Federal Register / Vol. 89, No. 220 / Thursday, November 14, 2024 / Notices 90109 

24See Nasdaq ISE Monday Approval. 

25 15 U.S.C. 78s(b)(3)(A). 

26 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

27 17 CFR 240.19b–4(f)(6)(iii). 

28For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

29 17 CFR 200.30–3(a)(12), (59). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 99711 

(March 11, 2024), 89 FR 18991 (March 15, 2024) 

(SR–FICC–2024–003). FICC also filed the proposals 

contained in the proposed rule change as advance 

notice SR–FICC–2024–801 with the Commission 

pursuant to Section 806(e)(1) of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act 

Continued 

tailor their investment and hedging 

needs more effectively. 

The Exchange does not believe the 

proposal will impose any burden on 

inter-market competition, as nothing 

prevents the other options exchanges 

from proposing similar rules to list and 

trade Monday ETP Expirations. As 

noted above, the Commission recently 

approved a substantively identical 

proposal of another exchange.24 Further, 

the Exchange does not believe the 

proposal will impose any burden on 

intramarket competition, as all market 

participants will be treated in the same 

manner under this proposal. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 25 and Rule 19b– 

4(f)(6) thereunder.26

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act normally does not become operative 

for 30 days after the date of its filing. 

However, Rule 19b–4(f)(6)(iii) 27 permits 

the Commission to designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has requested 

that the Commission waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. According to the Exchange, 

waiver of the operative delay will 

ensure fair competition among the 

exchanges by allowing the Exchange to 

implement its proposal without delay, 

thus creating competition among Short 

Term Option Series throughout the 

industry, which will ultimately benefit 

investors. The proposed rule change 

raises no novel legal or regulatory 

issues. Thus, the Commission believes 

that waiver of the 30-day operative 

delay is consistent with the protection 

of investors and the public interest. 

Accordingly, the Commission hereby 

waives the 30-day operative delay and 

designates the proposed rule change 

operative upon filing.28

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSEARCA–2024–92 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–NYSEARCA–2024–92. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 10 

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

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NYSEARCA–2024–92 and should be 

submitted on or before December 5, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–26417 Filed 11–13–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101569; File No. SR–FICC– 

2024–003] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving a Proposed Rule Change, 

as Modified by Partial Amendment No. 

1, To Adopt a Minimum Margin Amount 

at GSD 

November 8, 2024. 

On February 27, 2024, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2024–003 

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

Securities Exchange Act of 1934 

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

The proposed rule change was 

published for comment in the Federal 

Register on March 15, 2024.3 On March 


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90110 Federal Register / Vol. 89, No. 220 / Thursday, November 14, 2024 / Notices 

entitled the Payment, Clearing, and Settlement 

Supervision Act of 2010 (‘‘Clearing Supervision 

Act’’). 12 U.S.C. 5465(e)(1); 17 CFR 240.19b– 

4(n)(1)(i). Notice of the advance notice was 

published in the Federal Register on March 15, 

2024. Securities Exchange Act Release No. 99712 

(March 11, 2024), 89 FR 18981 (March 15, 2024) 

(SR–FICC–2024–801). Pursuant to Section 

806(e)(1)(H) of the Clearing Supervision Act, the 

Commission extended the review period of the 

advance notice for an additional 60 days after 

finding that the advance notice raised novel and 

complex issues. On March 22, 2024, the 

Commission requested additional information from 

FICC pursuant to Section 806(e)(1)(D) of the 

Clearing Supervision Act, which tolled the 

Commission’s review period of review of the 

advance notice. 12 U.S.C. 5465(e)(1)(D). On April 

26, 2024, the Commission received FICC’s response 

to the Commission’s request for additional 

information. 

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

5Securities Exchange Act Release No. 99769 

(March 19, 2024), 89 FR 20716 (March 25, 2024) 

(SR–FICC–2024–003). 

6FICC has requested confidential treatment 

pursuant to 17 CFR 240.24b–2 with respect to 

Exhibit 3 and Exhibit 5b. 

7On April 5, 2024, FICC filed Partial Amendment 

No. 1 to the advance notice, which makes the same 

corrections as Partial Amendment No. 1 to the 

proposed rule change. The Commission published 

notice of the advance notice, as modified by Partial 

Amendment No. 1, for comment in the Federal 

Register on May 20, 2024. Securities Exchange Act 

Release No. 100140 (May 14, 2024), 89 FR 43941 

(May 20, 2024) (SR–FICC–2024–801). The advance 

notice, as modified by Partial Amendment No. 1, is 

hereinafter referred to as the ‘‘Advance Notice.’’ On 

August 13, 2024, the Commission made a second 

request for additional information from FICC 

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

Supervision Act, which tolled the Commission’s 

review period of review of the Advance Notice. 12 

U.S.C. 5465(e)(1)(D). On September 26, 2024, the 

Commission received FICC’s response to the 

Commission’s second request for additional 

information. 

8Securities Exchange Act Release No. 100141 

(May 14, 2024), 89 FR 43915 (May 20, 2024) (SR– 

FICC–2024–003) (‘‘Notice’’). 

9 15 U.S.C. 78s(b)(2)(B)(ii)(II). 

