allow 

the CCA to holistically consider the 

procyclical impacts of intraday margin 

calls, which, as commenters stated, 

should be considered as part of a CCA’s 

analysis about such calls. 

Therefore, the Commission is further 

amending Rule 17Ad–22(e)(6)(ii) to add 

paragraph (e)(6)(ii)(D) to require that a 

CCA’s risk-based margin system 

‘‘[d]ocuments when the covered clearing 

agency determines not to make an 

intraday margin call pursuant to its 

written policies and procedures 

required under paragraph 

(e)(6)(ii)(C)’’.118

A CCA generally should review, on a 

regular basis, any documentation 

created pursuant to this requirement of 

Rule 17Ad–22(e)(6)(ii)(D). Such 

documentation can be used to identify 

the CCA’s rationale for not making an 

intraday margin call. In addition, a CCA 

generally should consider whether (and 

how) to disclose the information 

required under this documentation 

requirement to its participants, to 

provide additional transparency to its 

participants about when a CCA chooses 

not to make intraday margin calls, 

including whether such disclosure is 

necessary pursuant to Rule 17Ad–25(j), 

which requires that the CCA establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to require the board 

of directors to solicit, consider, and 

document its consideration of the views 

of participants and other relevant 

stakeholders of the registered clearing 

agency regarding material developments 

in its risk management and operations 

on a recurring basis.119 Consistent with 

this obligation under Rule 17Ad–25(j), a 

CCA generally should consider how best 

to solicit the views of participants and 

other relevant stakeholders regarding 

intraday margin calls, which could 

include how they were applied in the 

past by the CCA. 

c. Other Comments 

The Commission proposed 

requirements related to monitoring for 

intraday exposure and providing further 

specificity as to the circumstances when 

an intraday margin call could be made. 

However, one commenter addressed 

three additional issues related to more 

granular details within the calculation 

of an intraday margin call. First, this 

commenter addressed the nature of an 

intraday margin call, stating that any 

margin determination, including any 

intraday determination, should be made 

with respect to a clearing member’s 

current positions and the current value 

of those positions, to the extent 

practicable.120 A CCA generally should 

determine margin based on its 

participants’ positions, including a 

participant’s total portfolio (that is, not 

just positions at end of day or 

intraday).121

Second, this commenter also 

requested that a CCA net against each 

other any amounts owing to a clearing 

member from, on the one hand, initial 

margin and, on the other hand, variation 

margin.122 Third, this commenter also 

requested that intraday margin calls be 

bidirectional to return margin cash or 

collateral to a CCA’s participants.123

In response to these points, the 

Commission reiterates that the 

circumstances that could give rise to 

intraday margin calls at a CCA may vary 

significantly (e.g., intraday volatility, 

large changes in participant positions), 

and may present varied challenges. 

Accordingly, although there may be 

circumstances where it would be 

appropriate for a CCA to take the 

approach suggested by the commenter, 

the Commission’s approach to Rule 

17Ad–22(e) is to provide flexibility to 

CCAs, subject to their obligations and 

responsibilities as SROs under the 

Exchange Act, to design and structure 

their policies and procedures to take 

into account the differences among 

clearing agencies and the markets and 

products it clears. Accordingly, the 

Commission is not adopting any 

requirements in response to this 

commenter. 

This commenter also stated that the 

establishment of intraday margin 


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124SIFMA at 7. 

125 Id. at 7–8 (discussing the development and 

maintenance of margin models; accurate, robust 

pricing; margin period of risk; calibration scenarios/ 

lookback periods; margin add-ons, such as 

concentration and liquidity risks; offsets; antiprocyclicality measures; margin returns; and 

interoperability). 

126 17 CFR 240.17ad–22(e)(6)(i), (iii), (v). 

127The Associations at 3. 128 17 CFR 240.17ad–22(e)(23)(iv). 129SIFMA at 10. 130See supra note 96 and accompanying text. 131 Id. 132See, e.g., DTCC, ‘‘Fixed Income Clearing 

Corporation and National Securities Clearing 

Corporation Public Quantitative Disclosures for 

Central Counterparties: Q2 2024’’ (Aug. 29, 2024) at 

13, https://www.dtcc.com/-/media/Files/ 

Downloads/legal/policy-and-compliance/CPMIIOSCO-Public-Quantitative-Disclosures-Q2- 

2024.pdf. 

133RWP Proposing Release, supra note 18, at 

34713. 

134See id. at 34715 (stating that ‘‘substantive’’ 

refers to ‘‘any inputs used by the covered clearing 

agency that are necessary for the risk-based margin 

system to calculate margin’’). 

135 Id. at 34714. 

136 Id. 

137 Id. (explaining that a reliable source of timely 

price data was necessary because a CCA’s ‘‘margin 

system needs such data to operate with a high 

degree of accuracy and reliability, given the risks 

that the CCA’s size, operation, and importance pose 

to U.S. securities markets’’). 

138 Id. 

139 Id. at 34714–15 (‘‘The Commission is therefore 

proposing to amend Rule 17Ad–22(e)(6)(iv) to 

expand its scope beyond price data to encompass 

other substantive inputs to its risk-based margin 

system and to impose requirements on a [CCA] to 

have procedures when such substantive inputs are 

not readily available or reliable’’). 

140 Id. at 34714. 

procedures cannot be viewed separately 

from the establishment of margin 

procedures as a whole, and that the 

reduction of ‘‘surprises’’ with respect to 

intraday margin depends on having 

transparent margin procedures generally 

and on having the start of day margin be 

as near correct as possible (meaning that 

the margin collected at the established 

start of day time period, as opposed to 

an intraday margin call, should be as 

accurate as possible).124 The commenter 

provided several suggestions regarding 

the calculation of margin more 

generally.125 The Commission proposed 

requirements related to monitoring for 

intraday exposure and providing further 

specificity as to when the CCA must 

consider an intraday margin call. The 

suggestions provided by the commenter 

relate to granular details within the 

calculation of margin. Rule 17Ad– 

22(e)(6) already contains requirements 

related to these issues raised by the 

commenter, most notably, that the 

CCA’s risk-based margin system must 

consider, and produce margin levels 

commensurate with, the risks and 

particular attributes of each relevant 

product, portfolio, and market, and 

calculate margin sufficient to cover its 

potential future exposure to participants 

between the last margin collection and 

the close out of positions following a 

participant default, and use an 

appropriate method for measuring credit 

exposure that accounts for relevant 

product risk factors and portfolio effects 

across products.126 Although there may 

be circumstances where it would be 

appropriate for a CCA to incorporate 

policies and procedures such as those 

suggested by the commenter, the 

Commission’s approach to Rule 17Ad– 

22(e) is to provide flexibility to CCAs, 

subject to their obligations and 

responsibilities as SROs under the 

Exchange Act, to design and structure 

their policies and procedures to take 

into account each clearing agency’s 

unique characteristics. In addition, the 

transparency requirements discussed in 

Part II.A.2.b.ii apply to all components 

of a CCA’s margin model, including 

those discussed by the commenter. 

One commenter recommended that 

the Commission require a CCA to 

disclose particular aspects of its risk 

models used in the calculation of initial 

margin.127 As discussed supra in Part 

II.A.2.b.ii, CCAs are already required to 

provide disclosure of key aspects of 

their margin models under Exchange 

Act Rule 17Ad–22(e)(23)(iv) and to file 

their rules as part of the SRO and/or 

SIFMU rule filing processes, which 

further provides transparency.128

Therefore, additional disclosure 

requirements are not required because 

of the current requirements that a CCA 

must disclose key aspects of its margin 

model. 

Another commenter stated that a CCA 

should be required to publish regular 

statistics in a consistent format as to the 

performance of margin requirements, 

including how many clearing members 

were subject to margin calls of what 

size, did clearing members go into a 

margin deficit, and how frequently.129

However, CCAs already include, as part 

of their public disclosures under Rule 

17Ad–22(e)(23)(iv)(C), a description of 

basic data and performance statistics on 

their services and operations, such as 

basic volume and value statistics by 

product type, average aggregate intraday 

exposures to its participants, and 

statistics on the CCA’s operational 

reliability.130 As such, the Commission 

is not adopting any additional 

disclosure requirements. However, 

CCAs generally provide such public 

information regarding their margin 

models’ performance as part of their 

periodic disclosures.131 For example, 

these disclosures include, with respect 

to margin, identification of the number 

of times over the past 12 months that 

margin coverage held against any 

account fell below the actual mark-tomarket exposure of that member 

account based on daily backtesting 

results and, in the event of a breach of 

initial margin coverage, a report on the 

size of the uncovered exposure, both of 

which are data points consistent with 

the commenter’s request to identify 

whether clearing members went into a 

margin deficit and how frequently.132

Accordingly, the Commission is not 

adopting additional requirements. 

However, a CCA generally should 

consider what disclosures regarding its 

policies and procedures for margin 

collection can be useful to market 

participants to facilitate their 

understanding of the performance of its 

margin model. 

B. Inputs to Margin System 

1. Proposed Amendment to Rule 17Ad– 

22(e)(6)(iv) 

In the RWP Proposing Release, the 

Commission proposed to amend Rule 

17Ad–22(e)(6)(iv) to strengthen its 

requirements that a CCA have policies 

and procedures reasonably designed to 

cover its credit exposures to its 

participants by establishing a risk-based 

margin system that, among other things, 

uses reliable sources for its price data 

and uses procedures for addressing 

circumstances in which price data are 

not readily available or reliable.133

Specifically, the Commission proposed 

expanding the rule’s scope beyond price 

data to also include other substantive 

inputs to a CCA’s risk-based margin 

system,134 meaning that the CCA’s 

procedures would also have to address 

when such a substantive input is not 

readily available or reliable.135 The 

unavailability or unreliability of any 

substantive input to a CCA’s margin 

system could potentially affect the 

CCA’s ability to calculate margin.136

Citing as justification the current 

requirement of ‘‘reliable sources’’ of 

price data,137 the Commission stated 

that there is a need to use reliable 

sources for substantive inputs other 

than price data.138 In response, the 

Commission proposed to expand this 

requirement to substantive inputs other 

than price data.139 The Commission 

stated that this proposal ‘‘should help 

ensure that the CCA can continue to 

calculate and collect margin’’ pursuant 

to its obligations under Rule 17Ad– 

22(e)(6).140

The Commission also proposed two 

new requirements on a CCA’s backup 

procedures when price data and other 


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141 Id. at 34715. 

142 Id. 

143 Id. 

144 Id. 

145 Id. 

146Specifically, the Commission is: (1) adding 

paragraph markers (in the form of capital letters) to 

separate the clauses of the rule text into (A), (B), 

and (C); (2) changing the punctuation from a comma 

to a semi-colon and deleting the word ‘‘and’’ at the 

end of paragraph (e)(6)(iv)(A); (2) adding 

parenthesis around the text ‘‘and, with respect to 

price data, sound valuation models’’, deleting the 

comma at the end of that language, and changing 

the period to a semi-colon at the end of paragraph 

(e)(6)(iv)(B); (3) adding additional paragraph 

markers (1) and (2) to paragraph (e)(6)(iv)(C) before 

each of the two alternatives listed in this paragraph 

(i.e., ‘‘the use of price data or substantive inputs 

from an alternate source; or’’ and ‘‘if it does not use 

an alternate source, the use of a risk-based margin 

system that does not rely on the unavailable or 

unreliable substantive input;’’) and capitalizing the 

first word in each new paragraphs (e)(6)(iv)(C)(1) 

and (2) (‘‘The’’ and ‘‘If’’, respectively); (4) adding a 

clarifying, internal cross-reference (‘‘such 

procedures under paragraph (e)(6)(iv)(B)’’) in 

paragraph (e)(6)(iv)(C); and (5) replacing the word 

‘‘shall’’ in new Rule 17Ad–22(e)(6)(iv)(C) (i.e., 

‘‘Such procedure under paragraph (e)(6)(iv)(B) of 

this section shall’’) with ‘‘must’’ to use more plain 

language. 

147 In addition, to improve clarity and consistency 

of terms, the Commission proposed technical edits 

standardizing references to ‘‘price data’’ in Rule 

17Ad–22(e)(6)(iv), which currently refers to both 

‘‘price data’’ and ‘‘pricing data,’’ to refer only to 

price data. The Commission previously used the 

two words interchangeably in preexisting Rule 

17Ad–22(e)(6)(ii). RWP Proposing Release, supra 

note 18, at 34714 n.59. The Commission received 

no comments on this proposed technical change of 

‘‘pricing data’’ to ‘‘price data’’ in this provision and 

is adopting as proposed. 

148RWP Proposing Release, supra note 18, at 

34714. 

149See Better Markets at 8–9; CCP12 at 2; DTCC 

at 5; The Associations at 8. 

150See Better Markets at 8–9. 

151 Id. at 8. 

152See DTCC at 5; CCP12 at 2; The Associations 

at 8. 

153 DTCC at 5. 

154 Id.; CCP12 at 2. 

155CCP12 at 2. 

156The Associations at 8. 

157RWP Proposing Release, supra note 18, at 

34715. 

158See DTCC at 5; CCP12 at 2; The Associations 

at 8. 

159See CCA Standards Adopting Release, supra 

note 5, at 70800–01. 

160See id. at 70800. 

161The Associations at 8. 

substantive inputs are not readily 

available or reliable. First, the 

Commission proposed these procedures 

to help ensure that the CCA can meet its 

obligations under Rule 17Ad– 

22(e)(6).141 Second, the Commission 

proposed that these procedures must 

include either: (i) the use of price data 

or other substantive input from an 

alternate source; or (ii) the use of an 

alternate risk-based margin system that 

does not similarly rely on the same 

unavailable or unreliable substantive 

input.142

In proposing this amendment, the 

Commission included the following 

guidance: an alternate source ‘‘generally 

should meet the same level of reliability 

of the primary source;’’ and an 

‘‘alternate risk-based system needs to be 

an alternate margin model that does not 

rely on the same data source that is 

unavailable or unreliable’’ to ensure to 

compliance with Rule 17Ad–22(e)(6).143

The Commission also stated that an 

alternate risk-based margin system 

would be subject to the requirements of 

17 CFR 240.17ad–22(e)(6)(vi) and (vii), 

with respect to monitoring, review, 

testing, verification, and model 

validation.144 Additionally, the 

Commission stated that a CCA should 

‘‘consider its reliance on any third party 

sources for purposes of its risk-based 

margin system and consider whether an 

alternate system or source of data or 

other inputs that is internal to the CCA, 

and does not rely upon any third party 

provider, would be appropriate.’’ 145

The Commission is adopting the 

requirement as proposed, with minor 

modifications discussed in Part II.B.2 

below. The Commission is also making 

clarifying technical changes.146

2. Discussion of Comments 

a. Inclusion and Definition of 

Substantive Inputs 

As discussed above, the Commission 

proposed expanding the scope of Rule 

17Ad–22(e)(6)(iv) beyond price data to 

also include substantive inputs to a 

CCA’s margin methodology.147 Based on 

its supervisory experience, the 

Commission understands that such 

substantive inputs could include: (i) 

portfolio size; (ii) volatility, (iii) 

sensitivity to various risk factors that are 

likely to influence security prices; (iv) 

duration; (v) convexity; and/or (vi) the 

results of models run by third parties.148

Several commenters addressed this 

proposed modification to Rule 17Ad– 

22(e)(6)(iv).149 One commenter agreed 

generally with the proposed extension 

of the rule’s scope to include 

‘‘substantive inputs.’’ 150 The 

commenter supported extending the 

requirement for ‘‘reliable sources’’ to 

include substantive inputs because a 

CCA’s margin systems need ‘‘to operate 

with a high degree of accuracy and 

reliability, given the risk that [its] size, 

operation, and importance posed to the 

securities market.’’ 151

Several commenters requested that 

the Commission provide more guidance 

regarding its statement about what 

inputs may be ‘‘substantive.’’ 152 One 

commenter requested that ‘‘the term 

‘substantive’ as used in this context be 

further refined to avoid confusion over 

the inputs that are ‘necessary’ and those 

that are ‘non-consequential.’ ’’ 153 In 

addition, several commenters stated that 

the CCA should determine what 

constitutes a substantive input.154 One 

such commenter also stated that, if the 

Commission prescribed a definition of 

‘‘substantive input,’’ a CCA may be 

forced to ‘‘obtain, often at great expense, 

alternate data sources for inputs with 

limited utility and minimal or no 

impact on margin calculations.’’ 155

However, another commenter stated 

that the Commission’s rules around 

substantive inputs should be principles 

based, identifying one such principle 

that ‘‘every input that affects margin 

requirements by [x]% is deemed 

substantive.’’ 156

The Commission is not making any 

amendments to define what constitutes 

a substantive input. A CCA is 

responsible for developing its own 

policies and procedures, including its 

margin methodology, and it is best 

positioned to determine what 

constitutes a substantive input into its 

margin methodology. As stated in the 

RWP Proposing Release, ‘‘substantive’’ 

for the purposes of Rule 17Ad– 

22(e)(6)(iv), ‘‘refers to any inputs used 

by the CCA that are necessary for the 

risk-based margin system to calculate 

margin’’ and ‘‘is meant to distinguish 

from other potential inputs that may not 

be consequential to the calculation of 

margin.’’ 157 Accordingly, as requested 

by some commenters, the Commission 

confirms that a CCA has the discretion 

to determine what is a ‘‘substantive’’ 

input, based on its knowledge of its riskbased margin system, as compared to 

those that it determines to be nonconsequential.158 When establishing 

and maintaining its risk-based margin 

system, each CCA must have the ability 

to consider its own unique 

characteristics and circumstances, as 

well as those of the market it serves.159

Rather than have the Commission define 

the term ‘‘substantive’’ prescriptively for 

each CCA, this discretion corresponds 

with the Commission’s principles-based 

approach in Rule 17Ad–22(e), which 

helps each CCA effectively meet the 

evolving risks and challenges in the 

markets that each CCA serves.160

Therefore, no further clarifications or 

guidance are necessary to distinguish a 

substantive input from those inputs that 

are non-consequential. 

Further, the Commission is not 

adopting any amendments to Rule 

17Ad–22(e)(6)(iv) to incorporate the 

principle that ‘‘every input that affects 

margin requirements by [x]% is deemed 

substantive.’’ 161 This type of 

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162RWP Proposing Release, supra note 18, at 

34715. 

163Better Markets at 9 (stating that this proposed 

requirement would ensure that the backup 

procedures available to a CCA ‘‘are sufficiently 

distinct from the impaired data source that they 

will serves as reliable alternatives’’). 

164See OCC at 4; ICE at 2; CCP12 at 2. 

165 DTCC at 4 (stating that a CCA should have 

‘‘the flexibility to develop reasonable backup 

procedures and contingency plans for these types 

of circumstances, which will depend on the cleared 

products and market structure at issue, and may not 

in all cases include the use of third-party secondary 

vendors or data sources’’); OCC at 5 (stating that a 

CCA should be permitted to use its informed 

judgment to determine the appropriate substitutions 

for unavailable inputs in its margin system, which 

would ensure that CCAs have sufficient flexibility 

to address the need for alternative data sources in 

a manner that addresses the Commission’s policy 

objectives, is tailored to the markets served and 

products cleared by the [CCA], and is not 

unnecessarily burdensome). 

166 DTCC at 4–5 (stating that requiring an 

alternate source would not always be the most 

practical or effective means to ensure a CCA meets 

its participants’ credit obligations under Exchange 

Act Rule 17Ad–22(e)(4), due to the possible absence 

of an alternate source of pricing data or other 

substantive inputs (e.g., because of industry 

consolidation among vendors), and the inability to 

use discretion to develop a solution to unavailable 

price data or other substantive input); OCC at 4 

(stating that alternate sources may not exist, or may 

be prohibitively expensive or technically difficult to 

implement when compared to the impact of the 

input on the margin model). One such commenter 

suggested that a CCA may find it appropriate if its 

policies and procedures incorporated the use of an 

alternative pricing vendor, where applicable, or in 

the absence of such an alternative provider, 

pursuant to the CCA’s policies and procedures to 

ensure that timely pricing data is applied, with 

such procedures including, for example, recording 

‘‘the last available price’’ in the CCA’s pricing 

database with such price consumable to applicable 

participants (citing to its recent update to its 

Clearing Agencies’ Securities Valuation 

Framework). Id. at 5. 

167The Associations at 9. 

168OCC at 5. 

169RWP Proposing Release, supra note 18, at 

34715 (emphasis added). 

170 Id. 

171For example, one CCA commenter stated that 

its existing policy provided that backup pricing 

may more accurately be sourced from an alternative 

pricing vendor or may also be determined, in the 

absence of an alternative pricing vendor, pursuant 

to the CCA’s applicable policies and procedures to 

ensure that timely pricing data is applied, with 

such procedures including, for example, using the 

last available price which is consumable to 

applicable participants. DTCC at 5. 

172RWP Proposing Release, supra note 18, at 

34715. 

173See OCC at 5. 

174CCP12 at 2. 

based and instead would prescribe a 

particular scope of what constitutes 

‘‘substantive,’’ which the Commission 

does not seek to do. Based on its 

supervisory experience, the Commission 

understands that a wide range of margin 

models exists among the CCAs. This 

wide range of margin models exists due 

to each CCA’s different participants, 

different products cleared, and different 

markets served. Given these distinctions 

among the CCAs, and consistent with 

the principles-based approach in Rule 

17Ad–22(e) more generally, the 

Commission believes it would be 

inappropriate to include in Rule 17Ad– 

22(e)(6)(iv) a quantitative threshold 

defining those inputs that would be 

‘‘substantive.’’ Such a specific 

percentage threshold likely would fail to 

identify all the inputs for all CCAs’ 

margin models that are necessary to 

ensure every CCA’s margin model can 

meet the requirements of Rule 17Ad– 

22(e)(6) (i.e., covering its credit 

exposures to its participants). Therefore, 

the Commission is not adopting 

modifications responsive to the 

commenter requesting ‘‘substantive’’ to 

correspond to a percentage impact on 

margin requirements. 

b. Use of an Alternate Source or an 

Alternate Risk-Based Margin System 

As proposed, the changes to Rule 

17Ad–22(e)(6)(iv) required that the 

procedures for when price data or 

substantive inputs are not readily 

available or reliable must include the 

use of price data or substantive inputs 

from an alternate source or, if it does not 

use an alternate source, the use of an 

alternate risk-based margin system (that 

does not similarly rely on the 

unavailable or unreliable substantive 

input).162

One commenter expressed support for 

this proposed requirement,163 and other 

commenters acknowledged the 

importance of ensuring that a CCA’s 

risk-based margin system be able to 

perform even when certain sources of 

pricing data or other inputs become 

unavailable.164

However, several commenters 

disagreed with the requirement of a sole 

means of contingency (that is, the use of 

alternate sources) and stated that CCAs 

should have the flexibility to develop 

their own backup procedures and/or 

appropriate substitutions for 

unavailable inputs in their margin 

models, depending on the products 

cleared and the markets served.165

These commenters stated that it may not 

always be possible to have a ‘‘like-forlike’’ substitution of an alternate 

source.166 One commenter stated that 

the Commission should not restrict 

choices in an emergency situation by 

requiring that an alternate source be 

independent of the third-party provider, 

and that CCAs should simply have a 

‘‘credible fallback’’ in the event of 

unavailable price data or substantive 

inputs.167 Another such commenter 

recommended that the proposal be 

modified to allow for ‘‘substantive 

inputs from an alternate source, and/or 

of appropriate alternate inputs.’’ 168

In response to the commenters who 

sought revisions to the proposed 

requirement’s obligation to use an 

alternate source, the requirement of an 

alternate source does not mean that 

such an alternate source must be 

external to a CCA or that the alternate 

source must be of the same nature as the 

original substantive input (that is, the 

alternate source need not be a ‘‘like-forlike’’ substitute). As stated in the RWP 

Proposing Release, ‘‘alternate source[s] 

generally should meet the same level of 

reliability of the primary source, 

whether that alternate is sourced from 

an external provider or created 

internally.’’ 169 By acknowledging that 

an alternate source may be created 

internally, the Commission recognized 

that an alternate source means, simply, 

an alternate to the primary input and 

does not require an entirely 

independent, third-party source to 

provide the same input. Similarly, the 

recognition that the alternate source 

may be created internally means that the 

Commission also recognized that the 

alternate source may, in fact, be the 

result of internal policies and 

procedures that the CCA designs to 

develop an internal alternate source and 

meet the needs of its margin 

methodology. 

Further, in response to the 

commenters seeking flexibility to 

develop their own backup procedures, 

this requirement does not prevent a 

CCA from using its discretion to 

determine the most appropriate 

substitution for any price data or 

substantive input to its risk-based 

margin system.170 This requirement also 

does not preclude the use of policies 

and procedures that establish a 

methodology or approach to determine 

the appropriate price,171 so long as, as 

discussed in Part II.B.2.c infra, the CCA 

can still meet the obligations of Rule 

17Ad–22(e)(6), including meeting its 

credit obligations to its participants.172

Therefore, revisions to or deletion of the 

rule text regarding alternate sources, 

including those suggested by one 

commenter to allow for ‘‘substantive 

inputs from an alternate source, and/or 

of appropriate alternate inputs,173 are 

not necessary, as the rule text does not 

require an externally provided alternate 

source. 

One commenter stated that the 

Commission should ‘‘refocus[ ]’’ the 

final rule on policies and procedures, as 

opposed to requiring policies and 

procedures that include an alternate 

source or risk-based margin system.174

The Commission agrees that the 


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175OCC at 5. 

176See infra notes 178 and 186 and 

accompanying text. 

177 ICE at 2–3. 

178See infra note 187 and accompanying text. 

179 Id. 

180 ICE at 2. 

181 Id. at 3. 

182 Id. 

183 Id. 

184CCP12 at 3 (stating that the development of 

such an alternate system would require a CCA to 

effectively maintain two very distinct margin 

systems, which is likely very resource intensive and 

time consuming). 

185RWP Proposing Release, supra note 18, at 

34715. 

186 Id. at 34714. 

187See supra notes 175, 184 and 177 and 

accompanying text. 

188The Commission also removes from Rule 

17Ad–22(e)(6)(iv)(C) the word ‘‘similarly’’ from 

between the words ‘‘not’’ and ‘‘rely’’ (i.e., ‘‘the use 

of a risk-based margin system that does not rely on 

the unavailable or unreliable substantive input’’) to 

remove redundancy (as the word ‘‘similarly’’ was 

unnecessary to convey the meaning that the 

prohibited reliance was on the unavailable or 

unreliable substantive input in question). The 

Commission also revises the reference to ‘‘the 

unavailable or unreliable substantive input’’ to 

‘‘substantive inputs that are unavailable or reliable’’ 

for the same reasons. 

189RWP Proposing Release, supra note 18, at 

34715. 

190 Id. 

requirement should allow for flexibility 

in how CCAs address the unavailability 

or unreliability of an input to their 

margin model. The requirement being 

adopted does not mandate that a 

specific alternate source be used, but 

rather that the CCAs have policies and 

procedures to ensure that some alternate 

source is available, even if that source 

is determined internally by the CCA. 

With respect to the requirement of a 

potential alternate risk-based margin 

system, one commenter stated that 

requiring CCAs to develop and maintain 

an entire alternate risk-based margin 

system would be prohibitively 

expensive and operationally 

burdensome.175 However, the 

Commission disagrees with the 

commenter’s characterization that such 

costs are necessary because the 

proposed rule does not require the 

development and maintenance of a 

second risk-based margin system 

separate from its current risk-based 

margin system, as discussed below.176

Another commenter suggested that the 

Commission should remove the 

requirement of a potential alternate riskbased margin system from the rule 

text.177 The Commission disagrees that 

the proposed rule requires a second 

risk-based margin system separate from 

a CCA’s current risk-based margin 

system, and the Commission is 

modifying the term ‘‘alternate risk-based 

margin system’’ to make this point 

clear.178 Specifically, the proposed 

requirement for backup procedures 

when substantive inputs ‘‘are not 

readily available or reliable’’ should 

help a CCA ensure it ‘‘can continue to 

calculate and collect margin 

commensurate with, the risks and 

particular attributes of each relevant 

product, portfolio, and market, as 

required under Rule 17Ad– 

22(e)(6)(i).’’ 179

Similarly, another commenter 

disagreed with the proposed additional 

requirement that a CCA have advance 

plans ‘‘to use an alternate risk-based 

margin system because of the 

unavailability or unreliability of a 

particular input,’’ which ‘‘would impose 

a significant burden on a [CCA] solely 

for the purpose of addressing a problem 

with an input that may be 

transitory.’’ 180 The commenter stated 

that it ‘‘is not aware of circumstances 

where a [CCA] has been unable to 

address a problem with an input price 

through its normal business practices 

and procedures.’’ 181 The commenter 

also stated that it ‘‘does not believe that 

the Commission has articulated a 

problem (other than a theoretical one)’’ 

that the proposal is designed to address 

and ‘‘has not recognized the 

considerable costs to’’ CCAs, clearing 

firms, and other market participants 

‘‘that would be required to develop and 

implement alternate margin models to 

address a remote and theoretical 

problem with price or other data 

inputs.’’ 182 The commenter suggested 

that this clause be removed from the 

rule text.183 In addition, one commenter 

requested that the Commission confirm 

that any final rule does not create an 

expectation that CCAs should develop 

an alternate risk-based margin 

system.184

The Commission disagrees with the 

commenter that the failure of a CCA’s 

margin model (i.e., its risk-based margin 

system) due to an unavailable or 

unreliable input is a ‘‘theoretical’’ 

problem. Rather, the unavailability or 

unreliability of a substantive input 

could impact a CCA’s ability to 

establish, implement, maintain, and 

enforce a risk-based margin system that 

Rule 17Ad–22(e)(6) requires. Moreover, 

contrary to the commenter’s assertion, 

the Commission is not requiring that 

CCAs develop and implement alternate 

margin models, but rather, is requiring 

that the CCA establish, implement, 

maintain and enforce written policies 

and procedures to address particular 

issues that could affect the functioning 

of its margin model. The requirement 

also allows for the use of an alternate 

source in the existing risk-based margin 

system, and a CCA may determine the 

alternate source using its own policies 

and procedures.185 An alternate source 

from a third-party provider is not 

required. More generally, this 

requirement is designed to expand the 

scope of the preexisting rule and ensure 

that a CCA establishes, implements, 

maintains and enforces written policies 

and procedures to address the 

unavailability of a substantive input to 

its margin model and meet its 

obligations under Rule 17Ad–22(e)(6). 

As stated in the RWP Proposing Release, 

when substantive inputs are unavailable 

or unreliable, CCAs must be able to 

continue to calculate and collect margin 

commensurate with, the risks and 

particular attributes of each relevant 

product, portfolio, and market.186

Additionally, the Commission analyzed 

the costs of the requirement in Part IV, 

infra, and in the RWP Proposing 

Release. Given the analysis, the 

Commission disagrees with the 

commenter’s suggestion to remove the 

clause from the proposal. 

The Commission is making several 

technical changes to the rule text to 

clarify that an alternate risk-based 

margin system is not required in all 

instances. Specifically, the Commission 

deletes the word ‘‘alternate’’ from ‘‘an 

alternate risk-based margin system’’ in 

Rule 17Ad–22(e)(6)(iv)(C)(2) (and 

changes ‘‘an’’ to ‘‘a’’ before ‘‘risk-based 

margin system’’ for grammatical 

reasons). This revision responds to 

commenters’ concerns that the rule 

requires that a CCA develop an alternate 

risk-based margin system separate from 

a CCA’s current risk-based margin 

system.187 The rule does not include 

such a requirement. The Commission is 

also adding the term ‘‘either’’ after 

‘‘must include’’ to clarify that satisfying 

either paragraph (e)(6)(iv)(C)(1) or (2) 

fulfills paragraph (e)(6)(iv)(C)’s 

requirement.188

c. Obligation To Meet a CCA’s 

Obligations Under Rule 17Ad–22(e)(6) 

The proposed amendment to Rule 

17Ad–22(e)(6)(iv) also provided that the 

procedures discussed in Part II.B.2.b 

must ensure that the CCA is able to meet 

its obligation to cover credit exposures 

to its participants under Rule 17Ad– 

22(e)(6).189 In the RWP Proposing 

Release, the Commission explained that, 

by specifying how these procedures 

must perform (i.e., to allow a CCA to 

continue to cover its credit exposures), 

this proposed amendment helps ensure 

that a CCA adopts sufficiently robust 

procedures.190 As such, this proposed 

amendment would, with respect to both 


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191 Id. 

192Better Markets at 10. 

193 Id. 

194 Id. 

195 Id. 

196SIFMA at 10–11. 

197 Id. 

198Letter from Erkki Liikanen, Co-Chair, and 

Simon Johnson, Co-Chair, CFA Institute Systemic 

Risk Council (Aug. 30, 2023) (‘‘CFA’’) at 5. 

199See, e.g., Davidson at 1. This concern 

regarding the feasibility or advisability of winddown in the context of CCAs is discussed further 

in Part II.D.1.c. 

200See 17 CFR 240.17ad–22(e)(4)(i) (requiring a 

CCA to maintain sufficient financial resources to 

cover its credit exposure to each participant fully 

with a high degree of confidence); see also 17 CFR 

240.17ad–22(e)(4)(ii) (requiring a CCA that provides 

CCP services and is either systemically important 

in multiple jurisdictions or a clearing agency 

involved in activities with a more complex risk 

profile to maintain additional financial resources at 

the minimum to enable it to cover a wide range of 

foreseeable stress scenarios that include, but are not 

limited to, the default of the two participant 

families that would potentially cause the largest 

aggregate credit exposure for the CCA in extreme 

but plausible market conditions); 17 CFR 240.17ad– 

22(e)(4)(iii) (requiring a CCA that is not subject to 

Rule 17Ad–22(e)(4)(ii) to maintain additional 

financial resources at the minimum to enable it to 

cover a wide range of foreseeable stress scenarios 

that include, but are not limited to, the default of 

the participant family that would potentially cause 

the largest aggregate credit exposure for the CCA in 

extreme but plausible market conditions). 

201See 17 CFR 240.17ad–22(e)(15)(ii) (requiring a 

CCA, at a minimum, to hold liquid net assets 

funded by equity equal to the greater of either six 

months of the CCA’s current operating expenses, or 

the amount determined by the board of directors to 

be sufficient to ensure a recovery or orderly winddown of the CCA). 

price data and other substantive inputs, 

require that such procedures should 

address circumstances in which price 

data or substantive inputs are not 

readily available or reliable, in order to 

ensure that the CCA be able to meet its 

requirements under Rule 17Ad–22(e)(6) 

and cover its credit exposures to its 

participants.191

The Commission received no 

comments on this requirement and is 

adopting as proposed. 

C. Contents of Recovery and Orderly 

Wind-Down Plans 

The Commission received several 

overarching comments on proposed 

Rule 17Ad–26 that were generally 

supportive of the approach, particularly 

the addition of new and more specific 

requirements applicable to a CCA’s 

RWP. One commenter stated that a 

detailed RWP is essential, as the 

inability of a CCA to recover from severe 

losses, or the disorderly wind-down of 

a CCA, could have significant 

repercussions not only for the sector in 

which the CCA operates but for the 

markets and the economy as a whole.192

The commenter also stated that CCAs 

must have comprehensive RWPs 

because even sound risk management 

may not prevent a CCA’s default in 

extreme circumstances.193 The 

commenter continued by stating the 

obvious strength of recovery and orderly 

wind-down planning is the ex ante 

development of a strategy to maintain as 

a going concern the critical operations 

of the CCA, even in the face of losses 

that would otherwise have caused its 

insolvency, or to ensure the orderly 

transfer of functions.194 The commenter 

stated that not aligning RWPs to 

uniform requirements introduces risk, 

and that the proposed rule mitigates that 

risk by requiring all RWPs to 

incorporate at least nine specific 

elements.195 Another commenter 

explained that CCAs face no meaningful 

competitive pressure when they are the 

sole clearing agency for the products 

they clear and can be a source of 

systemic risk.196 The commenter stated 

that, in such cases, to improve CCAs, 

regulatory mandates must effectively 

codify existing best practices to enhance 

resiliency and create a level playing 

field for resiliency, and that such 

improvements will only occur if the 

Commission imposes specific regulatory 

requirements.197

One commenter cautioned that the 

proposed upgrades and focus on RWP 

design and testing may create 

unrealistic expectations and overreliance on RWPs. The commenter also 

stated that care is needed to ensure that 

confidence in such plans is well 

grounded and that the efficient 

implementation of RWPs is properly 

stressed, accounting for rapidly evolving 

market risk and for the ever-increasing 

speed of market-moving data.198 In the 

Commission’s view, effective planning 

can help preserve financial stability and 

ensure the continuity of critical CCP 

and CSD functions for the markets 

served by CCAs, and the availability of 

tools and resources in the RWP 

generally reserved for recovery and 

wind-down scenarios would not lead to 

an ‘‘over-reliance’’ on such tools in 

practice. In practical terms, default 

management, recovery, and wind-down 

exist as distinct points across a 

spectrum from normal market 

conditions to highly stressed market 

conditions. As such, a CCA would 

deploy its RWP either (i) in a default 

scenario, only after its business-as-usual 

default management tools had failed to 

close out any defaulting portfolios and, 

likely, after the CCA had fully 

exhausted its prefunded resources, or 

(ii) in a non-default scenario, after 

resources set aside for business risk 

(e.g., six months of operating expenses) 

or for other purposes had been 

exhausted. Commission rules impose a 

high standard for resilience in normal 

and stressed market conditions across 

both default and non-default loss 

scenarios, consistent with the 

international standards set forth in the 

PFMI, of which planning for recovery 

and orderly wind-down is but one part 

of a multi-part and comprehensive 

regulatory framework. Given this 

dynamic, CCAs would not have 

incentives to ‘‘activate’’ their RWPs 

early. 

More generally, the Commission 

agrees with commenters expressing the 

view that thoughtful recovery and winddown planning is necessary, even when 

effective risk-management measures are 

in place, because of the potential 

systemic risk implications of the failure 

of a CCA. Given the evolving nature of 

recovery and orderly wind-down 

planning, as well as the annual review 

and testing requirements included in 

Rule 17Ad–26, the concern that adding 

more robust requirements for 

development and testing of RWPs will 

lead to ‘‘over-reliance’’ on RWPs is 

misplaced. Effective RWPs, with robust 

consideration of scenarios, triggers, and 

processes for testing and board 

approval, help promote recovery. Such 

planning for recovery is essential 

because, as other commenters have 

stated, the wind-down of systemic 

functions often would not leave 

alternative providers of clearance and 

settlement services to support continued 

market function.199 To reach the stage 

where a CCA would consider 

implementing its RWP, in the context of 

a default loss, the CCA would have to 

incur default losses greater than the 

financial resources maintained pursuant 

to policies and procedures required by 

Rule 17Ad–22(e)(4),200 or in a nondefault loss context, incur losses greater 

than the liquid net assets funded by 

equity held pursuant to the policies and 

procedures required by Rule 17Ad– 

22(e)(15)(ii) to cover potential business 

losses.201 As such, neither CCAs nor 

market participants are in danger of 

‘‘over-reliance’’ on the policies and 

procedures that undergird RWPs. In 

addition, although many systemic 

functions are not currently offered by 

alternative providers, RWPs can, in 

establishing robust policies and 

procedures for orderly wind-down, help 

facilitate the orderly transfer of systemic 

functions to a new entity to maintain 

clearance and settlement services for the 

market served. 


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202 Davidson at 1–3. 

203See, e.g., Staff Report on the Regulation of 

Clearing Agencies (Oct. 1, 2020) at 18, n.93, https:// 

www.sec.gov/files/regulation-clearing-agencies100120.pdf (describing recent examples of 

participant defaults); Bank for International 

Settlements (‘‘BIS’’), CCP Failure: A Rare but 

Present Danger (Dec. 16, 2018), https://www.bis.org/ 

publ/qtrpdf/r_qt1812z.htm (describing three CCP 

failures over the last 50 years); ‘‘The October 1987 

Market Break, A Report by the Division of Market 

Regulation’’ (Feb. 1988), https://

www.sechistorical.org/collection/papers/1980/ 

1988_0201_MarketBreak_01.pdf (describing the 

market stress associated with the 1987 market crash 

and the stress it placed on CCPs at the time). 

204See supra Part I and notes 5–13, 23–40, and 

accompanying text (discussing the rationale for the 

proposed rules and the statutory authority for the 

regulation of clearing agencies). 

205See RWP Proposing Release, supra note 18, at 

34709. 

206See supra note 39 and accompanying text. 

207The Commission is making one technical edit 

to the preamble language for Rule 17Ad–26, 

replacing ‘‘shall’’ with ‘‘must’’ to use more plain 

language, as well as align with the approaches in 

other recently adopted rules for clearing agencies at 

17 CFR 240.17ad–25 and 240.17ad–27. 

208RWP Proposing Release, supra note 18, at 

34718. 

209See proposed Rule 17Ad–26(b). 

210See SIFMA at 14 (‘‘strongly supports the 

requirement that Clearing Agencies ensure that they 

are able to maintain access to services’’); ICE at 3 

(‘‘supports the requirement to identify critical 

payment, clearing, and settlement services and to 

address continued use of such services during a 

Another commenter stated that the 

RWP Proposing Release has not met the 

burden of proof required by the 

Administrative Procedure Act. More 

specifically, the commenter stated that 

the Commission has not demonstrated 

that the rule amendments are necessary 

or in the public interest because the 

proposed amendments are to existing 

rules that already more than adequately 

cover the areas in question, and there 

have been no examples of CCAs or 

clearing agency participants that failed 

or of CCAs that executed recovery plans 

or parts thereof. 202 The commenter 

further explains that the existing SRO 

rules of the CCAs relating to RWPs have 

been approved by the Commission, and 

that the Commission has conducted 

multiple examinations of CCAs under 

those rules, where any deficiencies 

found have been subject to, or are in the 

process of, review and remediation. 

Although rare, CCPs both in the U.S. 

and abroad have experienced highly 

stressed market conditions that led to 

participant defaults, and CCP failures 

have occurred outside the U.S. 

Examples of such participant defaults 

include three CCP failures in other 

jurisdictions in recent history, as well as 

the market stress that CCPs faced in 

response to the 1987 market break and 

in response to the beginning of the 

COVID–19 pandemic in 2020.203 These 

defaults and failures could happen 

again and underscore the importance of 

the Commission’s ongoing efforts to 

ensure effective supervision and 

regulation of CCAs following the 

enactment of the Dodd-Frank Act, as 

discussed in Part I.204 These examples 

also reinforce the possibility that even a 

robust and resilient CCA holding a 

sizeable pool of prefunded resources 

and other liquid resources may 

experience stressed market conditions 

or other events so extreme that the 

resources it has reserved for potential 

loss scenarios will prove insufficient, 

potentially necessitating actions beyond 

‘‘business-as-usual’’ default 

management. By establishing 

requirements related to core services 

and service providers, the identification 

of scenarios, triggers, and tools for 

recovery and orderly wind-down, and 

robust processes for implementation, 

notification, testing and board review 

and approval, new Rule 17Ad–26 helps 

ensure that CCAs can successfully plan 

for, and navigate highly stressed or 

extreme market conditions, where 

events may occur or conditions 

deteriorate rapidly.205

Pursuant to the Exchange Act, the 

Commission is directed to facilitate the 

ongoing development of the national 

system for clearance and settlement, 

which includes ensuring effective risk 

management at CCAs. As discussed 

throughout the RWP Proposing Release, 

and in this release, the Commission has 

proposed and is now adopting new Rule 

17Ad–26 to codify certain elements that 

have emerged across some RWPs that 

must be included in all RWPs to help 

ensure a CCA can effectively allocate 

uncovered losses, manage liquidity 

shortfalls, and address capital shortfalls 

arising from other causes. As such, new 

Rule 17Ad–26 sets forth these elements. 