10Securities Exchange Act Release No. 100958 

(Sept. 6, 2024), 89 FR 74309 (Sept. 12, 2024) (SR– 

FICC–2024–003). 

11Comments on the Proposed Rule Change are 

available at https://www.sec.gov/comments/sr-ficc2024-003/srficc2024003.htm. Comments on the 

Advance Notice are available at https://

www.sec.gov/comments/sr-ficc-2024-801/ 

srficc2024801.htm. Because the proposals 

contained in the Advance Notice and the Proposed 

Rule Change are the same, all comments received 

on the proposals were considered regardless of 

whether the comments were submitted with respect 

to the Advance Notice or the Proposed Rule 

Change. 

12See Letter from Timothy B. Hulse, Managing 

Director Financial Risk, Governance & Credit Risk 

of Depository Trust & Clearing Corporation, (June 

24, 2024) (‘‘FICC Letter’’). 

13The GSD Rules are available at https://

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

rules/ficc_gov_rules.pdf. Terms not otherwise 

defined herein are defined in the GSD Rules. 14 GSD also clears and settles certain transactions 

on securities issued or guaranteed by U.S. 

government agencies and government sponsored 

enterprises. 

15See GSD Rule 4 (Clearing Fund and Loss 

Allocation), supra note 13. 

16See id. 

25, 2024, pursuant to Section 19(b)(2) of 

the Act,4 the Commission designated a 

longer period within which to approve, 

disapprove, or institute proceedings to 

determine whether to approve or 

disapprove the Proposed Rule Change.5

On April 5, 2024, FICC filed Partial 

Amendment No. 1 to the proposed rule 

change to correct errors FICC discovered 

regarding the impact analysis filed as 

Exhibit 3 and discussed in the filing 

narrative, as well as correct a typo in the 

methodology formula in Exhibit 5b.6

The corrections in Partial Amendment 

No. 1 did not change the substance of 

the proposed rule change.7 The 

proposed rule change, as modified by 

Partial Amendment No. 1, is hereinafter 

referred to as the ‘‘Proposed Rule 

Change.’’ On May 20, 2024, the 

Commission published in the Federal 

Register notice of filing of Partial 

Amendment No. 1 and an order 

instituting proceedings to determine 

whether to approve or disapprove the 

Proposed Rule Change.8 On September 

12, 2024, pursuant to Section 19(b)(2) of 

the Act,9 the Commission extended the 

period for the conclusion of proceedings 

to determine whether to approve or 

disapprove the Proposed Rule Change.10

The Commission received comment 

letters on the Proposed Rule Change.11

In addition, the Commission received a 

letter from FICC responding to the 

public comments.12 For the reasons 

discussed below, the Commission is 

approving the Proposed Rule Change. 

I. Description of the Proposed Rule 

Change 

A. Executive Summary 

FICC proposes to add a new 

Minimum Margin Amount (‘‘MMA’’) 

calculation to the GSD margin 

methodology to ensure that FICC 

collects sufficient margin amounts from 

its members during sudden periods of 

extreme market volatility. Recently, 

FICC faced increased risk exposure to its 

members during two periods of extreme 

market volatility, i.e., the COVID-related 

volatility in March 2020 and the 

volatility resulting from the successive 

interest rate hikes that began in March 

2022. Those periods of volatility 

involved market price changes that 

exceeded the GSD margin model’s 

projections, causing FICC to collect 

margin amounts that were insufficient 

to cover FICC’s risk exposure to its 

members. This highlighted the need for 

FICC to enhance the GSD margin 

methodology to provide better coverage 

during periods of extreme market 

volatility. 

FICC proposes to add the MMA 

calculation to the Value-at-Risk charge 

(‘‘VaR Charge’’) component of the GSD 

margin methodology. Whereas the 

current VaR Charge is determined as the 

greater of two separate calculations, 

FICC proposes to add the MMA as a 

third calculation so that the VaR Charge 

would be the greater of three separate 

calculations. FICC specifically designed 

the MMA calculation to be more 

responsive to volatile market conditions 

than the two existing VaR Charge 

calculations. As described more fully 

below, the MMA calculation uses a 

filtered historical simulation (‘‘FHS’’) 

approach, which takes historical price 

data, removes the historical volatility 

estimates, and replaces them with 

volatility estimates that reflect current 

market conditions. The FHS approach 

also incorporates parameters that would 

give more weight to recent market 

events, such that when market volatility 

spikes, the MMA calculation would 

generate higher amounts and be more 

likely to exceed the other two VaR 

Charge calculations. Conversely, when 

market volatility subsides, the MMA 

calculation would generate lower 

amounts and be less likely to exceed the 

other two VaR Charge calculations. 

FICC conducted a 2-year impact study 

to analyze, among other things, the 

actual daily member-level margin 

amounts and backtesting results in 

comparison to the margin amounts and 

backtesting results had the MMA 

calculation been in place. The impact 

study indicates that if FICC used the 

MMA calculation during the 2-year 

period of analysis, FICC’s margin 

collections and backtesting coverage 

would have significantly improved and 

enabled FICC to meet its 99 percent 

backtesting performance targets. 

B. Background 

FICC, through its Government 

Securities Division (‘‘GSD’’),13 serves as 

a central counterparty (‘‘CCP’’) and 

provider of clearance and settlement 

services for transactions in U.S. 

government securities, as well as 

repurchase and reverse repurchase 

transactions involving U.S. government 

securities.14 A key tool that FICC uses 

to manage its credit exposures to its 

members is the daily collection of the 

Required Fund Deposit (i.e., margin) 

from each member.15 The aggregated 

amount of all members’ Required Fund 

Deposits constitutes the Clearing Fund, 

which FICC would access should a 

defaulted member’s own Required Fund 

Deposit be insufficient to satisfy losses 

to FICC caused by the liquidation of that 

member’s portfolio.16

A member’s Required Fund Deposit 

consists of a number of components, 


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17Supra note 15. 

18See GSD Rule 1 (Definitions—VaR Charge), 

supra note 13. 

19See id. 

20Market price risk refers to the risk that 

volatility in the market causes the price of a 

security to change between the execution of a trade 

and settlement of that trade. This risk is sometimes 

also referred to as volatility risk. 

21See GSD Rule 1 (Definitions—Margin Proxy), 

supra note 13; Securities Exchange Act Release Nos. 

80341 (March 30, 2017), 82 FR 16644 (April 5, 

2017) (SR–FICC–2017–801); Securities Exchange 

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

(May 17, 2018) (SR–FICC–2018–801). 

22See Notice, supra note 8 at 43918. Specifically, 

for member portfolios that contain both long and 

short positions in different classes of securities that 

have a high degree of historical price correlation, 

the sensitivity VaR methodology can generate 

inadequate VaR Charges. See id. 

23Supra note 18. 

24See Securities Exchange Act Release No. 83362 

(June 1, 2018), 83 FR 26514 (June 7, 2018) (SR– 

FICC–2018–001). Specifically, FICC calculates the 

VaR Floor by multiplying the absolute value of the 

sum of the portfolio’s net long positions and net 

short positions, grouped by product and remaining 

maturity, by a percentage designated by FICC for 

such group. For U.S. Treasury and agency 

securities, such percentage shall be a fraction, no 

less than 10 percent, of the historical minimum 

volatility of a benchmark fixed income index for 

such group by product and remaining maturity. For 

mortgage-backed securities, such percentage shall 

be a fixed percentage that is no less than 0.05 

percent. Supra note 18. 

25See Notice, supra note 8 at 43918. 

26Supra note 18. 

27Backtesting is an ex-post comparison of actual 

outcomes (i.e., the actual margin collected) with 

expected outcomes derived from the use of margin 

models. See 17 CFR 240.17ad–22(a)(1). 

28FICC’s Model Risk Management Framework 

(‘‘Model Risk Management Framework’’) sets forth 

the model risk management practices of FICC and 

states that VaR and Clearing Fund requirement 

coverage backtesting would be performed on a daily 

basis or more frequently. See Securities Exchange 

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

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

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

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

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

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

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

10411 (Feb. 24, 2022) (SR–FICC–2022–001); 97890 

(July 13, 2023), 88 FR 46287 (July 19, 2023) (SR– 

FICC–2023–008). 

29Members may be required to post additional 

collateral to the Clearing Fund in addition to their 

Required Fund Deposit amount. See e.g., Section 7 

of GSD Rule 3 (Ongoing Membership 

Requirements), supra note 13 (providing that 

adequate assurances of financial responsibility of a 

member may be required, such as increased 

Clearing Fund deposits). For backtesting 

comparisons, FICC uses the Required Fund Deposit 

amount, without regard to the actual, total collateral 

posted by the member to the GSD Clearing Fund. 

30 During the periods of relatively low to 

moderate market volatility from January 2013 to 

March 2020, the VaR model generally performed 

above the 99 percent performance targets. See 

Notice, supra note 8 at 43917. 

31 During the pandemic-related volatility in 

March 2020 and the successive interest rate hikes 

that began in March 2022, the VaR model fell below 

the 99 percent performance targets. See Notice, 

supra note 8 at 43916–18. 

32As part of the Proposed Rule Change, FICC 

filed Exhibit 3—FICC Impact Study. Pursuant to 17 

CFR 240.24b–2, FICC requested confidential 

treatment of Exhibit 3. 

33See Notice, supra note 8 at 43921. 

34See id. 

35See Notice, supra note 8 at 43916–18. 

36See id. 

37See id. 