While existing RWPs at CCAs may 

contain several of these elements, new 

Rule 17Ad–26 requires each CCA to 

have every element in its RWP. As 

previously discussed,206 new Rule 

17Ad–26 also promotes three important 

objectives consistent with its statutory 

mandates: (i) bolstering the existing 

RWPs at CCAs; (ii) codifying some 

existing RWP elements to ensure that 

these elements remain in the plans over 

time; and (iii) establishing that the RWP 

of any new CCA would contain each of 

the elements specified in the rule. In so 

doing, the Commission is establishing a 

higher minimum standard for the 

quality and effectiveness of RWPs, 

designed to help ensure that planning 

for recovery and orderly wind-down is 

effective and can promote financial 

stability in periods of market stress. The 

Commission will continue to review 

rule filings and advance notices 

submitted by CCAs under the rules 

adopted in this release to help ensure 

the regulatory framework is an effective 

tool that can advance the evolving 

process of recovery and resolution 

planning for CCPs and other CCAs. 

Below the Commission addresses 

comments regarding specific elements 

of proposed Rule 17Ad–26.207

1. Core Services: Rule 17Ad–26(a)(1) 

Proposed Rule 17Ad–26(a)(1) required 

a CCA to identify and describe in its 

RWP the CCA’s critical payment, 

clearing, and settlement services and 

address how the CCA would continue to 

provide such critical services in the 

event of a recovery and during an 

orderly wind-down, including the 

identification of the staffing necessary to 

support such critical services and 

analysis of how such staffing would 

continue in the event of a recovery and 

during an orderly wind-down. 

In the RWP Proposing Release, the 

Commission explained that the first step 

in effective recovery and orderly winddown planning must be identification of 

the critical services provided to market 

participants because market participants 

rely on these services to facilitate 

payment, clearing, and settlement in the 

U.S. securities markets. The 

Commission also stated that such 

planning helps ensure that RWPs focus 

on a CCA’s ability to provide these 

services on an ongoing basis, even 

under stress.208 Furthermore, the 

Commission stated its belief that the 

CCA generally should consider the 

impact that any interruption to 

particular services would have on the 

CCA’s participants and the smooth 

functioning of the market it serves, as 

well as whether the service is available 

from any substitute provider. In the 

proposed rule, ‘‘critical’’ referred to the 

importance of the service to participants 

and to the proper functioning of the 

markets, where an inability to provide 

the service would implicate financial 

stability concerns. As such, the 

Commission also proposed definitions 

of ‘‘recovery’’ and ‘‘orderly wind-down’’ 

focused on the need to continue to 

provide the critical payment, clearance, 

and settlement services provided by a 

CCA through the recovery or winddown event.209

Several commenters generally 

supported the requirement to identify 

the critical payment, clearance, and 

settlement services provided by a CCA 

and address how the CCA would 

continue to provide such critical 

services.210


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recovery or wind-down’’); OCC at 6 (‘‘agrees that 

identification of critical services and planning for 

their continuation in a recovery or orderly winddown should be the core content of a CCA’s RWP’’). 

211 17 CFR 240.17ad–25(i). 

212See 17 CFR 242.1000 (defining ‘‘Critical SCI 

systems’’); see also RWP Proposing Release, supra 

note 18, at 34719 (acknowledging there would 

likely be some connection between what a CCA 

identifies as its critical services for purposes of 

inclusion in its RWP and what it identifies as 

‘‘critical SCI systems’’ for purposes of Regulation 

SCI, but inclusion of a critical service in a CCA’s 

RWP would have no impact on the CCA’s 

obligations under Regulation SCI). 

213RWP Proposing Release, supra note 18, at 

34718. 

214 Id. 

215OCC at 6 (agreeing that any consideration of 

how a CCA will continue its core services 

necessarily requires consideration of how to plan to 

retain the necessary staff for such efforts); ICE at 3 

(recognizing that it is necessary to identify staffing 

resources to implement RWPs); The Associations at 

13 (agreeing that emphasis should be placed on 

determining staffing requirements); SIFMA at 14 

(strongly supporting the requirement that CCAs 

ensure that they are able to maintain access to 

services, including personnel services, in a default 

scenario). 

216 ICE at 3. 

217 Id. 

218OCC at 6. 

219 Davidson at 6. 

220OCC at 6. 

221 Id. 

222 Id. 

223SIFMA at 14. 

224 Davidson at 6. 

225To eliminate extraneous words and align the 

text grammatically, the Commission has replaced 

the phrase ‘‘analysis of’’ with ‘‘analyze.’’ See infra 

note 228 and accompanying text (describing other 

grammatical changes to the rule text). 

a. Replacing ‘‘Critical’’ With ‘‘Core’’ 

The Commission is modifying the 

final rule to refer to ‘‘core payment, 

clearance, and settlement services’’ 

rather than ‘‘critical payment, clearance, 

and settlement services’’ (hereinafter, 

referred to as ‘‘core services’’) to 

improve clarity and consistency with 

terminology in other rules, such as Rule 

17Ad–25(i),211 which concerns the 

governance of ‘‘service providers for 

core services.’’ Furthermore, the use of 

‘‘core’’ as opposed to ‘‘critical’’ helps 

distinguish a CCA’s obligations under 

Rule 17Ad–26 from those under 17 CFR 

242.1000 through 242.1007 (‘‘Regulation 

SCI’’), which addresses, in the context 

of clearing agencies subject to the rule, 

‘‘critical systems’’ that support 

clearance and settlement.212

Use of the descriptive term ‘‘core’’ 

rather than ‘‘critical’’ does not affect the 

Commission’s guidance stated in the 

RWP Proposing Release on identifying 

those services.213 Accordingly, when 

identifying a core service, the CCA 

generally should consider the impact 

that any interruption to a particular 

service would have on the CCA’s 

participants and the smooth functioning 

of the markets that it serves, as well as 

whether the service is available from 

any substitute provider.214

b. Modification to ‘‘Staffing’’ Element 

Several commenters stated that 

identifying staffing or staffing resources 

is a necessary part of addressing how a 

CCA may continue providing its core 

services.215 One of those commenters 

stated that it is not necessary to identify 

specific personnel or positions required 

to be maintained, and a CCA should 

have flexibility to determine the staff 

needed in a particular situation, 

including taking into consideration the 

availability and willingness of 

personnel to perform services at the 

time of a recovery or wind-down.216 The 

commenter suggested the proposed rule 

be amended to clarify that the CCA is 

not required to identify specific 

personnel or positions required to be 

maintained.217 Similarly, another 

commenter stated that lists of specific 

employees may become dated quickly 

due to a shift in responsibility or normal 

attrition.218 Another commenter stated, 

given the volume of employee turnover 

and new initiatives, personnel 

designations likely change with 

regularity, making specific 

identification of personnel in the RWP 

superfluous.219

The Commission agrees with the 

commenters that identifying specific 

personnel or employees is not necessary 

in planning and recognizes that changes 

may occur in the staffing at a CCA. 

However, it is important for planning 

purposes to identify those positions, 

roles, or personnel functions that are 

necessary for the continuation of core 

services, regardless of who or how many 

staff fills the role in ordinary 

circumstances, to avoid unnecessary 

disruptions. As such, the Commission is 

modifying the final rule from the 

proposal to refer to the identification of 

‘‘staffing roles’’ instead of ‘‘staffing,’’ the 

latter of which could have been 

interpreted as requiring the 

identification of specific individuals. 

Several commenters responded to the 

clause requiring ‘‘analysis of how such 

staffing would continue in the event of 

a recovery and during an orderly winddown.’’ One commenter stated that the 

process for preparing to retain and 

incentivize critical employees under 

adverse circumstances is the critical 

piece of information necessary for the 

CCA and its supervisory and resolution 

authorities.220 The commenter stated 

that what is most important in this 

aspect of planning are the retention 

tools the CCA uses, how it considers 

retention when setting and negotiating 

employment terms with essential 

personnel, and how it tracks the terms 

of each such employee’s 

employment.221 The commenter 

suggested a minor wording change to 

proposed Rule 17Ad–26(a)(1) to state 

‘‘analysis of how the CCA prepares for 

such staffing to continue in the event of 

a recovery and during an orderly winddown.’’ 222 Another commenter stated 

that it is important to have sufficient 

going concern resources to allow a CCA 

to retain its key personnel, claiming that 

the inability to keep personnel from 

leaving after a prior high profile 

insolvency event in the 2008 financial 

crisis contributed to large losses.223

Another commenter stated that not even 

the most lucrative employment 

agreements can be sufficient to retain 

highly in-demand skilled employees on 

a ‘‘sinking ship,’’ and furthermore stated 

that certain CCAs have organized labor 

agreements in place with many 

employees that would require time 

consuming renegotiation to satisfy this 

clause in the proposed rule.224

To address the above concerns 

regarding the potentially unpredictable 

or evolving circumstances of 

employment during a recovery or winddown event, the Commission is 

modifying the clause related to 

analyzing the continuation of staffing 

roles in a recovery and during an 

orderly wind-down. The clause has 

been modified in the final rule to state 

‘‘analyzing how such staffing roles 

necessary to support such core services 

would continue in the event of a 

recovery and during an orderly winddown.’’ 225 In response to commenters 

generally focused on concerns that a 

CCA could not guarantee the 

circumstances of employment during a 

recovery or wind-down event, the rule 

only requires that a CCA conduct an 

analysis, through which it would be 

able to identify potential challenges and 

potential ways to address those 

challenges. The final rule does not 

require the CCA to guarantee or compel 

specific staff or personnel to remain in 

place. Rather, the requirement promotes 

preparation for recovery and winddown events, helping to ensure that 

from a staffing perspective the necessary 

roles or functions have been identified 

and established so that core services can 

continue uninterrupted. As one 

commenter stated, there may be 

organized labor agreements in place 

with employees. Pursuant to the final 

rule, to address such circumstances, a 

CCA is required in its RWP to analyze 

any such arrangements to see whether 

and how they might impact staffing 

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226Pursuant to Rule 17Ad–22(e)(15)(iii), these 

liquid assets are in addition to resources held by the 

CCA to cover participant defaults or other risks 

covered by Rules 17Ad–22(e)(4)(i) through (iii), as 

applicable, and to cover the liquidity risks 

identified in Rules 17Ad–22(e)(7)(i) and (ii). 

227OCC at 6. 

228Specifically, the phrase ‘‘the identification of’’ 

has become ‘‘by: identifying’’ and ‘‘analysis of’’ has 

become ‘‘analyzing.’’ See supra note 225 (describing 

other grammatical changes to the rule text). 

229RWP Proposing Release, supra note 18, at 

34719. 

230The Commission is also modifying in final 

Rule 17Ad–26(a)(2) the clause ‘‘and whether those 

obligations’’ to ‘‘and whether the obligations under 

those written agreements’’ for consistency with the 

written agreements modification. 

231 DTCC at 5–6. 

232 Id. at 5. 

233 Id. at 6. 

234OCC at 6. 

235To improve grammar and clarity, the 

Commission has also modified the phrase ‘‘specify 

to what services such service providers are 

relevant’’ to ‘‘specifying which core services each 

service provider supports’’ in final Rule 17Ad– 

26(a)(2). 

236 DTCC at 8–9 (The commenter stated that the 

proposed requirement ‘‘overestimates the 

negotiating leverage that CCAs have when entering 

contracts with service providers or assumes that 

CCAs would be able to unilaterally require service 

providers to continue performance during a 

recovery or orderly wind-down.’’). 

down, consistent with the terms of the 

rule requirement. The rule does not 

require a CCA to renegotiate such 

arrangements. 

In addition, and separate from the 

requirements in Rule 17Ad–26(a)(1), a 

CCA is required by Rule 17Ad– 

22(e)(15)(ii) to have written policies and 

procedures to cover potential general 

business losses by holding liquid net 

assets funded by equity equal to the 

greater of either six months of the 

covered clearing agency’s current 

operating expenses, or 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.226 As such, a CCA 

generally should estimate the potential 

costs associated with ensuring its core 

services, which could include the 

staffing necessary to support those 

services, to ensure that it can meet the 

requirements in Rule 17Ad–22(e)(15) 

related to implementing the recovery or 

orderly wind-down of critical 

operations and core services. 

One commenter suggested a ‘‘process’’ 

approach to retain employees with an 

associated wording change in the 

rule.227 By focusing on ‘‘roles’’ in the 

final rule, the modified rule text 

achieves the same result. In addition to 

the substantive change from ‘‘staffing’’ 

to ‘‘staffing roles necessary to support 

such core services’’ discussed above, the 

Commission has made technical edits to 

the rule text to add paragraph markers 

(i) and (ii), aligning the text 

grammatically.228

2. Service Providers: Rule 17Ad–26(a)(2) 

Proposed Rule 17Ad–26(a)(2) required 

the RWP of a CCA to identify and 

describe any service providers upon 

which the CCA relies to provide the 

services identified in paragraph (a)(1) of 

proposed Rule 17Ad–26, specify to what 

services such service providers are 

relevant and address how the CCA 

would ensure that such service 

providers would continue to perform in 

the event of a recovery and during an 

orderly wind-down, including 

consideration of contractual obligations 

with such service providers and 

whether those obligations are subject to 

alteration or termination as a result of 

initiation of the recovery and orderly 

wind-down plan. 

The Commission, based on its 

supervisory experience, has observed 

that CCAs rely upon some service 

providers to deliver core services.229 For 

those service providers that are 

necessary for the provision of core 

services, the failure of those service 

providers to perform could pose 

significant operational risks and have 

substantial effects on a CCA’s ability to 

provide core services. In a recovery or 

wind-down event, the continued 

performance of such a service provider 

would be essential for the continuity of 

core services. Thus, the Commission 

proposed to require a CCA to identify 

and describe the subset of its service 

providers necessary to ensure the 

continued delivery of core services 

throughout a recovery or wind-down 

event. 

Final Rule 17Ad–26(a)(2) refers to ‘‘its 

written agreements’’ instead of 

‘‘contractual obligations’’ for the reasons 

discussed in the modifications to the 

definition of ‘‘service provider for core 

services’’ in final Rule 17Ad–26(b) in 

Part II.D.2, infra.230 The Commission is 

also making technical changes to Rule 

17Ad–26(a)(2) by adding paragraph 

markers to separate the clauses of the 

rule text into paragraphs (a)(2)(i) and 

(ii). 

The Commission received comments 

on proposed Rule 17Ad–26(a)(2) and is 

making the modifications to the rule 

discussed below. 

a. Identify and Describe Service 

Providers for Core Services 

One commenter, agreeing with the 

Commission that continued 

performance of a service provider as 

part of the RWP would be essential, 

stated that the requirements of proposed 

Rule 17Ad–26(a)(2) and the related 

proposed definition of ‘‘service 

provider’’ in proposed Rule 17Ad–26(b) 

are circular in nature and overly broad, 

resulting in too many service providers 

being captured and the requirement 

being overly burdensome.231

Specifically, the commenter stated that 

the phrases ‘‘. . . upon which the 

covered clearing agency relies to 

provide the services identified in 

paragraph (a)(1) of this section . . .’’ in 

proposed Rule 17Ad–26(a)(2) and ‘‘. . . 

in any way related to the provision of 

critical services, as identified by the 

covered clearing agency in paragraph 

(a)(1) of this section . . .’’ in the 

definition of ‘‘service provider’’ in 

proposed Rule 17Ad–26(b) are 

superfluous and unnecessary, and thus, 

both are not needed.232 The commenter 

further stated that by including the term 

‘‘in any way’’ as well as ‘‘relies’’ in these 

two sections of the proposed rules, the 

Commission broadened the scope of 

‘‘service provider’’ to a point that 

renders the term functionally useless for 

identifying those service providers that 

are critical to the business operations of 

a CCA.233 By contrast, another 

commenter stated that the term as used 

in proposed Rule 17Ad–26(a)(2) appears 

to limit the subset of providers to be 

addressed in the RWP.234

Commenters differed in their 

interpretation of these phrases in 

proposed Rule 17Ad–26(a)(2) and the 

definition of ‘‘service provider’’ in 

proposed Rule 17Ad–26(b). The phrase 

‘‘upon which the covered clearing 

agency relies to provide the services 

identified in paragraph (a)(1) of this 

section’’ has been deleted in final Rule 

17Ad–26(a)(2) to avoid any duplication 

of, or inconsistency with, the definition 

of ‘‘service providers for core services’’ 

in final Rule 17Ad–26(b).235 Along with 

the modifications to the definition of 

‘‘service provider for core services’’ in 

final Rule 17Ad–26(b) discussed in Part 

II.D.2 infra, the scope of service 

providers captured is appropriate for 

recovery and orderly wind-down 

planning purposes. 

b. Ensure Continued Performance of 

Service Providers for Core Services 

One commenter disagrees that CCAs 

can reasonably ‘‘ensure’’ that there will 

be continuation of services by service 

providers.236 The commenter stated that 

it interprets Rule 17Ad–22(e)(15)(ii) to 

require a CCA to have sufficient 

resources to continue to pay service 

providers through the entirety of an 

execution of a CCA’s RWP, and 

therefore states that this existing 

requirement should adequately address 


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237 DTCC at 9. 

238 Id. 

239 ICE at 4. 

240The requirements of Rule 17Ad–26 lay out 

necessary elements of a RWP, while the 

requirement for the RWP itself resides in Rule 

17Ad–22(e)(3)(ii), which requires reasonably 

designed written policies and procedures. 

241A CCA designated systemically important 

generally should consider also whether and how 

such agreements may be impacted by the resolution 

or transfer of services conducted by the resolution 

authority pursuant to Title II. 

242OCC at 6. 

243 Id. at 7. 

244 In addition, board oversight of service 

provider relationships is subject to the requirements 

of Rule 17Ad–25(i), 17 CFR 240.17ad–25(i), which 

can also help ensure that relationships continue 

without sudden disruption in the event of a 

recovery or wind-down scenario. 

245 DTCC at 9. 

246 Id. 

247 Id. 

the Commission’s goals for this aspect of 

the proposal and recommends that the 

Commission revise proposed Rule 

17Ad–26(a)(2) by removing any 

requirement that a CCA ‘‘ensure’’ 

continuation of services.237

Alternatively, the commenter requested 

that the Commission adopt a standard 

that acknowledges these limitations of a 

CCA to ensure continued performance 

of service providers and that requires a 

CCA to establish, implement, maintain, 

and enforce written policies and 

procedures reasonably designed to 

facilitate considerations of contractual 

provisions with service providers that, 

subject to continued payment by the 

CCA (or successor) obligates them to 

continue to perform in the event of a 

recovery or during an orderly winddown.238

Another commenter stated it ‘‘does 

not believe it is possible for a CCA to 

‘ensure’ that a service provider would 

perform.’’ The commenter also stated 

that a CCA can and should analyze 

whether a service provider has any 

termination rights or other contractual 

basis for not performing in a recovery or 

wind-down situation. The commenter 

also stated that a CCA should assess and 

document how it would handle the 

situation where a service provider has a 

right to terminate or otherwise not 

perform in a recovery or wind-down 

situation.239 Accordingly, the 

commenter suggested that proposed 

Rule 17Ad–26(a)(2) be modified to 

require a CCA evaluate whether the 

service provider would continue to 

perform in the event of a recovery or 

orderly wind-down and address how 

the CCA would handle any termination 

or alternation of performance by the 

service provider. 

The Commission acknowledges that, 

while a CCA can, and generally should, 

include provisions in its written 

agreements so that it can contractually 

require that a service provider for core 

services continues to perform during a 

recovery or wind-down, a CCA may not 

be able to compel a service provider to 

continue to perform in all 

circumstances. However, as proposed, 

Rule 17Ad–26(a)(2) addresses planning 

for a recovery or wind-down scenario by 

requiring written policies and 

procedures reasonably designed to 

address how a CCA would ensure that 

service providers for core services 

would continue to perform in the event 

of a recovery and during an orderly 

wind-down.240 Thus, even though a 

CCA may not be able to compel a 

service provider to continue performing 

in all circumstances, such planning and 

any related contractual provisions 

designed to continue performance under 

the contract help limit the potential for 

abrupt or unanticipated disruptions in 

services during a recovery or winddown event.241 Achieving this 

requirement would likely involve an 

evaluation of whether the service 

provider would continue to perform in 

the event of a recovery or orderly winddown and address how the CCA would 

handle any termination or alteration of 

performance by the service provider. As 

previously discussed above, a CCA 

generally should consider when and 

how to include provisions in its written 

agreements with service providers that 

acknowledge and help ensure that 

service providers can continue to 

perform their services during a recovery 

or wind-down event to avoid potential 

disruptions in core services. In so doing, 

a CCA generally should consider the 

terms to which its service providers may 

be willing or unwilling to agree, so that 

the CCA can evaluate its options 

effectively and develop its written 

agreement accordingly. As this 

requirement concerns actions taken at 

the planning stage and does not require 

a CCA to compel another entity to act, 

the Commission is not making further 

modifications to Rule 17Ad–26(a)(2). 

One commenter, while agreeing that 

proposed Rule 17Ad–26(a)(2) identifies 

a key component of planning for 

recovery and orderly wind-down, stated 

that the Commission would best 

accomplish its objective of ensuring 

continued performance by service 

providers for core services by amending 

the proposed rule to focus on the CCA’s 

relevant processes for third-party 

engagement and management rather 

than on conditions at a snapshot point 

in time, as the nature of a CCA’s 

relationship with a service provider, the 

services provided, and the roster of 

relevant service providers necessarily 

evolves over time.242 The commenter 

recommended slightly altering the 

language of the relevant portion of 

proposed Rule 17Ad–26(a)(2) to state 

the following: 

. . . address the process by which how the 

CCA seeks to would ensure that service 

providers would continue to provide such 

critical services in the event of a recovery 

and during an orderly wind-down, including 

consideration and tracking of contractual 

obligations with such service providers and 

whether those obligations are subject to 

alteration or termination as a result of 

initiation of the recovery and orderly 

winddown plan.’’ 243

As stated by the commenter, a CCA’s 

roster of service providers for core 

services evolves over time as does the 

relationship with each such service 

provider and the services provided by it. 

However, a CCA is not required to 

outline any process or other means it 

uses to track relationships with service 

providers for core services in its RWP. 

Accordingly, final Rule 17Ad–26(a)(2) 

requires only the identification and 

description of such service providers, 

and a CCA has discretion on how to 

address any changes or updates to the 

service providers, which could be 

addressed in the reviews of a CCA’s 

RWP required by final Rule 17Ad– 

26(a)(9).244

One commenter raised the possible 

interaction with the U.S. Bankruptcy 

Code in connection with the transfer of 

critical services to another legal entity 

as part of an orderly wind-down 

strategy.245 The commenter stated that 

the Bankruptcy Code would stay any 

vendors from terminating their 

agreements subject to getting paid, 

which could allow for an assignment to 

the other legal entity.246 According to 

the commenter, this effectively would 

address the concern without an 

unnecessary and overly prescriptive 

rule.247

The Commission agrees that, in a 

scenario involving the transfer of 

services from a CCA to another legal 

entity, bankruptcy proceedings may 

facilitate continuity of services by, for 

example, staying any vendors from 

terminating their agreements. The 

Commission also acknowledges that, 

during a recovery or wind-down, service 

providers, affected participants, or other 

stakeholders in the CCA may attempt to 

initiate bankruptcy proceedings 

themselves for any number of reasons. 

Ultimately, the requirements in Rule 

17Ad–26 are designed to promote 

effective planning for a recovery or 


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248OCC at 8. 

249 Id. 

250RWP Proposing Release, supra note 18, at 

34721. 

251 Id. at 34725. 

252The Associations at 15 (citing CPMI–IOSCO 

Recovery Guidance, supra note 25, at 2.4.5). 

253See generally, PFMI, supra note 9, at 3.15.1 

(describing. as a general matter, the commonly 

understood meaning of ‘‘general business risk’’ in 

the context of FMIs, as follows: ‘‘General business 

risk refers to the risks and potential losses arising 

from an FMI’s administration and operation as a 

business enterprise that are neither related to 

participant default nor separately covered by 

financial resources under the credit or liquidity risk 

principles. General business risk includes any 

potential impairment of the FMI’s financial position 

(as a business concern) as a consequence of a 

decline in its revenues or an increase in its 

expenses, such that expenses exceed revenues and 

result in a loss that must be charged against capital. 

Such impairment can be caused by a variety of 

business factors, including poor execution of 

business strategy, negative cash flows, or 

unexpected and excessively large operating 

expenses. Business-related losses also may arise 

from risks covered by other principles, for example, 

legal risk (in the case of legal actions challenging 

the FMI’s custody arrangements), investment risk 

affecting the FMI’s resources, and operational risk 

(in the case of fraud, theft, or loss).’’). 

254See CCA Standards Adopting Release, supra 

note 5, at 70800. 

255The Associations at 15. 

256 Id.; see also ICI at 6, 8 (similarly requesting 

clear delineation between default and non-default 

loss scenarios). 

257See, e.g., RWP Proposing Release, supra note 

18, at 34712 n.41; see also supra notes 81–100 

(discussing the provisions of the SRO rule filing 

and advance notice processes, as well as other 

Commission rules that facilitate disclosure to 

clearing participants). 

258Letter from Muth, dated June 10, 2023 

(‘‘Muth’’) at 3. 

259RWP Proposing Release, supra note 18, at 

34721 (explaining that the set of scenarios would 

include scenarios arising from a participant default 

and from events not related to a participant default, 

and that potential scenarios not related to a 

participant default could include the realization of 

investment or custody losses, the failure of a third 

party, such as a settlement bank, to perform a 

critical function for the covered clearing agency, or 

scenarios caused by a systems compliance and 

integrity (SCI) event or other significant operational 

disruption, such as a significant cybersecurity 

incident); id. (explaining that each scenario 

generally should be analyzed individually in the 

recovery plan, with the analysis including: a 

description of the scenario; the events that are 

likely to trigger the scenario; the covered clearing 

agency’s process for monitoring such events; the 

market conditions, operational and financial issues, 

and other relevant circumstances that are likely to 

result from the scenario; the potential financial and 

operational impact of the scenario on the covered 

clearing agency and its participants, internal and 

external service providers, and relevant affiliated 

companies, both in an orderly and stressed market 

(e.g., where markets are unavailable or there are 

limited solvent counterparties); and the specific 

steps that the covered clearing agency would expect 

to take if the scenario occurs or appears likely to 

occur, including, without limitation, any 

governance or other procedures that may be 

necessary to implement the relevant tools or use the 

relevant resources and to ensure that such 

implementation occurs in sufficient time to achieve 

the intended effect). 

orderly wind-down, and the possibility 

of bankruptcy proceedings do not 

reduce a CCA’s obligations to plan 

effectively. 

3. Scenarios: Rule 17Ad–26(a)(3) 

Proposed Rule 17Ad–26(a)(3) required 

a CCA’s RWP to identify and describe 

scenarios that may potentially prevent 

the CCA from being able to provide its 

critical payment, clearing, and 

settlement services identified in 

proposed Rule 17Ad–26(a)(1) as a going 

concern, including uncovered credit 

losses (as described in paragraph 

(e)(4)(viii) of 17 CFR 240.17ad–22), 

uncovered liquidity shortfalls (as 

described in paragraph (e)(7)(viii) of 17 

CFR 240.17ad–22), and general business 

losses (as described in paragraph (e)(15) 

of 17 CFR 240.17ad–22). 

Commenters differed on the level of 

granularity that was appropriate in the 

rule. One commenter stated that it 

supported the proposed rule, agreed that 

appropriate scenarios will vary across 

different CCAs serving different 

markets, and stated that the Commission 

has provided appropriate discretion to a 

CCA to identify the scenarios most 

appropriate to its unique 

circumstances.248 The commenter also 

stated that the Commission should not 

identify particular scenarios for a CCA 

to address in its RWP.249 The 

Commission agrees with this 

commenter, and reiterates that the risks 

that may potentially prevent a CCA from 

being able to provide its core services 

vary across different types of CCAs and 

even across CCAs of the same type, 

resulting in identified scenarios that 

differ from CCA to CCA.250

Another commenter stated that the 

enumerated list of scenarios in Request 

for Comment No. 22 in the RWP 

Proposing Release 251 is comprehensive 

and in line with international standard 

setting guidance and further stated that 

the list should be considered a 

minimum, and supported a more 

granular list of scenarios that a CCA 

should consider.252 The Commission is 

not including such a further list of 

specific scenarios in final Rule 17Ad– 

26(a)(3). The rule requires a CCA to 

identify and describe scenarios for 

uncovered credit losses, uncovered 

liquidity shortfalls, and general business 

losses.253 Under these broad categories, 

each CCA must identify scenarios 

considering the unique circumstances of 

CCA, including the market served and 

products cleared. Furthermore, a more 

granular list of scenarios may not be 

appropriately applied to all CCAs, 

considering the variance in the 

circumstances each individual CCA 

faces, and such a prescriptive approach 

with a granular list of scenarios would 

be contrary to the principles-based 

approach to Rule 17Ad–22(e), which 

contains the requirement for a CCA to 

have a RWP.254 The commenter also 

stated that it could be a worthwhile 

analysis to see if plans would still be 

viable under a combination of scenarios, 

as there is potential for simultaneous 

shocks to occur.255 A CCA, considering 

the unique circumstances faced by it, 

may identify combinations of scenarios 

in its analysis to achieve the 

requirements of final Rule 17Ad– 

26(a)(3). The discretion to consider 

combinations of scenarios arising from 

the potential of simultaneous shocks 

best remains with a CCA in its planning 

for a recovery or orderly wind-down. In 

addition, the commenter recommended 

that the Commission consider greater 

transparency around the distinction 

between default and non-default losses 

and the tools used under these 

scenarios.256 However, information 

available in current rulebooks of the 

CCAs and through the SRO rule filing 

and advance notice processes provides 

transparency on the RWPs of CCAs, 

including how a CCA would address a 

default or non-default loss and the tools 

available in such scenarios.257 As a 

result, additional mechanisms to 

promote transparency are not necessary, 

as a clearing member or market 

participant may obtain from these 

publicly available documents a general 

understanding of the scenarios a CCA 

has identified for default and nondefault losses and the tools that could 

be used under such scenarios. 

One commenter stated that the 

requirement of explicit consideration in 

the recovery plan of what might lead to 

each scenario coming into being and 

how the scenario might take shape 

(including prerequisite contemplated 

market conditions) imposes a small 

burden on compliance and risk 

functions in the entity while creating 

greatly-enhanced transparency to 

investors and regulators around how, 

how quickly, and under what 

conditions the entity may fail to meet 

obligations.258 The Commission agrees 

that explicit consideration of what 

might lead to a scenario coming into 

being and how the scenario might take 

shape are important elements of 

identifying and describing scenarios, 

and accordingly, Rule 17Ad–26(a)(3) 

requires a CCA to both identify and 

describe such scenarios.259 In 

identifying and formulating the 

description of such scenarios, the CCA 

can share information and analysis with 

its participants and other key 

stakeholders to develop its own 


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260See infra Part II.C.8 (further discussing the 

requirements for RWP testing in new Rule 17Ad– 

26(a)(8)). 

261See infra note 366 (further discussing 

requirements related to the risk management 

committee in Rule 17Ad–25(d)(2)). 

262See infra note 367 (further discussing 

requirements for soliciting stakeholder viewpoints 

in Rule 17Ad–25(j)). 

263The Associations at 17. 

264OCC at 8. 

265 Id. 

266RWP Proposing Release, supra note 18, at 

34721. 

267See infra Part II.D (further explaining the 

definitions of ‘‘recovery’’ and ‘‘orderly winddown’’). 

268 Id. 

269See supra note 264. 

270The Associations at 18. 

271See supra note 264. 

272RWP Proposing Release, supra note 18, at 

34721. 

273 Id. 

274 Id. 

275To improve grammar and clarity, the 

Commission is adopting a technical amendment to 

the final rule text. Specifically, the Commission is 

removing use of the word ‘‘upon,’’ and adding the 

phrase ‘‘on which,’’ such that final Rule 17Ad– 

26(a)(5) states: ‘‘Identify and describe the rules, 

policies, procedures, and any other tools or 

resources on which the covered clearing agency 

would rely in a recovery or orderly wind-down.’’ 

276 Id. at 34722. 

understanding, as well as the 

understanding of its participants and 

other key stakeholders, regarding the 

potential causes of recovery and winddown scenarios. Various mechanisms 

under other Commission rules may 

facilitate this process, such as those 

requiring testing of its RWP,260

consideration by its risk management 

committee of matters related to the 

RWP,261 and general solicitation of 

stakeholder viewpoints regarding risk 

management topics.262 As discussed 

further in Part IV.C.1 and V.B, the 

burden associated with such planning is 

appropriate considering the risks 

associated with the potential failure of 

a CCA. 

Consistent with the above discussion, 

the Commission is adopting Rule 17Ad– 

26(a)(3) as proposed, except that it has 

replaced the term ‘‘critical payment, 

clearing, and settlement services’’ with 

‘‘core services’’ consistent with the 

modifications to uses of ‘‘critical’’ 

services as discussed in Part II.C.1. 

4. Triggers: Rule 17Ad–26(a)(4) 

Proposed Rule 17Ad–26(a)(4) required 

a CCA’s RWP to identify and describe 

criteria that would trigger the 

implementation of the recovery and 

orderly wind-down plans and the 

process that the CCA uses to monitor 

and determine whether the criteria have 

been met, including the governance 

arrangements applicable to such 

process. 

One commenter proposed that the 

Commission provide a list of triggers 

that are required to be covered in the 

RWP and another list of triggers that a 

CCA should consider for inclusion in 

the RWP.263 In contrast, another 

commenter stated that prescribing bright 

line, quantitative triggers that would 

apply to all CCAs, irrespective of their 

unique structures and the features of the 

markets they serve and products they 

clear, would run the risk of creating 

market instability by potentially forcing 

a CCA to initiate its RWP even when the 

CCA has not yet made the determination 

that it is necessary.264 For that reason, 

the commenter stated that it supports 

the Commission’s determination to 

allow CCAs to identify appropriate 

triggers for their individual 

circumstances.265 The Commission is 

not specifying a list of triggers in the 

rule for inclusion in an RWP. As stated 

in the RWP Proposing Release, for some 

circumstances, the trigger is obvious 

(e.g., uncovered default losses),266 and 

the Commission is not explicitly 

including such triggers in the final rule 

because it has already required in Rule 

17Ad–26(a)(3) that CCAs identify and 

describe scenarios based on the most 

obvious types of triggers (e.g., 

uncovered default losses, as well as 

uncovered liquidity shortfalls and 

general business losses) and also 

included each of these triggers in the 

definitions of ‘‘recovery’’ and ‘‘orderly 

wind-down’’ to ensure that CCAs 

consider these types of circumstances 

throughout the development of their 

RWPs.267 For other circumstances, as 

the Commission stated in the RWP 

Proposing Release, a CCA may have to 

employ more judgment to develop 

appropriate triggers,268 and discretion 

should be afforded to a CCA in the 

planning process to develop these 

triggers instead of having the 

Commission delineate a list of triggers 

that a CCA should consider. This view 

generally aligns with the latter 

commenter, in that the final rule 

provides for a CCA to identify 

appropriate triggers for its individual 

circumstances.269 The Commission 

further agrees with the latter commenter 

that the risk of having bright-line 

triggers could result in forcing a CCA to 

initiate its RWP even when the CCA has 

not yet made the determination that it 

was necessary, which could lead to 

market instability. 

Regarding CCA discretion to trigger 

the RWP, one commenter proposed that 

the general assumption should be that 

triggers are automatic, unless the CCA 

makes the determination that discretion 

is appropriate for a certain trigger.270

The Commission disagrees and is not 

requiring in the rule that triggers 

execute automatically. As suggested by 

the commenter,271 automatically 

triggering a RWP without discretion 

could adversely affect market stability. 

In the RWP Proposing Release, the 

Commission stated that the 

identification of triggers does not mean 

that such triggers should be selfexecuting; instead, the importance of 

identifying triggers lies in ensuring that 

a CCA considers and identifies ex ante 

when it would initiate its RWP.272 The 

Commission also stated that it believes 

that the RWP must identify and describe 

the process that the CCA uses to 

monitor and determine whether the 

criteria have been met, including the 

governance arrangements applicable to 

such process.273 The final rule provides 

a CCA with discretion to consider this 

guidance and to identify and describe 

triggers appropriate to its RWP and 

whether any such triggers are automatic 

or discretionary. 

The Commission is replacing the 

word ‘‘would’’ with ‘‘could’’ in final 

Rule 17Ad–26(a)(4) to avoid any 

presumption that triggers are selfexecuting and to reiterate the 

Commission’s statement in the RWP 

Proposing Release that the identification 

of triggers ‘‘does not mean that such 

triggers should be self-executing.’’ 274

5. Tools: Rule 17Ad–26(a)(5) 

Proposed Rule 17Ad–26(a)(5) required 

the RWP of a CCA to identify and 

describe the rules, policies, procedures, 

and any other tools or resources the 

CCA would rely upon in a recovery or 

orderly wind-down. The Commission is 

adopting Rule 17Ad–26(a)(5) as 

proposed.275

In the RWP Proposing Release, the 

Commission stated that the proposed 

requirement to describe rules, policies, 

procedures, and any other tools or 

resources that may be used in advance 

for certain situations would provide 

some level of predictability in such a 

situation and avoid unexpected actions 

because it would allow participants to 

understand the potential of tools or 

resources that could be used, including 

whether any of the tools would require 

participant involvement or resources 

(such as a cash call).276 While stating 

that rules, policies, procedures, and any 

other tools or resources should address 

shortfalls arising from the stress 

scenarios identified by the CCA, the 

Commission declined to prescribe 

particular tools, such as tear-up or 

margin haircutting, that a CCA would be 


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277 Id. 

278 Id. 

279OCC at 8. The commenter added that ‘‘a robust 

dialogue between CCAs, industry participants, and 

international standard-setting bodies concerning 

resolution tools is ongoing, and the Commission 

should avoid preempting with prescriptive 

rulemaking the development of consensus and 

common understanding that can emerge from such 

a dialogue.’’ OCC at 9. 

280 ICC at 4. 

281The Associations at 16. 

282 ICI at 7. 

283 Id. at 3, 6–7. 

284 Id. at 6. 

285See RWP Proposing Release, supra note 18, at 

34712, n. 41. 

286 15 U.S.C. 78s(b)(2)(C). 

287See, e.g., Release 34–83916 (Aug. 23, 2018), 83 

FR 44076 (Aug. 29, 2018) (SR–OCC–2017–020) 

(finding that the proposed rule change concerning 

OCC’s recovery tools was consistent with section 

17A(b)(3)(F) of the Exchange Act and Rules 17Ad– 

22(e)(2)(i), (iii), and (v), (e)(4)(viii) and (ix), (e)(13), 

and (e)(23)(i) and (ii) thereunder). 

288CCA Standards Adopting Release, supra note 

5, at 70809. 

289 Id. 

290The Associations at 5. The commenter added 

that RWPs need to ensure that clearing participants’ 

liability is limited and that certain tools can be used 

within monetary and time limits. Id. at 10. 

291 Id. at 12. 

292SIFMA at 12. 

293 Id. 

294 Id. 

295See supra notes 81–100 and accompanying 

text (discussing in further detail these Commission 

rules and processes facilitating input from and 

required to include in its RWP.277 The 

Commission stated its belief that this 

proposed requirement preserved 

discretion for each CCA to consider the 

full range of available recovery tools and 

select those most appropriate for the 

circumstances of the CCA, including the 

products cleared and the markets 

served.278

a. Discretion for CCAs in Selection of 

Tools 

One commenter stated that the rule 

should preserve discretion for each CCA 

to consider the full range of available 

recovery tools and select those most 

appropriate for the circumstances of the 

CCA.279 Another commenter agreed 

with the Commission’s decision not to 

mandate or prescribe the use of tools in 

certain situations and ‘‘believes that 

[CCAs] should have the discretion to 

determine the appropriate mix of tools 

to be used.’’ 280 Another commenter 

‘‘believe[s] that the clearing agency 

should be free to select the right or most 

appropriate tools for the markets and 

products it clears without any 

regulation constraints.’’ 281 The 

Commission generally agrees with these 

commenters and is adopting the rule as 

proposed, which allows for discretion 

by a CCA in the selection of tools that 

are most appropriate for the 

circumstances of the CCA. 

One commenter stated that the 

proposal would continue to provide 

CCAs with ‘‘unbridled authority to 

inappropriately allocate default losses to 

non-defaulting customers through tools 

such as partial tear-ups (PTUs) or 

variation margin gains haircutting 

(VGMH).’’ 282 The commenter further 

stated that the Commission should 

prescribe the tools that a CCA must use 

during recovery or wind-down, claiming 

that specifying the tools a CCA must 

deploy in those scenarios would be 

most effective at protecting nondefaulting customers’ assets, a critical 

priority of an RWP in the commenter’s 

view.283 The commenter added that 

‘‘[u]nfortunately, the proposals continue 

to provide broad discretion to a clearing 

entity to determine its recovery and 

orderly wind-down tools, which 

effectively sanctions the use of tools that 

may result in the inappropriate 

allocation of non-defaulting customers’ 

assets.’’ 284

A CCA does not have ‘‘unbridled 

authority’’ to select the tools in its RWP. 

The selection of tools in each RWP has 

been and is subject to the SRO rule 

filing process, which provides for public 

comment and Commission review and 

approval before inclusion of a tool in 

the RWP.285 Under section 19(b)(2)(C) of 

the Exchange Act,286 the Commission 

will approve, and has approved,287

proposed rule changes concerning the 

availability of a tool where the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Exchange Act and 

the applicable rules and regulations 

thereunder. 

The Commission also disagrees that 

prescribing the tools a CCA must deploy 

in recovery and wind-down scenarios 

would be most effective at protecting 

non-defaulting customers’ assets. As the 

Commission has previously explained, a 

‘‘one-size-fits-all’’ approach specifying 

recovery and orderly wind-down tools 

is not productive, and it is not possible 

to assess the utility of a particular tool 

in isolation without considering the 

context of RWP as a whole and the 

particular circumstances of a CCA.288

Furthermore, the discretion afforded a 

CCA in developing the tools available 

for use in its RWP would not enable the 

CCA to engage in the ‘‘inappropriate’’ 

allocation of non-defaulting customers’ 

assets. Instead, tools included in its 

RWP to allocate losses to non-defaulting 

customers may be necessary to prevent 

the potential transmission of systemic 

risk, and the planning facilitated by the 

RWP helps the CCA weigh the strengths 

and weaknesses of respective tools. In 

this way, the CCA has considered ex 

ante the set of tools that will be the most 

appropriate to address different 

scenarios.289 Accordingly, when a CCA 

has determined to allocate losses to nondefaulting customers, it has likely 

passed the point where other resources 

or tools are available to address the loss. 

Although a certain tool may appear 

drastic in the way that it allocates 

losses, such allocation may be 

appropriate to prevent the systemic 

transmission of risk in extreme 

circumstances. 

b. Safeguards, Prescriptions, and 

Limitations on Tools and Resources 

One commenter stated that ‘‘recovery 

tools and provisions should be designed 

in a way that allows clearing 

participants to limit their liability to the 

CCA and to ensure that recovery tools 

can only be used in a limited manner (in 

time and dollar value) to ensure that the 

impact of such tools is predictable and 

reliable during stress, and do not further 

destabilize the market.’’ 290 The 

commenter further stated that ‘‘limited 

use of recovery tools under regulatory 

oversight, in the interest of the whole 

market’’ warrants codification.291

Another commenter stated that certain 

recovery tools and procedures involve 

allocating losses to its clearing members 

or market participants, and therefore the 

tools must be transparent, predictable, 

and implemented with appropriate 

limitations and oversight so that the 

tools do not inappropriately assign 

losses to clearing members and market 

participants in a way that is 

destabilizing.292 The commenter 

continued that it is important to ensure 

that loss allocation procedures 

appropriately balance the incentives of 

a CCA’s owners and market participants 

to manage risk effectively and prevent a 

crisis from occurring.293 The commenter 

stated loss allocation procedures should 

be well defined and that a CCA should 

not have autonomy to allocate losses 

away from its shareholders.294

As discussed in the prior section, 

certain tools may appear drastic in the 

way that they allocate losses. Because of 

this, the Commission agrees with 

commenters that transparency and 

predictability regarding the use of tools 

for recovery and wind-down is 

important. However, the Commission 

disagrees that additional rule text 

changes are necessary because 

transparency regarding the tools that 

may be used in a recovery or winddown scenario, and a level of 

predictability regarding the use of such 

tools, are already provided through 

existing rules.295 When a CCA proposes 


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transparency to clearing participants and other key 

stakeholders). 