38The proposed changes would revise the GSD 

Rules and FICC’s Methodology Document—GSD 

Initial Market Risk Margin Model (the ‘‘QRM 

Continued 

each of which is calculated to address 

specific risks faced by FICC.17 The VaR 

Charge generally comprises the largest 

portion of a member’s Required Fund 

Deposit amount. The VaR Charge is a 

calculation of the volatility of the 

unsettled securities positions in a 

member’s portfolio.18 For each member 

portfolio, FICC currently uses two 

separate methods to calculate amounts, 

the greater of which constitutes the 

member’s VaR Charge.19

FICC’s first calculation uses a 

sensitivity-based VaR methodology to 

estimate the possible losses for a given 

portfolio based on: (1) confidence level, 

(2) a time horizon, and (3) historical 

market volatility. The sensitivity VaR 

methodology is intended to capture the 

market price risks that are associated 

with the securities positions in a 

member’s margin portfolio,20 at a 99 

percent confidence level. This 

methodology projects the potential 

losses that could occur in connection 

with the liquidation of a defaulting 

member’s portfolio, assuming a portfolio 

would take three days to liquidate in 

normal market conditions. The 

sensitivity VaR methodology relies on 

sensitivity data and historical risk factor 

time series data generated by an external 

vendor to calculate the risk profile of 

each member’s portfolio. In the event of 

a vendor data disruption, the GSD Rules 

provide for an alternative volatility 

calculation that relies on historical 

market index proxies (the ‘‘Margin 

Proxy’’ calculation).21

FICC recognizes that the sensitivity 

VaR methodology might not generate 

margin amounts sufficient to cover its 

exposure to its members consistent with 

its regulatory obligations when applied 

to certain types of member portfolios.22

Therefore, FICC’s second calculation 

uses a haircut-based methodology 

(currently referred to in the GSD Rules 

as the ‘‘VaR Floor’’),23 in which FICC 

applies a haircut to the market value of 

the gross unsettled positions in the 

member’s portfolio.24 The current VaR 

Floor is not designed to address the risk 

of potential underperformance of the 

sensitivity VaR methodology under 

extreme market volatility.25 Each 

member’s VaR Charge is either the 

sensitivity VaR calculation or the VaR 

Floor calculation, whichever is 

greater.26

FICC regularly assesses whether its 

margin methodologies generate margin 

levels commensurate with the particular 

risk attributes of each relevant product, 

portfolio, and market. For example, 

FICC employs daily backtesting 27 to 

determine the adequacy of margin 

collections from its members.28 FICC 

compares each Member’s Required 

Fund Deposit 29 with the simulated 

liquidation gains/losses, using the 

actual positions in each member 

portfolio and the actual historical 

security returns. A backtesting 

deficiency occurs when a member’s 

Required Fund Deposit would not have 

been adequate to cover the projected 

liquidation losses. Backtesting 

deficiencies highlight exposures that 

could subject FICC to potential losses in 

the event of a member default. 

FICC believes that its current VaR 

model has performed well in low to 

moderate volatility markets,30 though it 

has not met FICC’s performance targets 

during periods of extreme market 

volatility.31 As described more fully 

below, FICC performed an impact study 

on its members’ margin portfolios 

covering the period beginning July 1, 

2021 through June 30, 2023 (‘‘Impact 

Study’’).32 During the period of the 

Impact Study, FICC’s VaR model 

backtesting coverage was 98.86 percent, 

with 843 VaR model backtesting 

deficiencies.33 Also, during the period 

of the Impact Study, FICC’s overall 

margin backtesting coverage was 98.87 

percent, with 685 overall margin 

backtesting deficiencies.34 Thus, the 

Impact Study demonstrates that FICC’s 

backtesting metrics fell below 

performance targets during the period of 

the Impact Study.35 FICC states that the 

foregoing backtesting deficiencies are 

attributable to recent periods of extreme 

volatility in the fixed income market 

caused by monetary policy changes, 

inflation, and recession fears, which 

have led to greater risk exposures for 

FICC.36 Specifically, FICC states that the 

periods of extreme market volatility in 

March 2020 related to the COVID 

pandemic and the successive interest 

rate hikes that began in March 2022, 

have led to market price changes that 

exceeded the projections of FICC’s 

current VaR model, resulting in 

insufficient VaR Charges.37

Accordingly, in the Proposed Rule 

Change, FICC proposes changes to the 

VaR model that FICC believes would 

mitigate the risk of potential 

underperformance of the VaR model 

during periods of extreme market 

volatility.38


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Methodology’’) relevant to the VaR model. As part 

of the Proposed Rule Change, FICC filed Exhibit 

5b—Proposed Changes to the QRM Methodology. 

Pursuant to 17 CFR 240.24b–2, FICC requested 

confidential treatment of Exhibit 5b. FICC originally 

filed the QRM Methodology as a confidential 

exhibit to proposed rule change SR–FICC–2018– 

001. See supra note 24; see also Securities Exchange 

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

(May 17, 2018) (SR–FICC–2018–801). FICC has 

subsequently amended the QRM Methodology. See 

Securities Exchange Act Release Nos. 85944 (May 

24, 2019), 84 FR 25315 (May 31, 2019) (SR–FICC– 

2019–001); 90182 (Oct. 14, 2020), 85 FR 66630 (Oct. 

20, 2020) (SR–FICC–2020–009); 93234 (Oct. 1, 

2021), 86 FR 55891 (Oct. 7, 2021) (SR–FICC–2021– 

007); 95605 (Aug. 25, 2022), 87 FR 53522 (Aug. 31, 

2022) (SR–FICC–2022–005); 97342 (Apr. 21, 2023), 

88 FR 25721 (Apr. 27, 2023) (SR–FICC–2023–003); 

99447 (Jan. 30, 2024), 89 FR 8260 (Feb. 6, 2024) 

(SR–FICC–2024–001). 

39FICC refers to the proposed approach as the 

‘‘price return-based risk representation’’ in the QRM 

Methodology. See Notice, supra note 8 at 43918. 

Given the availability and accessibility of historical 

price returns data, FICC believes the proposed 

approach would help minimize and diversify 

FICC’s risk exposure from external data vendors. 

See id. 

40The FHS method differs from the historical 

simulation method, which uses historical price 

return data as is, by incorporating the volatilities of 

historical price returns. In particular, the FHS 

method constructs the filtered historical price 

returns in two steps: ‘‘devolatilizing’’ the historical 

price returns by dividing them by a volatility 

estimate for the day of the price return; and 

‘‘revolatilizing’’ the devolatilized price returns by 

multiplying them by a volatility estimate based on 

the current market. For additional background on 

the FHS method, see Filtered Historical Simulation 

Value-at-Risk Models and Their Competitors, Pedro 

Gurrola-Perez and David Murphy, Bank of England, 

March 2015, at www.bankofengland.co.uk/workingpaper/2015/filtered-historical-simulation-value-atrisk-models-and-their-competitors. 

41FICC would provide members with at least one 

Business Day advance notice of any change to the 

decay factor via an Important Notice. 

42The ‘‘repo interest volatility charge’’ is a 

component of the VaR Charge designed to address 

repo interest volatility. The repo interest volatility 

charge is calculated based on internally constructed 

repo interest rate indices. As proposed, FICC would 

include the repo interest volatility charge as a 

component of the MMA; however, FICC is not 

proposing to otherwise change the repo interest 

volatility charge or the manner in which it is 

calculated. See Notice, supra note 8 at 43918. 

43The ‘‘bid-ask spread risk charge’’ is a 

component of the VaR Charge designed to address 

transaction costs related to bid-ask spread in the 

market that FICC could incur when liquidating a 

portfolio. As proposed, FICC would include the bidask spread risk charge as a component of the MMA; 

however, FICC is not proposing to otherwise change 

the bid-ask spread risk charge or the manner in 

which it is calculated. See Notice, supra note 8 at 

43918. 

44See Notice, supra note 8 at 43919. 

45See Notice, supra note 8 at 43916–17. 

46See Model Risk Management Framework, supra 

note 28. 

C. Proposed Changes 

In the Proposed Rule Change, FICC 

proposes to introduce a new minimum 

margin amount (i.e., the MMA) into the 

GSD margin methodology. FICC 

proposes to calculate the MMA for each 

member portfolio as a supplement to the 

existing sensitivity VaR calculation and 

the haircut-based VaR Floor calculation 

described above in Section I.B. FICC 

proposes to rename the current haircutbased VaR Floor calculation as the ‘‘VaR 

Floor Percentage Amount.’’ FICC 

proposes to revise the existing VaR 

Floor definition to mean the greater of 

(1) the VaR Floor Percentage Amount, 

and (2) the MMA. Thus, the greater of 

the three calculations (i.e., sensitivity 

VaR, VaR Floor Percentage Amount, and 

MMA) would constitute the member’s 

VaR Charge. Additionally, FICC 

proposes to clarify that the VaR Floor 

would also apply in the event that the 

Margin Proxy is invoked. The proposed 

changes are described in greater detail 

below. 

1. Minimum Margin Amount 

Calculation 

FICC would calculate the MMA for 

each portfolio using historical price 

returns to represent risk.39 FICC would 

calculate the MMA as the sum of the 

following: (1) amounts calculated using 

an FHS approach 40 to assess volatility 

by scaling historical market price 

returns to current market volatility, with 

market volatility being measured by 

applying an exponentially weighted 

moving average (‘‘EWMA’’) to the 

historical market price returns with a 

decay factor between 0.93 and 0.99,41 as 

determined by FICC based on sensitivity 

analysis, macroeconomic conditions, 

and/or backtesting performance; (2) 

amounts calculated using a haircut 

method to measure the risk exposure of 

those securities that lack sufficient 

historical price return data; and (3) 

amounts calculated to incorporate risks 

related to (i) repo interest volatility 

(‘‘repo interest volatility charge’’) 42 and 

(ii) transaction costs related to bid-ask 

spread in the market that could be 

incurred when liquidating a portfolio 

(‘‘bid-ask spread risk charge’’).43

FHS Method: For the FHS method, 

FICC would first construct historical 

price returns using certain mapped 

fixed income securities benchmarks. 

Specifically, FICC proposes to use the 

following mapped fixed income 

securities benchmarks with the FHS 

method when calculating the MMA: (1) 

Bloomberg Treasury indexes for U.S. 

Treasury and agency securities; (2) 

Bloomberg TIPS indexes for Treasury 

Inflation-Protected Securities (‘‘TIPS’’); 

and (3) to-be-announced (‘‘TBA’’) 

securities for mortgage-backed securities 

(‘‘MBS’’) pools. FICC states that it chose 

these benchmarks because their price 

movements generally closely track those 

of the securities mapped to them and 

that their price history is generally 

readily available and accessible.44

After constructing historical price 

returns, FICC would estimate a market 

volatility associated with each historical 

price return by applying an EWMA to 

the historical price returns. FICC would 

‘‘devolatilize’’ the historical price 

returns (i.e., remove an amount 

attributable to the historical market 

volatility from the price returns) by 

dividing them by the corresponding 

EWMA volatilities to obtain the residual 

returns. FICC would ‘‘revolatilize’’ the 

residual returns (i.e., add an amount 

attributable to the current market 

volatility to the residual returns) by 

multiplying them by the current EWMA 

volatility to obtain the filtered returns. 