296See id. (discussing these processes in further 

detail); see also RWP Proposing Release, supra note 

18, at 34712 n.41 (providing citations to existing 

RWPs approved by the Commission, which 

includes the current set of tools in each). 

297 17 CFR 240.17ad–22(e)(23)(i), (ii). 

298See supra notes 81–100 and accompanying 

text (discussing in further detail these Commission 

rules and processes facilitating input from and 

transparency to clearing participants and other key 

stakeholders). 

299 17 CFR 240.17ad–22(e)(2)(vi). 

300See CCA Standards Adopting Release, supra 

note 5, at 70829. 

301SIFMA at 13; The Associations at 16–17. 

302SIFMA at 13. 

303 Id.; The Associations at 10, 16–17. 

304SIFMA at 12; The Associations at 11, 12, 16– 

17. 

305SIFMA at 5, 12, 19, 20–21; The Associations 

at 12. 

to add or modify the tools available in 

its RWP, such modifications are subject 

to Commission review and approval, 

pursuant to the SRO rule filing and 

advance notice processes, which 

includes public notice and an 

opportunity for public comment and, if 

approved, an approval order describing 

how the modifications are consistent 

with the Exchange Act.296 Furthermore, 

to achieve compliance with existing 

Rule 17Ad–22(e)(23), a CCA is obligated 

to establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to provide for 

publicly disclosing all relevant rules 

and material procedures, including key 

aspects of its default rules and 

procedures, and provide sufficient 

information to enable participants to 

identify and evaluate the risks, fees, and 

other material costs they incur by 

participating in the CCA.297 Such 

policies and procedures should provide 

participants with relevant rules and 

procedures to evaluate the risks, fees, 

and other material costs that 

participants could incur in a recovery or 

wind-down scenario. In addition, new 

requirements in Rule 17Ad–26 related 

to scenarios, triggers, tools, testing, and 

implementation of the RWP also help 

ensure that the CCA is providing 

transparency to its participants and 

others as to whether and when certain 

tools may be used, based on the 

scenarios developed by the CCA and in 

a way that is informed by periodic 

testing of the RWP, which includes 

participation by a subset of clearing 

participants and other relevant 

stakeholders. 

Regarding the limitations sought by 

certain commenters, any appropriate 

limitations on tools proposed for 

inclusion in a CCA’s RWP would be 

addressed through the SRO rule filing 

process, where specific tools would be 

subject to Commission review and 

approval, as well as public comment. 

Furthermore, to approve the addition of 

such tools, the proposed rule change 

must be consistent with the 

requirements of the Exchange Act and 

any advance notice must also be 

consistent with the standard for advance 

notices set forth in the Dodd-Frank 

Act.298 Among the rules and regulations 

applicable to a CCA is Rule 17Ad– 

22(e)(2)(vi), which requires a CCA to 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to consider the 

interests of participants’ customers, 

securities issuers and holders, and other 

relevant stakeholders of the CCA.299 To 

the extent that participants oppose the 

use of a tool either as a general matter 

or under certain conditions, a CCA 

would be obligated under Rule 17Ad– 

22(e)(2)(vi) to consider those concerns 

when modifying its RWP to include 

such a tool. Such required 

considerations, which would include 

input from clients of clearing 

participants, securities issuers, transfer 

agents, and other market infrastructure 

to which the CCA is linked, generally 

should help ensure that a CCA 

considers and includes limitations on 

certain tools included in the RWP where 

appropriate and consistent with its 

obligations under the Exchange Act. 

Ultimately, whether limitations on 

specific tools will be appropriate 

depends on the circumstances in which 

the tools would be deployed, and so the 

Commission is not adopting limitations 

as to specific tools in this release. 

Regarding the comment related to a 

CCA having the ‘‘autonomy’’ to allocate 

losses away from its shareholders, as 

explained above, whenever a CCA seeks 

to add or modify a tool available in its 

RWP, the CCA must obtain prior 

Commission approval for any tools that 

it may deploy in a recovery or winddown scenario through the previously 

described SRO rule filing and advance 

notice processes, which provide for 

public notice and comment. In those 

processes, a CCA is attempting to gain 

approval of tools to have in place in 

advance of a recovery or wind-down 

scenario to prevent the losses incurred 

by the CCA from becoming a 

transmission mechanism for systemic 

risk. This necessarily requires the CCA 

to seek an appropriate balance between 

affording participants predictability and 

certainty, on one hand, and ensuring 

that the CCA can effectively manage risk 

to continue its risk mitigating function 

within the broader financial system, on 

the other.300 While a CCA will retain 

discretion consistent with its rules, 

policies, and procedures regarding the 

ways to implement its RWP if a recovery 

or wind-down scenario arises, the CCA’s 

discretion to allocate losses to its 

participants will always be limited by 

the requirements of the Exchange Act 

and Commission rules and regulations 

thereunder. Accordingly, a CCA would 

not have complete autonomy to allocate 

losses away from its shareholders. 

c. Specific Limitations or Bans on 

Certain Tools 

Several commenters requested the 

Commission place limitation on or ban 

certain recovery tools. Two commenters 

generally stated that partial tear-ups 

should be subject to appropriate 

limitations and restrictions.301 One 

commenter stated that forced allocation 

should be completely barred.302 For 

variation margin gains haircutting, 

commenters generally stated that the 

Commission should place restrictions 

on the time and amount, and that this 

tool should only be deployed with 

regulatory approval.303 Commenters 

generally requested that the 

Commission ban initial margin 

haircutting.304 For assessments on 

clearing members to replenish 

resources, commenters generally stated 

that there needs to be a maximum 

amount for assessments set at a 

reasonable level that is defined ex 

ante.305

The CCAs under the Commission’s 

supervision vary in markets served, 

products cleared, and ownership 

structures. These differences, among 

others, make it imprudent for the 

Commission to ex ante ban or explicitly 

limit certain tools, for the same reasons 

discussed in Part II.C.5.b, supra, 

regarding whether safeguards, 

prescriptions, and other limits on tools 

and resources generally are appropriate. 

Rather, by establishing new 

requirements related to scenarios, 

triggers, tools, testing, and 

implementation of the RWP, Rule 

17Ad–26 helps ensure that the CCA is 

providing transparency to its 

participants and others as to whether 

and when certain tools may be used, 

based on the scenarios developed by the 

CCA and in a way that is informed by 

periodic testing of the RWP, which 

includes participation by a subset of 

clearing participants and other relevant 

stakeholders. 

d. Level of Specificity of Description in 

RWP 

In the RWP Proposing Release, the 

Commission stated that the requirement 

to describe rules, policies, procedures, 


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306RWP Proposing Release, supra note 18, at 

34722. 

307 Id. 

308 Id. 

309 ICI at 4, 5, n.15. 

310SIFMA at 12. 

311 Id.; The Associations at 19; ICI at 5, n.15. 

312See supra notes 81–100 and accompanying 

text (discussing in further detail these Commission 

rules and processes facilitating input from and 

transparency to clearing participants and other key 

stakeholders). 

313See supra notes 81–100 and accompanying 

text (discussing in further detail these Commission 

rules and processes facilitating input from and 

transparency to clearing participants and other key 

stakeholders). 

314See CCA Standards Adopting Release, supra 

note 5, at 70800. 315SIFMA at 5. 316 Id. at 5, 12, 16, 18–19. 317The Associations at 4, 6, 7–8. 

318 Id. at 4. 

319 ICI at 3. 

320 Id. at 6, 7–8. 

and any other tools or resources that 

may be used in advance for certain 

situations would provide some level of 

predictability in such a situation and 

avoid unexpected actions because it 

would allow participants to understand 

the potential of tools or resources that 

could be used, including whether any of 

the tools would require participant 

involvement or resources (such as a 

cash call).306 The Commission also 

provided guidance for a CCA to 

generally consider when it is identifying 

and evaluating the appropriateness of 

tools and other resources for a particular 

recovery scenario or an orderly winddown that may be included in its 

RWP.307 Furthermore, the Commission 

laid out nine items that a CCA generally 

should consider when analyzing the 

tools to be included in its RWP.308

One commenter strongly supported 

the proposed requirement to describe 

tools a CCA would use in a recovery or 

wind-down scenario. 309 Another 

commenter stated that the Commission 

should require CCAs to provide further 

specificity on the use of recovery tools 

in the RWP to provide transparency and 

predictability for their clearing 

members, market participants, and the 

broader market and to ensure that these 

tools are not procyclical.310 Several 

commenters stated that the Commission 

should make the guidance provided in 

the RWP Proposing Release 

mandatory.311

Requiring further specificity on the 

use of recovery tools in the RWP is not 

necessary as information on the 

recovery tools of a CCA is publicly 

available. As previously explained 

above, when a CCA proposes to add or 

modify the tools available in its RWP, 

such modifications are subject to 

Commission review and approval, 

pursuant to the SRO rule filing and 

advance notice processes, which 

includes public notice and an 

opportunity for public comment and, if 

approved, an approval order describing 

how the modifications are consistent 

with the Exchange Act.312 Furthermore, 

to achieve compliance with existing 

Rule 17Ad–22(e)(23), a CCA is obligated 

to establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to provide for 

publicly disclosing all relevant rules 

and material procedures, including key 

aspects of its default rules and 

procedures (which includes the tools 

that would be deployed pursuant to the 

RWP), and provide sufficient 

information to enable participants to 

identify and evaluate the risks, fees, and 

other material costs they incur by 

participating in the CCA. With this 

information, clearing members, market 

participants, and the broader market can 

consider whether such tools are 

procyclical. 

With respect to the comment stating 

that tools should not be procyclical, 

whether a tool is procyclical will 

necessarily depend on the way it is 

designed and applied, the products to 

which it is applied, and the market in 

which it would be used. In Part 

II.A.2.b.iii, the Commission discussed 

how a CCA might need to consider 

procyclical effects when collecting 

intraday margin, and commenters 

expressed support for ensuring that 

CCAs had appropriate discretion to 

apply margin to avoid procyclical 

effects. Similarly to that context, the 

Commission believes that discretion to 

select tools is a better approach than 

prescribing limits or imposing bans on 

certain tools in Rule 17Ad–26. 

Providing such discretion helps enable 

CCAs to apply their expertise and 

consider the range of tools they have 

developed in their RWPs for addressing 

a recovery or wind-down scenario that 

may minimize procyclical effects. 

In the case of a recovery or winddown scenario, procyclical effects may 

facilitate the unnecessary onward 

transmission of systemic risk. As such, 

when a CCA seeks to add or modify the 

tools available in a recovery or winddown scenario, those modifications 

would be subject to the proposed rule 

change and advance notice processes, 

where the specific facts and 

circumstances of a particular CCA (such 

as its organizational structure, markets 

served, or products cleared) and public 

comments on the proposed modification 

can help the Commission and the CCA 

identify whether any tools would be 

inappropriate, or appropriate only with 

certain limitations, consistent with the 

CCA’s obligations under the Exchange 

Act and the Dodd-Frank Act.313

The guidance in the RWP Proposing 

Release to identify and analyze tools for 

inclusion in the RWP is not being 

incorporated into the text of final Rule 

17Ad–26(a)(5). This rule is part of the 

framework of rules applicable to CCAs 

that takes a principles-based approach, 

which does not prescribe specific 

arrangements to meet the required 

principles.314 Given that each CCA, 

serves different markets, clears different 

products, and deploys different 

ownership structures, the Commission 

is not incorporating the guidance into 

the rule text. 

e. Allocation of Non-Default Losses 

One commenter stated that 

procedures should clearly distinguish 

between treatment of default losses 

resulting from the failure of a clearing 

member and non-default losses 

(‘‘NDLs’’) caused by a CCA’s internal 

business decisions.315 The commenter 

further stated that financial 

responsibility for NDLs should be borne 

by the CCA and not by clearing 

members and market participants, that 

CCAs should be required to specify 

tools that would be used in an NDL 

scenario, and that a rule is needed to 

require CCAs to reserve appropriate 

amounts for NDL.316 Another 

commenter stated that a CCA’s 

rulebooks and RWPs should make clear 

that the CCA is responsible for NDLs, 

for it is not generally appropriate for 

clearing members or participants to bear 

NDLs because they are not responsible 

for choices that lead to those losses.317

The commenter also stated that 

regulators require CCAs to manage, 

monitor, and hold sufficient capital 

against NDLs to ensure that such losses 

do not disrupt a CCA’s ability to 

perform obligations, and that RWPs 

should be required to demonstrate a 

CCA’s ability to cover such NDLs.318

Another commenter strongly 

recommended that the Commission 

ensure that the RWPs distinguish 

between the CCA’s approach to default 

and non-default scenarios.319 The 

commenter also strongly recommended 

that the Commission require that the 

recovery tools a CCA uses in a NDL 

scenario ensure that the CCA and its 

shareholders are fully responsible for 

non-default losses, reflecting the 

principle that CCA and its shareholders 

are responsible for NDLs because such 

losses result directly from business 

decisions of CCA’s management.320

While the Commission’s regulatory 

framework for CCAs does not use ‘‘nonVerDate Sep<11>2014 18:56 Nov 15, 2024 Jkt 265001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 E:\FR\FM\18NOR3.SGM 18NOR3

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321 17 CFR 240.17ad–22(e)(15). 

322 17 CFR 240.17ad–22(e)(15)(ii). 

323As explained above, CCAs are required to have 

policies and procedures for holding sufficient 

liquid resources funded by equity to cover, at a 

minimum, six months of operating expenses or the 

amount determined by the board of directors to be 

sufficient to ensure a recovery or orderly winddown. 17 CFR 240.17ad–22(e)(15)(ii); see also 

PFMI, supra note 9, at 3.15. 

324 17 CFR 240.17ad–22(e)(3)(ii). 

325See 17 CFR 240.17ad–22(e)(15). 

326See supra notes 81–100 (discussing in further 

detail these Commission rules and processes 

facilitating input from and transparency to clearing 

participants and other key stakeholders). 

327SIFMA at 5, 12–13, 16, 17–18. 

328The Associations at 5, 11–12. 

329 ICI at 7. 330See CA Governance Adopting Release, supra 

note 12, at 84504; CCA Standards Adopting Release, 

supra note 5, at 70806. 331See CCA Standards Adopting Release, supra 

note 5, at 70806. 332CA Governance Adopting Release, supra note 

12, at 84504. 333See CCA Standards Adopting Release, supra 

note 5, at 70806. 334See DTC Rule 4, Section 5 (‘‘Corporate 

Contribution’’); FICC Rule 4, Section 7a (‘‘Corporate 

Contribution’’); ICC Rule 801(b) (‘‘ICE Clear Credit 

contributions’’); LCH SA Article 4.3.3 (‘‘LCH SA 

Contribution’’); NSCC Rule 4 (‘‘Corporate 

Contribution’’); OCC Rule 101 (‘‘Minimum 

Corporate Contribution’’). 

default losses’’ to describe losses other 

than default losses, existing Rule 17Ad– 

22(e)(15) requires a CCA to implement 

risk management measures to address 

‘‘general business losses,’’ 321 which 

generally includes what the commenters 

refer to as ‘‘NDL.’’ Having a requirement 

specific to address general business loss 

does distinguish those losses from other 

losses such as default losses. 

Rule 17Ad–22(e)(15) requires a CCA 

to have policies and procedures 

reasonably designed to mitigate the risk 

that business losses result in the 

disruption of clearing services. Under 

these policies and procedures, CCAs are 

required to hold liquid net assets 

funded by equity sufficient to cover 

potential general business losses, 

including by holding the greater of 

either six months of the covered 

clearing agency’s current operating 

expenses, or 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.322

Accordingly, Rule 17Ad–22(e)(15) 

already requires a CCA to reserve 

appropriate resources to address general 

business losses and help ensure that the 

CCA internalizes financial 

responsibility for such losses by 

applying its own resources to general 

business losses. The particular 

mechanisms at each CCA for identifying 

the amount and holding appropriate 

resources under the rule have been set 

by the CCAs through the SRO rule filing 

and advance notice processes and are 

subject to examination. 

Consistent with existing Commission 

rules, however, the CCA itself is not 

required to be ‘‘fully responsible’’ for 

general business losses.323 Rather, such 

losses could trigger implementation of a 

CCA’s RWP, as Rule 17Ad–22(e)(3)(ii) 

includes requirements directed to 

planning for recovery and orderly winddown for ‘‘losses from general business 

risk.’’ 324 As previously discussed, Rule 

17Ad–22(e)(15) requires a CCA to have 

policies and procedures for holding 

liquid net assets funded by equity 

sufficient to cover potential general 

business losses, including by holding 

the greater of either six months of the 

covered clearing agency’s current 

operating expenses, or 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 set forth in its RWP. 

Where such losses from general 

business risk prevent the CCA from 

continuing as a going concern and 

liquid net assets funded by equity held 

pursuant to Rule 17Ad–22(e)(15) have 

failed to cover potential business losses, 

a CCA may need to implement its RWP 

to fully address such losses. In such a 

case, the CCA would deploy resources 

held pursuant to Rule 17Ad–22(e)(15) to 

implement its RWP but may also,325

pursuant to its RWP and any rules for 

loss allocation approved pursuant to the 

Rule 19b–4 process deploy tools that 

draw upon other resources of the CCA, 

including mutualized resources, to 

avoid it from becoming a transmission 

mechanism for systemic risk. 

Participation in a clearing agency where 

resources, and the loss allocation 

mechanisms that draw upon them, have 

been mutualized among the CCA and its 

participants, necessarily means that the 

CCA and its participants have agreed to 

mutualize losses, and such loss 

allocation mechanisms are explained in 

publicly available sources, including the 

CCA’s rules, notices and approval 

orders published as part of the SRO rule 

filing process, and public disclosures 

made by the CCAs as required by Rule 

17Ad–22(e)(23).326

f. Skin-in-the-Game Requirement 

One commenter stated that 

Commission rules are needed to ensure 

that each CCA contributes equity to its 

default waterfall, even if the amount is 

not a meaningful loss absorbing 

resource, to serve as an additional risk 

management tool, and the commenter 

provided several accompanying 

recommendations to determine the 

appropriate amount that should be 

required.327 Another commenter stated 

that it is important for a CCA to 

maintain a second tranche of equity to 

apply to losses before the CCA allocates 

losses beyond its allocation of losses 

above the funded default reserve to 

better align the interests of the CCA and 

its clearing members.328 Another 

commenter stated that tools should 

ensure that a CCA designates a material 

amount of its own capital to cover 

default losses.329

The Commission is not adopting a 

‘‘skin-in-the-game’’ (‘‘SITG’’) 

requirement.330 In the context of a 

participant default, SITG may assist a 

CCA in addressing the resulting losses 

because a CCA will apply a designated 

amount of its own equity capital to 

address certain losses prior to allocating 

any prefunded resources of nondefaulting participants to the loss, or 

prior to applying an assessment to nondefaulting participants directing them to 

contribute additional resources because 

all other prefunded resources of the 

CCA have been exhausted.331 The 

Commission has considered comments 

regarding SITG previously, stating that 

such new SITG requirements can help 

successfully manage the divergent 

incentives of a CCA’s owners and 

participants and could be appropriate in 

the future.332 While SITG generally can 

play a role in helping to ensure the 

proper alignment of incentives between 

the owners of a clearing agency and its 

participants,333 in the context of this 

rulemaking regarding the planning for 

recovery and wind-down by CCAs, SITG 

would be a specific tool that a CCA may 

choose to incorporate into its RWP. As 

such, the Commission is not adopting a 

requirement for SITG to be a specific 

tool because the appropriateness of the 

tool in the context of planning for 

recovery and wind-down by CCAs will 

vary depending on the particular design 

and implementation of the RWP. Even 

though Commission rules for clearing 

agencies do not include an explicit 

requirement for SITG, CCAs generally 

have incorporated SITG into their 

respective default waterfalls.334

g. Compensation for Contributing 

Clearing Members 

One commenter stated that the 

externalization of losses to nondefaulting clearing members and market 

participants should be treated as 

‘‘financing resources’’ recoverable by 

those that contributed, which would 

make a distinction between loss 


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335SIFMA at 13, 20–21. 

336The Associations at 4–5, 10–12. 

337SIFMA at 11. 

338See 17 CFR 240.17ad–22(e)(2); 17 CFR 

240.17ad–25; see also infra Part IV.B.1 (discussing 

the various ownership models across CCAs and 

relevant governance arrangements). 

339SIFMA at 5, 20–21. 340The Associations at 13. 341 17 CFR 240.17ad–22(e)(15)(ii). 342See supra note 334. 343 17 CFR 240.17ad–22(e)(15). 344RWP Proposing Release, supra note 18, at 

34712. 

345See supra note 26 and accompanying text. 

346OCC at 9; The Associations at 19–20. 

347 DTCC at 13. This concern is also relevant to 

the requirement in Rule 17Ad–26(a)(7) to provide 

notification to the Commission when a CCA is 

‘‘considering’’ implementation of its RWP. See infra 

Part II.C.7. 

348See infra Part II.C.7 (further explaining and 

distinguishing the requirement for ‘‘timely 

implementation’’ in Rule 17Ad–26(a)(6) from the 

requirement for notification specifically to the 

Commission when a CCA is ‘‘considering 

implementing’’ its RWP). 

349The Associations at 19–20. 

absorbing and financing resources.335

Another commenter stated that the 

Commission should include a 

requirement for compensation of 

clearing members that cover losses 

during a recovery or a wind-down.336

Treatment of resources obtained from 

clearing members in a recovery or winddown scenario would be subject to the 

CCA’s rules, policies, and procedures, 

which would have been approved on an 

ex ante basis in the applicable SRO rule 

filing and advance notice processes. A 

CCA should be afforded discretion to 

structure its loss allocation rules, 

policies, and procedures in light of the 

needs of its unique ownership or 

governance structures, provided that 

those rules, policies, and procedures are 

consistent with the requirements of the 

Exchange Act and rules and regulations 

thereunder. 

As previously discussed, disclosures 

that already must be publicly provided 

by CCAs under Rule 17Ad–22(e)(23)(ii) 

require a CCA to provide participants 

with sufficient information to enable the 

participants to evaluate the risks, fees, 

and other material costs they may incur 

by participating in the CCA. With that 

information, a participant may 

determine whether the CCA would 

compensate non-defaulting participants 

for contributions made during a 

recovery or an orderly wind-down. 

h. Governance 

One commenter stated that a CCA’s 

RWP should include governance 

practices that obtain and address input 

from market participants on relevant 

risk issues and entail oversight by the 

systemic regulator in relation to tools 

like partial tear-up that may have 

broader market impact.337

Existing Commission requirements 

already address this concern for input 

and oversight.338 First, the SRO rule 

filing and advance notice processes 

provide for public notice and comment 

allowing for market participants to 

provide input on changes to rules, 

policies and procedures regarding 

recovery tools, and such processes 

require review and approval by the 

Commission. Second, Rule 17Ad– 

22(e)(2) includes requirements designed 

to provide for governance arrangements 

that clearly prioritize the safety and 

efficiency of the CCA, support the 

public interest requirements in section 

17A of the Exchange Act applicable to 

clearing agencies, and support the 

objectives of owners and participants. 

Third, the requirement in section 

17A(b)(3)(F) of the Exchange Act to have 

rules designed, in general, to protect 

investors helps ensure that a CCA’s risk 

management functions are appropriately 

aligned with the goal of risk mitigation 

and responsive to the legitimate 

concerns of the relevant constituents. 

i. Other Comments on Resources 

Several comments concerned 

resources in general that should be 

available in a recovery or a wind-down 

scenario. One commenter stated that 

rules are needed to require a CCAs to 

arrange ex ante resources for use in 

RWPs, that the Commission should 

require application of equity-funded 

assets to implement RWPs, that CCA 

capital should be available in full before 

entry into resolution, that rules should 

be explicit that equity is fully loss 

absorbing in resolution and 

shareholders claims are fully 

subordinate to other creditors, and that 

it is critical that resolution authorities 

require CCAs to set aside ex ante 

resources for recapitalization to be 

bailed-in by the resolution authority to 

continue to operate the resolved 

CCA.339 Another commenter 

recommends including disclosures of 

external sources of liquidity (lenders, 

creditors, liquidity providers) and when 

applicable, where they sit in the 

waterfall.340

A CCA already is required to hold 

equity-funded assets to implement its 

RWP under Rule 17Ad–22(e)(15)(ii), 

which requires a CCA to hold liquid net 

assets funded by equity equal to the 

greater of either six months of the CCA’s 

current operating expenses or the 

amount sufficient to ensure a recovery 

or orderly wind-down.341 Other 

resources of the CCA available to cover 

certain losses before entry into 

resolution are those included in the 

current rules of the CCAs, which 

include SITG contributions 342 and 

liquid net assets funded by equity of the 

CCA to cover potential business losses 

under Rule 17Ad–22(e)(15).343

Comments were received regarding 

the resolution of a CCA, and as 

described in the RWP Proposing 

Release, the FDIC would be appointed 

as the resolution authority of a CCA in 

the event the CCA was placed into 

resolution under Title II.344 Ultimate 

decisions regarding resolution would be 

determined pursuant to the 

requirements of Title II,345 and it is 

likely that a CCA’s RWP would guide 

the resolution authority in evaluating 

any decisions to be made in support of 

an orderly resolution. 

Regarding the disclosures of external 

sources of liquidity and where they sit 

in the waterfall, a CCA’s rules, SRO rule 

filing notices and approval orders, and 

disclosures under Rule 17Ad–22(e)(15) 

provide transparency regarding the 

structure and composition of the default 

waterfalls across the CCAs. 

6. Implementation: Rule 17Ad–26(a)(6) 

Proposed Rule 17Ad–26(a)(6) required 

a CCA’s RWP to address how the rules, 

policies, procedures, and any other tools 

or resources identified in Rule 17Ad– 

26(a)(5) would ensure timely 

implementation of the recovery and 

orderly wind-down plan. 

Commenters expressed support for 

the rule as proposed.346 One commenter 

encourages the Commission to be 

internally prepared and in a proactive 

position to receive, consider, and 

approve any necessary regulatory 

requests from CCAs in a timely manner 

when RWPs have been implemented.347

As previously discussed, the 

Commission engages in ongoing 

supervision and oversight of CCAs to 

ensure that it is prepared to receive, 

consider, and act upon any requests 

related to RWPs. As discussed further in 

response to comments regarding Rule 

17Ad–26(a)(7) below,348 policies and 

procedures that ensure the timely 

implementation of the RWP pursuant to 

Rule 17Ad–26(a)(6) would necessarily 

include provisions that ensure timely 

notification to affected parties that the 

CCA will implement its RWP. Such 

affected parties generally should 

include clearing participants, service 

providers for core services, other key 

stakeholders, the Commission, and 

other regulatory authorities, as 

appropriate. 

Another commenter recommended 

‘‘the implementation of rigorous 

governance around the use of tools or 

emergency powers.’’ 349 The 


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350See CA Governance Adopting Release, supra 

note 12. 351RWP Proposing Release, supra note 18, at 

34723. 352 Id. 353 Id. 

354 DTCC at 13; see also supra note 347. 355OCC at 9 (explaining that this potential 

liability is particularly true if the triggers require an 

application of judgment while monitoring 

operations and risk on a continuous basis). 356 Id. at 9–10. 357 ICE at 4; CCP12 at 5. 

Commission has recently adopted rules 

intended to bolster the governance of 

CCAs through requirements regarding 

board composition and director 

independence, the nominating and risk 

management committees of the board, 

conflicts of interest, oversight of service 

providers, and the solicitation of 

stakeholder viewpoints.350 Through 

these existing requirements, as well as 

the rule filing and advance notice 

requirements applicable to CCAs, the 

appropriate governance processes exist 

to help ensure that further development 

of the RWPs is consistent with the rules 

adopted in this release. The 

Commission is adopting Rule 17Ad– 

26(a)(6) as proposed. 

7. Notification to Commission: Rule 

17Ad–26(a)(7) 

Proposed Rule 17Ad–26(a)(7) required 

a CCA’s RWP to include procedures for 

informing the Commission as soon as 

practicable when the CCA is 

considering initiating a recovery or 

orderly wind-down. In the RWP 

Proposing Release, the Commission 

stated it is critical that notice of 

potential recovery and wind-down be 

provided to the Commission as soon as 

practicable.351 The Commission 

explained that the systemic risk 

concerns raised by a recovery or orderly 

wind-down of a CCA are significant. 

With notice being provided to the 

Commission when a CCA is considering 

implementing its RWP, the Commission 

has the opportunity to consider whether 

the CCA engages the potential recovery 

or wind-down event consistent with its 

established RWP and the requirements 

of Commission rules to help mitigate the 

potential onward transmission of 

systemic risk and help ensure that a 

wind-down, if necessary, is orderly. 

Furthermore, such early notice would 

help the Commission ensure that it has 

information that it can share with other 

relevant authorities, such as the 

resolution authority, regarding the 

potential need for resolution.352 As 

discussed in the RWP Proposing 

Release, the Commission already 

maintains regular contact with each of 

the CCAs through its supervisory 

program, and this is a communication 

channel through which the CCA could 

provide notice to the Commission.353

One comment in support of Rule 

17Ad–26(a)(6) as proposed stated that it 

was important for the Commission to be 

in a proactive position to receive, 

consider, and approve any necessary 

regulatory requests from CCAs in a 

timely manner when RWPs have been 

implemented.354 Several commenters 

asked for clarification or further 

guidance on the ‘‘considering initiating’’ 

phrase in the proposed rule text. One 

commenter, agreeing that open 

communication is critical, stated that 

the ‘‘considering initiating’’ phrase 

introduces subjectivity and uncertainty 

into the requirement, which could 

expose a CCA and its responsible 

personnel to potential enforcement 

action if their interpretation differs from 

the Commission.355 The commenter 

recommends changing the phrase to 

make the obligation to notify the 

Commission when the CCA has 

‘‘determined to initiate’’ its RWP.356

Similarly, other commenters stated that 

the proposed standard is vague and 

could lead to uncertainty about when 

the notification is required, and 

suggested, for clarity and consistent 

application, that the trigger to notify the 

Commission should be the formal 

decision to implement the plan.357

In requesting that the Commission 

remove ‘‘considering’’ from the rule 

text, these commenters misconstrue the 

purpose of the requirement in Rule 

17Ad–26(a)(6) regarding timely 

implementation of the RWP with the 

requirement in Rule 17Ad–26(a)(7) 

regarding notice to the Commission. To 

ensure timely implementation of the 

RWP under Rule 17Ad–26(a)(6), a CCA 

generally should have policies and 

procedures that can ensure affected 

parties, including clearing participants, 

service providers, other relevant 

stakeholders, and other market 

infrastructure to which it is linked, as 

well as the Commission and other 

relevant authorities, receive notification 

that the CCA has begun to implement 

elements of its RWP. However, requiring 

a CCA to notify the Commission only 

when it has decided to implement its 

RWP would limit the Commission’s 

ability to evaluate market conditions 

and the decision-making process of the 

CCA in the time between when it begins 

to consider implementing and before it 

has decided to implement. Once a CCA 

decides to implement its RWP, it will 

likely have numerous contractual 

obligations to share information 

regarding the implementation of its 

RWP with its participants, service 

providers, other key stakeholders, and 

other market infrastructure to which it 

is linked. Given these obligations, 

requiring notification only upon 

implementation would primarily serve 

the purpose of documenting and 

announcing the fact of implementation, 

rather than the separate but equally 

important purpose of informing the 

Commission, as market conditions are 

deteriorating or other events are 

occurring at the CCA that may trigger 

implementation of the RWP so that the 

Commission can consider whether it too 

should take action in response to the 

event. 

In contrast to Rule 17Ad–26(a)(6)’s 

requirement that CCAs provide timely 

notice of the RWP’s implementation, 

Rule 17Ad–26(a)(7) helps ensure that 

the Commission receives advance notice 

that stressed market conditions or other 

events have raised the potential for 

implementation of the RWP. This 

requirement for timely notification 

when the CCA is considering 

implementation of its RWP will 

significantly enhance the Commission’s 

ability to conduct effective supervision 

and market oversight and to share 

information on a timely basis, as 

appropriate, with other authorities. 

While the Commission regularly 

engages with CCAs as part of its 

supervisory process to anticipate the 

need for potential regulatory requests, 

Rule 17Ad–26(a)(7) further helps the 

Commission should it need to act by 

promoting timely advance notification 

that a CCA may implement its RWP. 

In addition, in contrast to the phase 

of a stressed market or other event 

where a CCA is considering 

implementation of its RWP, once a CCA 

has begun to implement its RWP the 

ability of the Commission to take steps 

of its own, consistent with its 

supervisory authority, and to coordinate 

with other authorities, may be more 

limited because the CCA will already be 

taking action in response to the event. 

For example, if a CCA is considering 

implementation of its RWP to deploy a 

certain recovery tool, to allocate losses, 

or to replenish resources, the 

Commission or other authorities may 

evaluate other available actions or tools 

that could also address or mitigate 

financial stability concerns in response 

to market events than the action 

planned by the CCA. In this regard, the 

Commission can best ensure that actions 

appropriate to maintaining financial 

stability can be made if it is notified 

when a CCA is ‘‘considering’’ action, 

rather than when a CCA has already 

begun to implement its RWP. 

As explained above, commenters also 

sought clarification regarding ‘‘consider 


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358The Commission is making a technical 

modification to the rule to replace ‘‘initiating’’ with 

‘‘implementing.’’ ‘‘Implementing’’ is consistent 

with language used in other requirements in Rule 

17Ad–26, as well as in the RWP Proposing Release 

and in the comments received more generally when 

referring to the implementation of the RWP. For 

example, Rules 17Ad–26(a)(4), (6), and (8) all use 

‘‘implementing’’ rather than ‘‘initiating.’’ 

359See, e.g., FSB Analysis, supra note 24, at 1– 

2 (analyzing CCP services across seven entities and, 

in so doing, identifying hypothetical default and 

non-default loss scenarios that would have required 

the use of, or exhausted the use of, recovery tools 

in some scenarios for some of entities’ service 

lines). 

360See id. 

361The Associations at 20–21. 

362 DTCC at 12–13; see also Muth at 2 (‘‘In part 

because of the complex Venn-diagram-esque 

relationship between financial regulators in terms 

of both activities and jurisdiction, management may 

be misinformed or uninformed as to when, how, 

and why to contact regulators who are the ‘relevant 

authorities’ under the CCA Standards or what to 

communicate that would be illustrative as to the 

entity’s predicament.’’). 

363RWP Proposing Release, supra note 18, at 

34723. 

364Rule 17a–1. 

365The Associations at 5; ICI at 5, n.15. 

initiating.’’ 358 In response to concerns 

that the Commission and the CCA may 

differ regarding the exact moment when 

a CCA begins to ‘‘consider’’ 

implementing its RWP, CCAs generally 

should seek to provide notification to 

the Commission that establishes an 

open line of communication, enabling 

the Commission, and other relevant 

authorities with which the Commission 

may be coordinating, time to evaluate 

market conditions and the potential 

financial stability implications of any 

decision under the RWP. The ability for 

the Commission or other relevant 

authorities to act potentially could help 

mitigate the need for a recovery or 

wind-down. When market conditions 

are deteriorating rapidly, the CCA may 

be the first party in a position to identify 

a potential scenario that could trigger 

implementation of the RWP, and so 

providing advance notice to the 

Commission can help the CCA, the 

Commission, and other potentially 

relevant authorities, navigate market 

events. Accordingly, a CCA generally 

would be ‘‘considering’’ implementing a 

recovery when the clearing agency 

determines that a market event may 

result in uncovered losses, liquidity 

shortfalls, or general business losses at 

the CCA following end-of-day 

settlement, or if the CCA anticipates that 

it will need to deploy prefunded 

financial resources or liquidity 

arrangements following end-of-day 

settlement in order to continue meeting 

its regulatory obligations.359 Similarly, 

if a clearing agency is faced with 

circumstances in which its status as a 

‘‘going concern’’ may be in doubt 

following end-of-day settlement, 

resulting in the potential for a 

permanent cessation, sale, or transfer of 

one of more of its core services, a CCA 

would be ‘‘considering’’ implementation 

of its orderly wind-down plan.360

Whether a CCA is ‘‘considering’’ 

implementing its RWP also depends on 

governance and decision-making 

processes within the CCA, and so CCAs 

generally should consider at what levels 

decisions regarding RWP can be made 

within their organization. For example, 

a CCA generally should consider 

whether decisions regarding RWP 

implementation and Commission 

notification are made by senior 

management, a specific senior officer, or 

the board of directors. The appropriate 

governance level may vary depending 

on the specific type of event or element 

of the RWP. For example, in considering 

implementing a recovery, questions 

regarding the potential for liquidity 

shortfalls may fall primarily to 

management or specific senior officers, 

whereas decisions regarding cessation 

or transfer of the business are likely to 

require board input before considering 

implementation. Accordingly, the 

Commission is retaining the 

‘‘considering’’ language as proposed. 

Some commenters also expressed 

views on the means of notification. One 

commenter stated that the notification 

should be made in a way that leaves an 

audit trail and can be better directed, 

avoiding a potential for the notification 

to not reach the right destination or 

receive the appropriate level of 

attention.361 One commenter 

recommended that a CCA be permitted 

to select the particular means of 

communication that would be used to 

notify the Commission, including 

dedicated phone numbers, email 

addresses, or other forms of electronic 

communication.362 Because 

Commission staff already remains in 

regular contact with each of the CCAs as 

part of its supervisory program,363 the 

purpose of the requirement in Rule 

17Ad–26(a)(7), in part, is to facilitate a 

line of communication between the 

Commission and the CCA regarding the 

event, so that the Commission can 

evaluate the circumstances of a 

potential recovery or wind-down and its 

potential transmission of systemic risk. 

In this sense, the timeliness of 

notification is paramount, while the 

form of notification or the process of 

notification may vary under the 

circumstances so long as the CCA 

establishes a line of communication. 

Accordingly, the Commission is 

modifying the rule in response to these 

comments to replace the rule text stating 

‘‘Include procedures for informing’’ 

with ‘‘Require the covered clearing 

agency to inform.’’ This modification 

removes the need to codify specific 

notification forms or procedures, 

providing the CCA with discretion to 

assess the best method for 

communication and the level of 

formality in the communication that is 

most appropriate under the 

circumstances, while ensuring that the 

timeliness of notification is the primary 

focus of the CCA. To ensure an 

appropriate audit or record of its 

decision, a CCA generally should 

consider memorializing the steps that it 

took to notify the Commission. In some 

circumstances, it may be appropriate to 

complete this documentation after the 

fact of notification, while in others, as 

described by the commenter, it may be 

appropriate to document notifications 

internally to ensure a proper audit trail. 

Any such correspondence with the 

Commission constitutes a record of a 

clearing agency and would be subject to 

the requirements of 17 CFR 240.17a– 

1.364

Two commenters stated that the 

Commission should require CCAs to 

notify clearing participants when the 

CCA is considering implementation of 

its RWP and when it has done so, in 

addition to providing notification to the 

Commission.365 Commission rules 

already provide for notification to 

participants regarding a range of issues, 

which generally would include the 

implementation of the RWP. As 

previously discussed, requirements for 

timely implementation of the RWP 

under Rule 17Ad–26(a)(6) generally 

should include notification to 

participants and other stakeholders. In 

addition, other rules also promote the 

timely sharing of information between 

CCAs and clearing participants 

regarding their participation in the 

clearing agency. For example, Rule 

17Ad–22(e)(23)(ii) requires that a CCA 

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 CCA. 

Because implementing a recovery or 

orderly wind-down may involve the use 

or replenishment of prefunded 

resources, as well as the potential 

allocation of losses from default or nondefault loss scenarios to participants, a 

CCA generally would need to inform its 

participants regarding those aspects of a 

recovery or wind-down event at the 

time of implementation pursuant to 

Rule 17Ad–26(a)(6). In addition, a CCA 


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366Specifically, Rule 17Ad–25(d)(2) requires that 

the risk management committee, in the performance 

of its duties, be able to provide a risk-based, 

independent, and informed opinion on all matters 

presented to the committee for consideration in a 

manner that supports the overall risk management, 

safety and efficiency of the registered clearing 

agency. 17 CFR 240.17ad–25(d)(2). 

367Specifically, Rule 17Ad–25(j) requires that 

each registered clearing agency must establish, 

implement, maintain, and enforce written policies 

and procedures reasonably designed to require the 

board of directors to solicit, consider, and 

document its consideration of the views of 

participants and other relevant stakeholders of the 

registered clearing agency regarding material 

developments in its risk management and 

operations on a recurring basis. 

368See, e.g., supra notes 366–367 and 

accompanying text. 

369RWP Proposing Release, supra note 18, at 

34723. 

370 Id. at 34735. 

371OCC at 10; The Associations at 21; ICE at 4; 

ICI at 5; CCP12 at 4. 

372OCC at 10. 

373 Id. 

374CCP12 at 4. 

375 ICE at 4. 

376The Associations at 21. 

generally should discuss with its 

participants and other key stakeholders 

planning and development with respect 

to the RWP, as well as the results of 

testing. Two such venues for discussion 

of the RWP are already required by 

existing rules, as follows: Rule 17Ad– 

25(d), requiring the establishment of a 

risk management committee,366 and 

Rule 17Ad–25(j), regarding the 

solicitation of stakeholder 

viewpoints.367 These venues already 

require the CCA to share information 

regarding risk management topics, 

which necessarily would include the 

risk management implications of its 

RWP, with the risk management 

committee and with relevant 

stakeholders, respectively. In both cases, 

clearing participants would receive 

information regarding the RWP and 

have an opportunity to provide input 

(either as members of the risk 

management committee when reviewing 

matters regarding the RWP before the 

committee, or in providing viewpoints 

when solicited by the CCA). 

In contrast, the purpose of the 

notification requirement in Rule 17Ad– 

26(a)(7) is to ensure that the 

Commission specifically has timely 

information regarding the potential for a 

CCA to implement recovery or winddown. As previously discussed above, 

this helps ensure that the Commission 

can use the information in a timely 

manner to consider appropriate 

regulatory responses to market events, 

as well as to share information, as 

appropriate, with other authorities, such 

as the resolution authority, that also 

may be monitoring stressed market 

events alongside the Commission and 

may need to consider the potential for 

resolution. In addition, pursuant to 

clearing agency rules, clearing 

participants generally will be notified of 

circumstances related to a participant 

default, the potential for a portfolio 

auction, and the use of default 

management tools that may precede a 

recovery or wind-down event. While 

existing Commission rules,368 as well as 

participant agreements or other 

arrangements between CCAs and their 

participants are likely to facilitate 

timely notification regarding the 

planning, development, and 

implementation of key aspects of the 

RWP, as discussed above, it may not be 

appropriate in all circumstances for a 

CCA to provide advance notice to 

participants that it is considering 

implementing its RWP because such 

notification could increase market stress 

or accelerate deteriorating conditions, 

precipitating the very recovery or winddown event that, in the absence of such 

increase or acceleration, the CCA, the 

Commission, or another authority could 

take appropriate steps to mitigate and 

avoid. Accordingly, the Commission is 

not adding a provision specifically 

requiring notification that the CCA is 

considering implementing its RWP to 

clearing participants as part of Rule 

17Ad–26(a)(7). 

8. Testing: Rule 17Ad–26(a)(8) 

Proposed Rule 17Ad–26(a)(8) required 

a CCA’s RWP to include procedures for 

testing the CCA’s ability to implement 

the recovery and wind-down plans at 

least every 12 months, including by 

requiring the CCA’s participants and, 

when practicable, other stakeholders to 

participate in the testing of its plans, 

providing for reporting the results of the 

testing to the CCA’s board of directors 

and senior management, and specifying 

the procedures for, as appropriate, 

amending the plans to address the 

results of the testing. 

In the RWP Proposing Release, the 

Commission explained that a testing 

requirement is important since it should 

help ensure that a CCA’s RWP will be 

effective in the event of an actual 

recovery or orderly wind-down.369 The 

testing would likely be similar to that 

required under Rule 17Ad–22(e)(13), in 

that it would test how the RWP would 

perform in crisis situations, including 

the participation of senior management 

and the board of directors. The 

Commission stated that testing must 

involve the CCA’s participants and, 

where applicable, other stakeholders. 

This inclusion should help to make sure 

that procedures will be practical and 

effective in the face of a recovery or 

orderly wind-down, noting that 

coordination will be required in such a 

situation. 