FICC proposes to use the FHS method 

to improve the responsiveness of the 

VaR model to periods of extreme market 

volatility because historical returns are 

scaled to current market volatility.45

FICC would use filtered return time 

series to simulate the profits and losses 

of a member’s portfolio and derive the 

volatility of the portfolio using the 

standard historical simulation approach. 

Specifically, FICC would map each 

security that is in a member’s portfolio 

to a respective fixed income securities 

benchmark, as applicable, based on the 

security’s asset class and remaining 

maturity. FICC would use the filtered 

returns of the benchmark as the 

simulated returns of the mapped 

security to calculate the simulated 

profits and losses of a member’s 

portfolio. Finally, FICC would calculate 

the MMA as the 99-percentile of the 

simulated portfolio loss. In accordance 

with FICC’s model risk management 

practices and governance set forth in the 

Clearing Agency Model Risk 

Management Framework,46 FICC would 

determine the mapped fixed income 

securities benchmarks, historical market 

price returns, parameters, and volatility 

assessments used to calculate the MMA. 

FHS Parameters: The proposed MMA 

would use a lookback period for the 

FHS and a decay factor for calculating 

the EWMA volatility of the historical 

price returns. Specifically, the MMA 

lookback period would be the same as 

the lookback period currently used for 

the sensitivity VaR calculation, which is 

10 years, plus, to the extent applicable, 

a stressed period. FICC would analyze 

the MMA’s lookback period and 

evaluate its sensitivity and impact on 

margin model performance, consistent 

with the VaR methodology outlined in 

the QRM Methodology and pursuant to 

the model performance monitoring 


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47The Model Risk Management Framework 

provides that all models undergo ongoing model 

performance monitoring and backtesting, which is 

the process of evaluating an active model’s ongoing 

performance based on theoretical tests, monitoring 

the model’s parameters through the use of threshold 

indicators, and/or backtesting using actual 

historical data/realizations to test a VaR model’s 

predictive power. Supra note 28. 

48See Notice, supra note 8 at 43920. 

49See id. 

50See Model Risk Management Framework, supra 

note 28. Similar to the lookback period described 

above, FICC would also analyze the decay factor to 

evaluate its sensitivity and impact to the model 

performance pursuant to the model performance 

monitoring required under the Model Risk 

Management Framework. 

51Accounting for the basis risk would enable 

FICC to explicitly model and manage the basis risk 

between an agency security and the mapped U.S. 

Treasury index, given that agency securities are not 

as actively traded as U.S. Treasury securities. 

52See note 28. 

53See Notice, supra note 8 at 43920. 

54See id. 

55See id. 

56See Model Risk Management Framework, supra 

note 28. 

57FICC states that it currently does not use 

Margin Proxy as an adjustment factor to the VaR 

and does not intend to use it as such in the future. 

See Notice, supra note 8 at 43921. 

58The Backtesting Charge is an additional charge 

that may be added to a member’s VaR Charge to 

mitigate exposures to FICC caused when the 

member exhibits a pattern of breaching the target 

coverage ratio of 99 percent. See GSD Rule 1 

(Definitions—Backtesting Charge), supra note 13. 

59Margin Proxy was not invoked during the 

period of the Impact Study. However, if the 

proposed MMA had been in place and the Margin 

Proxy was invoked during the period of the Impact 

Study: the aggregate average daily SOD VaR Charges 

would have increased by approximately $4.16 

billion or 20.97 percent; the VaR model backtesting 

coverage would have increased from approximately 

98.17 percent to 99.38 percent; and the number of 

the VaR model backtesting deficiencies would have 

been reduced by 899 (from 1358 to 459, or 

approximately 66.2 percent). See Notice, supra note 

8 at 43921 

required under the Model Risk 

Management Framework.47

The decay factor generally affects (1) 

whether and how the MMA would be 

invoked (i.e., applied as a member’s VaR 

Charge), (2) the peak level of margin 

increase or the degree of procyclicality, 

and (3) how quickly the margin would 

fall back to pre-stress levels. As 

proposed, FICC would have the 

discretion to set the decay factor 

between 0.93 and 0.99, with the initial 

decay factor value set at 0.97. FICC 

expects that any adjustment to the decay 

factor would be an infrequent event that 

would typically happen only when 

there is an unprecedented market 

volatility event resulting in risk 

exposures to FICC that cannot be 

adequately mitigated by the thencalibrated decay factor.48 FICC’s 

decision to adjust the decay factor 

would be based on an analysis of the 

decay factor’s sensitivity and impact to 

the model performance, considering 

factors including the impact to the VaR 

Charges, macroeconomic conditions, 

and/or backtesting performance.49 Any 

decision by FICC to adjust the decay 

factor would be in accordance with 

FICC’s model risk management practices 

and governance set forth in the Model 

Risk Management Framework.50

Haircut Method: Occasionally, a 

member’s portfolio might contain 

classes of securities that reflect market 

price changes that are not consistently 

related to historical price moves. The 

value of such securities is often 

uncertain because the securities’ market 

volume varies widely. Because the 

volume and historical price information 

for such securities are not sufficient to 

perform accurate statistical analyses, the 

FHS method would not generate an 

MMA amount that adequately reflects 

the risk profile of such securities. 

Accordingly, FICC would use a haircut 

method to assess the market risk of 

securities that are more difficult to 

simulate (e.g., due to thin trading 

history). 

Specifically, FICC would use a haircut 

method for MBS pools that are not TBA 

securities eligible, floating rate notes, 

and U.S. Treasury/agency securities 

with remaining time to maturities of less 

than or equal to one year. FICC would 

also use a haircut method to account for 

the basis risk between an agency 

security and the mapped U.S. Treasury 

index to supplement the historical 

market price moves generated by the 

FHS method for agency securities to 

reflect any residual risks between 

agency securities and the mapped fixed 

income securities benchmarks (i.e., 

Bloomberg Treasury indexes).51

Similarly, FICC would use a haircut 

method to account for the MBS pool/ 

TBA basis risk to address the residual 

risk for using TBA price returns as 

proxies for MBS pool returns used in 

the FHS method. 

Ongoing Performance Monitoring: The 

Model Risk Management Framework 

would require FICC to conduct ongoing 

model performance monitoring of the 

MMA methodology.52 FICC’s current 

model performance monitoring 

practices would provide for sensitivity 

analysis of relevant model parameters 

and assumptions to be conducted 

monthly, or more frequently when 

markets display high volatility.53

Additionally, FICC would monitor each 

member’s Required Fund Deposit and 

the aggregate Clearing Fund 

requirements versus the requirements 

calculated by the MMA, by comparing 

the results versus the three-day profit 

and loss of each member’s portfolio 

based on actual market price moves.54

Based on the results of the sensitivity 

analysis and/or backtesting, FICC could 

consider adjustments to the MMA, 

including changing the decay factor as 

appropriate.55 Any adjustment to the 

MMA calculation would be subject to 

the model risk management practices 

and governance process set forth in the 

Model Risk Management Framework.56

Impact Study: As mentioned above in 

Section I.B., FICC performed an Impact 

Study on its members’ margin portfolios 

covering the period beginning July 1, 

2021 through June 30, 2023.57 The 

Impact Study lists the actual daily and 

average VaR Charges at both the 

member-level and CCP-level during the 

period of the Impact Study, compared 

with how those amounts would have 

changed if the proposed MMA had been 

in place. The Impact Study also lists the 

actual daily backtesting results at the 

member-level during the period of the 

Impact Study, compared with how those 

amounts would have changed if the 

proposed MMA had been in place. The 

Impact Study shows that if the proposed 

MMA had been in place during the 

period of the Impact Study, when 

compared to the current VaR 

methodology: (1) the aggregate average 

daily start-of-day (‘‘SOD’’) VaR Charges 

would have increased by approximately 

$2.90 billion or 13.89 percent; (2) the 

aggregate average daily noon VaR 

Charges would have increased by 

approximately $3.03 billion or 14.06 

percent; and (3) the aggregate average 

daily Backtesting Charges 58 would have 

decreased by approximately $622 

million or 64.46 percent.59

The Impact Study indicates that if the 

proposed MMA had been in place, the 

VaR model backtesting coverage would 

have increased from approximately 

98.86 percent to 99.46 percent during 

the period of the Impact Study and the 

number of VaR model backtesting 

deficiencies would have been reduced 

by 441 (from 843 to 402, or 

approximately 52 percent). The Impact 

Study also indicates that if the proposed 

MMA had been in place: (1) overall 

margin backtesting coverage would have 

increased from approximately 98.87 

percent to 99.33 percent, (2) the number 

of overall margin backtesting 

deficiencies would have been reduced 

by 280 (from 685 to 405, or 

approximately 41 percent), and (3) the 

overall margin backtesting coverage for 

94 members (approximately 72 percent 

of the GSD membership) would have 

improved, with 36 members who were 

below 99 percent coverage brought back 

to above 99 percent. 


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60The term ‘‘Net Capital’’ means, as of a 

particular date, the amount equal to the net capital 

of a broker or dealer as defined in SEC Rule 15c3– 

1(c)(2), or any successor rule or regulation thereto. 

See GSD Rule 1 (Definitions), supra note 13. 

61FICC may deem such data to be unavailable 

and deploy Margin Proxy when there are concerns 

with the quality of data provided by the vendor. See 

Notice, supra note 8 at 43920. 

62See id. 

63 15 U.S.C. 78s(b)(2)(C). 

64 15 U.S.C. 78q–1(b)(3)(F) and (b)(3)(I). 

66 15 U.S.C. 78q–1(b)(3)(F). 

67The Impact Study, filed confidentially as 

Exhibit 3, includes, among other things, the 

following confidentially filed information covering 

the period from July 1, 2021 through June 30 2023: 

actual daily VaR amounts for each member; daily 

VaR amounts for each member had MMA been 

implemented; daily VaR increase (reflected in 

dollars, percent, and percent of Net Capital), if any, 

attributable to MMA; average member-level VaR 

amounts (reflected in dollars and average of Net 

Capital); average member-level VaR amounts had 

MMA been implemented; average member-level 

VaR increase (reflected in percent and percent of 

Net Capital), if any, attributable to MMA; further 

analysis of the foregoing data to determine 

minimum, maximum, and average increases to 

member-level VaR amounts, Net Capital amounts, 

and CCP-level VaR amounts; member-level VaR 

amounts had Margin Proxy been invoked (daily and 

summarized); and member-level backtesting results 

(daily and summarized). 