The Commission also explained that 

testing every 12 months was an 

appropriate frequency because annual 

testing is already required for many 

other aspects of a CCA’s risk 

management. Accordingly, a 

requirement for testing every 12 months 

for RWPs strikes an appropriate balance 

between the need to test an RWP and 

the desire to avoid duplicative 

requirements. The Commission further 

stated that a CCA may choose to 

conduct this RWP testing in conjunction 

with default testing for Rule 17Ad– 

22(e)(13) or business continuity testing. 

Due to the possibility of leveraging 

existing default management testing, the 

Commission believed that costs 

associated with RWP testing may not be 

too high for CCAs and likely would be 

moderate for participants, as they are 

already involved in the default 

management testing.370

a. Support for Testing Requirement 

Several commenters expressed their 

agreement with or support of the 

proposed requirement to annually test 

the ability to implement a CCA’s 

RWP.371 One commenter agreed with 

the importance of ensuring that a CCA’s 

RWP is workable for a potential crisis 

situation, stating that it is essential for 

the CCA, its members and customers, 

and regulators all have confidence that 

the RWP will operate as designed.372

The commenter also stated that the 

value of periodic testing is to reduce the 

burden on a CCA when the need for 

implementing the RWP arises, a time 

when resources may be stretched thin, 

ensuring that there is a workable 

roadmap to address the situation at 

hand.373 Similarly, a different 

commenter emphasized that it is critical 

for a CCA to be confident that the RWP 

would be effective in an actual recovery 

or orderly wind-down event.374 Another 

commenter agrees that RWP testing is 

generally appropriate, provided that 

annual RWP testing can be combined 

with existing default management 

testing.375 One other commenter echoed 

this point and agrees that plans need to 

be tested on a regular basis, and a test 

every 12 months would be in line with 

requirements for default testing.376

b. Scope of Testing and Interaction With 

Other Testing Requirements 

Some commenters sought more clarity 

regarding the scope of the ‘‘testing’’ 

requirement in proposed Rule 17Ad– 


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377 Davidson at 5 (explaining that ‘‘testing’’ needs 

to be clearly defined, pragmatic, and cost effective, 

and that it comes in many varieties, listing among 

the different types of testing conducted by CCAs 

business continuity tests, margin model and 

clearing fund testing and validations, default 

management testing, compliance testing, and 

internal audit testing); SIFMA at 11 (urging the 

Commission to set baseline standards for testing 

that would require CCAs to adhere to standards 

based on common best practices rather than 

establishing voluntary disparate practices); The 

Associations at 21 (stating that not every recovery 

scenario needs to be tested annually but that a CCA 

should pick material and significant scenarios and 

endeavor to test different scenarios or different 

parts of the plan each year). 

378 ICE at 4–5; OCC at 10–11 (identifying its 

existing regular and periodic testing efforts (e.g., 

default simulations, table-top exercises, monthly 

analysis and monitoring for assessment capability) 

used to assess and enhance the operational capacity 

and effectiveness of risk management processes and 

tools, and stating that they are appropriately 

designed to ‘‘help ensure that the RWP will be 

effective in the event of an actual recovery or 

orderly wind-down’’); DTCC at 10–11; CCP12 at 4– 

5. 

379OCC at 10. 

380CCP12 at 4. 

381More specifically, Rule 17Ad–26(b) defines 

‘‘recovery’’ to mean the actions of a covered 

clearing agency, consistent with its rules, 

procedures, and other ex ante contractual 

arrangements, to address any uncovered loss, 

liquidity shortfall, or capital inadequacy, whether 

arising from participant default or other causes 

(such as business, operational, or other structural 

weaknesses), including actions to replenish any 

depleted prefunded financial resources and 

liquidity arrangements, as necessary to maintain the 

covered clearing agency’s viability as a going 

concern and to continue its provision of core 

services, as identified by the covered clearing 

agency pursuant to Rule 17Ad–26(a)(1). It defines 

‘‘orderly wind-down’’ to mean the actions of a CCA 

to effect the permanent cessation, sale, or transfer 

of one or more of its core services, as identified by 

the CCA pursuant to Rule 17Ad–26(a)(1), in a 

manner that would not increase the risk of 

significant liquidity, credit, or operational problems 

spreading among financial institutions or markets 

and thereby threaten the stability of the U.S. 

financial system. 

382See infra Part IV.C.1.h (further discussing the 

benefits and costs associated with the testing 

requirement) and V.B (further discussing the 

paperwork burdens associated with Rule 17Ad–26). 

383Separate from any obligations under Rule 

17Ad–22(e)(13) with respect to default management 

testing, 31 CCPs voluntarily participated in a 

default management exercise led by CCP Global in 

2023 to share best practices, identify areas for 

follow-on work, and highlight insights from the 

testing process. Another exercise is planned for 

2025. Such efforts suggest that, even where testing 

efforts require a commitment of time, personnel and 

resources, CCPs are eager to engage in testing as an 

effective mechanism to improve their rules, policies 

and procedures. CCP Global, Default Simulation 

Exercises by CCPs, https://ccp-global.org/ 

defaultsimulation/ (describing an exercise 

completed in 2023). 

26(a)(8), recommending baseline 

standards and discretion to test different 

scenarios or aspects of the plan each 

year.377

Several commenters specifically 

stated that CCAs should have discretion 

and flexibility to determine an 

appropriate approach to testing so that 

testing would not become duplicative, 

unnecessary, or burdensome.378 One 

commenter stated that a new testing 

requirement would require significant 

investment of time and resources from 

a CCA’s most critical personnel, both to 

plan and execute the testing, which is 

a highly manual process.379 Similarly, 

another commenter explained that RWP 

testing at CCAs typically includes 

various types of exercises, and 

suggested that any final rule make clear 

that a CCA has discretion to rely on 

such practices to satisfy Rule 17Ad– 

27(a)(8).380

The definitions in Rule 17Ad–26(b) 

regarding ‘‘recovery’’ and ‘‘orderly 

wind-down’’ provide much of the 

direction that commenters seek 

regarding the scope of testing 

contemplated under Rule 17Ad– 

26(a)(8). Specifically, RWP testing 

would involve testing a CCA’s plans for 

recovery (e.g., actions the CCA would 

take to address an uncovered loss, 

liquidity shortfall, or capital 

inadequacy, whether arising from a 

participant default or other causes, 

including actions to replenish any 

depleted prefunded financial resources 

and liquidity arrangements), and for 

wind-down (e.g., actions the CCA would 

take in scenarios that exhaust the CCA’s 

ability to replenish resources and 

necessitate that it effect the permanent 

cessation, sale, or transfer of one or 

more of its core services).381 As such, 

testing of RWPs generally should 

include scenarios that consider both 

default and non-default scenarios. When 

testing the RWP against a default 

scenario, the clearing agency generally 

should consider the effects of 

exhausting prefunded resources, to 

ensure that the clearing agency also tests 

its ability replenish those resources (i.e., 

complete recovery). In the context of a 

default scenario, such a test may have 

similar elements to a default 

management testing exercise, though it 

would necessarily consider steps related 

to replenishing prefunded resources 

deployed in response to the scenario. In 

contrast, testing that considers nondefault losses generally could not 

leverage existing testing related to 

default management, and so testing 

exercises developed for RWPs under 

Rule 17Ad–26(a)(8) would also need to 

include testing of non-default loss 

scenarios to demonstrate that RWP 

testing was reasonably designed, 

consistent with the rule requirements. 

Because of the range of scenarios that 

may implicate RWPs, including 

scenarios in both default and nondefault scenarios, or a combination 

thereof, a CCA retains discretion under 

the annual testing requirement to 

organize and design its testing scenarios 

to ensure that testing exercises produce 

effective tests of the elements of the 

RWP, in such a way that the CCA can 

review its testing results and consider 

improvements over time. 

With respect to the investment of time 

and resources necessary to plan and 

execute testing, and the charge that 

RWP testing is ‘‘unnecessary’’ or 

‘‘burdensome,’’ the commitment of such 

time and resources is critical to ensuring 

an effective RWP.382 The circumstances 

in which a CCA may need to implement 

its RWP are of such systemic 

consequence that CCAs should test their 

rules, policies, and procedures so that, 

should real world conditions arise, the 

CCA is prepared to implement its RWP 

in an effective manner, thereby helping 

to ensure the CCA does not become a 

mechanism for spreading contagion 

through the financial system or 

otherwise endangering financial 

stability. Similar to the way that default 

management testing under Rule 17Ad– 

22(e)(13) helps a CCA test its close-out 

procedures for a defaulted portfolio so 

that policies and procedures are 

sufficiently developed to promote a 

smooth and successful process,383 RWP 

testing can help a CCA ensure that its 

policies and procedures for recovery 

and orderly wind-down are sufficiently 

developed and can be effective in 

completing loss allocation and 

replenishment tasks, in the case of a 

recovery, or a cessation of services, in 

the case of a wind-down. A CCA that 

does not engage in regular testing of its 

RWP may find, in a moment where 

stressed market conditions are likely to 

be extreme and the viability of the CCA 

is itself in question, that it is underprepared to implement its plan, 

potentially negating the benefits of the 

planning process. The Commission 

agrees that effective planning for RWP 

testing is likely to be a manual process 

that draws upon critical personnel 

because RWP planning requires careful 

consideration of the procedures and 

tools upon which a CCA would draw in 

extreme market circumstances to 

maintain the ongoing viability of the 

CCA itself. As such, critical personnel, 

who may be directed in the RWP to 

make loss allocation or other critical 

decisions during a recovery or winddown scenario, generally should 

participate in RWP testing conducted by 

the CCA to help ensure the design and 

execution of testing scenarios resemble, 

as well as can be estimated during the 

planning and testing process, 

anticipated real-world conditions 

necessitating a recovery or wind-down. 


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384RWP Proposing Release, supra note 18, at 

34723–24. 

385 ICE at 4. 

386The Associations at 21. 

387CFA at 4. 

388 DTCC at 11. 

389OCC at 10. 

390For example, in contrast to a default 

management exercise, where the CCA likely 

assumes it has sufficient resources to close out a 

defaulting participant’s portfolio, a recovery plan 

generally should be formulated on the presumption 

that any uncovered loss or liquidity shortfall will 

be borne by the CCA, its owners’ and its 

participants’ own resources and provide an 

effective means of achieving a matched book, where 

applicable, and a means of replenishing financial 

resources. See CPMI–IOSCO Recovery Guidance, 

supra note 25, at 2.3.1. 

391To improve readability, the Commission is 

also adding paragraph headings to the rule and 

modifying the first reference to ‘‘recovery and winddown plans’’ to the defined terms, so that it instead 

reads ‘‘recovery and orderly wind-down plans.’’ As 

such, final Rule 17Ad–22(a)(8) reads in full as 

follows: Include procedures for testing the CCA’s 

ability to implement the recovery and orderly winddown plans at least every 12 months, including by 

(a) requiring the CCA’s participants and, when 

practicable, other stakeholders to participate in the 

testing of its plans, (b) requiring that such testing 

would be in addition to the testing required in 

paragraph (e)(13) of 17 CFR 240.17ad–22, (c) 

providing for reporting the results of the testing to 

the CCA’s board of directors and senior 

management, and (d) specifying the procedures for, 

as appropriate, amending the plans to address the 

results of the testing. 

392RWP Proposing Release, supra note 18, at 

34716. 

Including these critical personnel in 

RWP testing may increase the overall 

cost of testing but is necessary because 

these critical personnel are best 

positioned to identify the planning and 

procedures that can help ensure timely 

and effective implementation under 

real-world conditions. 

With respect to whether such testing 

may be duplicative, commenters also 

requested clarification as to the extent 

testing under Rule 17Ad–26(a)(8) could 

be conducted as part of existing default 

management testing required under 

Rule 17Ad–22(e)(13) or business 

continuity testing required by 

Commission rules.384 One commenter 

stated that it would not object to the 

proposed frequency of annual RWP 

testing if it could be combined with 

existing default testing.385 Another 

similarly stated that the RWP and 

default management testing 

requirements could be combined into 

one, noting that both contemplate 

annual testing.386 One commenter, 

citing an operational concern in the 

potential overlap of the testing 

requirements, stated that it is unclear 

RWP testing would differ noticeably 

from default management testing, and 

encouraged combining both to reduce 

the potential for duplicative efforts that 

would be costly and perfunctory.387

Citing the potential cost-effectiveness of 

leveraging existing practices pursuant to 

default management testing under Rule 

17Ad–22(e)(13), another commenter 

stated that the Commission should more 

closely harmonize the proposed RWP 

testing requirement with the 

requirement in Rule 17Ad–22(e)(13), 

which would give CCAs flexibility to 

design testing procedures to properly fit 

the particular markets, cleared products, 

and participants that they serve.388

As discussed above, regular, annual 

testing is necessary to facilitate the 

timely implementation of the RWP 

when a recovery or wind-down scenario 

arises, as such scenario is likely to 

include stressed market conditions 

where clearing agency participants have 

defaulted or a non-default loss event 

that may contribute to market stress, 

strained organizational resources at the 

CCA, and market events that progress 

rapidly. The purpose of such testing is 

not to be duplicative; rather, it may well 

be complementary to, for example, the 

default management testing required by 

Rule 17Ad–22(e)(13). Accordingly, as 

explained further below, the 

Commission is modifying Rule 17Ad– 

26(a)(8) to explicitly distinguish default 

management testing from RWP testing 

because the CCA’s role in default 

management would be distinct from its 

role implementing a recovery or winddown. 

Nonetheless, as one commenter 

explained, CCAs may engage in one set 

of testing exercises designed to address 

multiple testing procedures or 

scenarios.389 Such an approach to 

harmonizing default management 

testing with RWP testing is consistent 

with the requirements of the rule; 

namely, a CCA can conduct one exercise 

with multiple tests, such as one that 

tests both default management and 

implementation of RWPs. Under Rule 

17Ad–26(a)(8), a CCA retains discretion 

to conduct a single testing exercise 

intended to address multiple testing 

requirements under Commission rules, 

so long as the testing exercise addresses 

the distinct elements of separate testing 

requirements, including the possibility 

that some RWP testing scenarios would 

include non-default losses, as opposed 

to losses arising during a CCA’s default 

management process. 

For example, rather than conducting a 

narrow test of ‘‘business as usual’’ 

default management, a CCA may instead 

choose to conduct a more 

comprehensive testing exercise 

intended to cover not only its rules, 

policies and procedures for default 

management but scenarios and triggers 

for loss allocation that would activate 

the need for a recovery or orderly winddown. Such an approach may be more 

efficient than conducting RWP testing 

that is wholly distinct from default 

management testing, given that 

participant defaults can be one of the 

scenarios or triggers that lead to a 

recovery or wind-down scenario. A 

more comprehensive testing exercise 

may also make it less costly to assemble 

a representative set of participants and 

other key stakeholders, as well as the 

board, producing a more effective 

testing exercise. As previously 

discussed above, and in contrast to 

default management testing, RWP 

testing may require consideration of 

scenarios and testing of procedures that 

go beyond default management because, 

for example, recovery includes the 

actions taken to address uncovered 

losses and replenishment of prefunded 

resources,390 and wind-down includes 

actions taken when resources have been 

exhausted, necessitating the permanent 

cessation, sale, or transfer of one or 

more of the CCA’s core services. 

Accordingly, as discussed above, and 

because RWP testing is necessarily 

distinct from, if in ways complementary 

to, default management testing under 

Rule 17Ad–22(e)(13), the Commission is 

modifying Rule 17Ad–26(a)(8) at 

adoption to add new language stating, as 

follows: ‘‘[r]equiring that such testing be 

in addition to testing pursuant to 

§ 240.17ad–22(e)(13).’’ As previously 

explained, this language clarifies that, 

although a CCA may choose for 

efficiency purposes to combine default 

management and RWP testing into a 

single exercise, RWP testing should 

include testing of the procedures 

specific to its RWP.391 In addition, the 

existing requirement regarding default 

management testing in Rule 17Ad– 

22(e)(13) is unchanged; it is not 

replaced or superseded by the separate 

and distinct requirement for RWP 

testing. 

c. Participation by Clearing Agency 

Participants and Other Stakeholders 

In the RWP Proposing Release, the 

Commission proposed to require that 

RWP testing include participation by 

clearing agency participants and, when 

practicable, other stakeholders.392 One 

commenter stated that involvement of 

clearing members is not necessarily 

appropriate for certain scenarios or tools 

related to general business losses or 

other non-default losses, and CCAs 

should have flexibility to determine the 

appropriate approach to testing and 

clearing member involvement in such 


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393 ICE at 5. 

394 Id. 

395CCP12 at 4. 

396 Id. 

397 Id. 

398 Id. 

399The Associations at 21; see also ICE at 4–5 

(expressing concern that additional testing 

requirements could be unnecessarily burdensome, 

particularly for clearing members who are likely to 

have testing obligations at multiple clearing 

organizations). 

400 Davidson at 6 (key external third parties, 

according to the commenter, may include 

settlement banks, liquidity providers, clearing 

members, technology vendors, market-makers, 

exchanges, and trading venues). 

401 ICI at 9. 

402 DTCC at 9. 

403 Id. at 10. In the commenter’s view, participant 

action and awareness of the defaulter’s portfolio is 

not needed in such a case and would be 

counterproductive to the CCA’s need for 

confidentiality around its market-facing close-out 

activity. The commenter also stated that cashmarket clearing agencies have a relatively large 

number of participants, meaning that a prescriptive 

mandate for engagement by all participants in 

testing would be impractical, cost and resource 

intensive, and potentially antithetical to the 

underlying goals of testing. Id. 

404 Id. 

405 Id. 

406 Id. at 11. 

407For example, as discussed in Part II.C.8.d 

immediately below, testing of orderly wind-down 

plans may involve a tabletop exercise with the 

board and senior management focused on the 

considerations related to, e.g., a bankruptcy filing. 

cases.393 The commenter suggested that 

the Commission remove or qualify the 

reference to requiring participant 

participation in testing.394 Another 

commenter stated that direct 

participation in testing of participants or 

other stakeholders is not necessarily the 

most effective way to test and requiring 

such participation may distract the CCA 

from optimizing its RWP testing.395 The 

commenter explained their inclusion 

may not be appropriate or beneficial for 

aspects of an RWP that do not impact 

them and also stated that testing aspects 

of an RWP can involve confidential or 

highly sensitive information that could 

make the inclusion of clearing members 

and other stakeholders inappropriate.396

The commenter stated that there are 

various other ways in which 

participants or other stakeholders can be 

educated in default management and 

recovery and orderly wind-down 

processes.397 In conclusion, the 

commenter requested that the 

Commission clarify, for the avoidance of 

doubt, that testing should not require 

any participation of clearing member or 

other stakeholders, as CCAs must retain 

flexibility to determine how their testing 

should be conducted, including whether 

and how to include participants and 

third-party stakeholders.398 Another 

commenter agreed that participants and 

other stakeholders should be included 

in tests if any action is required from 

them as part of the plan; however, such 

testing should not become unduly 

onerous for market participants and 

knowing the significant overlap in 

member bases at CCAs, consideration 

should be given that testing be done 

simultaneously with other CCAs.399 One 

commenter stated that it was sensible to 

require that key external third parties 

participate.400 Another commenter 

recommended that the participation of 

risk management committees and risk 

advisory working groups be required, as 

the market participants on those bodies 

would possess relevant perspectives and 

input to ensure that the tests are 

properly calibrated and administered.401

One commenter stated it does not 

believe that it is appropriate to prescribe 

a specified approach for the inclusion of 

CCA participants and, where applicable, 

other stakeholders in the testing of its 

RWP.402 The commenter explained that 

it is important to recognize the 

differences in closing out a defaulting 

member at a CCA that clears cashsettled U.S. securities transactions 

versus a derivatives clearing agency.403

Additionally, for a CCA with multiple 

participant types, the commenter stated 

it is unclear how each different type of 

participant would participate in annual 

testing.404 The commenter recommends 

that CCAs be allowed to consider and 

implement approaches such as training 

and other educational outreach efforts to 

members and participants to satisfy any 

final requirement the Commission 

adopts for RWP testing.405 Instead of 

mandating participation, the commenter 

recommends that the Commission apply 

the same guidance to RWP testing as it 

did for default management testing 

under Rule 17Ad–22(e)(13)—not specify 

that participants be included in the 

testing process, but that some or all 

participants could be included in some 

or all of the testing.406

Mindful of the requirements under 

Rule 17Ad–22(e)(13) for testing in the 

default management context, and 

consistent with the approach taken by 

the Commission there, Rule 17Ad– 

26(a)(8) has the same requirement for 

participant and other stakeholder 

involvement in RWP testing. 

Accordingly, the rule does not specify 

that all clearing agency participants 

participate in every test because, 

particularly for CCAs with large 

numbers of participants or multiple 

participant types, it may be impractical 

or counterproductive from a testing 

perspective and, as explained by 

commenters, given the wider range of 

topics covered as part of RWP planning, 

it may not always be appropriate to 

include participants in all aspects of 

testing.407 Nonetheless, participation in 

testing by clearing members helps 

ensure that clearing members are 

familiar with the CCA procedures that 

will be followed in a recovery or winddown scenario, creating positive 

feedback where both clearing members 

and the CCA can plan, share 

experiences, and consider whether 

existing plans would, in fact, be viable. 

While other efforts by a CCA, such as 

trainings and educational outreach to 

participants and other stakeholders, 

may assist in the preparation for 

recovery and wind-down scenarios, and 

may also help ensure that participants 

participate meaningfully in testing 

exercises, training and other education 

activities are no substitute for having 

participants and other categories of 

stakeholders participate in testing. 

In designing its testing plan consistent 

with Rule 17Ad–26(a)(8), a CCA may 

choose to designate in its policies and 

procedures certain participants, or 

categories of participants, for 

participation in certain tests. For 

example, in testing of loss allocation 

tools, where losses could be assigned to 

a participant, it may be useful to include 

participants in the testing to allow them 

to understand when they can be 

expected to bear losses and how those 

losses would be absorbed. In testing that 

involves business losses or certain types 

of non-default losses, it may be less 

appropriate to have participants 

participate in the testing, though a 

recovery or wind-down scenario 

involving a cybersecurity event may 

benefit from participant testing even if 

the loss is categorized as a non-default 

loss. In developing testing scenarios, a 

CCA may at times also need to use 

confidential or highly sensitive 

information that could limit its ability to 

include clearing participants. In 

addition, for testing that implicates the 

risk management framework, such as 

RWP testing for default loss scenarios, it 

may be appropriate to facilitate 

participation by the risk management 

committee of the board of directors, or 

other risk committees or advisory 

working groups organized by the CCA. 

Over time, a CCA generally should 

consider how to help ensure that a wide 

range of participants and other 

categories of stakeholder have 

participated in at least those aspects of 

testing that would affect those 

participants and other categories of 

stakeholder so that the participants and 


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408 DTCC at 9. 

409 DTCC at 11 (explaining that, as a practical 

matter for a CCA, other than internal governance 

requirements necessary to determine whether to 

trigger the implementation of the orderly winddown plan, implementation would include 

preparation of Bankruptcy Court filings, the 

provisioning of legal advice as a result of entering 

into the bankruptcy process, and then entering into 

various agreements and other processes that are 

operational in nature). 

410CCP12 at 4–5; OCC at 11, n.27 (stating that 

some aspects of an RWP do not lend themselves to 

full simulation testing in any event, such as the 

contemplation of a potential transaction with an asyet-identified third-party for a merger or 

acquisition). 

411A CCA designated systemically important also 

generally should consider the extent to which 

recovery and wind-down scenarios may result in 

resolution by the resolution authority pursuant to 

Title II. 

412OCC at 10. 

413The Associations at 21. 

414OCC at 11 (also supporting the fact that the 

cadence of testing matches that of board review); 

The Associations at 22 (citing the importance of 

RWPs to the overall business of the CCA); Davidson 

at 12. 

other stakeholders are well informed as 

to the CCA’s policies and procedures 

regarding recovery and wind-down. The 

requirements of the rule give discretion 

to CCAs to identify the appropriate 

scenarios, participants, and audiences 

for tests, and for the inclusion of 

participants and other stakeholders as 

appropriate so that the testing 

requirement is not unduly onerous, 

either on CCAs or their participants and 

other key stakeholders. 

As with Rule 17Ad–22(e)(13), the 

Commission recognizes that under Rule 

17Ad–26(a)(8), a CCA may have limited 

ability to require participation by all 

stakeholders in all circumstances, but a 

CCA generally should make efforts to 

secure participation of relevant 

stakeholders, such as liquidity providers 

or settlement banks. It may also 

consider including supervisory and 

resolution authorities as observers. 

Accordingly, the Commission is not 

modifying proposed Rule 17Ad–26(a)(8) 

to remove requirements related to 

participation by clearing members and 

other key stakeholders. 

d. Testing of Orderly Wind-Down 

Processes 

One commenter requested that the 

Commission provide additional 

guidance on how CCAs would 

implement the wind-down portion of 

their RWPs.408 The commenter asked for 

clarification that end-to-end testing 

obligations in the proposal do not 

require testing of steps related to 

effectuating legal processes and related 

decision-making, as those steps are 

operational in nature and do not lend 

themselves to standardized testing 

scripts or protocols.409 Other 

commenters echoed this statement that 

legal processes do not lend themselves 

to standardized testing processes, 

requesting that CCAs have discretion to 

determine whether it is necessary or 

feasible to test.410

For the portion of annual testing 

pertaining to orderly wind-down, a CCA 

generally should consider that elements 

of the legal processes associated with a 

wind-down may vary depending on the 

circumstances of the scenario and so the 

CCA may need to decide the order in 

which services wind down to help 

ensure an orderly process. In deciding 

in what order to wind down services, a 

CCA generally should consider the steps 

it would need to take to help ensure the 

wind-down is orderly. Additionally, as 

part of its orderly wind-down plan, a 

CCA generally should explore the steps 

that could achieve recovery and thereby 

avoid wind-down, to ensure all 

available tools and resources intended 

to prevent a wind-down have been 

exhausted before implementing the 

orderly wind-down of the CCA. Even 

though they are operational in nature, 

this aspect of testing may differ from 

other testing in that it could involve 

considering which legal documents to 

prepare or file, rather than engaging in 

an exercise that progresses through the 

CCA’s default waterfall and related 

tools. Wind-down testing may also 

include, for example, tabletop exercises 

with senior management that consider 

when and how to execute bankruptcy 

proceedings or transfer of core functions 

to another entity.411 In addition, a CCA 

generally should consider whether 

different wind-down scenarios 

necessitate that a CCA consider winding 

down services in different sequences, so 

that the overall wind-down effort 

remains orderly across different 

scenarios. 

e. Board Review and Sharing of Testing 

Results 

One commenter agreed that testing 

results should be provided to the board 

and senior management of the CCA to 

enable them to effectively oversee the 

RWP and its implementation.412

Another commenter stated that testing 

results should also be shared with risk 

advisory committees to ensure that 

participants are educated and can 

provide feedback to enhance 

procedures, as well as with regulatory 

authorities who can review and 

challenge the quality of testing 

scenarios, outputs, and the adequacy of 

resources.413

While the Commission agrees that 

CCAs generally should consider ways to 

share information effectively throughout 

their organizations, as well as with their 

participants and regulatory authorities, 

other existing requirements already 

address the concerns raised by these 

commenters. For example, Rule 17Ad– 

25(j) establishes an obligation of the 

board to solicit and consider viewpoints 

of participants and other relevant 

stakeholders, such as through risk 

advisory committees. Under Rule 17Ad– 

25(j), each registered clearing agency 

must establish, implement, maintain, 

and enforce written policies and 

procedures reasonably designed to 

require the board of directors to solicit, 

consider, and document its 

consideration of the views of 

participants and other relevant 

stakeholders of the registered clearing 

agency regarding material developments 

in its risk management and operations 

on a recurring basis. A CCA generally 

should consider material changes to, 

and annual testing of, its RWP as 

material developments in the CCA’s risk 

management and operations under Rule 

17Ad–25(j). In addition, Rule 17Ad– 

22(e)(23)(ii) also requires a CCA to 

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 CCA. 

Under this requirement, a CCA 

generally should consider the ways in 

which information regarding its RWP, 

changes thereto, and testing thereof, 

should be provided to participants to 

satisfy the requirements of Rule 17Ad– 

22(e)(23)(ii). Furthermore, records 

related to RWP testing would be 

available to the Commission as records 

of the CCA pursuant to 17 CFR 240.17a– 

1, including the results of testing 

provided to the board pursuant to Rule 

17Ad–26(a)(8). In addition, as part of its 

supervisory program for CCAs, 

Commission staff generally do 

participate in existing default 

management exercises, which also 

address matters related to RWPs. 

9. Board Approval: Rule 17Ad–26(a)(9) 

Proposed Rule 17Ad–26(a)(9) required 

a CCA’s RWP to include procedures 

requiring review and approval by the 

board of the plans at least every 12 

months or following material changes to 

the CCA’s operations that would 

significantly affect the viability or 

execution of the plans, with such review 

informed, as appropriate by the CCA’s 

testing of the plans. 

Three commenters supported the 

proposed approach.414 In addition, one 


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415 ICI at 8. 

416 17 CFR 240.17ad–25(d)(1). 

417The Commission is making two technical 

modifications to the rule: for clarity and 

grammatical correctness, the final rule text modifies 

the phrase ‘‘review and approval by the board of 

directors of the plans’’ to ‘‘review and approval of 

the plans by the board of directors of the covered 

clearing agency’’ and includes an additional comma 

after the phrase ‘‘as appropriate’’ and before ‘‘by the 

CCA’s testing of the plans.’’ 

418 ICE at 5; ICI at 5 (also stating that, although 

the Commission and CFTC proposals differ 

regarding non-substantive matters, such differences 

may cause confusion and redundancy regarding the 

standards for RWPs and result in inefficiencies and 

harmonization would better facilitate compliance 

and consistency, certainty, and efficiency); OCC at 

5, n.14; The Associations at 12; SIFMA at 5. The 

Options Clearing Corporation (‘‘OCC’’) and ICE 

Clear Credit (‘‘ICC’’) are each a CCA that is also 

registered as a SIDCO with the CFTC. See infra Part 

IV.B.1 (further describing each of the CCAs 

registered with the Commission). 

419OCC at 5, n.14; ICI at 5. 

420See supra note 43 (explaining that 

Commission staff communicate with the CFTC staff 

regularly and has consulted on the respective 

proposed rules regarding RWPs specifically). 

421CCA Standards Adopting Release, supra note 

5, at 70795 (explaining that ‘‘the Commission has 

consulted with the CFTC, FRB, and FSOC in the 

development of [Rule 17Ad–22(e)] to, in part, avoid 

unnecessarily duplicative or inconsistent regulation 

with respect to clearing agencies that are dually 

registered’’ and that ‘‘because Rule 17Ad–22(e) and 

other comparable regulations—including those of 

the CFTC—are based on the same international 

standards, the potential for inconsistent regulation 

is low’’) (citation omitted). 

422 ICI at 5. 

423 DTCC at 12. 

424RWP Proposing Release, supra note 18, at 

34724. 

425SRC at 6. 

426See supra note 421 (discussing the same). 

427 17 CFR 240.17ad–22(e)(16). 

428The Associations at 5. 

429See supra note 421 (discussing the same). 

commenter stated that the board should 

consult with the risk management 

committee when developing or 

amending its RWP.415 Commission rules 

already require the board of a registered 

clearing agency to establish a risk 

management committee to assist the 

board in overseeing the risk 

management of the registered clearing 

agency.416 Given that many elements of 

the RWP would closely implicate the 

risk management of a CCA, and that the 

risk management committee is a 

committee of the board, a CCA generally 

should consider whether and how the 

risk management committee should 

assist in the review and approval of 

material changes to RWPs and review of 

RWP testing results. Accordingly, 

because Rule 17Ad–26(a)(9) already 

requires the board to review and 

approve the RWP, it is unnecessary to 

separately also require the board to 

consult the risk management committee 

as part of its review and approval. 

Consistent with the above, the 

Commission is adopting the rule as 

proposed, with two technical 

modifications to improve clarity.417

10. Other Comments 

a. Harmonization With CFTC Proposal 

Several commenters recommended 

that the Commission and CFTC 

coordinate to ensure that any final rules 

are aligned or structured so that dually 

registered entities (i.e., CCAs registered 

with the Commission and SIDCOs 

registered with the CFTC) can efficiently 

comply with both Commission and 

recently proposed CFTC rules,418 which 

two of these commenters stated include 

more prescriptive elements than the 

Commission’s proposed rules.419

In developing Rule 17Ad–26, and 

consistent with its obligations under 

Title VIII of the Dodd-Frank Act, the 

Commission has consulted with the 

CFTC to ensure that regulatory 

requirements are effective and 

consistent.420 The Commission’s final 

Rule 17Ad–26 is highly aligned with the 

CFTC’s proposal. While commenters 

have identified some aspects of the 

CFTC’s approach that differ in terms of 

the level of granularity, 

prescriptiveness, or in the use of 

particular language, these differences 

generally result from differences in 

historical approach or regulatory scope 

between the Commission and CFTC. For 

example, requirements proposed by the 

CFTC identify specific scenarios beyond 

those described in Rule 17Ad–26(a)(3), 

which focuses on scenarios involving 

uncovered credit losses, uncovered 

liquidity shortfalls, and general business 

losses, consistent with other 

requirements in Rule 17Ad–22. Such 

differences reflect non-substantive 

differences in approach between SIDCO 

regulations and the Commission’s rules 

for CCAs, and it is important for the 

Commission’s regulatory framework to 

align the new requirements in Rule 

17Ad–26 with existing requirements in 

Rule 17Ad–22. In addition, the 

Commission’s approach reflects the 

range of markets served and products 

cleared by CCAs and the principlesbased approach generally taken in both 

Rule 17Ad–22 and new Rule 17Ad–26. 

As with the other requirements set forth 

in rules for CCAs, which are also 

consistent with comparable CFTC 

rules,421 the requirements in Rule 

17Ad–26 related to the scenarios that 

might be implicated, and the tools that 

would be applied, in a recovery or 

wind-down scenario necessarily 

depend, in part, on the risk profile of 

the products cleared and the structure of 

the markets served. Accordingly, such 

differences in approach as to the 

granularity of certain requirements are, 

as one commenter stated, nonsubstantive,422 and as such could not 

result in conflicting or confusing 

regulatory requirements for dually 

registered clearinghouses. 

b. International Standards 

One commenter, addressing the 

discussion in the RWP Proposing 

Release stating that CCAs consider new 

policy statements from standard-setting 

bodies, asked the Commission to 

reaffirm that international policy 

statements are non-binding guidance 

and considering when and how to 

implement such non-binding guidance 

remains within the discretion of the 

CCA.423

As a general matter, international 

standing-setting bodies provide 

guidance that is helpful for regulatory 

authorities to consider when 

establishing and implementing changes 

to their regulatory frameworks in their 

respective jurisdictions. While not 

required by the rule, as discussed in the 

RWP Proposing Release, CCAs generally 

should consider policy statements and 

other guidance issued by standardsetting bodies when reviewing and 

considering updates to their rules, 

policies, and procedures related to 

RWPs.424

c. Other Topics 

One commenter reiterated its 

recommendation that the Commission 

impose very restrictive investment and 

credit policies for CCA margin and 

default funds.425 Preexisting 

Commission rules already establish 

requirements designed to minimize 

custody and investment risk consistent 

with international standards.426

Specifically, Rule 17Ad–22(e)(16) 

requires a CCA to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

safeguard the CCA’s own and its 

participants’ assets, minimize the risk of 

loss and delay in access to these assets, 

and invest such assets in instruments 

with minimal credit, market, and 

liquidity risks.427 This requirement 

applies to margin and guaranty fund 

contributions held by the CCA on behalf 

of its participants. 

Another commenter stated that RWPs 

should allow for positions to be ported 

to other CCAs.428 Preexisting 

Commission rules already establish 

requirements for segregation and 

portability consistent with international 

standards.429 Specifically, Rule 17Ad– 

22(e)(14) requires a CCA to establish, 

implement, maintain and enforce 


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430 17 CFR 240.17ad–22(e)(14). 

431 ICI at 11. 

432See supra note 14 and accompanying text 

(citing papers prepared by CPMI–IOSCO in 

coordination with the BCBS on topics related to 

CCP margin). 

433See supra notes 14, 25, 29 and accompanying 

text (citing guidance prepared by CPMI–IOSCO on 

CCP resilience and recovery). 

434See supra notes 24 and 29 and accompanying 

text (citing analysis and guidance prepared by the 

FSB on CCP resolution). 

435SRC at 4. 

436See supra note 8 and accompanying text. 

437See supra note 12 and accompanying text. 

438RWP Proposing Release, supra note 18, at 

34718. 

439 Id. 

440 Id. at 34718. 

441 ICE at 3, n.6 (explaining that while the goal 

of any wind-down should be to minimize such 

problems, the commenter did not believe the 

possibility of increased risk should disqualify a 

wind-down from being ‘‘orderly’’); see also DTCC 

at 11–12 (stating that it is impossible for either a 

CCA or its RWP to ex ante guarantee that contagion 

will not occur or that the U.S. financial system will 

not be impacted). 

442CCA Standards Adopting Release, supra note 

5, at 70808. 

443 Id. 

written policies and procedures 

reasonably designed to enable the 

segregation and portability of positions 

of a participant’s customers and the 

collateral provided to the CCA with 

respect to those positions and 

effectively protect such positions and 

related collateral from the default or 

insolvency of that participant.430

One commenter requested that the 

Commission and CFTC continue to 

move forward with important regulatory 

reforms to address several other areas 

related to clearinghouses, including CCP 

margin methodologies, CCP 

transparency and disclosures, CCP 

liquidity risk and stress testing, and CCP 

capital and SITG.431 Each such topic is 

the subject of or closely related to 

existing workstreams underway at the 

Basel Committee on Banking 

Supervision,432 CPMI–IOSCO,433 and 

the FSB,434 and Commission staff 

currently participate in each. 

Another commenter remains 

concerned with challenges resulting 

from the concentration of exposures at 

CCAs, stating that such concentration 

could potentially jeopardize the 

priorities for efficient clearing, 

settlement, and payment functions that 

CCAs must ensure pursuant to Title VIII 

of the Dodd-Frank Act.435 As discussed 

in Part I,436 the Commission has long 

acknowledged that, while central 

clearing and other important functions 

provided by CCAs generally benefit the 

markets they serve, CCAs can also pose 

systemic risk due in part to the fact that 

the clearing function concentrates risk. 

To mitigate this potential risk, the 

Commission has adopted a series of 

rules since the enactment of the DoddFrank Act designed to promote the 

resilience of CCAs. These rules include 

Rule 17Ad–22(e), which sets forth 

standards for CCAs that address all 

aspects of a CCA’s operations, including 

financial risk management, operational 

risk, default management, governance, 

and participation requirements.437

These features of the regulatory 

framework, made more robust by the 

requirements adopted in this release, 

help ensure that CCAs benefit the 

markets they serve and do not create 

contagion events that could pose a 

systemic danger to the U.S. financial 

system. 

D. Defined Terms in Rule 17Ad–26 

1. Definition of ‘‘Orderly Wind-Down’’ 

Proposed Rule 17Ad–26(b) defined 

‘‘orderly wind-down’’ to mean the 

actions of a CCA to effect the permanent 

cessation, sale, or transfer of one or 

more of its critical services in a manner 

that would not increase the risk of 

significant liquidity, credit, or 

operational problems spreading among 

financial institutions or markets and 

thereby threaten the stability of the U.S. 

financial system. 

In the RWP Proposing Release, the 

Commission explained that the 

proposed definition would help identify 

the specific goals of an orderly winddown: that the actions of a CCA should 

not increase the risk of significant 

liquidity, credit, or operational 

problems spreading among financial 

institutions or markets and thereby 

threaten the stability of the U.S. 

financial system, and that these actions 

would serve as a final and binding 

solution to whatever circumstance 

necessitated the wind-down (i.e., not a 

temporary stopgap measure).438 These 

considerations help distinguish the 

difference between an orderly winddown, as opposed to a wind-down 

where the goal is to cease operations as 

quickly as possible. As discussed in the 

RWP Proposing Release, to be orderly, a 

wind-down generally should include 

providing notice to participants 

sufficient to allow them to transition to 

alternative arrangements in an orderly 

manner, as well as maintaining the 

operation of the CCA’s critical 

services.439 Moreover, for a wind-down 

involving the sale or transfer of all or a 

portion of the CCA to be orderly, the 

CCA generally should consider the 

separability of the parts of the CCA and 

whether there are certain portions of the 

CCA’s business that could be sold or 

transferred as separate businesses.440

a. Meaning of ‘‘Orderly’’ 

Two commenters expressed the view 

that, despite the best efforts of all 

involved, a distressed CCA may be 

unable to wind-down in an ‘‘orderly’’ 

manner without increasing the risk of 

significant liquidity, credit, or 

operational problems spreading among 

financial institutions or markets, 

thereby threatening the stability of the 

U.S. financial system.441 As the 

Commission acknowledged in the CCA 

Standards Adopting Release, winddown may not always be advisable, and 

strategies based on recovery (rather than 

wind-down) may prove more feasible or 

workable in certain circumstances.442

Nonetheless, one purpose of Rule 

17Ad–22(e)(3)(ii)—and now also of Rule 

17Ad–26—is to ensure that CCAs have 

developed sufficient plans for both 

recovery and orderly wind-down to 

facilitate effective engagement and 

decision-making with its supervisory 

and resolution authorities as they 

consider implementing their RWPs. Key 

to such engagement is ensuring that 

planning by the CCA has considered a 

range of scenarios, across circumstances 

that include both recovery and winddown. Such planning, therefore, 

generally should focus on identifying 

strategies that can facilitate wind-down 

while mitigating to the greatest extent 

possible the risk of significant liquidity, 

credit, or operational problems 

spreading to other entities. Accordingly, 

in the CCA Standards Adopting Release, 

the Commission reiterated the 

importance of having plans for both 

recovery and orderly wind-down, 

explaining that a CCA generally should 

consider many factors across a range of 

potential considerations related to 

recovery and wind-down, including 

consideration of which options may be 

the most workable.443 Importantly, final 

Rule 17Ad–26 requires planning for an 

orderly wind-down, having considered 

significant liquidity, credit, or 

operational problems spreading among 

financial institutions or markets should 

a wind-down become necessary. It also 

requires timely implementation of the 

RWP so that the CCA, participants in 

the clearing agency, and other 

stakeholders, including its supervisory 

and resolution authorities, can assess 

the impact of different scenarios. Such 

planning will be most effective when 

the CCA considers ways to effect the 

permanent cessation, sale, or transfer of 

one or more of its services in a manner 

that would not increase the risk of 

significant liquidity, credit, or 

operational problems spreading among 

financial institutions or markets and 

thereby threaten the stability of the U.S. 


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444 DTCC at 11–12. 

445 17 CFR 240.17ad–22(e)(3)(ii). 

446 Id. 

447 Davidson at 1 (‘‘It is simply not possible, as 

a practical matter, to ‘resolve’ a systemically 

important financial market utility. They must be 

‘recovered.’ ’’). 

448CCA Standards Adopting Release, supra note 

5, at 70808. 

449 Id. 

450See supra note 442 (stating the same). 

451For example, the RWP would include 

information that can assist the resolution authority 

in the context of resolution planning. 

financial system. Accordingly, it is 

appropriate for the final rule to require 

planning designed to effect an orderly 

wind-down that mitigates the risk of 

significant liquidity, credit, or 

operational problems arising from the 

wind-down scenario. 

b. Applying a ‘‘Reasonably Designed’’ 

Standard 

One of the commenters recommended 

that the Commission modify the 

definition to incorporate a ‘‘reasonably 

designed’’ standard, suggesting that the 

definition be revised to state ‘‘in a 

manner that is reasonably designed to 

not increase the risk of significant 

liquidity, credit, or operational 

problems spreading among financial 

institutions or markets and thereby 

threaten the stability of the U.S. 

financial system, while seeking the 

continuity of critical services provided 

by the CCA and limiting any related 

disruptions’’ (emphasis added) 

(hereinafter the ‘‘in a manner’’ 

clause).444

With respect to requiring that an 

orderly wind-down be ‘‘reasonably 

designed,’’ Rule 17Ad–22(e)(3)(ii) 

already applies a ‘‘reasonably designed’’ 

standard for the development of 

RWPs.445 Accordingly, a CCA must 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to, as applicable, 

include plans for the recovery and 

orderly wind-down of the CCA 

necessitated by credit losses, liquidity 

shortfalls, losses from general business 

risk, or any other losses.446 This 

‘‘reasonably designed’’ standard effects 

the outcome desired by the commenter, 

and adding a second ‘‘reasonably 

designed’’ standard into the definition 

of ‘‘orderly wind-down’’ would make 

the definition less clear, since the 

definition itself only defines what 

constitutes an ‘‘orderly’’ wind-down. 

Accordingly, the Commission is 

retaining the ‘‘in a manner’’ clause as 

proposed. 

c. Feasibility of Wind-Down 

One commenter stated that winddown of a CCA is infeasible because 

suitable alternatives do not exist and the 

time it would take to establish or 

transfer critical functions to a ‘‘bridge’’ 

or new entity would cause permanent 

damage to the markets served by the 

CCA.447 When the Commission adopted 

preexisting Rule 17Ad–22(e), which 

includes in paragraph (e)(3)(ii) the 

requirement for CCAs to have RWPs, it 

addressed comments expressing 

concern with the feasibility of winding 

down a CCA. As explained above, the 

Commission reiterated in the CCA 

Standards Adopting Release the 

importance of having plans for both 

recovery and orderly wind-down, 

explaining that a CCA generally should 

consider many factors in a range of 

potential considerations related to 

recovery and orderly wind-down, 

including consideration of which 

options may be the most feasible or 

workable.448 One commenter to the CCA 

Standards Adopting Release, 

representing three CCAs, stated its view 

that, while CCAs should analyze the 

feasibility of an orderly wind-down in 

their plans and include it when 

appropriate, in the commenter’s view, 

recovery strategies (rather than winddown) most effectively promote 

financial stability, ensure the 

continuation of services, and distribute 

losses in a fair and economically 

efficient manner.449 The Commission 

continues to agree that the steps to be 

taken in a recovery or wind-down 

scenario must promote financial 

stability, the continuity of systemically 

important services, and the fair and 

efficient allocation of losses.450

Consistent with this view, the 

requirements related to orderly winddown in Rule 17Ad–26 include 

elements focused on planning and 

timely implementation, to help ensure 

that, if a CCA were to enter recovery or 

become unable to continue as a going 

concern, the relevant supervisory 

authorities, and, in the case of a 

resolution, the relevant resolution 

authorities, could rely on the planning 

set forth in the CCA’s RWPs. Such 

elements can help those authorities 

evaluate the most effective course of 

action under the circumstances while 

ensuring that systemically important 

functions continue to serve the affected 

markets.451 Accordingly, the definition 

of ‘‘orderly wind-down’’ seeks to 

identify those circumstances where a 

permanent cessation, sale, or transfer of 

one or more of its critical services could 

occur in a manner that would not 

increase the risk of significant liquidity, 

credit, or operational problems 

spreading among financial institutions 

or markets. In this way, although it may 

be unworkable to fully wind down 

systemically important functions 

provided by a CCA such that markets 

lose continuity of access to these 

functions, planning for the orderly 

wind-down of a CCA can help ensure 

that the CCA itself, as well as the 

markets it serves, have planned for and 

developed the mechanisms that can 

facilitate the continuity of such 

systemically important functions even if 

the CCA itself is unable to continue as 

a going concern. The Commission is 

therefore adopting the definition of 

‘‘orderly wind-down’’ in final Rule 

17Ad–26 as proposed, with certain 

technical modifications to ensure 

consistency across the elements of Rule 

17Ad–26, as discussed immediately 

below. 

d. Other Modifications for Consistency 

The Commission is modifying the 

definition of ‘‘orderly wind-down’’ to 

ensure consistency with other 

modifications made in Rule 17Ad–26 

with respect to the defined term 

‘‘service providers for core services,’’ as 

discussed above. Accordingly, the 

Commission is replacing the reference 

to ‘‘critical services’’ in the proposed 

definition with ‘‘core services, as 

identified by the covered clearing 

agency pursuant to paragraph (a)(1) of 

this section.’’ As such, final Rule 17Ad– 

26(b) defines ‘‘orderly wind-down’’ to 

mean the actions of a CCA to effect the 

permanent cessation, sale, or transfer of 

one or more of its core services, as 

identified by the CCA pursuant to Rule 

17Ad–26(a)(1), in a manner that would 

not increase the risk of significant 

liquidity, credit, or operational 

problems spreading among financial 

institutions or markets and thereby 

threaten the stability of the U.S. 

financial system. 

2. Other Defined Terms and 

Introductory Clause 

In addition to the definition of 

‘‘orderly wind-down,’’ the Commission 

proposed definitions for the terms 

‘‘affiliate,’’ ‘‘recovery,’’ and ‘‘service 

provider.’’ 

The definition of ‘‘affiliate’’ as 

proposed meant a person that directly or 

indirectly controls, is controlled by, or 

is under common control with the CCA. 

The Commission received no comments 

on this definition and is adopting the 

definition of ‘‘affiliate’’ as proposed. 

The definition of ‘‘recovery’’ as 

proposed meant the actions of a CCA, 

consistent with its rules, procedures, 

and other ex ante contractual 

arrangements, to address any uncovered 

loss, liquidity shortfall, or capital 


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452 DTCC at 6; ICC at 3–4; OCC at 6–7; CCP12 at 

3. 

453 DTCC at 7; ICC at 4. 

454The Commission is also making a technical 

edit to the definition of ‘‘service provider for core 

services’’ in final Rule 17Ad–26(b): replacing ‘‘in 17 

CFR 240.17ad–26(a)(1)’’ with ‘‘pursuant to 

paragraph (a)(1) of this section.’’ 

455 In determining compliance dates, the 

Commission considers the benefits of the rules as 

well as the costs of delayed compliance dates, and 

potential overlapping compliance dates. For the 

reasons discussed throughout the release, to the 

extent that there are costs from overlapping 

compliance dates, the benefits of the rule justify the 

costs. See infra sections IV.B. and IV.C.3 in the 

Economic Analysis for a discussion of the 

interaction of the final rule with certain other 

Commission rules. 

456Under section 3(f) of the Exchange Act, 

whenever the Commission engages in rulemaking 

under the Exchange Act and is required to consider 

or determine whether an action is necessary or 

appropriate in the public interest, it must consider, 

in addition to the protection of investors, whether 

the action will promote efficiency, competition, and 

capital formation. See 15 U.S.C. 78c(f). In addition, 

section 23(a)(2) of the Exchange Act prohibits the 

Commission from adopting any rule that would 

impose a burden on competition not necessary or 

appropriate in furtherance of the purposes of the 

Exchange Act. See 15 U.S.C. 78w(a)(2). 

inadequacy, whether arising from 

participant default or other causes (such 

as business, operational, or other 

structural weaknesses), including 

actions to replenish any depleted 

prefunded financial resources and 

liquidity arrangements, as necessary to 

maintain the CCA’s viability as a going 

concern and to continue its provision of 

critical services. The Commission 

received no comments on this 

definition. To align this definition with 

modifications to paragraph (a)(1) of Rule 

17Ad–26, as well as corresponding 

modifications to the definitions of 

‘‘service provider for core services’’ and 

‘‘orderly wind-down,’’ the Commission 

is modifying the definition of 

‘‘recovery’’ at adoption by replacing the 

language regarding ‘‘critical services’’ 

with ‘‘core services, as identified by the 

covered clearing agency pursuant to 

paragraph (a)(1) of this section.’’ 

Accordingly, as adopted, the definition 

of ‘‘recovery’’ means the actions of a 

CCA, consistent with its rules, 

procedures, and other ex ante 

contractual arrangements, to address 

any uncovered loss, liquidity shortfall, 

or capital inadequacy, whether arising 

from participant default or other causes 

(such as business, operational, or other 

structural weaknesses), including 

actions to replenish any depleted 

prefunded financial resources and 

liquidity arrangements, as necessary to 

maintain the CCA’s viability as a going 

concern and to continue its provision of 

core services, as identified by the CCA 

pursuant to Rule 17Ad–26(a)(1). 

The definition of ‘‘service provider’’ 

as proposed meant any person, 

including an affiliate or a third party, 

that is contractually obligated to the 

CCA in any way related to the provision 

of critical services, as identified by the 

CCA in 17 CFR 240.17ad–26(a)(1). 

Several commenters stated that the 

proposed definition was overly broad, 

capturing service providers that would 

not directly support critical services, 

and that it would be burdensome to map 

to such a wide scope of service 

providers to critical services.452

Commenters made suggestions to 

narrow the scope of the definition, 

several of which the Commission is 

adopting,453 as discussed in Parts II.C.1 

and 2. 

To narrow the scope of the definition 

and consistent with the changes 

previously discussed in Parts II.C.1 and 

2 regarding Rule 17Ad–26(a)(1) and (2), 

the Commission is modifying the 

defined term ‘‘service provider’’ to be 

‘‘service provider for core services.’’ The 

Commission is also modifying the 

definition to narrow the scope to 

include only those services providers 

that have a written agreement to 

provide, on an ongoing basis, services 

that directly support the core services of 

the CCA. Specifically, the Commission 

is replacing the clause ‘‘any person . . . 

that is contractually obligated to the 

CCA in any way related to the provision 

of critical services’’ with ‘‘any person 

. . . that, through a written agreement 

for services provided to or on behalf of 

the CCA, on an ongoing basis, directly 

supports the delivery of core 

services[.]’’ 454 These changes closely 

link the scope of ‘‘service providers’’ 

with the requirement in Rule 17Ad– 

26(a)(1) to identify core services. The 

modifications to the definition also 

align the approach in Rule 17Ad–26 

with the approach in existing Rule 

17Ad–25, which establishes 

requirements, in part, for the board of 

directors of a registered clearing agency 

to oversee service providers for core 

services. 

Finally, the Commission is also 

modifying the introductory clause of 

paragraph (b) of Rule 17Ad–26 to state: 

‘‘All terms used in this section have the 

same meaning as in the Securities 

Exchange Act of 1934, and, unless the 

context otherwise requires, the 

following definitions apply for purposes 

of this section[.]’’ This modification 

clarifies that the terms defined in Rule 

17Ad–26(b) are for the purpose of Rule 

17Ad–26 and intended to be consistent 

with terms used in the Exchange Act. 

III. Compliance Date 

The Commission did not receive any 

comments regarding compliance dates 

for the proposed rule amendments and 

new rules being adopted in this 

release.455 The Commission is adopting 

two compliance dates regarding these 

final rule amendments and new rules, as 

follows: (1) each covered clearing 

agency will be required to file with the 

Commission any proposed rule changes 

required under Rule 19b–4 and any 

Advance Notices required under Title 

VIII of the Dodd-Frank Act and Rule 

19b–4(n) no later than April 17, 2025, 

and (2) the proposed rule changes and 

the Advance Notices must be effective 

by December 15, 2025. These 

compliance dates provide sufficient 

time for CCAs to consider changes to 

their rules, policies, and procedures 

necessary to ensure consistency with 

the rules amended and adopted in this 

release because, as discussed above and 

further in the Economic Analysis and 

Paperwork Reduction Act analysis 

below, CCAs generally have policies 

and procedures consistent with many of 

the elements of the final amendments to 

17Ad–22(e)(6) and new Rule 17Ad–26. 

As such, while these new requirements 

likely require a CCA to review and 

update existing policies and procedures, 

it does not require a CCA to develop 

new systems, technologies, or processes. 

Because these rules promote iterative 

and incremental updates to existing 

policies and procedures, generally based 

on existing practices at some or all of 

the current set of CCAs, these 

compliance dates provide a sufficient 

time period to facilitate the filing, 

publication, and Commission review 

and approval, as appropriate, of any 

incremental changes to policies and 

procedures consistent with the 

processes for proposed rule changes 

under Rule 19b–4 and Advance Notices 

under Title VIII and Rule 19b–4(n). 

IV. Economic Analysis 

A. Introduction 

The Commission is sensitive to the 

economic consequences and effects of 

the final rule and amendments, 

including their benefits and costs.456

Since the final rule and amendments 

could require a CCA to adopt new 

policies and procedures, the 

Commission acknowledges that the 

development and implementation of 

those new policies and procedures will 

have economic effects. 

This section addresses the economic 

effects of the final rule and 

amendments, including their 

anticipated and estimated benefits and 

costs and their effects on efficiency, 

competition, and capital formation. It is 

not feasible to quantify many of the 


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457Reporting of Securities Loans, Release No. 34– 

98737 (Oct. 13, 2023) [88 FR 75644 (Nov. 3, 2023)] 

(‘‘Rule 10c–1a Adopting Release’’). This rule 

requires any covered person who agrees to a 

covered securities loan on behalf of itself or another 

person to report specified information about the 

covered securities loan to a registered national 

securities association (currently FINRA is the only 

registered national securities association)—or rely 

on a reporting agent to do so—and requires the 

registered national securities association to make 

certain information it receives available to the 

public. Covered persons will include market 

intermediaries, securities lenders, and brokerdealers, while reporting agents include certain 

brokers, dealers, or registered clearing agencies. The 

rule’s compliance dates required that the registered 

national securities association propose rules 

pursuant to Rule 10c–1a(f) by May 2, 2024, and the 

proposed rules shall be effective no later than Jan. 

2, 2025; that covered persons report Rule 10c–1a 

information to a registered national securities 

association on or by Jan. 2, 2026 (which requires 

that the registered national securities association 

have implemented data retention and availability 

requirements for reporting); and that the registered 

national securities association publicly report Rule 

10c–1a information by Apr. 2, 2026. See Rule 10c– 

1a Adopting Release, section VIII. 

458CA Governance Adopting Release, supra note 

12. The CA Governance Adopting Release 

establishes Rule 17Ad–25 for new governance 

requirements for registered clearing agencies. These 

include requirements for independent directors and 

for the composition of a registered clearing agency’s 

board of directors, nominating committee, and risk 

management committee; requirements to identify 

and document existing or potential conflicts of 

interest involving directors or senior managers, and 

mitigate or eliminate and document the mitigation 

or elimination of such conflicts; and requirements 

for policies and procedures obligating directors to 

report conflicts of interest, managing risks from 

relationships with service providers, and requiring 

boards to solicit, consider, and document their 

consideration of the views of participants and other 

relevant stakeholders. The compliance date for Rule 

17Ad-25 is Dec. 5, 2024, except that the compliance 

date for the independence requirements of the 

board and board committees in Rules 17Ad– 

25(b)(1), (c)(2), and (e) is Dec. 5, 2025. See CA 

Governance Adopting Release, section III. 

459Treasury Clearing Adopting Release, supra 

note 62. Among other things, the amendments 

require CCAs for U.S. Treasury securities to have 

written policies and procedures reasonably 

designed to require that every direct participant of 

the CCA submit for clearance and settlement all 

eligible secondary market transactions in U.S. 

Treasury securities to which it is a counterparty. 

The compliance date was Mar. 18, 2024, for CCAs 

to file any proposed rule changes pursuant to Rule 

17Ad–22(e)(6)(i) and (e)(18)(iv)(C) and 17 CFR 

240.15c3–3 (‘‘Rule 15c3–3’’), which must be 

effective by Mar. 31, 2025. With respect to the 

changes to Rule 17Ad–22(e)(18)(iv)(A) and (B), (i) 

CCAs were required to file any proposed rule 

changes regarding those amendments no later than 

June 14, 2024, and (ii) those changes must be 

effective by Dec. 31, 2025, for cash market 

transactions encompassed by section (ii) of the 

definition of an eligible secondary market 

transaction, and by June 30, 2026, for repo 

transactions encompassed by section (i) of the 

definition of eligible secondary market transactions. 

Finally, the Commission amended the broker-dealer 

customer protection rule to permit margin required 

and on deposit with CCAs for U.S. Treasury 

securities to be included as a debit in the reserve 

formulas for accounts of customers and proprietary 

accounts of broker-dealers, subject to certain 

conditions. Compliance by the direct participants of 

a U.S. Treasury securities CCA with the 

requirement to clear eligible secondary market 

transactions is not required until Dec. 31, 2025, and 

June 30, 2026, respectively, for cash and repo 

transactions. See Treasury Clearing Adopting 

Release, section III. 

460There are two registered but inactive clearing 

agencies: Boston Stock Exchange Clearing 

Corporation (‘‘BSECC’’) and Stock Clearing 

Corporation of Philadelphia (‘‘SCCP’’). Neither has 

provided clearing services in well over a decade. 

See Self-Regulatory Organizations; The Boston 

Stock Clearing Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

to Amend the Articles of Organization and ByLaws, Exchange Act Release No. 63629 (Jan. 3, 

2011), 76 FR 1473, 1474 (Jan. 3, 2011) (BSECC 

‘‘returned all clearing funds to its members by 

September 30, 2010, and [ ] no longer maintains 

clearing members or has any other clearing 

operations as of that date. [ ] BSECC [ ] maintain[s] 

its registration as a clearing agency with the 

Commission for possible active operations in the 

future.’’); Self-Regulatory Organizations; Stock 

Clearing Corporation of Philadelphia; Notice of 

Filing and Immediate Effectiveness of Proposed 

Rule Change Relating to the Suspension of Certain 

Provisions Due to Inactivity, Exchange Act Release 

No. 63268 (Nov. 8, 2010), 75 FR 69730, 69731 (Nov. 

15, 2010) (SCCP ‘‘returned all clearing fund 

deposits by September 30, 2009; [and] as of that 

date SCCP no longer maintains clearing members or 

has any other clearing operations. [ ] SCCP [ ] 

maintain[s] its registration as a clearing agency for 

possible active operations in the future.’’). Because 

they do not provide clearing services, BSECC and 

SCCP are not included in the economic baseline or 

the consideration of benefits and costs. ICE Clear 

Europe Limited withdrew its registration in Nov. 

2023. See Exchange Act Release No. 98902 (Nov. 9, 

2023), 88 FR 78428 (Nov. 15, 2023). 

461A CCP is a type of registered clearing agency 

that acts as the buyer to every seller and the seller 

to every buyer, providing a trade guaranty with 

respect to transactions submitted for clearing by the 

CCP’s participants. See supra note 6. A CCP may 

perform a variety of risk management functions to 

manage the market, credit, and liquidity risks 

associated with transactions submitted for clearing. 

For example, CCPs help manage the effects of a 

participant default by closing out the defaulting 

participant’s open positions and using financial 

resources available to the CCP to absorb any losses. 

In this way, the CCP can prevent the onward 

transmission of financial risk. See, e.g., Shortening 

the Securities Transaction Settlement Cycle, 

Exchange Act Release No. 94196 (Feb. 9, 2022), 87 

FR 10436, 10448 (Feb. 24, 2022). 

462A CSD is a type of registered clearing agency 

that acts as a depository for handling securities, 

whereby all securities of a particular class or series 

of any issuer deposited within the system are 

treated as fungible. Through use of a CSD, securities 

may be transferred, loaned, or pledged by 

bookkeeping entry without the physical delivery of 

certificates. A CSD also may permit or facilitate the 

settlement of securities transactions more generally. 

See supra note 6. 

benefits and costs. For example, risk 

management is an area of key concern 

for all clearing agency stakeholders. 

Perceptions of risk affect how clearing 

agencies are operated, and those 

operations, in turn, affect perceptions of 

risk. Any change to the policies and 

procedures about how clearing agencies 

act in times of crisis affects the behavior 

of clearing agencies and participants in 

complex ways not only during a crisis 

but also before the crisis, and those 

behavioral changes may affect the 

likelihood and severity of a crisis. While 

the Commission has attempted to 

quantify economic effects where 

possible, much of the discussion of 

economic effects is qualitative in nature. 

The Commission also discusses the 

potential economic effects of certain 

alternatives to the final rule and 

amendments. 

B. Economic Baseline 

To consider the effect of the final rule 

and amendments, the Commission first 

explains the current situation in the 

market (i.e., the economic baseline). All 

the benefits and costs of the final rule 

and amendments are calculated relative 

to the economic baseline. The economic 

baseline in this analysis considers: (1) 

the current market for CCA activities, 

including the number of CCAs, the 

distribution of participants across these 

clearing agencies, and the level of 

activity these clearing agencies process; 

(2) the current regulatory framework for 

CCAs; (3) the current recovery and 

orderly wind-down plans of CCAs; and 

(4) the current risk-based margin 

systems of CCAs. The Commission did 

not receive any comments on the 

economic baseline. 

We have considered the potential 

effects on entities that are implementing 

other recently adopted rules during the 

compliance period for these 

amendments. Recently adopted rules 

that may place compliance obligations 

on some of the same entities with 

obligations under these amendments 

include the 17 CFR 240.10c–1a (‘‘Rule 

10c–1a’’) Adopting Release,457 the CA 

Governance Adopting Release,458 and 

the Treasury Clearing Adopting 

Release.459

1. Description of Market 

Of the eight registered clearing 

agencies, six are currently in 

operation.460 Five provide central 

counterparty (‘‘CCP’’) services,461 and 

one provides central securities 

depository (‘‘CSD’’) services.462

National Securities Clearing Corporation 

(‘‘NSCC’’), Fixed Income Clearing 

Corporation (‘‘FICC’’), and Depository 

Trust Company (‘‘DTC’’) are all CCAs 

that are subsidiaries of Depository Trust 

& Clearing Corporation (‘‘DTCC’’). NSCC 

offers clearance and settlement services 

for equities, corporate and municipal 

debt, American depositary receipts, 

exchange traded funds, and unit 

investment trusts (‘‘UITs’’). FICC’s 

Mortgage-Backed Securities Division 

(‘‘MBSD’’) provides clearing, netting, 

and risk management services for trades 

in the mortgage-backed securities 

market. FICC’s Government Securities 

Division (‘‘GSD’’) provides clearing, 


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463See, e.g., Release No. 34–52922 (Dec. 7, 2005), 

70 FR 74070 (Dec. 14, 2005) (explaining that 

participants of DTC, FICC, and NSCC that make full 

use of the services of one or more of these clearing 

agency subsidiaries of DTCC are required to 

purchase DTCC common shares). 

464OCC is owned by certain options exchanges, 

which are all publicly traded. ICC is a subsidiary 

of ICE (a publicly traded company). LCH SA is a 

subsidiary of LCH Group Holdings, Ltd., which is 

majority-owned by London Stock Exchange Group 

plc (a publicly traded company). 

465See SIFMA at 10. 

466See Alistair Milne, Central Securities 

Depositories and Securities Clearing and 

Settlement: Business Practice and Public Policy 

Concerns, in Analyzing the Economics of Financial 

Market Infrastructures 334, 335 (Martin Diehl, et al. 

eds., 2016), available at https://doi.org/10.4018/ 

978-1-4666-8745-5.ch017 (‘‘Clearing and settlement 

operations have evolved over time to become 

remarkably complex. This complexity creates 

business challenges, especially for management of 

liquidity, which could potentially have systemic 

consequences for the wider financial system. This 

complexity may also increase the barriers to entry 

that can discourage competition in trade settlement 

and securities services.’’). 

467Membership requirements vary across the 

CCAs. For example, the self-clearing minimum netcapital requirement is $500 thousand for NSCC, 

while OCC’s net capital requirement is $2.5 million. 

Multiple memberships by the same firm are much 

more common at NSCC than at the other CCAs. 

468See Better Markets at 10 (‘‘Since [the 2008 

financial crisis], more and more connections in the 

global financial system run through CCPs. This 

growing interconnectedness has benefits but also 

poses risks.’’). See SIFMA at 2 (‘‘In this regard, the 

SEC’s Proposal is increasingly relevant in light of 

the SEC’s recent proposal to require increased 

clearing of the Treasury market, which would occur 

through a single SEC-regulated Clearing Agency.’’). 

469 Data from DTCC’s Trade Information 

Warehouse, compiled by Commission staff. At the 

time of adoption, 2023 data were not available. 

470See supra note 459. 

471See DTCC, Annual Report (2023), available at 

https://www.dtcc.com/-/media/Files/Downloads/

Annual%20Report/2023/DTCC-2023-AR-Print.pdf. 

The total value of transactions settled in 2021 was 

$432 trillion. The proposing release reported the 

related statistic of the total value of securities 

transactions settled in 2021, which was $152 

trillion. 

netting, and risk management services 

for trades in U.S. Government debt, 

including buy-sell transactions and 

repurchase agreement transactions. DTC 

provides end-of-day net settlement for 

clients, processes corporate actions, 

provides securities movements for 

NSCC’s net settlements, and it provides 

settlement for institutional trades. 

ICE Clear Credit LLC (‘‘ICC’’) is a CCA 

for credit default swaps (‘‘CDS’’), and it 

is a subsidiary of Intercontinental 

Exchange, Inc. (‘‘ICE’’). LCH SA is 

another CCA that offers clearing for 

CDS, and it is a France-based subsidiary 

of LCH Group Holdings Ltd, which, in 

turn, is majority owned by the London 

Stock Exchange Group plc. The sixth 

CCA, Options Clearing Corporation 

(‘‘OCC’’), offers clearing services for 

exchange-traded U.S. equity options. 

CCAs operate under one of two broad 

ownership models. In one model, the 

CCA is member-owned,463 while in the 

other model, the CCA is publicly 

traded.464

CCAs currently operate specialized 

clearing services and face limited 

competition in their markets.465 For 

each of the following asset classes, for 

example, there is only one CCA serving 

as a central counterparty: exchangetraded equity options (OCC), 

government securities (FICC), mortgagebacked securities (FICC), and equity 

securities (NSCC). There is also only 

one CCA providing central securities 

depository services (DTC). CCA 

activities exhibit high barriers to entry 

and economies of scale.466 These 

features of the existing markets, and the 

resulting concentration of clearing and 

settlement services within a handful of 

entities, inform the Commission’s 

examination of the effects of the final 

rule and amendments on competition, 

efficiency, and capital formation (see 

Part IV.C.3). Table 1 summarizes the 

most recent data on the number of 

participants at each CCA.467

TABLE 1a—NUMBER OF PARTICIPANTS AT CCAS IN AUGUST 2024 

CCA Number of 

participants 

Subsidiaries of The Depository Trust & Clearing Corporation: ........................

National Securities Clearing Corporation b ................................................................................................................................... 4,502 

The Depository Trust Company c ................................................................................................................................................. 877 

Fixed Income Clearing Corporation (Government Securities Division) d ..................................................................................... 220 

Fixed Income Clearing Corporation (Mortgage Backed Securities Division) e ............................................................................ 139 

Subsidiaries of Intercontinental Exchange: 

ICE Clear Credit f .......................................................................................................................................................................... 31 

Subsidiaries of LCH: 

LCH SA (CDSClear Participants Only) g ...................................................................................................................................... 26 

The Options Clearing Corporation h ............................................................................................................................................. 181 

aParticipant statistics were taken from the websites of each of the listed clearing agencies in Aug. 2024. 

b DTCC, NSCC Member Directories, available at http://www.dtcc.com/client-center/nscc-directories. c DTCC, DTC Member Directories, available at http://www.dtcc.com/client-center/dtc-directories. d DTCC, FICC–GOV Member Directories, available at http://www.dtcc.com/client-center/ficc-gov-directories. e DTCC, FICC–MBS Member Directories, available at http://www.dtcc.com/client-center/ficc-mbs-directories. f ICE, ICE Clear Credit Participants, available at https://www.theice.com/clear-credit/participants. g LCH, LCH SA Membership, available at https://www.lch.com/membership/member-search. hOCC, Member Directory, available at http://www.theocc.com/Company-Information/Member-Directory. 

CCAs have become an essential part 

of the infrastructure of the U.S. 

securities markets due to their role as 

intermediaries. Over the last several 

years, CCAs have become increasingly 

important in financial markets as they 

clear an increasing fraction of market 

transactions.468 For example, in the 12- 

month period from October 2021 to 

September 2022, approximately 65 

percent, or $1.3 trillion notionally, of all 

single-name CDS transactions in the 

United States were centrally cleared,469

and the Commission adopted in 

December 2023 rule changes which, 

among other things, require CCAs for 

U.S. Treasury securities to have written 

policies and procedures reasonably 

designed to require that every direct 

participant of the CCA submit for 

clearance and settlement all eligible 

secondary market transactions in U.S. 

Treasury securities to which it is a 

counterparty.470 The average daily value 

of equities trades cleared by NSCC in 

2023 was $1.9 trillion; at FICC, the total 

net value of government securities 

transactions in 2023 was $2,019 trillion 

and the total net par value for mortgage 

backed securities in 2023 was $58 

trillion; and the total value of 

transactions settled by DTC in 2023 was 

$446 trillion.471 In addition, in 2023, 


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472See OCC, Press Release OCC Reports 

December 2023 and Total 2023 Volume Data (Jan. 

4, 2024), available at https://www.theocc.com/ 

newsroom/press-releases/2024/1-03-occ-reportsdecember-2023-and-total-2023-volume-data. 

473See Darrell Duffie, Still the World’s Safe 

Haven? Redesigning the U.S. Treasury Market After 

the COVID–19 Crisis 15 (Hutchins Center Working 

Paper, Paper No. 62, 2020), available at https://

www.brookings.edu/wp-content/uploads/2020/05/ 

wp62_duffie_v2.pdf (‘‘Central clearing increases the 

transparency of settlement risk to regulators and 

market participants, and in particular allows the 

CCP to identify concentrated positions and crowded 

trades, adjusting margin requirements accordingly. 

Central clearing also improves market safety by 

lowering exposure to settlement failures. . . . As 

depicted, settlement failures rose less in March 

[2020] for [U.S. Treasury] trades that were centrally 

cleared by FICC than for all trades involving 

primary dealers. A possible explanation is that 

central clearing reduces ‘daisy-chain’ failures, 

which occur when firm A fails to deliver a security 

to firm B, causing firm B to fail to firm C, and so 

on.’’). 

474See generally Albert J. Menkveld & Guillaume 

Vuillemey, The Economics of Central Clearing, 13 

Ann. Rev. Fin. Econ. 153 (2021). 

475See generally Dietrich Domanski, Leonardo 

Gambacorta, & Cristina Picillo, Central Clearing: 

Trends and Current Issues, BIS Q. Rev. (Dec. 2015), 

available at https://www.bis.org/publ/qtrpdf/r_

qt1512g.pdf (describing links between CCP 

financial risk management and systemic risk); 

Darrell Duffie, Ada Li, & Theo Lubke, Policy 

Perspectives on OTC Derivatives Market 

Infrastructure 9 (Fed. Res. Bank N.Y. Staff Rep., 

Paper No. 424, 2010), available at http://

www.newyorkfed.org/research/staff_reports/ 

sr424.pdf (‘‘If a CCP is successful in clearing a large 

quantity of derivatives trades, the CCP is itself a 

systemically important financial institution. The 

failure of a CCP could suddenly expose many major 

market participants to losses. Any such failure, 

moreover, is likely to have been triggered by the 

failure of one or more large clearing agency 

participants, and therefore to occur during a period 

of extreme market fragility.’’); Craig Pirrong, The 

Inefficiency of Clearing Mandates 11–14, 16–17, 

24–26 (Policy Analysis Working Paper, Paper No. 

655, 2010), available at http://www.cato.org/pubs/ 

pas/PA665.pdf (stating, among other things, that 

‘‘CCPs are concentrated points of potential failure 

that can create their own systemic risks,’’ that ‘‘[a]t 

most, creation of CCPs changes the topology of the 

network of connections among firms, but it does not 

eliminate these connections,’’ that clearing may 

lead speculators and hedgers to take larger 

positions, that a CCP’s failure to effectively price 

counterparty risks may lead to moral hazard and 

adverse selection problems, that the main effect of 

clearing would be to ‘‘redistribute losses 

consequent to a bankruptcy or run,’’ and that 

clearing entities have failed or come under stress in 

the past, including in connection with the 1987 

market break); see Glenn Hubbard et al., Report of 

the Task Force on Financial Stability, Brookings 

Inst., 96 (June 2021), available at https://

www.brookings.edu/wp-content/uploads/2021/06/ 

financial-stability_report.pdf (‘‘In short, the 

systemic consequences from a failure of a major 

CCP, or worse, multiple CCPs, would be severe. 

Pervasive reforms of derivatives markets following 

2008 are, in effect, unfinished business; the 

systemic risk of CCPs has been exacerbated and left 

unaddressed.’’); Froukelien Wendt, Central 

Counterparties: Addressing their Too Important to 

Fail Nature (working paper Jan. 2015), available at 

https://ssrn.com/abstract=2568596 (retrieved from 

SSRN Elsevier database) (assessing the potential 

channels for contagion arising from CCP 

interconnectedness); Manmohan Singh, Making 

OTC Derivatives Safe—A Fresh Look 5–11 (IMF 

Working Paper, Paper No. 11/66, 2011), available at 

http://www.imf.org/external/pubs/ft/wp/2011/ 

wp1166.pdf (addressing factors that could lead 

central counterparties to be ‘‘risk nodes’’ that may 

threaten systemic disruption). 

476See Better Markets at 10 (‘‘The inability of a 

CCP to recover from severe losses, or the disorderly 

wind-down of a CCP, could have significant 

repercussions not only for the sector in which the 

CCP operates but for the markets and the economy 

as a whole.’’); SIFMA at 2 (‘‘In this regard, the SEC’s 

Proposal is increasingly relevant in light of the 

SEC’s recent proposal to require increased clearing 

of the Treasury market, which would occur through 

a single SEC-regulated Clearing Agency.’’). 

477See Paolo Saguato, Financial Regulation, 

Corporate Governance, and the Hidden Costs of 

Clearinghouses, 82 Ohio St. L.J. 1071, 1074–75 

(2021), available at https://moritzlaw.osu.edu/sites/ 

default/files/2022-03/18.%20Saguato_v82-6_1071- 

1140.pdf (‘‘[T]he decision to centralize risk in 

clearinghouses made them critical for the stability 

of the financial system, to the point that they are 

considered not only too-big-to-fail, but also tooimportant-to-fail institutions.’’). 

478See RWP Proposing Release, supra note 18 at 

Part II. 

479See supra Part III.D.2. 

480See 12 U.S.C. 5472, 5469. Currently, ICC, LCH 

SA, and OCC are regulated by the Commission and 

the CFTC. The CFTC is the primary supervisory 

regulator for ICC and LCH SA, while the 

Commission is the primary supervisory regulator 

for OCC. DTC, FICC, NSCC, ICC, and OCC have 

been designated systemically important financial 

market utilities by the FSOC (see infra note 517 and 

the accompanying text). DTC is also a state member 

bank of the Federal Reserve System and a New York 

State registered trust company and is therefore also 

regulated by the New York Department of Banking 

and Finance. LCH SA is not regulated by the Board 

of Governors. The Board of Governors addresses 

certain recovery and orderly wind-down plans in 

Regulation HH (see RWP Proposing Release, supra 

note 18, at 34710 n.68 and accompanying text), and 

the CFTC requires certain derivatives clearing 

organizations to maintain recovery and orderly 

wind-down plans through Regulation § 39.39(b) and 

subsequent guidance (see RWP Proposing Release, 

supra note 18, at 34716 n.69 and accompanying 

text). 

481See LCH, Company Structure, available at 

https://www.lch.com/about-us/structure-andgovernance/company-structure. 

482See RWP Proposing Release, supra note 18, at 

34710 n.16 and accompanying text. 

OCC cleared 11.1 billion options 

contracts.472

Central clearing benefits the markets 

by significantly reducing participants’ 

counterparty risk and through more 

efficient netting of margin requirements. 

Consequently, central clearing also 

benefits the financial system by 

increasing financial resilience and the 

ability to monitor and manage risk.473

The role of a clearing agency in 

promoting resilience highlights its 

central importance in the functioning of 

markets.474 If a CCP is unable to perform 

its risk management functions 

effectively, it can transmit risk 

throughout the financial system. 

Similarly, if a CSD is unable to perform 

its functions, market participants may 

be unable to settle their transactions, 

which may transmit risk throughout the 

financial system. 

Disruption to a clearing agency’s 

operations, or failure on the part of a 

clearing agency to meet its obligations, 

could serve as a source of contagion, 

resulting in significant costs not only to 

the clearing agency itself and its 

participants but also to other market 

participants and the broader U.S. 

financial system.475 Absent proper risk 

management, a clearing agency failure 

could destabilize the financial 

system.476 As a result, proper 

management of the risks associated with 

central clearing helps ensure the 

stability of the U.S. securities markets 

and the broader U.S. financial 

system.477

2. Overview of the Existing Regulatory 

Framework 

The existing regulatory framework for 

clearing agencies registered with the 

Commission includes section 17A of the 

Exchange Act, the Dodd-Frank Act, and 

the related rules adopted by the 

Commission.478

Clearing agencies registered with the 

Commission may also be subject to 

other domestic or foreign regulation.479

Specifically, clearing agencies operating 

in the U.S. may also be subject to 

regulation by the CFTC (as designated 

clearing organizations, or DCOs, for 

futures or swaps that are dually 

registered with the CFTC and SEC) and 

the Board of Governors (as SIFMUs or 

State member banks).480 Additionally, 

LCH SA is regulated by l’Autorite ́ des 

marche ́s financiers, l’Autorite ́ de 

Controˆle Prudentiel et de Re ́solution, 

and the Banque de France, and it is 

subject to European Market 

Infrastructure Regulation (EMIR).481

3. Current Recovery and Orderly WindDown Plans 

Each CCA, as part of a sound riskmanagement framework, is currently 

required to establish and maintain plans 

for the recovery and orderly wind-down 

of the CCA necessitated by credit losses, 

liquidity shortfalls, losses from general 

business risk, or any other losses (such 

plans are referred to as recovery and 

wind-down plans, or RWPs).482 The 

CCA may have one RWP document, or 

it may maintain two separate 

documents, referring to one as the 

recovery plan and the other as the 

orderly wind-down plan. Although the 

Commission did not include specific 

requirements for RWPs in the CCA 

Standards Adopting Release, the 

Commission did offer guidance about 

what CCAs should consider when 


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483CCA Standards Adopting Release, supra note 

5, at 70810; see also RWP Proposing Release, supra 

note 18 at Part II.A (discussing the guidance). 

484See RWP Proposing Release supra note 18, at 

34711 n.32 (regarding Form 19b–4); id. at 34712 

n.41 (regarding proposed rule changes). 

485See, e.g., https://www.sec.gov/rules/sro/nscc/ 

2018/34-82430-ex5a.pdf (as an example of the 

redacted filing materials posted for SR–NSCC– 

2017–017); see also id. A commenter stated that 

CCA members will manage key risks better if they 

have transparency into the RWPs of their CCAs. See 

ICI Letter at 8 (‘‘It is critical for clearing members 

and end-user customers, such as funds, to have 

greater transparency into the content of RWPs. Such 

transparency could allow participants to determine 

the extent of their potential liabilities and 

predictably manage exposures to a clearing 

entity.’’). 

486See RWP Proposing Release, supra note 18, at 

34711 n.32. 

487 In a change from Proposed Rule 17Ad– 

26(a)(1), instead of referring to ‘‘critical payment, 

clearing and settlement services,’’ the final rule 

refers to ‘‘core payment, clearing, and settlement 

services.’’ Use of the descriptive term ‘‘core’’ rather 

than ‘‘critical’’ does not affect the Commission’s 

prior guidance on identifying those services. See 

supra Part II.C.1. 

488See, e.g., Exchange Act Release Nos. 82462 

(Jan. 2, 2018), 83 FR 884, 885 (Jan. 8, 2018) (SR– 

DTC–2017–021) (stating that the RWP provided a 

description of its services and the criteria to 

determine which services are considered critical) 

(‘‘DTC 2017 Notice’’); 82431 (Jan. 2, 2018), 83 FR 

871, 872 (Jan. 8, 2018) (SR–FICC–2017–021) (stating 

that the RWP provided a description of its services 

and the criteria to determine which services are 

considered critical) (‘‘FICC 2017 Notice’’); 34–91806 

(May 10, 2021), 86 FR 26561 (May 14, 2021) (SR– 

ICC–2021–005) (‘‘ICC 2021 Order’’) (stating that the 

ICC recovery plan explains that ICC’s sole critical 

operation is provides credit default swap clearing 

services); 82316 (Dec. 13, 2017), 82 FR 60246, 

60247 (Dec. 19, 2017) (SR–LCH SA–2017–012) 

(stating that LCH SA performed an assessment on 

identification of critical functions and shared 

services in accordance with Financial Stability 

Board guidance) (‘‘LCH 2017 Notice’’); 82430 (Jan. 

2, 2018), 83 FR 841, 842 (Jan. 8, 2018) (SR–NSCC– 

2017–017) (stating that the RWP provided a 

description of its services and the criteria to 

determine which services are considered critical) 

(‘‘NSCC 2017 Notice’’); 82352 (Dec. 19, 2017), 82 FR 

61072, 61074–75 (Dec. 26, 2017) (SR–OCC–2017– 

021) (stating that OCC’s RWP identifies critical 

services and critical support functions) (‘‘OCC 2017 

Notice’’). 

489For example, OCC’s plan discusses the critical 

vendors for each of the identified critical services, 

the critical support functions, and the critical 

external interconnections that OCC maintains with 

other FMUs, exchanges (including designated 

contract markets), clearing and settlement banks, 

custodian banks, letter of credit banks, clearing 

members and credit facility lenders, and the 

appendices to the plan identifies key vendors and 

service providers, as well as key agreements to be 

maintained. OCC 2017 Notice, supra note 488, at 

61075. ICC’s plan categorizes its critical services by 

those that are provided to ICC by its parent 

company versus those that are provided by external 

third parties, and it also details the IT systems and 

applications critical to ICC’s clearing operations, 

including those provided by ICE, those provided by 

external third parties, and those that ICC itself 

provides. Further, the plan analyzes ICC’s 

contractual arrangements in the context of 

continuing services under those contracts during 

recovery. 34–79750 (Jan. 6, 2017), 82 FR 3831 (Jan. 

12, 2017) (SR–ICC–2016–013). In addition, NSCC’s, 

FICC’s, and DTC’s plans identify external service 

providers for which the relationships are managed 

by a particular office within DTCC. See, e.g., 

Securities Exchange Act Release Nos. 91428 (Mar. 

29, 2021), 86 FR 17440, 17442 (Mar. 29, 2021) (SR– 

NSCC–2021–004) (‘‘NSCC 2021 Notice’’); 91430 

(Mar. 29, 2021), 86 FR 17432, 17433–34 (Apr. 2, 

2021) (SR–FICC–2021–002) (‘‘FICC 2021 Notice’’); 

91429 (Mar. 29, 2021), 86 FR 17421, 17422 (Mar. 

29, 2021) (SR–DTC–2021–004) (‘‘DTC 2021 

Notice’’). 

490For example, OCC’s plan identifies and 

considers scenarios that may potentially prevent it 

from being able to provide its critical services as a 

going concern. See OCC 2017 Notice, supra note 

488, at 61073. ICC’s plan describes potential stress 

scenarios that may prevent it from being able to 

meet obligations and provide services and the 

recovery tools available to it to address these stress 

scenarios. See Securities Exchange Act Release No. 

91439 (Mar. 30, 2021), 86 FR 17649, 17650 (Apr. 

5, 2021) (SR–ICC–2021–005) (‘‘ICC 2021 Notice’’). 

LCH SA’s plans categorizes potential stress 

scenarios in two ways as a result of either: (i) 

Clearing member defaults and (ii) non-clearing 

member events. See LCH 2017 Notice, supra note 

488, at 60248. In addition, each of the plans for 

NSCC, FICC, and DTC discuss, at a general level, 

scenarios in terms of uncovered losses or liquidity 

shortfalls that could result from the default of one 

or more of its members as well as losses that could 

arise from non-default events. See, e.g., NSCC 2021 

Notice, supra note 489, at 17441; FICC 2021 Notice, 

supra note 489, at 17433; DTC 2021 Notice, supra 

note 489, at 17421. 

491See OCC 2017 Notice, supra note 488, at 

61079–80 (discussing OCC’s identification of 

qualitative trigger events for both recovery and 

wind-down); 83 FR 34183, 34221, and 44970 

(stating the DTC, NSCC, and FICC have identified 

wind-down triggers and that a CCA would have 

entered ‘‘recovery phase’’ when it issues its first 

loss allocation round); ICC 2021 Order, supra note 

488, at 26562. 

creating their RWPs.483 The RWPs are 

subject to the rule filing requirement of 

Rule 19b–4, and all six active CCAs 

have submitted their plans and 

subsequent modifications to the 

Commission for review, public 

comment, and approval.484

Additionally, all of the CCAs have 

submitted confidential treatment 

requests with their RWPs pursuant to 17 

CFR 240.24b–2. The Commission has 

also reviewed these confidential 

treatment requests and concluded that 

the redacted material could be withheld 

from the public under the Freedom of 

Information Act.485 Due to the 

confidential treatment of the RWPs, the 

current release includes aggregated, 

anonymized analyses of the RWPs 

submitted to the Commission by the 

clearing agencies. Additionally, Form 

19b–4, which is public, requires a 

description of the proposed rule change 

for public comment.486 To the extent 

that information in the baseline has 

been drawn from public sources, such 

as the CCAs’ SRO rule filings, we have 

included attribution accordingly. All six 

active CCAs have approved RWPs in 

place, and the plans differ in, for 

example, length, style, emphasis, and 

specificity. In the remainder of Part 

IV.B. 3, we summarize CCAs’ current 

RWPs in terms of nine elements that are 

part of final Rule 17Ad–26. 

a. Core Services 

Each RWP currently includes what 

the CCA has identified and described as 

its core payment, clearing, and 

settlement services,487 as well as the 

criteria that the CCA employs to make 

such a determination as to what 

constitutes core services.488 Depending 

on their operations and the structure of 

their RWPs, CCAs currently identify 

between one and a dozen or more core 

services in those RWPs. Currently, no 

CCA has analyses in its RWP regarding 

the staffing roles necessary to support 

the core services that they list or how 

such staffing roles necessary to support 

such core services would be available to 

continue operating the CCA in the event 

of a recovery and during an orderly 

wind-down. 

b. Service Providers 

Each RWP identifies and describes, to 

varying degrees, certain service 

providers, including both affiliates and 

third parties, upon which the associated 

CCA relies to provide its core payment, 

clearing, and settlement services. Most 

plans do not explicitly link the 

identified service providers to the CCAs’ 

core payment, clearing, and settlement 

services. Some of the RWPs state that 

they assume core service providers will 

continue to perform in the event of a 

wind-down; at least one RWP states that 

it analyzes its contractual arrangements 

with respect to continuing to provide 

services during a recovery; 489 and at 

least one RWP states that it is reducing 

dependencies on third parties. 

c. Scenarios 

Each RWP generally identifies and 

describes certain scenarios that may 

potentially prevent the CCA from being 

able to provide its core payment, 

clearing, and settlement services as a 

going concern.490 The RWPs differ in 

the number of scenarios identified and 

described as well as the extent of the 

specificity with which each scenario is 

discussed. For example, some RWPs 

present short qualitative analyses of 

member defaults, while others present 

long, detailed quantitative analyses of 

member defaults. 

d. Criteria That Could Trigger 

Implementation 

Each RWP identifies and describes 

criteria that could trigger the CCA’s 

implementation of the recovery and 

orderly wind-down plans.491 The RWPs 

differ in the number of identified 

triggering criteria and in the detail in 

which they discuss each triggering 


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492See, e.g., 83 FR 34220–21 (identifying NSCC’s 

recovery tool characteristics); FICC 2017 Notice, 

supra note 488, at 878 (identifying FICC’s recovery 

tool characteristics); 83 FR 44970 (identifying DTC’s 

recovery tool characteristics); OCC 2017 Notice, 

supra note 488, at 61075–80 (identifying OCC’s 

enhanced risk management and recovery tools); ICC 

2021 Order, supra note 488, at 26562 (identifying 

ICC’s recovery tools); 83 FR 28886–87 (describing 

LCH SA’s tools). 

493Each of the plans for NSCC, FICC, and DTC 

provides a description of the governance and 

process around management of a stress event along 

a ‘‘Crisis Continuum’’ timeline. See, e.g., NSCC 

2017 Notice, supra note 488, at 842; FICC 2017 

Notice, supra note 488, at 872; DTC 2017 Notice, 

supra note 488, at 886. OCC’s recovery plan 

outlines an escalation process for the occurrence of 

a ‘‘Recovery Trigger Event’’ as well as provides 

general descriptions of how it would anticipate 

deploying its recovery tools in response to the six 

stress scenarios it identified. OCC 2017 Notice, 

supra note 488, at 61079–80. The ICC recovery plan 

describes the governance arrangements that provide 

oversight and direction of the plan. See ICC 2021 

Notice, supra note 490, at 17649. The LCH SA 

recovery plan identifies the groups and individuals 

within LCH SA that are responsible for the various 

aspects of plan. See LCH 2017 Notice, supra note 

488, at 60250. 

494See ICC 2021 Order, supra note 488, at 26562 

(referencing testing its Recovery Plan at least 

annually, as part of its annual default management 

drills and providing the results of such testing, as 

well as any changes it recommends due to such 

testing, to the ICC Board and Risk Committee); 

ICCEU, 83 FR 2857 (referencing testing elements of 

the Recovery Plan as part of normal operations and 

risk management procedures); LCH 2017 Notice, 

supra note 488, at 60250 (referencing fire drills 

intended to simulate all aspects of a member 

default, including the auctioning of the defaulting 

members portfolio to non-defaulting members 

(where appropriate) and involving the participation 

of members and relevant functions within the LCH 

SA organization, with revisions to the recovery plan 

as appropriate in light of the testing). 

495NSCC, FICC, and DTC review their respective 

RWPs biennially. See NSCC 2021 Notice, supra 

note 489, at 17441; FICC 2021 Notice, supra note 

489, at 17433; DTC 2021 Notice, supra note 489, at 

17421. OCC conducts an annual review of its RWP. 

See Securities Exchange Act Release No. 90315 

(Nov. 3, 2020), 85 FR 71384, 71385 (Nov. 9, 2020) 

(SR–OCC–2020–013); see also OCC 2017 Notice, 

supra note 488, at 61080. ICC’s RWP describes 

governance arrangements that provide for oversight 

and direction in respect to review and testing of the 

plans. See ICC 2021 Notice, supra note 490, at 

17651–52. LCH SA decided to review its winddown plan on an annual basis or more frequently, 

if required. See Securities Exchange Act Release No. 

88297 (Feb. 27, 2020), 85 FR 12814 (Mar. 4, 2020) 

(SR–LCH SA–2020–001). 

496Rule 17Ad–22(e)(6)(ii). 

497See OCC, Disclosure Framework supra note 96 

at 50; OCC Rule 609 (regarding intra-day margin 

calls). 

498See NSCC Disclosure Framework supra note 

96 at 58; NSCC Rules, Procedure XV (defining 

intraday mark-to-market charge). See DTCC at 3. 

499See FICC’s GSD Rule 4, section 2a (regarding 

the intraday supplemental fund deposit); FICC’s 

MBSD Rule 1 (defining intraday VaR and intraday 

mark-to-market charges) and Rule 4, section 2(b) 

(regarding the daily margin requirement) and 

section 3a (regarding the intraday requirements). In 

addition, FICC’s GSD collects margin twice a day 

under its current rules, notwithstanding any 

additional intraday margin calls. See FICC’s GSD 

Rules, schedule of timeframes. 

criterion. There are also differences in 

the descriptions of the processes that 

CCAs use to monitor and determine 

whether the triggering criteria have been 

met, thus causing their RWPs to be 

implemented. 

e. Rules, Policies, Procedures, and Other 

Tools or Resources 

Each RWP describes, to varying 

degrees, the rules, policies, procedures, 

and other tools or resources the CCA 

could rely upon in a recovery or orderly 

wind-down to address the scenarios 

identified in the RWP.492

f. Procedures To Ensure Timely 

Implementation 

Each RWP mentions, to varying 

degrees, mechanisms that would ensure 

timely implementation of the RWP.493

Some of the RWPs include specific 

procedures to ensure timely 

implementation of the recovery and 

orderly wind-down plan after specific 

criteria have been triggered. One of the 

RWPs has taken steps to ensure timely 

completion of its recovery and orderly 

wind-down plan. 

g. Informing the Commission 

Each RWP generally refers to 

informing the Commission about 

recovery or orderly wind-down 

activities. Some of the RWPs state that 

they will inform the Commission after 

a recovery or wind-down has been 

initiated. 

h. Testing 

Three RWPs provide for annual plan 

testing but with varying degrees of 

specificity about the participants’ 

involvement as well as the frequency of 

such testing. One such RWP specifically 

refers to sharing the results of the testing 

with its board of directors, and another 

states that the RWP would be updated 

as appropriate as a result of the 

testing.494 The remaining CCAs do not 

mention testing in their RWPs. 

i. Board Review and Approval 

Each RWP provides for periodic plan 

reviews, typically annually or 

biennially.495 Two RWPs provide for 

non-scheduled reviews. In the existing 

plans, the boards of directors of the CCA 

are responsible for the review and 

approval of the RWPs, but the plans 

vary in whether they specify that such 

review will also occur after material 

changes to the CCA’s operations or in 

response to the results of periodic 

testing of the RWPs. 

4. Current Risk-Based Margin 

As discussed in Part II.A supra and 

Part II.B supra, Rule 17Ad–22(e)(6) 

requires CCAs that provide central 

counterparty services to establish 

written policies and procedures 

reasonably designed to cover their credit 

exposure to their participants by 

establishing risk-based margin systems 

with certain characteristics. Intraday 

margining is an important tool used by 

CCAs to manage risk exposures on a 

real-time basis because it permits the 

CCAs to make quick changes in required 

collateral from their participants to 

cover actual and potential losses in 

response to volatility spikes. 

a. Monitoring Exposure and Intraday 

Margin Calls 

Each CCA currently has some ability 

to monitor for intraday exposure and to 

make certain intraday margin calls. The 

frequency of intraday monitoring and 

margin calls varies across markets, and 

it is responsive to the risk 

characteristics of the underlying 

markets and participants. Participants 

are generally required to post margin 

within an hour of notification or at 

specified times pursuant to the CCA’s 

rules and procedures. The current 

practice of CCAs is to release excess 

margin to participants only once a day 

at a pre-scheduled time. CCAs have 

existing policies and procedures around 

the collection of intraday margin,496 and 

some CCAs document when they 

determine not to make an intraday call 

pursuant to their written policies and 

procedures required under Rule 17Ad– 

22(e)(6)(ii). 

For example, OCC revalues its 

participants’ portfolios throughout the 

day to calculate updated account net 

asset value, and its rules provide it the 

authority to issue intraday margin 

calls.497 Its intraday calls are generally 

issued between 11 a.m. and 1:30 p.m. 

when unrealized losses of an account, 

based on its start-of-day positions, 

exceed 50 percent of the account’s total 

margin. NSCC’s rules provide the 

authority to impose intraday mark-tomarket charges, and NSCC tracks 

intraday market price and position 

changes in 15-minute intervals. NSCC 

generally collects additional margin if 

the difference between the most recent 

mark-to-market price of a participant’s 

net positions and the most recent 

observed market price exceeds a 

predetermined threshold, which is 

currently 80 percent of the participant’s 

volatility charge and may be reduced if 

NSCC determines that a reduction of the 

threshold is appropriate to mitigate risk 

during volatile market conditions.498

FICC’s GSD and FICC’s MBSD have 

the authority to make intraday margin 

calls.499 FICC monitors changes in 


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500See generally supra note 499; FICC Disclosure 

Framework at 65, available at https://

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

policy-and-compliance/FICC_Disclosure_

Framework.pdf. 

501 ICC Disclosure Framework at 22–23, available 

at https://www.theice.com/publicdocs/clear_credit/ 

ICEClearCredit_DisclosureFramework.pdf; ICC Rule 

401. 

502See generally LCH SA Disclosure Framework 

at 31, available at https://www.lch.com/system/ 

files/media_root/LCH%20SA%20- 

%20Comprehensive%20

Disclosure%20as%20required

%20by%20SEC%20Rule%2017Ad-22%28e%29

%2823%29_2022%20Q32022.pdf, and LCH CDS 

Clearing Procedures section 2.21 (describing 

‘‘extraordinary margin’’ that LCH SA may require to 

cover the risk of price/spread fluctuations occurring 

on an intraday basis). 

503See generally FICC Disclosure Framework at 

62; Release No. 34–82779 (Feb. 26, 2018), 83 FR 

9055 (Mar. 2, 2018) (File No. SR–FICC–2018–801) 

(describing both the sensitivity-based VaR model 

that would use a third party vendor to supply 

security-level risk sensitivity data and relevant 

historical risk factor time series data and the use of 

the ‘‘Margin Proxy’’ in the event of a disruption at 

FICC’s third-party vendor, as well as the procedures 

that would govern in the event that the vendor fails 

to deliver such data). 

504See, e.g., FICC Disclosure Framework at 64; 

Release No. 34–079643 (Dec. 21, 2016), 81 FR 95669 

(Dec. 28, 2016) (File No. SR–FICC–2016–801) 

(describing both the sensitivity-based VaR model 

that would use a third party vendor to supply 

security-level risk sensitivity data and relevant 

historical risk factor time series data and the use of 

the ‘‘Margin Proxy’’ in the event of a disruption at 

FICC’s third-party vendor, as well as the procedures 

that would govern in the event that the vendor fails 

to deliver such data); Release No. 34–92145 (June 

10, 2021), 86 FR 32079 (June 16, 2021) (File No. 

SR–FICC–2020–804) (describing the calculation of 

the Minimum Margin Amount). 

505See NSCC Disclosure Framework, supra note 

498, at 58–61. 

506See SIFMA at 3 (‘‘Our members are in 

agreement with the Commissions’ determination 

that there is a very significant benefit to requiring 

the Clearing Agencies to better define their risk 

management procedures’’). 

507They may experience indirect benefits to the 

extent other CCAs make risk-reducing changes that 

reduce the risk of negative spillovers. 

508See SIFMA at 14 and 22 (‘‘With the 

combination of clearing mandates and single 

product provider status, there is very limited 

business pressure on Clearing Agencies to invest in 

the optimum level of risk management. Rather, the 

impetus must come from regulatory oversight.’’). 

pricing and positions frequently 

throughout the day, and it may collect 

intraday margin to cover the price 

movement from those participants with 

a significant exposure in an identified 

security or net portfolio and the market 

value of those positions.500

ICC also monitors each participant’s 

intraday profit and loss to determine if 

its intraday exposure is covered by the 

margin on deposit, and it may issue 

margin calls to participants that are not 

sufficiently collateralized.501 LCH SA 

also has the ability and authority to 

make intraday margin calls that are 

based on intraday positions and 

valuations.502

b. Reliable Sources of Timely Price Data 

and Other Substantive Inputs 

CCAs use price data as well as other 

data sources and other substantive 

inputs in their risk-based margin 

systems, which is expected given the 

substantive differences in the markets 

and participants they serve. Based on its 

supervisory experience, the Commission 

understands that all CCAs generally 

have policies and procedures in place to 

use a risk-based margin system that uses 

reliable sources of timely price data and 

includes procedures and sound 

valuation models for addressing 

circumstances in which price data are 

not readily available or reliable. The 

Commission also understands that if a 

CCA uses other substantive inputs, such 

as portfolio size, asset price volatility, 

duration, convexity, and outputs from 

external model vendors, which are not 

required by the Commission’s rules, not 

all CCAs have policies and procedures 

for addressing circumstances in which 

those substantive inputs are not readily 

available or reliable so that the CCA can 

continue to meet its requirements under 

Rule 17Ad–22(e)(6).The policies and 

procedures used when price data or 

other substantive inputs are not 

available vary from one RWP to another. 

For example, the largest component of 

margin at FICC’s GSD is typically its 

‘‘VaR Charge.’’ The VaR Charge is based 

on the potential price volatility of 

unsettled positions using a sensitivitybased Value-at-Risk (‘‘VaR’’) 

methodology over a ten-year historical 

look-back period. In addition, FICC’s 

GSD also uses an alternative ‘‘Margin 

Proxy’’ calculation as a backup VaR 

Charge calculation to the sensitivity 

approach in the event that FICC 

experiences a data disruption with the 

third-party vendor upon which FICC 

relies to produce the sensitivity-based 

VaR Charge.503 In a similar fashion, 

FICC’s MBSD uses both a VaR Charge 

and, as a backup in the event of a data 

disruption from its third-party vendor, a 

Margin Proxy 504 NSCC relies upon a 

parametric VaR model to determine the 

potential future exposure of a given 

portfolio based on historical price 

movements, using 153 days as the 

minimum sample period for the 

historical data. For certain securities, 

including fixed income securities, UITs, 

illiquid securities, securities that are 

amendable to statistical analysis only in 

a complex manner, and securities that 

are less amenable to statistical analysis, 

a haircut-based volatility charge is 

applied in lieu of the VaR Charge.505

C. Consideration of Benefits and Costs 

as Well as the Effects on Efficiency, 

Competition, and Capital Formation 

The following discussion sets forth 

the potential economic effects stemming 

from the final rule and amendments, 

including the anticipated effects on 

efficiency, competition, and capital 

formation. The benefits and costs 

discussed in this section are relative to 

the economic baseline discussed 

previously, which includes the CCAs’ 

current RWPs and their current riskbased margin practices. A commenter 

agrees that there is a large benefit 

flowing from requiring the CCAs to 

better define their risk management 

procedures.506

The level of change a CCA makes to 

its RWP and risk management practices 

to bring itself into alignment with the 

final rule and amendments will impact 

the size of the benefits and costs, both 

direct and indirect, for the CCAs, their 

members, and the broader market. As 

stated in the baseline, each CCAs’ plans 

differ in, for example, length, style, 

emphasis, and specificity, and each 

CCA has a current risk-based margin 

system that it has designed to manage 

certain idiosyncratic risks that it faces. 

Additionally, the final rules and 

amendments are designed to provide a 

CCA with discretion and flexibility, 

which means that the CCAs will be able 

to tailor their RWPs and risk-based 

margin systems to their particular 

situations. 

To the extent that a CCA determines 

that it does not have to make changes 

to its RWP or risk-based margin system 

in response to a particular part of the 

final rule and amendments, the CCA, its 

participants, and the broader market 

will have already absorbed the benefits 

and costs of those parts of the final rule 

and amendments and, therefore, they 

may not experience any direct benefits 

or costs from those parts of the final rule 

and amendments.507

Sufficiently large disruptions in the 

operations at any of the CCAs would 

cause significant negative externalities 

in the markets they serve, which would 

likely spill over into other markets. 

These ripple effects would negatively 

affect numerous market participants, 

including investors. Because CCAs may 

not internalize the full cost of these 

externalities due in part to the structure 

of the clearing markets, their 

investments in their RWPs and riskbased margin systems might be 

suboptimal from a public welfare 

perspective.508 An important benefit of 

the final rule and amendments is that 

they require CCAs to maintain a higher 

investment in risk management than 

they might otherwise choose if they 


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509More specifically, the market clearing quantity 

of the good or service supplied will adjust and the 

extent of industry-wide cost pass-through in a 

perfectly competitive market depends on the 

elasticity of demand relative to supply. The more 

elastic is demand, and the less elastic is supply, the 

smaller the extent of pass-through, all else being 

equal. See RBB Economics, Cost Pass-Through: 

Theory, Measurement and Potential Policy 

Implications, 4 (Feb. 2014), available at https://

assets.publishing.service.gov.uk/government/ 

uploads/system/uploads/attachment_data/file/ 

320912/Cost_Pass-Through_Report.pdf. 

510Supra note 484. See infra section IV.C.1.j for 

cost estimates of written policies and procedures 

associated with final Rule 17Ad–26 and the rule 

19b–4 approval process. 

511See infra section IV.C.2.c for cost estimates of 

written policies and procedures associated with 

final Rule 17Ad–22(e)(6) and the Rule 19b–4 

approval process. 

512See ICI at 8 (‘‘It is critical for clearing members 

and end-user customers, such as funds, to have 

greater transparency into the content of RWPs. Such 

transparency could allow participants to determine 

the extent of their potential liabilities and 

predictably manage exposures to a clearing entity. 

Importantly, increased transparency could facilitate 

input from participants that may serve to enhance 

a clearing entity’s risk management functions. 

While requiring clearing entities to maintain and 

submit RWPs for regulatory purposes provides the 

agencies with needed visibility and can increase 

confidence in cleared markets, such requirements 

alone fail to provide these important benefits to 

market participants.’’). Id. at 9 (‘‘At a minimum, 

clearing members and customers should be aware 

of (1) the criteria that may trigger implementation, 

(2) the tools and strategies that a clearing entity 

plans to use, and (3) the source of capital or funds 

to be applied in a recovery or wind-down scenario. 

Providing access to these material portions of RWPs 

would help market participants have a more 

complete understanding of the risks presented by 

clearing with a particular clearing entity and allow 

them to better manage their exposures’’). 

513See supra note 484. Additionally, Rule 19b– 

4 would also apply to certain statements that a CCA 

issues concerning its margin methodology. See 

supra note 83. 

514See supra note 475 and accompanying text. 

See Better Markets at 9 (‘‘Requiring that the 

recovery and wind-down plans of covered clearing 

agencies include certain specific elements is likely 

to reduce the risk of unsuccessful recoveries, 

disorderly wind downs, and negative spillovers to 

other clearing agencies and other markets.’’). 

515 Davidson at 2. 

516See supra note 508 and accompanying text; 

see also Muth at 2 (‘‘A complex cocktail of 

incentives familiar to the Commission but too 

labyrinthine to elucidate here causes management 

to (1) underestimate the risk of entity failure, (2) 

underestimate the range of scenarios that might 

threaten entity survival, and (3) underestimate the 

amount of information that needs to be 

communicated effectively to ’relevant authorities’ to 

illuminate threats to the entity’s solvency, 

especially when those threats are high-magnitude, 

low-frequency risks.’’). 

have not already adopted the 

requirements of the rule and 

amendments. 

The Commission has sought to strike 

a balance between requirements that 

enhance risk management practices and 

recovery and winddown procedures and 

maintaining some flexibility in the 

design and implementation of these 

requirements. For example, while CCAs 

will be required to test their ability to 

implement the RWPs at least every 12 

months, each CCA may structure the 

planning, execution, and analysis of 

each test in a way that reduces its 

aggregate testing costs for itself, its 

participants, and its other stakeholders, 

so long as the testing exercise addresses 

the distinct elements of the separate 

testing requirements. 

The costs discussed in Part IV.C will 

be borne by CCAs and their participants. 

For CCAs owned by participants, all the 

costs will ultimately be passed on to 

participants because they are residual 

beneficiaries of the CCA. For CCAs not 

owned by participants, the level of passthrough will depend upon several 

factors, including the level of 

competition among clearing agencies 

and the existence of mandates that force 

market participants to clear. In both 

cases, the participants will likely pass 

through some of these costs to their 

customers, the level of which will 

depend on factors such as the 

customers’ sensitivities to costs and the 

amount of competition between 

participants for customers. Generally, if 

a CCA does not face significant 

competition, it will have an incentive to 

absorb part of the cost increase. In the 

extreme case of a perfectly competitive 

market, on the other hand, an increase 

in costs will be fully passed through to 

the customer because there are no 

economic profits and price equals 

marginal costs.509

To the extent that a CCA’s current 

practices are misaligned with the final 

rule and amendments, the CCA, as 

discussed in the remainder of this 

subsection, will need to modify its RWP 

or risk-based margin system to comply 

with the new standards. The resulting 

benefits and costs will increase with the 

number of modifications. Because the 

Commission has previously stated that 

RWPs are rules for purposes of a CCA’s 

SRO obligations, and because the CCAs 

already have filed such RWPs with the 

Commission for approval, any such 

modifications will be subject to 

Commission review and public 

comment pursuant to Rule 19b–4.510

Similarly, the Commission considers 

changes to a CCA’s risk-based margin 

system as part of the SRO rule filing 

process, making any such modifications 

also subject to Commission review and 

public comment pursuant to Rule 19b– 

4.511 The final rule and amendments 

could also cause a clearing agency to 

make different business decisions, such 

as capital expenditure decisions, that 

may not be subject to the same 

Commission review process. 

One commenter stated that 

participants and end-user customers 

need ‘‘greater transparency into the 

content of RWPs’’ for several reasons, 

including allowing participants to better 

manage their exposure to the CCA and 

positively affecting the CCA’s risk 

management functions.512 The new rule 

and the final amendments will increase 

transparency because they impose a 

public minimum standard that all CCAs 

must follow and also because, as 

described in the baseline, CCAs are 

subject to a public notice and comment 

process before making certain changes, 

including changes to their rule books.513

1. Final Rule 17Ad–26 

Final Rule 17Ad–26 sets forth nine 

elements that must be included in a 

CCA’s RWP. The remainder of this 

subsection discusses each of these 

elements in turn, explaining how some 

will make RWPs more effective in 

guiding the CCAs during times of 

recovery or wind-down while others 

will help participants and regulators 

better understand how the CCAs will 

prepare for and respond to stress. The 

final rule will reduce systemic risk to 

the extent that it reduces the risk of 

unsuccessful recoveries, disorderly 

wind-downs, and negative spillovers to 

other clearing agencies and to other 

markets.514 These benefits likely will 

increase with the amount of change 

each CCA makes to align itself with the 

final rule because, as stated in the 

baseline analysis, some RWPs are more 

aligned with the nine elements that are 

part of final Rule 17Ad–26 than are 

other RWPs. Final Rule 17Ad–26 will 

require CCAs to modify their RWPs to 

the extent their RWPs do not already 

align with the final rule. One 

commenter stated that the benefits are 

purely hypothetical because they would 

only accrue in the event of the 

implementation of a recovery plan.515

The Commission disagrees with this 

assessment and anticipates that these 

changes may result in the CCAs being 

more aware of potential risks and the 

associated costs of certain factors under 

their control, which could, in turn, lead 

to the CCA making risk-reducing 

changes to certain business practices. A 

few commenters stated that CCAs’ 

current risk-management efforts may be 

suboptimal from a public welfare 

perspective.516 The final new rule 

includes a set of risk-focused 

requirements that RWPs must meet in 

the future, which will ensure that CCAs 

maintain a higher investment in risk 

management than they might otherwise 

choose. 


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517Five of the six CCAs have been designated by 

the FSOC as SIFMUs because the failure or 

disruption to the functioning of the financial market 

utility could create or increase the risk of significant 

liquidity or credit problems spreading among 

financial institutions or markets. See Designations, 

U.S. Dep’t Treasury, https://home.treasury.gov/ 

policy-issues/financial-markets-financialinstitutions-and-fiscal-service/fsoc/designations; 

see also supra note 88. 

518See SIFMA at 14 (‘‘In fact, one of the lessons 

that can be drawn from the Lehman Brothers failure 

that precipitated the 2008 financial crisis is that the 

largest losses may not be the ones that lead up to 

the insolvency event, but rather those that follow 

the insolvency event. In the case of Lehman 

Brothers, its inability following the insolvency 

event to keep its personnel from leaving and the 

difficulty it had in continuing servicing 

relationships were in large part the cause of the 

financial losses to its customers and market 

disruptions.’’). 

519See Donaldson at 5 (‘‘Likewise, the required 

skills, the demands on retention, and the time to 

identify, attract and train new staff to the necessary 

level of expertise in virtually all the relevant 

departments is very substantial.’’). See SIFMA at 14 

(‘‘It is important that a Clearing Agency have 

service contracts that cannot be terminated in the 

aftermath of an insolvency event and that it has 

sufficient going concern resources that will allow it 

to retain its key personnel.’’). See Donaldson at 6 

(‘‘The recent experience at a large household name 

social media company should make clear that even 

the most lucrative employment agreements are 

rarely sufficient to get highly in demand skilled 

employees to stay on board a ‘sinking ship.’ 

Furthermore, certain CCAs have organized labor 

agreements in place with many of their employees 

which would likely require time consuming 

renegotiation in order to satisfy this provision.’’). 

520See SIFMA at 14 (‘‘It is important that a 

Clearing Agency have service contracts that cannot 

be terminated in the aftermath of an insolvency 

event and that it has sufficient going concern 

resources that will allow it to retain its key 

personnel.’’). 

The Commission did not receive any 

comments on the costs each CCA will 

incur to bring its RWP into alignment 

with proposed Rule 17Ad–26(a)(4), (5), 

and (6). 

a. Core Clearing and Settlement Services 

Final Rule 17Ad–26(a)(1) requires 

RWPs to identify and describe their core 

payment, clearing, and settlement 

services and to address how the CCA 

would continue to provide such core 

services in the event of a recovery and 

during an orderly wind-down, including 

the (a) identification of the staffing roles 

necessary to support such core services, 

and (b) analysis of how such staffing 

roles necessary to support such core 

services would continue in the event of 

a recovery and during an orderly winddown. 

CCAs play an important role as 

financial market utilities. By virtue of 

the unique services that they offer, the 

network effects under which they 

operate, and their specialization by asset 

class, any failure of the CCAs to provide 

their core services might affect the 

stability of U.S. financial markets.517

Accordingly, policies and procedures 

that increase the resiliency of CCAs are 

expected to improve the stability of 

these markets. 

Each of the CCAs’ RWPs currently 

identifies its core services, as stated in 

the baseline analysis, but they differ in 

the degree to which they address 

continuation in the event of a recovery 

and during an orderly wind-down. 

Markets in which the dominant CCAs 

are currently less comprehensive in 

addressing continuation in their RWPs 

likely will benefit from this requirement 

because these CCAs will be required to 

work through and memorialize in their 

RWPs how the CCA will continue to 

provide its core services in the event of 

a recovery and during an orderly winddown. 

As mentioned in the economic 

baseline section, none of the CCAs 

currently identifies the staffing roles 

necessary to support core services or 

provides in their RWPs analyses of how 

such staffing roles necessary to support 

such core services would continue in 

the event of a recovery and during an 

orderly wind-down. Because CCAs do 

not currently identify the staffing roles 

that are necessary to support core 

services and how such staffing roles 

would continue during times of crisis, 

this new requirement likely will provide 

benefits to the market. Forward-looking 

analyses around issues related to 

potential staffing shortfalls should 

provide each CCA with additional 

certainty and clarity around who would 

deploy the RWP and supervise its 

implementation. The RWP might 

contemplate tools that help with the 

retention of certain personnel, the 

development of other internal personnel 

who could stand in for those personnel, 

the recruitment of replacement 

personnel, possibly from its own 

participants or from other domestic or 

international CCAs. In all cases, the 

tools should be robust regardless of the 

financial situation of the CCA. A CCA 

that retains its personnel and its ability 

to service external relationships in the 

event of a recovery or orderly winddown may be able to reduce not only 

potential losses for its participants but 

also further market disruptions by 

ensuring its critical clearance and 

settlement services continue.518

The current lack of staffing role 

analyses in RWPs means that CCAs will 

incur costs, related to drafting the 

analyses and implementing the resulting 

conclusions from the analyses. For 

example, were the CCA to undertake a 

recovery or wind-down that 

significantly affects its operations or 

structure, a CCA may determine that 

certain personnel would be likely to 

leave the CCA. The CCA may determine 

that it is appropriate to strengthen its 

employee agreements so that those 

employees have more incentives to 

remain at the CCA during a recovery or 

wind-down even if this includes a sale 

or transfer of one or more of its core 

services to another entity or a receiver. 

Alternatively, or additionally, a CCA 

may choose to invest in internal 

development programs and processes so 

other employees acquire skills that are 

necessary during recovery and winddown events, making the loss of any 

employee less costly via internal 

redundancy. Commenters stated that 

attracting and retaining skilled 

employees is costly; one commenter 

stated that some employees might chose 

to leave in certain circumstances despite 

having very lucrative employment 

contracts; another commenter stated 

CCAs with sufficient resources will be 

able to retain their key personnel.519

The Commission recognizes that it may 

be costly to ensure that employees in 

essential staffing roles are available to 

support core services in the event of a 

recovery and during an orderly winddown. The final rules do not require 

retention of any employee, but they do 

require the identification of staffing 

roles and an analysis of how those roles 

would continue. The final rules allow 

CCAs to use a variety of human resource 

management tools, which will better 

enable CCAs to find cost-effective tools 

that enable them to maintain their core 

services in the event of a recovery and 

during an orderly wind-down. 

b. Service Providers 

Final Rule 17Ad–26(a)(2) requires 

RWPs (i) to identify and describe any 

service providers for core services, 

specifying which core services each 

service provider support, and (ii) to 

address how the CCA would ensure that 

service providers for core services 

would continue to perform in the event 

of a recovery and during an orderly 

wind-down, including consideration of 

its written agreements with such service 

providers and whether the obligations 

under those written agreements are 

subject to alteration or termination as a 

result of initiation of the recovery and 

orderly wind-down plan. 

One commenter stated that it is 

critical that CCAs have service contracts 

that cannot be terminated in the 

aftermath of an insolvency event,520

whereas other commenters stated that 

CCAs cannot ‘‘ensure’’ that service 

providers would continue to perform in 

the event of a recovery and during an 


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521See CCP12 at 4 (‘‘CCAs cannot ‘ensure’ that 

such service providers would continue to perform 

in the event of a recovery and during an orderly 

winddown.’’). See DTCC at 8 (‘‘This proposed 

requirement overestimates the negotiating leverage 

that CCAs have when entering contracts with 

service providers or assumes that CCAs would be 

able to unilaterally require service providers to 

continue performance during a recovery or orderly 

winddown.’’). See ICE at 4 (‘‘ICE does not believe 

it is possible for a [clearing agency] to ‘ensure’ that 

a service provider would perform.’’). 

522See supra Part II.C.2. 

523See DTCC at 6 (‘‘[The proposed rule] would 

capture large numbers of service providers to DTCC 

that are not immediately necessary to the ongoing 

operations of the critical services of DTCC’s CCAs. 

We believe that this would result in a significant 

burden upon our CCAs (and likely other CCAs) 

with minimal benefit to the development of 

effective RWP.’’). See ICE at 4 (‘‘ICE believes that 

the proposed definition of ‘critical services’ would 

include third parties that are [not] ‘in any way 

related to the provision of a critical service’ and 

believes this definition is overly broad. In 

particular, the definition would cover service 

providers that are only tangentially related to 

clearing services and have no practical impact on 

recovery or wind-down planning which would be 

burdensome for CAs and provide minimal, if any, 

benefit.’’). 

524See supra Parts II.C.2.a and II.D.2. 

525See DTCC at 2 (‘‘DTCC continues to stress, as 

it has in prior comment letters to the Commission, 

that CCAs must be afforded the discretion and 

flexibility to interpret and implement rules based 

on the risk profiles, markets, and products that 

respective CCAs serve. Aspects from the Proposal 

that would benefit from this discretion include . . . 

the proposed requirement to include contractual 

terms and conditions that would prevent automatic 

termination by service providers in the event of a 

recovery or orderly wind-down.’’). 

526See Davidson at 7 (‘‘[a]t present, while it is 

possible to operate separate genre of application 

software on different ‘Cloud’ providers, it is 

extremely challenging, requiring significant time for 

deployment and rigorous testing, to move a set of 

tightly woven operational software applications 

from one ‘Cloud’ provider to another. While the 

existence of several major competitors in the 

‘Cloud’ computing space would appear to support 

the ability to move among providers in the highly 

improbable event of a catastrophic failure of one of 

them, the above constraints make that a timeconsuming process for all users. . . . 

Notwithstanding their tremendous scale and ability 

to support existing customers with ‘capacity on 

demand,’ such vendors do not make a habit of 

operating with sufficient spare capacity to 

accommodate a significant piece of their 

competitors’ business quickly and easily.’’). 527See supra note 514. 

orderly wind-down.521 The Commission 

acknowledges that a CCA cannot ensure 

that a service provider for core services 

will continue to perform throughout a 

recovery and an orderly wind-down; 

nevertheless, if its analysis indicates 

that the service provider might not 

continue to perform in those events, it 

could address how it would handle any 

termination or non-performance by the 

service provider, which could satisfy 

the new requirements.522

Some commenters stated that the 

proposed definition of ‘‘service 

provider’’ was too broad and would 

unnecessarily increase CCA costs by 

capturing too many non-essential 

service providers.523 The Commission 

generally agrees with the comments on 

this point and therefore made 

corresponding changes to the proposed 

rule text. The reduced scope of service 

providers captured by the revised rule is 

appropriate for recovery and orderly 

wind-down planning purposes and 

helps ensure that the CCA focuses its 

RWPs on the key risks and its responses 

to those risks.524

One commenter stated that due to 

differences across CCAs, markets, and 

members, CCAs must be afforded 

flexibility to interpret and implement 

the final Rule 17Ad–26(a)(2).525 The 

Commission acknowledges that there 

are important differences across CCAs 

in terms of products cleared and 

markets served. The principles-based 

Rule 17Ad–26(a)(2) allows CCAs to take 

approaches in their RWPs that differ 

from those taken by other CCAs in their 

RWPs. 

As stated in the baseline analysis, the 

RWPs differ in their degree of alignment 

with the final rule and the level of 

descriptiveness of service providers. 

The markets that likely will benefit the 

most from this new requirement are the 

ones in which the dominant CCAs’ 

RWPs are currently the least 

comprehensive in identifying and 

describing the required service 

providers and identifying how those 

service providers will perform in the 

event of a recovery and during an 

orderly wind-down because those CCAs 

would have to negotiate with service 

providers to ensure their continued 

performance or find other alternatives. 

CCAs that make more changes in 

identifying the service providers and the 

core payment, clearing, and settlement 

services provided by each service 

provider likely will bring more benefits 

to the markets they serve by putting 

themselves in a better position to 

manage their service providers in the 

event of a recovery or during an orderly 

wind-down. One commenter stated that 

in the event that one of the service 

providers fails, it may not be possible to 

switch to another service provider 

because the remaining service providers 

might not be able to quickly scale up 

their operations.526 The Commission 

recognizes that switching vendors may 

be difficult in certain circumstances 

such as during times of crisis and when 

other CCAs are switching in or out of 

the same service providers en masse. A 

key benefit of final Rule 17Ad–26(a)(2) 

is that CCAs will consider these sorts of 

costs and incorporate appropriate 

prophylactic responses to them into 

their RWPs. This will make the CCAs 

more resilient, by having more robust 

RWPs, which will, in turn, reduce the 

risk and/or size of systemic events. 

Each CCA will incur costs to bring its 

RWP into alignment with the new rule, 

and these costs are estimated in Part 

IV.C.1.j, infra. These alignment costs 

will depend on the extent of the 

enhancements the CCA makes to its 

RWP, including any contractual changes 

with its service providers. The 

underlying costs of the contractual 

changes may be affected by the relative 

market power of the CCA versus the 

service provider in light of the 

regulatory requirement to meet these 

new standards. For example, the 

amendments require the consideration 

of the CCA’s written agreements with its 

service providers and whether the 

obligations under those written 

agreements are subject to alteration or 

termination as a result of initiation of 

the recovery and orderly wind-down 

plan. Consequently, a service provider 

that has market power or offers a service 

for which there are high switching costs 

could potentially earn economic profits 

by increasing its fees to sign a written 

agreement with a CCA that ensures the 

continuation of a core service in the 

event of a recovery and orderly winddown. 

c. Scenarios 

Final Rule 17Ad–26(a)(3) requires 

RWPs to identify and describe scenarios 

that may potentially prevent the CCA 

from being able to provide its core 

services identified in Rule 17Ad– 

26(a)(1) as a going concern, including (a) 

uncovered credit losses, (b) uncovered 

liquidity shortfalls, and (c) general 

business losses. As stated in the 

baseline analysis, each of the CCAs’ 

RWPs currently identifies and describes, 

to varying degrees, certain relevant 

scenarios. 

The more significant benefits of being 

required to identify these scenarios will 

accrue to those markets in which the 

dominant CCAs lack breadth and 

specificity in identifying and describing 

their scenarios. By better understanding 

the circumstances that could threaten 

their ability to provide their core 

services, these CCAs can take steps to 

reduce the likelihood of these scenarios 

and, should they materialize, be better 

prepared to achieve a recovery or 

orderly wind-down.527

Each CCA will incur costs to bring its 

RWP into alignment with the new rule. 

The alignment costs will depend on the 

extent of the enhancements the CCA 

makes to its RWP. The costs to modify 

plans that require changes, including 

those that need to be expanded to 


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528See Muth at 2 (‘‘A complex cocktail of 

incentives familiar to the Commission but too 

labyrinthine to elucidate here causes management 

to . . . underestimate the range of scenarios that 

might threaten entity survival’’). 

529See id. at 3 (‘‘The requirement of explicit 

consideration in the recovery plan of what might 

lead to each scenario’s coming into being and how 

the scenario might take shape (including 

prerequisite contemplated market conditions) 

imposes a small burden on compliance and risk 

functions in the entity while creating greatlyenhanced transparency to investors and regulators 

around how, how quickly, and under what 

conditions the entity may fail to meet obligations.’’). 

530See infra Part IV.D.1. 

include additional scenarios, will be 

modest, but they will vary across CCAs 

because of differences in the markets 

and participants they serve. 

A commenter stated that CCAs 

underestimate the range of scenarios 

that might threaten their survival 528 and 

that scenario analyses impose small 

costs while yielding greatly enhanced 

transparency benefits.529 A key benefit 

of final Rule 17Ad–26(a)(3) is that each 

CCA will revisit the question of what 

might threaten its ability to carry out its 

core services. As certain CCAs update 

their RWPs in response to this new rule, 

they may conclude that they need to 

add new scenarios and that they need to 

discuss their scenarios in more detail. 

That notwithstanding, it will not be 

costly for CCAs to comply with the new 

rule, which is shown by the cost 

estimates that are presented in Part 

IV.C.1.j infra. The Commission is not 

mandating that all CCAs include a 

common list of specific scenarios in 

their RWPs because of differences across 

CCAs and the products cleared and 

markets served—scenarios that are 

essential at one CCA might be irrelevant 

at another CCA—and because the list of 

scenarios is likely to change through 

time and is thus not suited for a static 

list.530

d. Criteria That Could Trigger 

Implementation 

Final Rule 17Ad–26(a)(4) requires 

RWPs to identify and describe (a) 

criteria that could trigger the CCA’s 

implementation of the recovery and 

orderly wind-down plans and (b) the 

process that the CCA uses to monitor 

and determine whether the criteria have 

been met, including the governance 

arrangements applicable to such 

process. 

As stated in the baseline analysis, 

each CCA’s RWP identifies and 

describes, to varying degrees, criteria 

that could trigger the implementation of 

a recovery or orderly wind-down. The 

largest benefits of this rule likely will 

accrue to the markets in which the 

dominant CCAs currently have the least 

comprehensive RWPs in identifying and 

describing appropriate triggers. The ex 

ante identification and description of 

triggers likely will have the benefit of 

being a disciplining mechanism that 

signals when and how the CCA may act 

during periods of market stress. The 

Commission further believes that the exante identification and description of 

triggers likely will lead CCAs to 

anticipate and prepare for market stress 

or other events that could lead to a 

recovery or wind-down. Each CCA will 

incur costs to bring its RWP into 

alignment with the final rule. The 

alignment costs will depend on the 

extent of the enhancements the CCA 

makes to its RWP. 

e. Rules, Policies, Procedures, and Other 

Tools or Resources 

Final Rule 17Ad–26(a)(5) requires 

RWPs to identify and describe the rules, 

policies, procedures, and any other tools 

or resources on which the CCA could 

rely in a recovery or orderly winddown. The markets that likely will 

benefit the most from this requirement 

are the ones in which the dominant 

CCAs have the least comprehensive 

RWPs in describing how the rules, 

policies, procedures, tools, and other 

resources could be used during a 

recovery or wind-down. Making these 

changes to their RWPs likely will enable 

the CCAs to anticipate more fully how 

future crises might affect their 

operations, which should enhance their 

ability to respond and, accordingly, 

decrease the expected costs borne by 

CCAs, the participants, and other 

stakeholders in future crises. For 

example, if a CCA determines that it 

needs a new rule to respond to a 

specific scenario, the CCA may be better 

positioned to respond appropriately to 

that scenario if it arises. 

Each CCA will incur costs to bring its 

RWP into alignment with the final rule. 

The alignment costs will depend on the 

extent of the enhancements the CCA 

makes to its RWP. CCAs that determine 

that they need to include more 

responses, different resources, or better 

descriptions will incur more costs as 

they make appropriate modifications to 

their RWPs. The costs to modify plans 

that require changes, including those 

that need to be expanded, will increase 

with the number of required changes 

such as the number of new rules the 

CCA adopts. 

f. Procedures To Ensure Timely 

Implementation 

Final Rule 17Ad–26(a)(6) requires 

RWPs to address how the rules, policies, 

procedures, and any other tools or 

resources identified in Rule 17Ad– 

26(a)(5) would ensure timely 

implementation of the RWP. As stated 

in the baseline analysis, each RWP 

mentions the concept of timeliness in 

either recovery or wind-down, but most 

RWPs do not list specific procedures to 

ensure the timely implementation of the 

RWP. A key benefit of this rule is that 

CCAs will address in their RWPs how 

the RWP will be implemented in a 

timely manner when the need arises. A 

timely start will increase the chance that 

the CCA is able to address the 

underlying problem quickly and with 

low costs to the various stakeholders. 

The benefits of this rule likely will 

accrue primarily to the markets in 

which the dominant CCAs add more or 

better rules, policies, procedures, tools, 

or other resources to ensure timely 

implementation of their RWPs. 

Each CCA will incur costs to bring its 

RWP into alignment with the final rule. 

The alignment costs will depend on the 

extent of the enhancements the CCA 

makes to its RWP. The costs to modify 

plans that require changes, including 

those that need to be expanded to 

include additional rules, policies, 

procedures, or any other tool or resource 

will be modest because current RWPs 

already place some focus on timeliness 

as a desired feature. 

g. Informing the Commission 

Final Rule 17Ad–26(a)(7) requires the 

CCA to inform the Commission as soon 

as practicable when the CCA is 

considering implementing a recovery or 

orderly wind-down. As stated in the 

baseline analysis, each RWP generally 

refers to informing the Commission, but 

some plans inform the Commission after 

initiating a recovery or orderly winddown. Providing notice to the 

Commission when the CCA is 

considering implementing a recovery or 

orderly wind-down may help ensure 

that the Commission can, from the start, 

dynamically monitor how a CCA 

engages the recovery or wind-down 

event consistent with its established 

RWPs and the requirements of 

Commission rules, to help mitigate the 

potential onward transmission of system 

risk and help ensure that a wind-down, 

if necessary, is orderly. These benefits 

likely will accrue primarily to the 

markets in which the dominant CCAs 

currently do not have a plan in place for 

informing the Commission as soon as 

practicable when the CCA is 

considering implementing a recovery or 

orderly wind-down. 

One cost of the new rule is that CCAs 

will need to decide whether they have 

begun considering an implementation of 

either a recovery or an orderly winddown. The marginal cost of such a 

determination is small, and it would 


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531See supra Part II.C.7. 

532See supra Part II.C.7. 

533See Muth at 2 (‘‘In the case of publicly-traded 

entities in particular, management may be 

understandably hesitant to make forward-looking 

pessimistic statements that may be unearthed in 

future shareholder litigation or insolvency 

proceedings.’’); id. (‘‘A complex cocktail of 

incentives familiar to the Commission but too 

labyrinthine to elucidate here causes management 

to . . . underestimate the amount of information 

that needs to be communicated effectively to 

‘relevant authorities’ to illuminate threats to the 

entity’s solvency, especially when those threats are 

high-magnitude, low-frequency risks.’’). 534See supra Part II.C.7. 

535See CCP12 at 4; DTCC at 9; ICE at 4. 

536See supra Part II.C.8.c. 

537See OCC at 10. 

538See supra Part II.C.8.b. 

occur in the normal course of business, 

separate from the new requirement. For 

example, a CCA generally would be 

‘‘considering’’ implementing a recovery 

when the clearing agency determines 

that a market event may result in 

uncovered losses, liquidity shortfalls, or 

capital inadequacies at the CCA 

following end-of-day settlement, or 

when the CCA anticipates that it will 

need to deploy prefunded financial 

resources or liquidity arrangements 

following end-of-day settlement in order 

continue meeting its regulatory 

obligations.531 Those determinations 

would be made in absence of the final 

notification rule, and they do not 

therefore affect the rule’s costs. 

Additionally, the primary focus for the 

CCA is on the timeliness of the 

notification to the Commission and not 

on its method or form.532 The 

Commission can best ensure that actions 

appropriate to maintaining financial 

stability can be made if it is notified 

when a CCA is ‘‘considering’’ action, 

rather than when a CCA has already 

begun to implement its RWP. For 

example, the Commission or other 

authorities may evaluate the available 

actions or tools to address or mitigate 

financial stability concerns in response 

to market events. 

A commenter stated that CCA 

management may face disincentives to 

candid communication with the 

Commission about considering 

implementing a recovery or orderly 

wind-down because of concerns about 

other implications of such reporting, 

including the potential for harm in 

future shareholder litigation.533 We 

acknowledge that there may be 

conflicting incentives for individual 

managers regarding any regulatory 

reporting, but we do not believe that 

these conflicting incentives would 

undermine the intended benefits nor do 

they alter the reporting and disclosure 

obligations of CCAs or their publiclytraded affiliates. These conflicting 

incentives are already present in the 

regulatory structure. All CCAs currently 

maintain frequent communication with 

Commission staff about potentially 

sensitive information. And CCAs are 

already required to disclose key 

information about their operations to 

various third parties that may be 

considerably more extensive than that 

which is mandated by new Rule 17Ad– 

26(a)(7). Pursuant to Commission rules, 

for example, clearing participants 

generally will be notified of 

circumstances related to a participant 

default, the potential for a portfolio 

auction, and the use of default 

management tools that may precede a 

recovery or wind-down event.534

Finally, while CCAs’ publicly-traded 

affiliates will need to consider whether 

public disclosure to investors is 

appropriate when considering 

implementing a recovery or orderly 

wind-down, those considerations exist 

regardless of any required notification to 

the Commission. 

Each CCA will incur costs to bring its 

RWP into alignment with the final rule. 

The alignment costs will depend on the 

extent of the enhancements the CCA 

makes to its RWP. The costs to modify 

plans that require changes, including 

those that need to change their RWPs to 

notify the Commission before the RWP 

implementation, likely will be modest 

because current RWPs already place 

some focus on informing the 

Commission. If the CCA ever 

experiences an event that causes it to 

consider implementing a recovery or 

orderly wind-down, it will have to 

devote nominal resources to inform the 

Commission as soon as practicable. 

h. Testing 

Final Rule 17Ad–26(a)(8) requires 

RWPs to include procedures for testing 

the CCA’s ability to implement the 

RWPs at least every 12 months, 

including by (a) requiring the CCA’s 

participants and, when practicable, 

other stakeholders to participate in the 

testing of its plans; (b) requiring that 

such testing would be in addition to 

testing pursuit to paragraph (e)(13) of 17 

CFR 240.17ab–22; (c) providing for 

reporting the results of the testing to the 

CCA’s board of directors and senior 

management; and (d) specifying the 

procedures for, as appropriate, 

amending the plans to address the 

results of such testing. 

A few commenters stated that CCAs 

need considerable latitude in designing 

and executing their testing obligations 

because including participants and 

certain other stakeholders in plan 

testing may be inefficient and perhaps 

inappropriate due to costs, sharing of 

private and confidential information, 

and other reasons.535 The Commission 

recognizes that there are certain 

efficiencies from allowing each CCA to 

customize its testing due to differences 

between markets, cleared products, 

participant types, and testing 

obligations from other regulators and 

final Rule 17Ad–26(a)(8) allows a CCA 

to designate in its policies and 

procedures that certain participants, or 

categories of participants, be designated 

for participation in certain tests. It may 

not always be appropriate to include 

certain participants in all aspects of 

testing.536 The different types of 

products that each CCA clears helps 

determine the type, resources, and 

expertise of stakeholders that participate 

in these testing exercises. For example, 

in testing of loss allocation tools, where 

losses could be assigned to a 

participant, it may be useful to include 

participants in the testing to allow them 

to understand when they can be 

expected to bear losses and how those 

losses would be absorbed. In testing that 

involves business losses or certain types 

of non-default losses, it may be less 

appropriate to have participants 

participate in the testing. 

One commenter stated that new 

testing requirements would require 

significant investment of time and 

resources by a CCA’s most critical 

personnel, both in the planning of the 

test and in the likely manual execution 

of the test for many CCAs.537 The 

Commission acknowledges that CCAs 

will incur costs every 12 months to plan 

and execute their tests. The CCAs’ most 

critical personnel will likely need to be 

actively engaged in the execution of the 

tests, including monitoring both market 

conditions and the CCAs’ resources as 

the situation develops. As stated above, 

including critical personnel in testing 

may increase the overall cost of testing, 

but it is necessary because these critical 

personnel are best positioned to identify 

the planning and procedures that can 

help ensure timely and effective 

implementation of the RWP in the event 

of a future recovery or orderly winddown.538 Plan testing benefits CCAs 

because it helps them identify weakness 

during the testing that can be used to 

update their RWPs and it helps them 

gain practical skills that may be used 

during an actual recovery or wind-down 

event. These effects, in turn, improve 

the stability of the CCAs, which benefits 

not only their participants but also the 

broader financial markets. A key cost to 

the CCA during plan testing is the 


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539RWP Proposing Release, supra note 18, at 

34740 (‘‘44. How costly will it be for covered 

clearing agencies to test their plans as required in 

proposed Rule 17ad–26(a)(8)? What costs will be 

incurred by the participants and, when practicable, 

other stakeholders? Will any of these costs 

substantively vary based on whether or not the 

current RWP includes testing?’’). 

540See infra note 542. 

541See supra Table 1 for the number of 

participants at CCAs as of Aug. 2024. 

542See DTCC at 10–11; ICE at 4–5; OCC at 10– 

11 (concluding that imposing additional testing 

requirements or mandating a separate, RWPdesigned test would be duplicative of ongoing 

testing and would introduce unnecessary and 

potentially significant burdens without a 

proportionate benefit); CCP12 at 4–5; CFA at 4. 

543See supra Part II.C.8.b. 

544CCP12 at 4. 

545See 17 CFR 240.17ad–22(e)(13); supra Part 

II.C.8.b. 

opportunity cost of the critical 

personnel being less available to attend 

to other matters, and participants will 

incur related costs from their 

participation. 

In the RWP Proposing Release, the 

Commission requested comment on 

how costly it will be for CCAs to test 

their plans as required in Rule 17Ad– 

26(a)(8).539 No commenter, including 

the CCAs, provided estimated plantesting costs or other information that 

would aid the Commission in 

quantifying the costs for CCAs to test 

their RWPs every 12 months.540 Because 

under the final rule the nature and 

scope of the required testing is 

dependent on the needs of each CCA, it 

would be impracticable to estimate the 

cost of testing without particularized 

information about the elements and 

testing scenarios of each CCA’s RWP 

after the RWPs have been brought into 

alignment with the final rule. Final Rule 

17Ad–26(a)(8) allows a CCA to retain 

discretion to organize and design its 

testing scenarios to ensure that testing 

exercises produce effective tests of the 

elements of the RWP. This discretion 

means that each CCA may test different 

default and non-default scenarios from 

one another. Additionally, final Rule 

17Ad–26(a)(8) does not create 

parameters around the number of 

scenarios a CCA is required to test. Final 

Rule 17Ad–26(a)(8) also allows a CCA to 

designate in its policies and procedures 

certain participants, or categories of 

participants, for participation in certain 

tests. Each CCA will rely on different 

resources and expertise of stakeholders 

depending on its market and the type of 

products that the CCA clears, and the 

number and identity of those 

participants will also vary.541 The 

Commission would need more 

information about the type and number 

of scenarios each CCA is testing or the 

type and number of participants each 

CCA will be designating in order to 

quantify the cost of testing. 

A few commenters also stated that 

testing requirements in Rules 17Ad–22 

and 17Ad–26 should be harmonized to 

the extent possible due to high testing 

costs that outweigh benefits of 

independent testing.542 The testing 

requirements in new Rule 17Ad– 

26(a)(8) are in addition to those in Rule 

17Ad–22(e)(13), and each test must be 

performed because RWP testing may 

require consideration of scenarios and 

testing of procedures that go beyond 

default management. For example, 

recovery includes the actions taken to 

address uncovered losses and 

replenishment of prefunded resources, 

and wind-down includes actions taken 

when resources have been exhausted, 

necessitating the permanent cessation, 

sale, or transfer of one or more of the 

CCA’s core services. Nevertheless, each 

CCA is allowed to structure the 

planning, execution, and analysis of 

each test in a way that improves 

efficiency and reduces its aggregate 

testing costs for itself, its participants, 

and its other stakeholders so long as the 

testing exercise addresses the distinct 

elements of the separate testing 

requirements.543 A more comprehensive 

testing exercise may make it less costly 

to assemble a representative set of 

participants and other key stakeholders, 

as well as the board, producing a more 

effective testing exercise. 

The new test required by final Rule 

17Ad–26(a)(8) cannot be subsumed by 

the default management tests under 

Rule 17Ad–22(e)(13) because it goes 

beyond default management by 

including, for example, recovery, which 

includes the actions taken to address 

uncovered losses and replenishment of 

prefunded resources, and wind-down, 

which includes actions taken when 

resources have been exhausted, 

necessitating the permanent cessation, 

sale, or transfer of one or more of the 

CCA’s core services. 

As stated in the baseline analysis, 

only a few RWPs refer to plan testing. 

The markets that likely will benefit the 

most from this requirement are those in 

which the dominant CCAs have the 

least comprehensive policies around 

testing in their RWPs because those 

CCAs likely will create procedures for 

more frequent testing and the inclusion 

of more stakeholders, and those changes 

likely will help ensure that those RWPs 

remain current and take into account 

changing system and market conditions. 

Additionally, the testing will help the 

test participants and other stakeholders 

better understand the recovery and 

orderly wind-down processes, and it 

may make them more efficient in the 

event of an actual recovery or winddown event because of their practice 

going through a dry-run recovery and 

orderly wind-down. Contrary to the 

suggestion of a commenter, the 

participation in a real test yields 

benefits for the various stakeholders that 

they cannot learn through other 

methods, including reading the CCAs’ 

RWPs.544

The upfront costs to begin testing as 

required by the new rule may not be 

large for the four CCAs that do not 

mention plan testing in their RWPs 

because they might be able to leverage 

existing requirements around default 

management testing under Rule 17Ad– 

22(e)(13) as they develop their new 

plans that are distinct from those 

existing requirements.545 The 

corresponding testing costs for the 

CCAs’ participants and, when 

practicable, other stakeholders likely 

will be moderate, in part because the 

CCAs are already required to include 

such entities in their default procedures 

testing under Rule 17Ad–22(e)(13). The 

costs for any subsequent RWP 

amendments in response to the annual 

testing likely will be small. 

i. Board Review and Approval 

Final Rule 17Ad–26(a)(9) requires 

RWPs to include procedures requiring 

review and approval of the plans by the 

board of directors of the CCA at least 

every 12 months or following material 

changes to the CCA’s operations that 

would significantly affect the viability 

or execution of the plans, with such 

review informed, as appropriate, by the 

CCA’s testing of the plans. As stated in 

the baseline analysis, each RWP refers 

to periodic plan reviews, typically 

annually or biennially. 

The markets that likely will benefit 

the most from this requirement are those 

in which the dominant CCAs currently 

have the least comprehensive RWPs in 

addressing plan review because they 

would create more frequent procedures 

for review, and more frequent reviews, 

in turn, should help ensure that RWPs 

remain current and consider any 

changes to the CCAs’ operations. 

There are costs associated to this new 

requirement. The board of directors of 

some CCAs will need to devote 

additional time and resources as they 

move to a review cycle of at least every 

12 months, and they will need to review 

material changes to the CCA’s 

operations that would significantly 

affect the viability or execution of the 

plans. For those CCAs that review every 

two years, moving to a review at least 

every 12 months will increase their 


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546The $49,000 estimate is based on the following 

calculations: $11,460 (blended hourly rate for 

assistant general counsel at $573 for 20 hours) + 

$22,450 (blended hourly rate for compliance 

attorney at $449 for 50 hours) + $8,575 (blended 

hourly rate for business risk analyst at $245 for 35 

hours) + $6,600 (blended hourly rate for senior risk 

management specialist at $440 for 15 hours) ≈ 

$49,000. Salaries for estimates presented in this 

section are derived from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified to account for an 1,800-hour workyear and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits 

and overhead. See infra note 610. As stated in the 

baseline analysis, some RWPs are more aligned 

with the nine elements that are part of final Rule 

17Ad–26 than are other RWPs, so the estimated cost 

may vary. 

547 Davidson at 12 (‘‘As a general matter the cost 

estimates in the document for the CCAs to conform 

to the proposed rules are ridiculously low. Rule 

change processes require the participation by a 

much broader cross-section of CCA management 

and staff . . . . A two order of magnitude 

multiplier on the current document’s estimates 

would not overcount the cost to comply.’’). 

548 Id. (‘‘Furthermore, the ‘informal’ interaction 

with [Trading & Markets] staff frequently continues 

for multiple months, always involving Legal 

Department staff and frequently requiring the 

engagement of domain experts as well. All this 

happens before a formal submission is permitted, 

and the post formal submission process also 

requires a significant amount of interaction, 

although that process draws more on Legal than 

domain expert resources.’’). 

549Assuming that the distribution of 

responsibility among CCA staff for completing the 

Rule 19b–4 submission process is similar to the 

distribution for reviewing and updating policies 

and procedures, see supra note 546 (estimating 120 

hours of total CCA staff time), the commenter’s 

estimate would imply that CCA staff would spend 

an average of approximately 12,000 hours per 

submission, inclusive of the 120 hours to review 

and update policies and procedures. The 

Commission disagrees that this is a reasonable 

estimate of the number of hours for the process. 

Rather, the Commission has previously estimated— 

after receiving no comments on a similar estimate 

in the proposing release—that submitting a 

proposed rule change through the Rule 19b–4 

process takes a CCA 34 hours for an average rule 

change filing and 129 hours for a novel or complex 

rule change filing. See Process for Submissions for 

Review of Security-Based Swaps for Mandatory 

Clearing and Notice Filing Requirements for 

Clearing Agencies; Technical Amendments to Rule 

19b–4 and Form 19b–4 Applicable to All SelfRegulatory Organizations, Release No. 34–67286 

(June 28, 2012) 77 FR 41602, 41631 & n.211 (July 

13, 2012). Using the time for a novel or complex 

rule change filing as a conservative estimate, the 

Commission assumes that the CCA staff with the 

highest hourly cost involved in reviewing and 

updating CCA policies and procedures (i.e., an 

assistant general counsel) performs all 129 hours of 

tasks associated with the Rule 19b–4 submission 

process, resulting in an estimated cost of $74,000. 

Specifically, the $74,000 estimate is based on the 

following calculations: $73,917 (blended hourly 

rate for assistant general counsel at $573 for 129 

hours) ≈ $74,000. If instead the estimated time for 

an average rule change filing were used, the 

estimated cost would be $19,000 based on the 

following calculations: $19,482 (blended hourly 

rate for assistant general counsel at $573 for 34 

hours) ≈ $19,000. 

550The Commission estimates an additional cost 

of $73,000 based on the following calculations: 

$52,716 (blended hourly rate for assistant general 

counsel at $573 for 92 hours) + $20,440 (blended 

hourly rate for attorney at $511 for 40 hours) ≈ 

$73,000. See id. at 41632 & nn.213–14 (estimating 

time for Advance Notice). 

551See CCA Standards Adopting Release, supra 

note 5, at 70892 (discussing Rule 17Ad–22(e)(2)). 

552The $19,000 estimate is based on the following 

calculations: $5,730 (blended hourly rate for 

assistant general counsel at $573 for 10 hours) + 

$13,470 (blended hourly rate for compliance 

attorney at $449 for 30 hours) ≈ $19,000. See infra 

note 611. As stated in the baseline analysis, some 

RWPs are more aligned with the nine elements that 

are part of final Rule 17Ad–26 than are other RWPs, 

so the estimated cost may vary. 

costs by as much as a factor of two. We 

estimate that the cost of the additional 

time and resources for each additional 

review will be minor because we do not 

anticipate that this type of review will 

take many hours or many board 

resources. 

Material changes to the CCA’s 

operations may result in changes to the 

RWP. Those RWP changes that are 

material will be reviewed by the board. 

We estimate that the cost of the 

additional time and resources by the 

CCA to determine which RWP changes 

are material will be minor because we 

do not anticipate that this determination 

will take many hours or many resources. 

Each CCA will incur costs to bring its 

RWP into alignment with the final rule. 

The alignment costs will depend on the 

extent of the enhancements the CCA 

makes to its RWP. The costs to modify 

plans that have biennial reviews to 

replace them with annual reviews will 

be modest. The costs to review RWPs 

after material changes to the CCAs’ 

operations will depend on the nature 

and number of material changes that 

result in new reviews. 

j. Quantified Costs of Written Policies 

and Procedures Associated With Final 

Rule 17Ad–26 

The Commission has estimated the 

implementation and ongoing cost of 

final Rule 17Ad–26. The estimated 

average implementation cost for one 

CCA to review and update existing 

policies and procedures is about 

$49,000.546 These approximate costs are 

the same as those estimated at the 

proposal stage for final Rule 17Ad–26 

adjusted for inflation, and we did not 

receive any specific comments on this 

estimate. 

One commenter provided feedback on 

the additional cost of obtaining 

Commission approval for any updated 

policies and procedures pursuant to 

Rule 19b–4.547 The commenter stated 

that a two order of magnitude multiplier 

should be applied to the Commission’s 

cost estimate because the rule-change 

process requires a broad cross-section of 

a CCA management and staff, as well as 

interactions with SEC staff.548 The 

Commission acknowledges that once a 

CCA has reviewed and updated its 

policies and procedures the CCA will 

have to submit its plan modifications to 

the Commission for review, public 

comment, and approval as required by 

Rule 19b–4, which requires time and 

effort from both CCA management and 

staff. As the number of consultations 

between CCA management and SEC 

staff increases during the process of 

submitting the CCA’s plan 

modifications, there will be 

corresponding increases in costs, as the 

commenter suggested. But the 

magnitude of these costs will be far less 

than the commenter suggested (i.e., 100 

times more than the costs associated 

with reviewing and updating policies 

and procedures). Instead, the 

Commission estimates this process will 

conservatively cost about $74,000 per 

CCA.549 In addition, to the extent that 

a CCA must submit an advance notice, 

the Commission estimates a cost of 

about $73,000 per CCA.550

Final Rule 17Ad–26 will also impose 

ongoing costs on a CCA. The rule will 

require ongoing monitoring and 

compliance activities with respect to the 

written policies and procedures created 

in response to the rule. Based on the 

Commission’s previous estimates for 

ongoing monitoring and compliance 

costs with respect to existing 17 CFR 

240.17ad–22(e)(2) (‘‘Rule 17Ad– 

22(e)(2)’’),551 the Commission estimates 

that the ongoing monitoring and 

compliance activities required by final 

Rule 17Ad–26 will impose an annual 

cost on CCAs of $19,000 per CCA.552

These approximate costs are the same as 

those estimated at the proposal stage for 

final Rule 17Ad–26 adjusted for 

inflation, and we did not receive any 

specific comments on this estimate. 

2. Amendments to Rule 17Ad–22(e)(6) 

Rule 17Ad–22(e)(6) requires CCAs 

that provide central counterparty 

services to establish a risk-based margin 

system to manage their credit exposures 

to their participants. The final 

amendment to Rule 17Ad–22(e)(6)(ii) 

will strengthen the requirements: (a) by 

requiring that CCAs monitor intraday 

risk exposures to their participants on 

an ongoing basis, and (b) by providing 

additional specificity to the 

circumstances in which CCAs should 

have policies and procedures in place to 

make intraday margin calls. The final 

amendment to Rule 17Ad–22(e)(6)(iv) 

will strengthen the requirements by 

ensuring that CCAs can meet their Rule 

17Ad–22(e)(6) obligations when their 

price data or other substantive inputs 

are not available by including 

procedures to use price data or other 


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553See Better Markets at 2 (‘‘The requirement that 

covered clearing agencies monitor intraday 

exposure responds to the risks that may arise 

intraday. A CCP faces the risk that its exposure to 

its participants can change rapidly as a result of 

intraday changes in price, positions, or both, 

including adverse price movements, as well as 

participants building larger positions through new 

trading (and settlement of maturing trades). For 

these reasons, a CCP must monitor and address 

such risks on an ongoing basis.’’); see also SIFMA 

at 4 (‘‘Failure to collect and maintain adequate 

margin from one clearing member transfers the risk 

of that deficiency to the other clearing members and 

market participants.’’). 

554See SIFMA at 6 (‘‘SIFMA believes that the 

making of such calls is essential to prudent risk 

management by a Clearing Agency and thus 

provides meaningful benefits not only to the 

Clearing Agency, but also to market participants 

and serves the interests of financial stability by 

protecting the Clearing Agency from default risk.’’). 

555See Davidson at 9; Better Markets at 7; ICI at 

10 (stating ‘‘the unpredictability of such margin 

calls means that funds must keep a portion of their 

assets in highly liquid assets in anticipation of 

potential ad hoc intraday margin calls, which may 

lower returns for fund investors’’), 11; SIFMA at 9; 

The Associations at 2; ICE at 2. 

556See Better Markets at 7; ICI at 11; SIFMA at 

5, 9. 

557See Davidson at 9. 

558See The Associations at 2; Davidson at 2; 

SIFMA at 8. 

substantive inputs from an alternate 

source or to use a risk-based margin 

system that does not similarly rely on 

the unavailable or unreliable 

substantive inputs. 

a. Monitoring Exposure and Intraday 

Margin Calls 

CCAs use intraday margin calls as one 

of their tools to manage their credit 

exposures to their participants. The 

final amendment to Rule 17Ad– 

22(e)(6)(ii) requires CCAs to monitor 

exposure on an ongoing basis and to 

make intraday margin calls as frequently 

as circumstances warrant, possibly 

including when risk thresholds 

specified by the CCA are breached or 

when the products cleared or markets 

served display elevated volatility, which 

would help reduce, but not eliminate, 

their credit exposure to their 

participants. When facing special 

circumstances such as these, the CCA is 

required to document when it 

determines not to make an intraday call 

pursuant to its written policies and 

procedures required under amended 

Rule 17Ad–22(e)(6)(ii)(C). 

Two commenters stated that 

members’ intraday actions can create 

large negative externalities with respect 

to other participants and the CCA itself 

that the CCA could mitigate through its 

margin policies.553 One commenter 

stated that margin calls benefit 

participants and the CCA, which, in 

turn, serves the interests of broader 

market stability.554 The Commission 

recognizes that the structure of these 

clearing markets may permit certain 

negative externalities, and it has crafted 

the amendment to Rule 17Ad– 

22(e)(6)(ii) to reduce those externalities, 

which will, in turn, improve market 

stability. The final amendment affords 

CCAs latitude in crafting their updated 

margin procedures that will better 

reduce these negative externalities given 

their products cleared and markets 

served. 

Each CCA will have to determine how 

to operationalize ‘‘on an ongoing basis’’ 

and ‘‘as frequently as circumstances 

warrant’’ given its own market and 

participants. Each CCA will also need to 

ensure that its systems can monitor 

exposure and make margin calls at those 

frequencies. As discussed in the 

baseline analysis, each CCA is already 

capable of monitoring exposure and 

collecting margin on an intraday basis; 

nevertheless, some CCAs might need to 

make changes to align with the final 

amendment, such as increasing the 

frequency of exposure monitoring and 

improving their information technology, 

so they can process more frequent 

scheduled and ad hoc intraday margin 

calls. As facts and circumstances change 

through time, CCAs might need to 

change how they operationalize these 

new requirements, including changing 

the frequency of potential scheduled 

and ad hoc intra-day margin calls. 

To the extent a CCA currently aligns 

with the final amendment, it will not 

experience new benefits from the final 

amendment. Nevertheless, the 

amendment will have incremental 

benefits for the market because it will 

ensure that the CCAs continue to meet 

the standard of the final amendment 

with which they are currently aligned 

and that any new CCA that provides 

central counterparty services meets the 

same standard. 

In addition to updating policies and 

procedures surrounding the risk-based 

margin systems that require changes, 

some CCAs might need to update IT and 

other systems in order to assess, impose, 

and collect intraday margin on a more 

frequent basis. The costs to modify the 

risk-based margin systems that require 

changes will be modest because CCAs 

have already incurred the initial costs of 

building their risk management 

infrastructure, including the ability to 

make intraday margin calls based on 

some sort of intraday monitoring. Once 

those costs have been incurred and 

amortized, the variable costs of 

modifying the frequency of the 

monitoring, and of additional margin 

calls, are likely low. 

To the extent that the final 

amendment results in CCAs being 

positioned to make more unscheduled 

margin calls, participants may face 

increased liquidity-management costs 

whether or not the CCAs actually make 

more unscheduled margin calls. Several 

commenters highlighted the potential 

for increased margin calls to impose 

increased liquidity costs on the CCAs’ 

participants and their clients,555 and 

several commenters explicitly stated 

that CCAs, in order to reduce 

participants’ liquidity costs, must make 

the triggers for intraday margin calls 

known to their participants.556 A CCA’s 

margin methodology constitutes a 

material aspect of its operations, 

meaning that it should be considered 

part of a CCA’s stated policies, 

practices, or interpretations under 

Exchange Act Rule 19b–4. As such, a 

CCA’s margin methodology is subject to 

the filing obligations applicable to SROs 

under section 19(b) of the Exchange Act 

regarding any proposed rule or 

proposed change to its rules. Through 

the notice and comment process, market 

participants and the general public will 

have transparency into a CCA’s margin 

call methodology. This information will 

enable the participants to reduce their 

liquidity costs to the extent they 

incorporate it into their liquidity 

models. That notwithstanding, a CCA’s 

policies and procedures regarding 

intraday margin generally should 

consider concerns such as 

procyclicality, so not every margin call 

can be perfectly predicted by the 

participants. 

One commenter stated that it is more 

costly for participants to respond to 

margin calls late in the trading day than 

early in the trading day because, in part, 

the United States is the last major 

market to close each day due to the 

geographic position of the International 

Date Line.557 The Commission 

recognizes that margin calls are costly 

for participants, that those costs may 

potentially rise near the end of the 

trading day, and that those costs may 

potentially be higher during times of 

market stress; nevertheless, these timevarying costs are not unique to the 

clearing market. Some participants 

might adjust their liquidity models to 

control for the costs of late-in-day ad 

hoc margin calls that CCAs might make. 

A few commenters stated that CCAs 

should be quick to return margin if 

markets revert during the trading day, 

and no commenter recommended 

against it.558 The Commission is 

unaware of any CCA that routinely 

returns margin on an intraday basis 

today even though no SEC rule would 


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559One commenter agrees with the Commission’s 

analysis of procyclicality. See The Associations at 

2 (‘‘Intraday margin calls can cause procyclical 

impacts to markets, especially if these calls are 

unpredictable for clearing participants.’’). 

560Revisiting Procyclicality: The Impact of the 

COVID Crisis on CCP Margin Requirements, Futures 

Indus. Ass’n (Oct. 2020), available at https://

www.fia.org/sites/default/files/2020-10/FIA_WP_

Procyclicality_CCP%20Margin%20Requirements.

pdf. 

561See ICE at 2 (‘‘ICE does not believe the 

Commission has considered the costs associated 

with the procyclical effects that intraday margin 

calls can have, potentially exacerbating credit and 

liquidity concerns with clearing members and in 

extreme cases causing market participant 

defaults.’’). 

562See Part II.A.2.b.iii. 

563See OCC at 4 (‘‘However, while OCC agrees 

with goal of ensuring that this capability can be 

exercised when and as needed, we are concerned 

that imposing a requirement to establish strict 

quantitative thresholds that will trigger an 

otherwise unscheduled margin call would prevent 

the CCA from applying its judgment and expertise 

to determining whether the benefit of collecting that 

margin for its own purposes at that moment 

outweighs these possible procyclical impacts.’’). 

564One commenter stated that the proposed 

amendment to Rule 17Ad–22(e)(6)(iv) should be 

scaled back because, in part, no CCA has ever had 

an input-price failure that it was unable to resolve 

through its normal business operations (see ICE at 

3); nevertheless, evolving market conditions, 

including high levels of growth in some cleared 

markets, justify regulatory changes to reduce the 

risk of future failures. 

565See OCC, Press Release OCC April 2024 

Monthly Volume Data (May 2, 2024), available at 

https://www.theocc.com/newsroom/views/2024/05- 

02-occ-april-2024-monthly-volume-data and DTCC 

2023 Annual Report, supra note 471. 

566The two busiest trading periods for both 

equities and equity options are usually immediately 

after the opening bell and immediately before the 

closing bell. 

567For instance, OCC and NSCC have an 

information-sharing agreement to facilitate the 

settlement and delivery of physically-settled stock 

options cleared by OCC via NSCC. See Securities 

Exchange Act Release No. 37731 (Sept. 26, 1996), 

61 FR 51731 (Oct. 3, 1996) (SR–OCC–96–04 and 

SR–NSCC–96–11) (Order Approving Proposed Rule 

Change Related to an Amended and Restated 

Options Exercise Settlement Agreement Between 

the Options Clearing Corporation and the National 

Securities Clearing Corporation); Securities 

Exchange Act Release No. 43837 (Jan. 12, 2001), 66 

FR 6726 (Jan. 22, 2001) (SR–OCC–00–12) (Order 

Granting Accelerated Approval of a Proposed Rule 

Change Relating to the Creation of a Program to 

Relieve Strains on Clearing Members’ Liquidity in 

Connection With Exercise Settlements); and 

Securities Exchange Act Release No. 58988 (Nov. 

20, 2008), 73 FR 72098 (Nov. 26, 2008) (SR–OCC– 

2008–18 and SR–NSCC–2008–09) (Notice of Filing 

and Order Granting Accelerated Approval of 

Proposed Rule Changes Relating to Amendment No. 

2 to the Third Amended and Restated Options 

Exercise Settlement Agreement). 

568RWP Proposing Release, supra note 18, at 

34739 (‘‘40. How costly is it for covered clearing 

agencies to secure the use of price data or 

substantive inputs from an alternate source? Must 

the data or substantive inputs subscription be 

purchased outright, or can the covered clearing 

agency, for a lower fee, purchase an option to use 

prohibit it. The Commission is not 

requiring CCAs to return some or all the 

newly collected intraday margin in the 

event of a same-day reversion, and it is 

instead leaving that decision to each 

CCA. The CCA will need to balance the 

benefits of potentially reduced liquidity 

costs to the participant from returning 

intraday margin against the benefits of 

potentially decreased risk to the CCA 

and its members from retaining intraday 

margin during periods of heightened 

asset volatility. The Commission’s 

approach to Rule 17Ad–22(e) is to 

provide flexibility to CCAs, subject to 

their obligations and responsibilities as 

SROs under the Exchange Act, to design 

and structure their policies and 

procedures to take into account the 

differences among clearing agencies and 

their participants and differences 

through time. 

Increased intraday margin calls may 

potentially result in procyclicality 

problems that exacerbate market stress: 

margin calls during periods of declining 

asset prices may cause participants to 

sell assets, putting further negative 

pressure on asset prices and the market 

that may negatively affect not just other 

participants but also may spill over into 

other CCAs and their markets.559 This 

stress may be transmitted by 

participants that are members of more 

than one CCA when, for example, a 

margin call in one market makes a 

participant sell assets in a different 

market. The stress may also be 

transmitted by assets that are linked 

between markets, such as the link 

between option prices (OCC) and equity 

prices (NSCC). Various industry 

participants have expressed concerns 

that excessive intraday margin calls, 

especially unanticipated ones, have the 

potential to exacerbate liquidity issues 

for clearing members who would have 

to post new liquid collateral to the CCA 

with little notice,560 and one commenter 

stated that the unanticipated margin call 

itself might cause the member firm to 

default.561 On the other hand, such 

intraday margin calls reduce immediate 

credit risk for the CCAs during periods 

of market stress, which, in turn, reduces 

risk for the other participants of those 

CCAs. 

CCAs, when deciding whether to 

make an intraday margin call exception, 

generally should consider these 

concerns about procyclicality and 

potential participant default.562

Notwithstanding their written policies 

and procedures that would require a 

CCA to issue a margin call in a 

particular situation, the CCA may 

choose to make an exception to its 

policies and procedures and not make a 

call, including in a situation where the 

CCA believes that procyclicality is a 

substantive risk or that the risk of the 

default of a particular participant is 

transient, perhaps due to the CCA’s 

knowledge of the participant’s portfolio. 

CCAs’ ability to make exceptions based 

on their particular facts and 

circumstances allows them to balance 

these competing risks during future 

crises.563

b. Reliable Sources of Timely Price Data 

and Other Substantive Inputs 

CCAs have risk-based margin systems 

that, to different degrees, align with the 

final amendment to Rule 17Ad– 

22(e)(6)(iv), with the exception of at 

least one CCA that likely would need to 

implement additional changes to its 

risk-based margin system to ensure that 

it could continue to meet its obligations 

under Rule 17Ad–22(e)(6) in the event 

of the unavailability of a substantive 

input from a third party. If that one CCA 

were to lose access to its price data or 

other inputs, it may be unable to 

perform its core payment, clearing, and 

settlement services, and that, in turn, 

may force it into an orderly wind-down, 

which would have negative 

implications for its participants and the 

broader financial system. 

The incremental benefits of the final 

amendment beyond the baseline lie 

primarily in expanding the scope of this 

rule beyond price data and further 

specifying the nature of the procedures 

that a CCA uses if such data or inputs 

are not readily available or reliable and 

in ensuring that any new CCA has that 

same standard of the final amendment. 

These benefits are substantial because 

the final amendment reduces the risk 

that the CCA fails to provide its core 

payment, clearing, and settlement 

services in future periods of high market 

stress.564 For example, the Options 

Clearing Corporation cleared a year-todate average daily volume of 47.4 

million contracts through April 2024, 

and DTCC reported that the average 

daily cleared broker-to-broker 

transactions was $1.9 trillion in 2023.565

Because there is increased activity in 

the financial markets at the end of the 

trading day,566 even a one-hour price 

data feed malfunction near the end of 

the trading day could affect the normal 

processing of millions of options 

contracts and hundreds of billions of 

dollars of equity transactions. Moreover, 

the unavailability of price data at one 

CCA that is closely interconnected to 

another CCA 567 could result in negative 

spillover effects that spread to that other 

CCA. 

In the RWP Proposing Release, the 

Commission requested comment on 

how costly it will be for CCAs to secure 

the use of price data or substantive 

inputs from an alternate source.568


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the data and substantive inputs only when its 

primary sources prove inadequate?’’). 569See CCP12 at 2 (stating that if the Commission 

prescribed a definition of ‘‘substantive input,’’ a 

CCA may be forced to ‘‘obtain, often at great 

expense, alternate data sources for inputs with 

limited utility and minimal or no impact on margin 

calculations.’’); OCC at 5 (stating that requiring 

CCAs to develop and maintain an entire alternate 

risk-based margin system would be prohibitively 

expensive and operationally burdensome); id. at 2 

and 4. 

570See DTCC at 4. 

571See Davidson at 7. 

572RWP Proposing Release, supra note 18, at 

34740 (‘‘41. How costly is it for covered clearing 

agencies to secure the use of alternate risk-based 

margin systems? Would covered clearing agencies 

create their own alternate risk-based margin 

systems, or would they secure access to one from 

a third party, and, if so, at what cost?’’). 

573See ICE at 2–3 (stating that the Commission 

has not ‘‘recognized the considerable costs to 

[CCAs], clearing firms and other market participants 

that would be required to develop and implement 

alternative margin models to address a remote and 

theoretical problem with price or other data 

inputs’’); OCC at 2, 4–5; CCP12 at 3. 

574See CCA Standards Adopting Release, supra 

note 5, at 70892, 70895–97 (discussing Rules 17Ad– 

22(e)(2) and (13)). Although the rule amendment is 

with respect to Rule 17Ad–22(e)(6), these Rules 

present the best overall comparison to the current 

rule amendment, in light of the nature of the 

changes needed to implement the proposal here and 

what was proposed in the CCA Standards. 

575The $59,000 estimate is based on the following 

calculations: $11,460 (blended hourly rate for 

assistant general counsel at $573 for 20 hours) + 

$17,960 (blended hourly rate for compliance 

attorney at $449 for 40 hours) + $6,504 (blended 

hourly rate for computer operations manager at 

$542 for 12 hours) + $8,160 (blended hourly rate 

for senior programmer at $408 for 20 hours) + 

$11,000 (blended hourly rate for senior risk 

management specialist at $440 for 25 hours) + 

$4,056 (blended hourly rate for senior business 

analyst at $338 for 12 hours) ≈ $59,000. Salaries for 

estimates presented in this section are derived from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified to account 

for an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits and overhead. See infra note 603. 

576See supra note 549. 

577See CCA Standards Adopting Release, supra 

note 5, at 70893, 70895–96 (discussing Rules 17Ad– 

22(e)(6) and (13)). 

578The $31,000 estimate is based on the following 

calculations: $11,674 (blended hourly rate for 

compliance attorney at $449 for 26 hours) + $10,045 

(blended hourly rate for business risk analyst at 

$245 for 41 hours) + $9,240 (blended hourly rate 

for senior risk management specialist at $440 for 21 

hours) ≈ $31,000. See infra note 604. 

579See supra Part IV.B (listing recent rule 

adoptions and their respective compliance dates) 

and Part III (listing compliance dates). 

580See Treasury Clearing Adopting Release, supra 

note 62, at 2717, 2791. 

581See Rule 10c–1a Adopting Release, supra note 

457, at 75647, 75717–18. The final rule adds 

‘‘registered clearing agencies’’ to the proposed rule’s 

scope of entities that are permitted to act as 

reporting agents, which was limited to brokers or 

dealers. Id. at 75656. However, a registered clearing 

agency may elect not to be a reporting agent. Id. at 

75733. 

Several commenters addressed the costs 

of the proposed amendments to Rule 

17Ad–22(e)(6)(iv). Some commenters 

stated that (a) alternate data sources are 

too costly and unlikely to substantively 

affect margin calculations,569 (b) the 

alternate data may not be available in 

the market for the desired 

circumstances,570 and (c) it may not be 

feasible to switch to a new source at the 

desired time due to capacity, timing, 

and other constraints.571 No commenter 

presented estimated data costs, and no 

commenter presented any data, 

methodology, or basis for estimating 

such costs. 

In the RWP Proposing Release, the 

Commission requested comment on 

how costly it will be for CCAs to secure 

the use of alternate risk-based margin 

systems.572 Several commenters stated 

that developing an alternate risk-based 

margin system is too costly.573 The 

amendments being adopted in this 

release do not mandate the use or 

development of an alternate risk-based 

margin system. Rather, the amendments 

require that a CCA must use procedures 

for addressing scenarios when price 

data or other substantial inputs become 

unavailable or unreliable to ensure that 

the CCA can meet its credit obligations 

to its participants, and that such 

procedures must include either: (i) price 

data or substantive inputs from an 

alternate source; or (ii) if the CCA does 

not use an alternate source, a risk-based 

margin system that does not rely on the 

unavailable or unreliable substantive 

input. As discussed in the baseline 

analysis, several CCAs already use one 

or both of these alternatives in their 

current margin systems. Even for a CCA 

that does not have policies and 

procedures developed to address this 

issue, the costs to develop such policies 

and procedures will not be very large 

because their experience dealing with 

periodic input failures means that they 

are already familiar with the risks of 

failures and the processes for dealing 

with those failures. 

c. Quantified Costs of Written Policies 

and Procedures Associated With Final 

Amendments to Rule 17Ad–22(e)(6) 

The estimated costs for the final 

amendment to Rule 17Ad–22(e)(6) may 

require a CCA to make fairly substantial 

changes to its policies and procedures. 

Based on the similar policies and 

procedures requirements and the 

corresponding estimates previously 

made by the Commission for several 

rules in the CCA Standards where the 

Commission anticipated similar 

costs,574 the Commission estimates that 

each CCA will incur a one-time cost of 

about $59,000.575 Additionally, the 

Commission estimates that the cost of 

obtaining Commission approval for any 

updated policies and procedures 

pursuant to Rule 19b–4 will 

conservatively cost about $23,000 per 

CCA.576

The final amendments to Rule 17Ad– 

22(e)(6) will also impose annual costs 

on the CCAs. The final rule will require 

ongoing monitoring and compliance 

activities with respect to the written 

policies and procedures created in 

response to the final rule. Based on the 

similar reporting requirements and the 

corresponding estimates previously 

made by the Commission for several 

rules in the CCA Standards where the 

Commission anticipated similar 

costs,577 the Commission estimates that 

the ongoing activities required by the 

amendments to Rule 17Ad–22(e)(6) will 

impose an annual cost of about 

$31,000.578

3. Other Compliance Costs 

We have considered the potential 

effects on entities that are implementing 

other recently adopted rules during the 

compliance period for these 

amendments. 

Consistent with its long-standing 

practice, the Commission’s economic 

analysis in each adopting release 

considers the incremental benefits and 

costs for the specific rule—that is, the 

benefits and costs stemming from that 

rule compared to the baseline. The 

Commission acknowledges that 

complying with more than one rule in 

the same time period may entail 

compliance costs that will be higher 

than if the rules were to be complied 

with separately. The Commission 

identified several rules for which the 

compliance periods overlap, in part, 

with the compliance periods for the 

amendments, but the compliance dates 

adopted by the Commission in recent 

rules are generally spread out over a 

period extending to January 2026.579

Entities subject to the amendments 

may be subject to one or more other 

recently adopted rules depending on 

whether those entities’ activities fall 

within the scope of the other rules. 

Specifically, the Treasury Clearing 

Adopting Release applies to certain 

clearing agencies for U.S. Treasury 

securities and certain participants of the 

CCAs.580 The Rule 10c–1a Adopting 

Release also applies to certain 

CCAs 581—although due to differing 

requirements, these rules may not all 

apply to any given CCA. Where overlap 

in compliance periods exists, the 

Commission acknowledges that there 

may be additional costs on those entities 

that are subject to one or more other 

rules. 


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582Three CCAs do not mention plan testing in 

their RWPs. See supra Part IV.B.3.h. 

583SIFMA at 4 (‘‘Failure to collect and maintain 

adequate margin from one clearing member 

transfers the risk of that deficiency to the other 

clearing members and market participants.’’). 

584See SIFMA at 10–11. 

585See John W. McPartland and Rebecca Lewis, 

The Goldilocks Problem: How to Get Incentives and 

Default Waterfalls ‘‘Just Right’’, 41 Econ. Persps. 1, 

2 (Mar. 2017), available at https://

www.chicagofed.org/publications/economicperspectives/2017/1-mcpartland-lewis (‘‘All CCPs 

have a default waterfall that provides financial 

resources for managing a clearing member default. 

The waterfall consists of both prefunded resources 

and unfunded obligations. When a clearing member 

defaults, the CCP must continue to meet defaulter’s 

financial obligations, whose performance it 

guarantees, to the non-defaulting clearing members, 

attempt to find clearing members willing accept the 

defaulter’s clients, and return to a matched book 

status by liquidating or auctioning off the 

defaulter’s positions. If the CCP cannot find other 

clearing members willing to onboard the defaulter’s 

clients, then the clients’ positions must be 

liquidated to restore the CCP to a matched book 

status. The default waterfall provides funding to 

cover the cost of meeting the defaulter’s obligations 

and liquidating the defaulter’s positions, as well as, 

if necessary, those of its clients.’’). 

586RWP Proposing Release, supra note 18, at 

34725 (‘‘25. Proposed Rule 17ad–26 would also 

require that the RWP identify triggers but does not 

prescribe a list of specific triggers. Should the 

Commission prescribe any particular triggers, 

whether qualitative or quantitative? For example, 

should the Commission require that a covered 

clearing agency should consider using the 

exhaustion of its prefunded resources as a 

trigger?’’). 

587The Associations at 17 (‘‘We propose for the 

Commission to provide a list of triggers that are 

required to be covered in the RWP, and ideally 

another list of triggers that a clearing agency should 

consider. For this second list, a clearing agency 

could determine (yet explain) that a trigger is not 

relevant for the products cleared and/or markets 

served by the clearing agency.’’). 

4. Efficiency, Competition, and Capital 

Formation 

a. Efficiency 

CCAs current policies and 

procedures, at a high level, largely align 

with final Rule 17Ad–26. As stated in 

the baseline, all CCAs make at least 

some reference in their current RWPs to 

each of the nine required elements of 

this new rule with the exception of plan 

testing.582 Therefore, the Commission 

does not expect substantive efficiency 

changes due to the final rule. 

The final amendment to Rule 17Ad– 

22(e)(6)(ii) will benefit participants by 

providing increased specificity around 

the methods used by CCAs to assess 

intraday margin calls, thus enabling 

more efficient planning in the use of 

scarce margin funds. This will reduce 

any negative effects on participants’ 

liquidity costs, as previously 

described.583

The final amendment to Rule 17Ad– 

22(e)(6)(iv) will increase informational 

efficiency by promoting the quick and 

reliable dissemination of information 

that allows for price discovery during 

periods when price data or other 

substantive inputs are not available to 

the CCA. Calculating margin and 

managing and disseminating risk 

information are core competencies of all 

CCAs, and various stakeholders rely on 

those data outputs. By requiring 

secondary sources, the final amendment 

may mitigate the reduction in efficiency 

that would otherwise happen when 

primary sources fail at a CCA that does 

not have secondary sources. Having the 

ability to continue calculating margin 

and disseminating that information to 

participants even when primary data are 

not available will prevent a reduction in 

informational efficiency when price 

data or other substantive inputs are not 

available. 

b. Competition 

As described in the baseline, CCAs 

are currently not subject to strong 

competitive pressures given high startup costs, the network effects that are 

inherent in the clearing business, their 

subsequent historical consolidation by 

market segments (options clearing for 

OCC, equities clearing for NSCC, fixed 

income clearing for FICC, etc.), and 

clearing mandates that require the use of 

clearing services.584 In terms of 

potential new entrants in the market for 

clearing and settlement services, the 

incremental costs of the final Rule 

17Ad–26 and the final amendment to 

Rule 17Ad–22(e)(6)(ii) are small and, 

therefore, unlikely to be noteworthy 

barriers to entry. The final amendment 

to Rule 17Ad–22(e)(6)(iv) may have a 

modest effect on competition because it 

imposes additional start-up costs that a 

new competitor would have to assume 

to enter the CCA market. 

As discussed above, the Commission 

acknowledges that overlapping 

compliance periods may in some cases 

increase costs. We acknowledge that to 

the extent overlap occurs between the 

compliance periods of this rule and the 

compliance periods of other rules, there 

could be costs that could affect 

competition. However, the compliance 

dates are spread over a period extending 

to January 2026. We therefore do not 

expect the risk of negative competitive 

effects from increased compliance costs 

from overlapping compliance periods to 

be significant. 

c. Capital Formation 

The Commission expects the effects of 

the final rule and amendments on 

capital formation to be ancillary because 

the final rule and amendments focus on 

issues related to secondary market 

trading and not on issues related to 

primary market issuances. To the degree 

that market participants view equity and 

fixed-income CCAs as more reliable 

venues for risk transfer, they may 

increase their activity and therefore 

signal a demand for more capitalcreating securities. 

D. Reasonable Alternatives to the Final 

Rule and Amendments 

1. Establish Precise Triggers for 

Implementation of RWPs Across All 

CCAs 

Instead of requiring CCAs to identify 

and implement their own triggers to 

recovery and orderly wind-down 

procedures, the Commission could 

adopt a more prescriptive approach and 

determine specific triggers that all CCAs 

would be required to follow. For 

example, the Commission could specify 

that exhausting prefunded financial 

resources in the waterfall structure of a 

CCA would immediately trigger a 

recovery or wind-down procedure.585

Alternatively, the Commission could 

require a trigger when unfunded 

commitments to the CCP are called 

upon and reach a specific dollar 

number. 

In the RWP Proposing Release, the 

Commission asked, ‘‘[s]hould the 

Commission prescribe any particular 

triggers, whether qualitative or 

quantitative? For example, should the 

Commission require that a CCA should 

consider using the exhaustion of its 

prefunded resources as a trigger?’’ 586

One commenter proposed both a list of 

required triggers and a list of triggers 

that each CCA should consider.587 This 

alternative would harmonize triggers 

across all CCAs, and it would create a 

single standard that market participants 

could rely on, eliminating any 

confusion or ambiguity attendant to 

different triggers. Nevertheless, CCAs 

are active in different markets (equities, 

bonds, options, CDS, etc.), have 

different organizational structures, and 

focus on different risks. As an example, 

one of the OCC’s focus areas is 

monitoring option sensitivities, and, as 

a result, its margin models and waterfall 

structure are responsive to that 

consideration while FICC, on the other 

hand, focuses on duration and 

convexity so its waterfall structure is 

more responsive to those risks. Having 

this more prescriptive approach would 

be unresponsive to the characteristics of 

each market and could expose CCAs to 

recovery or wind-down triggers that are 

not aligned with its actual risks. One 


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588OCC at 8 (‘‘Prescribing bright line, quantitative 

triggers that would apply to all CCAs, irrespective 

of their unique structures and the features of the 

markets they serve and products they clear, would 

run the risk of creating market instability by 

potentially forcing a CCA to initiate its RWP even 

when the CCA has not yet made the determination 

that it was necessary. For this reason, we support 

the Commission’s determination to allow CCAs to 

identify appropriate triggers for their individual 

circumstances.’’) (citation omitted). 

589Additional such scenarios that could be 

enumerated in new Rule 17Ad–26 could include 

any or all of the following scenarios: (A) credit 

losses or liquidity shortfalls created by single and 

multiple clearing member defaults; (B) liquidity 

shortfall created by a combination of clearing 

member default and a failure of a liquidity provider 

to perform; (C) settlement bank failure; (D) 

custodian or depository bank failure; (E) losses 

resulting from investment risk; (F) losses from poor 

business results; (G) financial effects from 

cybersecurity events; (H) fraud (internal, external, 

and/or actions of criminals or of public enemies); 

(I) legal liabilities, including those not specific to 

the CCA’s business as a CCA; (J) losses resulting 

from interconnections and interdependencies 

among the CCA and its parent, affiliates, and/or 

internal or external service providers; (K) losses 

resulting from interconnections and 

interdependencies with other CCAs; and (L) losses 

resulting from issues relating to services that are 

ancillary to the CCA’s critical services. It could also 

include scenarios involving multiple failures (e.g., 

a member default occurring simultaneously, or 

nearly so, with a failure of a service provider) that, 

in the judgment of the CCA, are particularly 

relevant to its business. 

590That is, the Commission could require in new 

Rule 17Ad–26 that the RWP include an analysis 

that includes: (A) a description of the scenario; (B) 

the events that are likely to trigger the scenario; (C) 

the CCA’s process for monitoring for such events; 

(D) the market conditions, operational and financial 

difficulties and other relevant circumstances that 

are likely to result from the scenario; (E) the 

potential financial and operational impact of the 

scenario on the CCA and on its clearing members, 

internal and external service providers and relevant 

affiliated companies, both in an orderly market and 

in a disorderly market; and (F) the specific steps the 

CCA would expect to take when the scenario 

occurs, or appears likely to occur, including, 

without limitation, any governance or other 

procedures that may be necessary to implement the 

relevant recovery tools and to ensure that such 

implementation occurs in sufficient time for the 

recovery tools to achieve their intended effect. 

591See supra Part IV.B.2; RWP Proposing Release 

supra note 18, at 34716–7 nn.68–69; id. at 34724– 

25 (discussing Request for Comment 15, and 21– 

23); see also supra notes 418 and 419 for 

commenters who recommended that the 

Commission and CFTC coordinate to ensure that 

any final rules are aligned or structured so that 

dually registered clearinghouses (i.e., CCAs 

registered with the Commission and SIDCOs 

registered with the CFTC) can efficiently comply 

with both Commission and CFTC rules. 

592For example, the Commission could require in 

new Rule 17Ad–26 that the RWP include an 

analysis that includes: (A) a description of the tools 

that the CCA would expect to use in each scenario; 

(B) the order in which each tool would be expected 

to be used; (C) the time frame within which the tool 

would be used; (D) the governance and approval 

processes and arrangements within the CCA for the 

use of each of the tools available, including the 

exercise of any available discretion; (E) the 

processes to obtain any approvals external to the 

CCA (including any regulatory approvals) that 

would be necessary to use each of the tools 

available, and the steps that might be taken if such 

approval is not obtained; (F) the steps necessary to 

implement the tools; (G) the roles and 

responsibilities of all parties, including nondefaulting participants; (H) whether the tool is 

mandatory or voluntary; (I) an assessment of the 

associated risks from the use of each tool to nondefaulting clearing members and their customers, 

linked financial market infrastructures, and the 

financial system more broadly; and (J), for winddown, an assessment of the likelihood that the tool 

would result in orderly wind-down. 

593See supra Part IV.B.2; RWP Proposing Release 

supra note 18, at 34716–7 nn.68–69; id. at 34724– 

25 (discussing Request for Comment 15, 20–22, and 

27; see also supra notes 418 and 419 for 

commenters who recommended that the 

Commission and CFTC coordinate to ensure that 

any final rules are aligned or structured so that 

dually registered clearinghouses (i.e., CCAs 

registered with the Commission and SIDCOs 

registered with the CFTC) can efficiently comply 

with both Commission and CFTC rules. 

594More specifically, a bank holding company 

structure may operate through a set of legal entities 

(e.g., a broker-dealer/futures commission merchant 

separate from a bank, which is in turn distinct from 

an information technology service provider), each 

of which has different relationships with the CCA. 

commenter agreed with the 

Commission’s conclusion.588

2. Establish Specific Scenarios and 

Analyses 

Instead of requiring CCAs to identify 

scenarios that may prevent them from 

being able to provide their core 

payment, clearing, and settlement 

services, the Commission could adopt a 

more prescriptive approach and identify 

specific scenarios in new Rule 17Ad–26 

that each CCA must include in its RWP. 

For example, the Commission could 

identify the scenario of the default of 

the CCA’s one or two largest 

participants and scenarios of specific 

business risks such as the default of a 

custodian bank or a significant cyberattack.589 The Commission could also 

require more detail regarding how each 

of the CCAs analyzes these scenarios.590

This alternative approach may reduce 

compliance costs by establishing the 

precise scope of the rule, which could 

allow CCAs to tailor their RWPs to the 

enumerated requirements for identifying 

scenarios and analyses. In addition, the 

inclusion of elements similar to those 

prescribed by other agencies that also 

regulate several CCAs could result in 

certain efficiencies and reduced costs 

for those CCAs.591

However, the adopted rule’s approach 

retains flexibility compared with this 

alternative by permitting the scenarios 

to vary across CCAs because the 

underlying risks vary across markets 

and participants. Because participants 

vary in size and economic significance 

across CCAs, scenarios invoking a predetermined number of failures or fixed 

dollar amounts may have significantly 

different effects in one CCA than in 

another. 

3. Establish Specific Rules, Policies, 

Procedures, Tools, and Resources 

Instead of requiring CCAs to describes 

the rules, policies, procedures, and any 

other tools or resources the CCA would 

rely upon in the event of a recovery or 

during an orderly wind-down to address 

the scenarios identified in their RWPs, 

the Commission could adopt a more 

prescriptive approach and identify in 

new Rule 17Ad–26 the rules, policies, 

procedures, and any other tools or 

resources for all CCAs. The Commission 

could also require in new Rule 17Ad– 

26 more detail regarding how a CCA 

analyzes its rules, policies, procedures, 

tools, and resources.592

This alternative approach may reduce 

compliance costs by establishing the 

precise scope of the rule, which could 

allow CCAs to tailor their RWPs to the 

enumerated requirements for describing 

rules, policies, procedures, and other 

tools or resources. In addition, the 

inclusion of elements similar to those 

prescribed by other agencies that also 

regulate several CCAs could result in 

certain efficiencies and reduced costs 

for those CCAs.593

However, it is better to permit the 

rules, policies, procedures, and any 

other tools or resources to vary across 

CCAs because the underlying risks and 

resources vary across CCAs. For 

example, a CCA that clears products of 

longer duration may have a greater need 

for a tear-up tool that extinguishes a 

participant’s positions in certain 

circumstances than a CCA that clears 

contracts with a relatively short 

duration. In addition, the overall 

volume of transactions settled by a CCA 

may affect the choice of its liquidity 

tools or resources, as the CCA would 

have to ensure that it had sufficient 

liquidity resources to complete 

settlement. 

4. Require the Identification of 

Interconnections and Interdependencies 

In addition to the requirements with 

respect to service providers set forth in 

final Rule 17Ad–26(a)(2), the 

Commission could require that the 

CCA’s RWP identify any financial or 

operational interconnections and 

interdependencies that the CCA has 

with other market participants. This 

would allow for consideration of the 

effect of the multiple roles and 

relationships that a single financial 

entity may have with respect to the CCA 

including affiliated entities and third 

parties (e.g., a single entity that acts as 

both a clearing member and a settlement 

bank and a liquidity provider).594

A CCA is already required to 

establish, implement, maintain, and 


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595 17 CFR 240.17ad–22(e)(20). 

596See supra Part IV.C.1. 

597Activity could be measured in different ways, 

including the number or value of cleared 

transactions. Average daily settlement value is 

much higher in the equity market (NSCC) than it 

is in the fixed income market (FICC). DTCC Annual 

Report, supra note 471. 

598The following securities markets have only 

one central counterparty: exchange-traded equity 

options (OCC), government securities (FICC), 

mortgage-backed securities (FICC), and equity 

securities (NSCC). The market for central securities 

depository services has only one provider (DTC). 

The credit default swaps market is served by LCH 

SA and ICC. 

599See 44 U.S.C. 3501 et seq. 

600Since the Commission issued the RWP 

Proposing Release, one CCA that provides CCP 

services has withdrawn its registration. See Release 

No. 34–98902 (Nov. 9, 2023), 88 FR 78428 (Nov. 15, 

2023). 

601RWP Proposing Release, supra note 18, at 

34740. 

602See, e.g., 5 U.S.C. 552. Exemption 4 of the 

Freedom of Information Act provides an exemption 

for trade secrets and commercial or financial 

information obtained from a person and privileged 

or confidential. See 5 U.S.C. 552(b)(4). Exemption 

8 of the Freedom of Information Act provides an 

exemption for matters that are contained in or 

related to examination, operating, or condition 

reports prepared by, on behalf of, or for the use of 

an agency responsible for the regulation or 

supervision of financial institutions. See 5 U.S.C. 

552(b)(8). 

enforce written policies and procedures 

reasonably designed to identify, 

monitor, and manage risks related to 

any link the CCA establishes with one 

or more other clearing agencies, 

financial market utilities, or trading 

markets.595 This requirement, in 

conjunction with the requirement to 

identify and describe service providers 

for core services and to specify to which 

core service they relate, should 

accomplish the same general objective, 

making this reasonable alternative 

redundant to the final policy choice. 

5. Establish a Specific Monitoring 

Frequency for Intraday Margin Calls 

The final amendment to Rule 17Ad– 

22(e)(6)(ii) expressly incorporates the 

requirement of intraday monitoring to 

ensure that such monitoring is done on 

an ongoing basis. One reasonable 

alternative is to prescribe the necessary 

frequency of monitoring as opposed to 

‘‘on an ongoing basis.’’ For example, 

CCAs could be required to monitor 

exposure every 5 or 15 minutes. 

However, monitoring on an ongoing 

basis is preferable because a fixed, prespecified monitoring frequency may not 

be responsive enough to risk differences 

that exist across the markets served by 

the CCAs or to volatility changes that 

may happen through time. 

6. Adopt Only Certain Elements of Rule 

17Ad–26 

Instead of adopting all nine elements 

of Rule 17Ad–26, the Commission could 

adopt a subset of the elements. For 

example, the Commission could drop 

the element to identify service providers 

or the element to address how the CCA 

would ensure that the service providers 

would continue to perform in the event 

of a recovery and during an orderly 

wind-down. Alternatively, the 

Commission could drop the element for 

plan review or the element for plan 

testing. 

It is better to adopt all nine elements 

of Rule 17Ad–26 because each element 

helps ensure that the plan is fit for 

purpose and the combination of all 

components provides sufficient and 

comprehensive identification of how a 

CCA would perform in the event of a 

recovery and during an orderly winddown. As described above, compliance 

with each of the nine elements by CCAs 

will contribute to reducing systemic risk 

and benefit other CCAs, other market 

participants, and investors in the event 

of a recovery or wind-down.596

7. Focus Intraday Margin Requirements 

on a Subset of CCAs 

As an alternative to implementing the 

intraday margin amendments on a 

blanket basis, the Commission could 

adopt a more tailored approach that 

imposes the requirements only on a 

subset of CCAs that operate in certain 

markets such as those markets with the 

highest levels of activity 597 or those 

markets that have only one CCA.598 A 

more tailored market-level risk-based 

approach would adjust to the size and 

systemic importance of each market, 

which would reduce, under this 

alternative, the compliance costs for the 

CCAs in the markets with less activity 

or with more than one available clearing 

agency. 

However, the amendments already 

include an appropriate adjustment for 

market-level risk insofar as they would 

require the CCAs to consider their own 

particular facts and circumstances when 

aligning with the final rules. For 

example, the final amendment to Rule 

17Ad–22(e)(6)(ii) would require CCAs to 

have the operational capacity to make 

intraday margin calls ‘‘as frequently as 

circumstances warrant,’’ and that 

frequency is expected to vary across 

markets and through time. 

V. Paperwork Reduction Act 

As discussed in the RWP Proposing 

Release, the amendments to Rule 17Ad– 

22(e)(6) and new Rule 17Ad–26 contain 

‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).599 The Commission submitted 

the proposed collections of information 

to the Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

the PRA. With respect to Rule 17Ad– 

22(e)(6), the title of the information 

collection is ‘‘Clearing Agency 

Standards for Operation and 

Governance’’ (OMB Control No. 3235– 

0695). With respect to Rule 17Ad–26, 

the title of the information collection is 

‘‘Rule 17Ad–26: CCA Recovery and 

Orderly Wind-Down Plans’’ (OMB 

Control No. OMB 3235–0811). An 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid OMB control 

number. 

A. Amendments to Rule 17Ad–22(e)(6) 

As discussed in the RWP Proposing 

Release, respondents under Rule 17Ad– 

22(e)(6) are CCAs that provide CCP 

services, of which there are currently 

five.600 The Commission continues to 

anticipate that one additional entity 

may seek to register as a clearing agency 

to provide CCP services in the next 

three years, and so for purposes of this 

adoption the Commission has assumed 

six respondents. 

As discussed in the RWP Proposing 

Release,601 the purpose of this 

collection of information is to enable a 

CCA to have the authority and 

operational capacity to monitor intraday 

exposures on an ongoing basis and to 

collect intraday margin in certain 

specified circumstances. The collection 

is mandatory. To the extent that the 

Commission receives confidential 

information pursuant to this collection 

of information, such information would 

be kept confidential subject to the 

provisions of applicable law.602

As discussed further in Part II, the 

amendments to Rule 17Ad–22(e)(6) 

require a CCA to establish, implement, 

maintain, and enforce written policies 

and procedures. The rule amendment 

contains similar provisions to 

preexisting rules for CCAs (i.e., Rule 

17Ad–22(e)(6)(ii) and (iv)), but also 

imposes additional requirements that 

did not appear in preexisting Rule 

17Ad–22(e)(6). As a result, a respondent 

CCA will incur burdens of reviewing 

and updating existing policies and 

procedures to consider whether it 

complies with the amendments to Rule 

17Ad–22(e)(6) and, in some cases, may 

need to create new policies and 

procedures to comply with the 

amendments to Rule 17Ad–22(e)(6). For 

example, a CCA likely will need to 

review its existing margin methodology 


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603This figure was calculated as follows: 

(Assistant General Counsel for 20 hours) + 

(Compliance Attorney for 40 hours) + (Computer 

Operations Manager for 12 hours) + (Senior 

Programmer for 20 hours) + (Senior Risk 

Management Specialist for 25 hours) + (Senior 

Business Analyst for 12 hours) = 129 hours × 6 

respondent clearing agencies = 774 hours. When 

compared to the estimates in the RWP Proposing 

Release, this reflects a reduction in the number of 

respondents from seven to six. 

604This figure was calculated as follows: 

(Compliance Attorney for 26 hours + Business Risk 

Analyst for 41 hours + Senior Risk Management 

Specialist for 21 hours) = 88 hours × 6 respondent 

clearing agencies = 528 hours. When compared to 

the estimates in the RWP Proposing Release, this 

reflects an increase of one burden hour for each of 

the Compliance Attorney, Business Risk Analyst, 

and Senior Risk Management Specialist, as well as 

a reduction in the number of respondents from 

seven to six. 

605RWP Proposing Release, supra note 18, at 

34741. 

606 Id. 

607See, e.g., 5 U.S.C. 552 et seq. Exemption 4 of 

the Freedom of Information Act provides an 

exemption for trade secrets and commercial or 

financial information obtained from a person and 

privileged or confidential. See 5 U.S.C. 552(b)(4). 

Exemption 8 of the Freedom of Information Act 

provides an exemption for matters that are 

contained in or related to examination, operating, 

or condition reports prepared by, on behalf of, or 

for the use of an agency responsible for the 

regulation or supervision of financial institutions. 

See 5 U.S.C. 552(b)(8). 

608See CCA Standards Adopting Release, supra 

note 5, at 70892 (discussing Rule 17Ad–22(e)(2)). 

609See, e.g., supra Part IV.B.3 (providing an 

overview of current RWPs). 

610This figure was calculated as follows: 

((Assistant General Counsel for 20 hours) + 

(Compliance Attorney for 50 hours) + (Business 

Risk Analyst for 35 hours) + (Senior Risk 

Management Specialist for 15) = 120 hours × 7 

respondent clearing agencies = 840 hours. When 

compared to the estimates in the RWP Proposing 

Release, this reflects a reduction in the number of 

respondents from eight to seven. 

611This figure was calculated as follows: 

((Assistant General Counsel for 10 hours) + 

Compliance Attorney for 30 hours)) × 7 respondent 

clearing agencies = 280 hours. When compared to 

the estimates in the RWP Proposing Release, this 

reflects a reduction in the number of respondents 

from eight to seven. 

612See 5 U.S.C. 601 et seq. 

613 5 U.S.C. 603(a). 

and consider whether any additional 

changes are necessary to ensure that it 

can meet the additional requirements of 

the rule. 

The estimated PRA burdens for the 

amendment to Rule 17Ad–22(e)(6) will 

require a respondent CCA to make fairly 

substantial changes to its policies and 

procedures. The amendments to Rule 

17Ad–22(e)(6) also would impose 

ongoing burdens on a respondent CCA 

by requiring ongoing monitoring and 

compliance activities with respect to the 

written policies and procedures created 

or modified in response to the rule. 

The Commission received no 

comments regarding the PRA estimates 

in the RWP Proposing Release; however, 

in addressing other comments on the 

proposed rule, the Commission has 

modified the rule text to add a 

requirement to document when the CCA 

determines not to make an intraday 

margin call, pursuant to its written 

policies and procedures for intraday 

margin collection, and this affects the 

burdens with respect to ongoing 

activities under the rule. Accordingly, 

the Commission continues to estimate 

that respondent CCAs would incur an 

aggregate one-time burden of 

approximately 774 hours to review 

existing policies and procedures and 

create new or modified policies and 

procedures.603 With respect to ongoing 

activities required by the amendments 

to Rule 17Ad–22(e)(6), the Commission 

now estimates that the final rule 

amendments will impose an aggregate 

annual burden on respondent CCAs of 

528 hours.604

B. New Rule 17Ad–26 

As discussed in the RWP Proposing 

Release,605 respondents under Rule 

17Ad–26 are CCAs, of which there are 

currently six. The Commission 

anticipates that one additional entity 

may seek to register as a CCA in the next 

three years, and so for purposes of this 

adoption the Commission has assumed 

seven respondents. 

As discussed in the RWP Proposing 

Release,606 the purpose of the 

collections under Rule 17Ad–26 is to 

ensure that CCAs include a set of 

particular items in the RWPs currently 

required under Rule 17Ad–22(e)(3)(ii). 

The collections are mandatory. To the 

extent that the Commission receives 

confidential information pursuant to 

this collection of information, such 

information would be kept confidential 

subject to the provisions of applicable 

law.607

Because Rule 17Ad–22(e)(3)(ii) 

already required CCAs to maintain 

RWPs, Rule 17Ad–26 will impose on a 

CCA similar burdens as when, for 

example, Rule 17Ad–22(e)(2) was 

proposed and CCAs generally had 

governance arrangements in place at 

that time.608 Based on the Commission’s 

review and understanding of the CCAs’ 

existing RWPs,609 respondent CCAs 

generally have written rules, policies, 

and procedures similar to the 

requirements that will be imposed 

under Rule 17Ad–26. The PRA burden 

imposed by the rule will therefore be 

minimal and will likely be limited to 

the review of current policies and 

procedures and updating existing 

policies and procedures where 

appropriate to ensure compliance with 

the rule. 

Rule 17Ad–26 will also impose 

ongoing burdens on a respondent CCA 

by requiring ongoing monitoring and 

compliance activities with respect to the 

written policies and procedures created 

or modified in response to the rule. 

The Commission received no 

comments regarding the PRA estimates 

in the RWP Proposing Release and 

estimates that respondent CCAs will 

incur an aggregate one-time burden of 

approximately 840 hours to review and 

update existing policies and 

procedures.610 The Commission also 

continues to estimate that the ongoing 

activities required by Rule 17Ad–26 will 

impose an aggregate annual burden on 

respondent CCAs of 280 hours.611

C. Chart of Total PRA Burdens 

Name of information collection Type of burden Number of 

respondents 

Initial 

burden per 

entity 

Aggregate 

initial 

burden 

Ongoing 

burden per 

entity 

Aggregate 

ongoing 

burden 

17Ad–22(e)(6) ......................... Recordkeeping ............... a 6 129 774 88 528 

17Ad–26 .................................. Recordkeeping ............... 7 120 840 40 280 

aSee supra notes 600, 605, and accompanying text (explaining that Rule 17Ad–22(e)(6) applies only to CCAs that provide CCP services, 

whereas Rule 17Ad–26 applies to all CCAs, which includes those that provide both CCP and CSD services). 

VI. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

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

promulgating rules, to consider the 

impact of those rules on small 

entities.612 Section 603(a) of the 

Administrative Procedure Act,613 as 

amended by the RFA, generally requires 

the Commission to undertake a 

regulatory flexibility analysis of all 

proposed rules to determine the impact 

of such rulemaking on ‘‘small 


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I I I I I I 
91058 Federal Register / Vol. 89, No. 222 / Monday, November 18, 2024 / Rules and Regulations 

614Section 601(b) of the RFA permits agencies to 

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

See 5 U.S.C. 601(b). The Commission has adopted 

definitions for the term ‘‘small entity’’ for the 

purposes of rulemaking in accordance with the 

RFA. These definitions, as relevant to this 

rulemaking, are set forth in 17 CFR 240.0–10. 

615See 5 U.S.C. 605(b). 

616See 17 CFR 240.0–10(d). 

617The average daily value of equities trades 

cleared by NSCC in 2023 was $1.932 trillion; at 

FICC, the total net value of government securities 

transactions in 2022 was $2.019 trillion and the 

total net par value for mortgage-backed securities in 

2023 was $58 trillion; and DTC settled a total of 

$446 trillion of securities in 2023. See DTCC, 2023 

Annual Report, at 39–40, https://www.dtcc.com/-/ 

media/Files/Downloads/Annual%20Report/2023/ 

DTCC-2023-AR-Print.pdf. In 2023, OCC cleared 

11.052 billion options contracts. See OCC, 2023 

Annual Report: 2023 Year in Review, https://

annualreport.theocc.com/2023/year-in-review. In 

addition, the notional value of CDS cleared by ICE 

was $18.8 trillion and $23.8 trillion in 2023 and 

2022, respectively. See ICE, 2023 Annual Report, at 

60, https://s2.q4cdn.com/154085107/files/doc_

financials/2023/ar/597756_002_bmk.pdf. The 

notional value of CDS cleared by LCH SA was 

Ö4,975 billion and Ö3,367 billion in 2023 and 2022, 

respectively. See LCH Group Holdings Ltd., 2023 

Annual Report, at 3, https://www.lch.com/system/ 

files/media_root/lch-group-holdings-limitedfinancial-statements.pdf. In each case, these 

volumes exceed the $500 million threshold for 

small entities. 

618See 17 CFR 240.0–10(d). The Commission 

based this determination on its review of public 

sources of financial information about registered 

clearing agencies. 619 5 U.S.C. 801 et seq. 

entities.’’ 614 Section 605(b) of the RFA 

states that this requirement shall not 

apply to any proposed rule which, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities.615 The 

Commission certified in the RWP 

Proposing Release, pursuant to section 

605(b) of the RFA, that the proposed 

rules would not, if adopted, have a 

significant impact on a substantial 

number of small entities. The 

Commission received no comments on 

this certification. 

A. Clearing Agencies 

The amendments to Rule 17Ad– 

22(e)(6) and new Rule 17Ad–26 apply to 

CCAs, which are registered clearing 

agencies that provide the services of a 

CCP or CSD. For the purposes of 

Commission rulemaking and as 

applicable to these rule amendments 

and new rule, a small entity includes, 

when used with reference to a clearing 

agency, a clearing agency that (i) 

compared, cleared, and settled less than 

$500 million in securities transactions 

during the preceding fiscal year, (ii) had 

less than $200 million of funds and 

securities in its custody or control at all 

times during the preceding fiscal year 

(or at any time that it has been in 

business, if shorter), and (iii) is not 

affiliated with any person (other than a 

natural person) that is not a small 

business or small organization.616

Based on the Commission’s existing 

information about the clearing agencies 

currently registered with the 

Commission,617 all such registered 

clearing agencies exceed the thresholds 

defining ‘‘small entities’’ set out above. 

While other clearing agencies may 

emerge and seek to register as clearing 

agencies with the Commission, no such 

entities would be ‘‘small entities’’ as 

defined in 17 CFR 240.0–10 (‘‘Exchange 

Act Rule 0–10’’).618 In any case, 

registered clearing agencies can only 

become subject to the rule amendments 

and new rule adopted in this release 

when they meet the definition of a CCA, 

as described above. Accordingly, the 

Commission preliminarily believes that 

any such registered clearing agencies 

will exceed the thresholds for ‘‘small 

entities’’ set forth in Exchange Act Rule 

0–10. 

B. Certification 

For the reasons described above, the 

Commission certifies that the 

amendments to rule 17Ad–22(e)(6) and 

new Rule 17Ad–26 do not have a 

significant economic impact on a 

substantial number of small entities for 

purposes of the RFA. 

VII. Other Matters 

The Commission considers the 

provisions of the final amendments to 

be severable to the fullest extent 

permitted by law. ‘‘If parts of a 

regulation are invalid and other parts 

are not,’’ courts ‘‘set aside only the 

invalid parts unless the remaining ones 

cannot operate by themselves or unless 

the agency manifests an intent for the 

entire package to rise or fall together.’’ 

Bd. of Cnty. Commissioners of Weld 

Cnty. v. EPA, 72 F.4th 284, 296 (D.C. 

Cir. 2023); see K Mart Corp. v. Cartier, 

Inc., 486 U.S. 281, 294 (1988). ‘‘In such 

an inquiry, the presumption is always in 

favor of severability.’’ Cmty. for Creative 

Non-Violence v. Turner, 893 F.2d 1387, 

1394 (D.C. Cir. 1990). Consistent with 

these principles, while the Commission 

believes that all provisions of the final 

amendments are fully consistent with 

governing law, if any of the provisions 

of these amendments, or the application 

thereof to any person or circumstance, 

is held to be invalid, the Commission 

intends that such invalidity shall not 

affect other provisions or application of 

such provisions to other persons or 

circumstances that can be given effect 

without the invalid provision or 

application. In particular, the 

amendments to Rule 17Ad–22(e)(6) 

pertaining to a CCA’s written policies 

and procedures for its risk-based margin 

system operate independently from new 

Rule 17Ad–26 pertaining to a CCA’s 

written policies and procedures for its 

RWPs. 

Pursuant to the Congressional Review 

Act,619 the Office of Information and 

Regulatory Affairs has designated these 

rules as a not a ‘‘major rule,’’ as defined 

by 5 U.S.C. 804(2). 

Statutory Authority 

The Commission is adopting 

amendments to Rule 17Ad–22(e)(6) and 

new Rule 17Ad–26 under the 

Commission’s rulemaking authority in 

the Exchange Act, particularly section 

17(a), 15 U.S.C. 78q(a), section 17A, 15 

U.S.C. 78q–1, and section 23(a), 15 

U.S.C. 78w(a), and the Dodd-Frank Act, 

particularly section 805 of the Clearing 

Supervision Act, 15 U.S.C. 5464. 

List of Subjects in 17 CFR Part 240 

Reporting and recordkeeping 

requirements, Securities. 

In accordance with the foregoing, title 

17, chapter II of the Code of Federal 

Regulations is amended as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 1. The authority citation for part 240 

continues to read, in part, as follows: 

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

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

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78j–4, 78k, 78k–1, 78l, 

78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 

78q, 78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll, 

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

3, 80b–4, 80b–11, 1681w(a)(1), 6801–6809, 

6825, 7201 et seq., and 8302; 7 U.S.C. 

2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 

1350; Pub. L. 111–203, 939A, 124 Stat. 1376 

(2010); and Pub. L. 112–106, sec. 503 and 

602, 126 Stat. 326 (2012), unless otherwise 

noted. 

* * * * * 

Section 240.17ad–22 is also issued under 

12 U.S.C. 5461 et seq. 

* * * * * 

■ 2. Amend § 240.17ad–22 by revising 

paragraphs (e)(6)(ii) and (iv) to read as 

follows: 

§ 240.17ad–22 Standards for clearing 

agencies. 

* * * * * 

(e) * * * 

(6) * * * 

(ii)(A) Marks participant positions to 

market and collects margin (including 

variation margin or equivalent charges if 

relevant) at least daily; 

(B) Monitors intraday exposures on an 

ongoing basis; 


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(C) Includes the authority and 

operational capacity to make intraday 

margin calls, as frequently as 

circumstances warrant, including the 

following circumstances: 

(1) When risk thresholds specified by 

the covered clearing agency are 

breached; or 

(2) When the products cleared or 

markets served display elevated 

volatility; and 

(D) Documents when the covered 

clearing agency determines not to make 

an intraday call pursuant to its written 

policies and procedures required under 

paragraph (e)(6)(ii)(C) of this section; 

* * * * * 

(iv)(A) Uses reliable sources of timely 

price data and other substantive inputs; 

(B) Uses procedures (and, with 

respect to price data, sound valuation 

models) for addressing circumstances in 

which price data or other substantive 

inputs are not readily available or 

reliable, to ensure that the covered 

clearing agency can continue to meet its 

obligations under this section; and 

(C) Such procedures under paragraph 

(e)(6)(iv)(B) of this section must include 

either: 

(1) The use of price data or 

substantive inputs from an alternate 

source; or 

(2) If it does not use an alternate 

source, the use of a risk-based margin 

system that does not rely on substantive 

inputs that are unavailable or 

unreliable; 

* * * * * 

■ 3. Section 240.17ad–26 is added to 

read as follows: 

§ 240.17ad–26 Recovery and orderly winddown plans of covered clearing agencies. 

(a) The plans for the recovery and 

orderly wind-down of the covered 

clearing agency referenced in 

§ 240.17ad–22(e)(3)(ii) must: 

(1) Identify and describe the covered 

clearing agency’s core payment, 

clearing, and settlement services and 

address how the covered clearing 

agency would continue to provide such 

core services in the event of a recovery 

and during an orderly wind-down, 

including by: 

(i) Identifying the staffing roles 

necessary to support such core services; 

and 

(ii) Analyzing how such staffing roles 

necessary to support such core services 

would continue in the event of a 

recovery and during an orderly winddown; 

(2)(i) Identify and describe any service 

providers for core services, specifying 

which core services each service 

provider supports; and 

(ii) Address how the covered clearing 

agency would ensure that service 

providers for core services would 

continue to perform in the event of a 

recovery and during an orderly winddown, including consideration of its 

written agreements with such service 

providers and whether the obligations 

under those written agreements are 

subject to alteration or termination as a 

result of initiation of the recovery and 

orderly wind-down plan; 

(3) Identify and describe scenarios 

that may potentially prevent the covered 

clearing agency from being able to 

provide its core services identified in 

paragraph (a)(1) of this section as a 

going concern, including uncovered 

credit losses (as described in 

§ 240.17ad–22(e)(4)(viii)), uncovered 

liquidity shortfalls (as described in 

§ 240.17ad–22(e)(7)(viii)), and general 

business losses (as described in 

§ 240.17ad–22(e)(15)); 

(4) Identify and describe criteria that 

could trigger the covered clearing 

agency’s implementation of the recovery 

and orderly wind-down plans and the 

process that the covered clearing agency 

uses to monitor and determine whether 

the criteria have been met, including the 

governance arrangements applicable to 

such process; 

(5) Identify and describe the rules, 

policies, procedures, and any other tools 

or resources on which the covered 

clearing agency would rely in a recovery 

or orderly wind-down; 

(6) Address how the rules, policies, 

procedures, and any other tools or 

resources identified in paragraph (a)(5) 

of this section would ensure timely 

implementation of the recovery and 

orderly wind-down plan; 

(7) Require the covered clearing 

agency to inform the Commission as 

soon as practicable when the covered 

clearing agency is considering 

implementing a recovery or orderly 

wind-down; 

(8) Include procedures for testing the 

covered clearing agency’s ability to 

implement the recovery and orderly 

wind-down plans at least every 12 

months, including by: 

(i) Requiring the covered clearing 

agency’s participants and, when 

practicable, other stakeholders to 

participate in the testing of its plans; 

(ii) Requiring that such testing be in 

addition to testing pursuant to 

§ 240.17ad–22(e)(13); 

(iii) Providing for reporting the results 

of such testing to the covered clearing 

agency’s board of directors and senior 

management; and 

(iv) Specifying the procedures for, as 

appropriate, amending the plans to 

address the results of such testing; and 

(9) Include procedures requiring 

review and approval of the plans by the 

board of directors of the covered 

clearing agency at least every 12 months 

or following material changes to the 

covered clearing agency’s operations 

that would significantly affect the 

viability or execution of the plans, with 

such review informed, as appropriate, 

by the covered clearing agency’s testing 

of the plans. 

(b) All terms used in this section have 

the same meaning as in the Securities 

Exchange Act of 1934, and unless the 

context otherwise requires, the 

following definitions apply for purposes 

of this section: 

Affiliate means a person that directly 

or indirectly controls, is controlled by, 

or is under common control with the 

covered clearing agency. 

Orderly wind-down means the actions 

of a covered clearing agency to effect the 

permanent cessation, sale, or transfer of 

one or more of its core services, as 

identified by the covered clearing 

agency pursuant to paragraph (a)(1) of 

this section, in a manner that would not 

increase the risk of significant liquidity, 

credit, or operational problems 

spreading among financial institutions 

or markets and thereby threaten the 

stability of the U.S. financial system. 

Recovery means the actions of a 

covered clearing agency, consistent with 

its rules, procedures, and other ex ante 

contractual arrangements, to address 

any uncovered loss, liquidity shortfall, 

or capital inadequacy, whether arising 

from participant default or other causes 

(such as business, operational, or other 

structural weaknesses), including 

actions to replenish any depleted 

prefunded financial resources and 

liquidity arrangements, as necessary to 

maintain the covered clearing agency’s 

viability as a going concern and to 

continue its provision of core services, 

as identified by the covered clearing 

agency pursuant to paragraph (a)(1) of 

this section. 

Service provider for core services 

means any person, including an affiliate 

or a third party, that, through a written 

agreement for services provided to or on 

behalf of the covered clearing agency, 

on an ongoing basis, directly supports 

the delivery of core services, as 

identified by the covered clearing 

agency pursuant to paragraph (a)(1) of 

this section. 

By the Commission. 

Dated: October 25, 2024. 

J. Matthew DeLesDernier, 

Deputy Secretary. 

[FR Doc. 2024–25570 Filed 11–15–24; 8:45 am] 

BILLING CODE 8011–01–P 


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