68See supra notes 3, 7. Because the proposals 

contained in the Proposed Rule Change and the 

Advance Notice are the same, all information 

submitted by FICC was considered regardless of 

whether the information was submitted with 

respect to the Proposed Rule Change or the 

Advance Notice. FICC’s responses to the 

Commission’s requests for additional information 

with respect to the Advance Notice include, among 

other things, the following confidentially filed 

information: FICC’s proprietary information 

regarding the GSD margin methodology; backtesting 

data and analyses of daily member-level sensitivity 

VaR, Margin Proxy, and MMA amounts with 

alternative stress periods; daily member-level 

backtesting, sensitivity VaR, and MMA amounts 

during the Impact Study period specific to bond 

and MBS positions; and daily member-level 

sensitivity VaR and MMA amounts for the period 

of February 1, 2024 through July 31, 2024, with 

analysis relating to the FICC–CME cross-margining 

arrangement. 

On average, at the member-level, the 

proposed MMA would have increased 

the SOD VaR Charge by approximately 

$22.43 million, or 17.56 percent, and 

the noon VaR Charge by approximately 

$23.25 million, or 17.43 percent, over 

the period of the Impact Study. The 

largest average percentage increase in 

SOD VaR Charge for any member would 

have been approximately 66.88 percent, 

or $97,051 (0.21percent of the member’s 

average Net Capital),60 and the largest 

average percentage increase in noon 

VaR Charge for any member would have 

been approximately 64.79 percent, or 

$61,613 (0.13 percent of the member’s 

average Net Capital). The largest average 

dollar increase in SOD VaR Charge for 

any member would have been 

approximately $268.51 million (0.34 

percent of the member’s average Net 

Capital), or 19.06 percent, and the 

largest dollar increase in noon VaR 

Charge for any member would have 

been approximately $289.00 million 

(1.07 percent of the member’s average 

Net Capital), or 13.67 percent. The top 

10 members based on the size of their 

average SOD VaR Charges and average 

noon VaR Charges would have 

contributed approximately 51.87 

percent and 53.64 percent of the 

aggregated SOD VaR Charges and 

aggregated noon VaR Charges, 

respectively, during the period of the 

Impact Study had the proposed MMA 

been in place. The same members 

would have contributed to 50.08 percent 

and 51.52 percent of the increase in 

aggregated SOD VaR Charges and 

aggregated noon VaR Charges, 

respectively, had the proposed MMA 

been in place during the period of the 

Impact Study. 

2. Clarification of VaR Floor To Include 

Margin Proxy 

As mentioned above in Section I.B., 

the Margin Proxy methodology is 

currently invoked as an alternative 

volatility calculation if the requisite 

vendor data used for the sensitivity VaR 

calculation is unavailable for an 

extended period of time.61 FICC 

proposes to clarify that the VaR Floor, 

which does not depend upon any 

vendor data, operates as a floor for the 

Margin Proxy, such that if the Margin 

Proxy, when invoked, is lower than the 

VaR Floor, then the VaR Floor would be 

utilized as the VaR Charge with respect 

to a member’s portfolio. FICC believes 

this clarification would enable Margin 

Proxy to be an effective risk mitigant 

under extreme market volatility and 

heightened market stress because as 

discussed above in Section I.C.1., the 

proposed VaR Floor would include the 

MMA calculation.62

II. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 63

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Act and 

rules and regulations thereunder 

applicable to such organization. After 

carefully considering the Proposed Rule 

Change, the Commission finds that the 

Proposed Rule Change is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to FICC. In particular, the 

Commission finds that the Proposed 

Rule Change is consistent with Sections 

17A(b)(3)(F) and (b)(3)(I) of the Act 64

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

(e)(23)(ii) thereunder.65

A. Consistency With Section 

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

Section 17A(b)(3)(F) of the Act 66

requires that the rules of a clearing 

agency, such as FICC, be designed to, 

among other things, (i) promote the 

prompt and accurate clearance and 

settlement of securities transactions, (ii) 

assure the safeguarding of securities and 

funds which are in the custody or 

control of the clearing agency or for 

which it is responsible, and (iii) protect 

investors and the public interest. 

As described above in Section I.C., 

FICC proposes to introduce the MMA 

into its margin methodology to help 

ensure that FICC collects sufficient 

margin to manage its potential loss 

exposure during periods of extreme 

market volatility. Specifically, the 

extreme market volatilities during 

recent stressful market periods led to 

market price changes that exceeded the 

current VaR model’s projections, 

generating margin amounts that were 

not sufficient to mitigate FICC’s credit 

exposure to its members’ portfolios at a 

99 percent confidence level. FICC’s 

proposed incorporation of the MMA 

calculation into the GSD margin 

methodology would result in margin 

levels that better reflect the risks and 

particular attributes of member 

portfolios during periods of extreme 

market volatility. 

Implementing the MMA would enable 

FICC to collect additional margin when 

the market price volatility implied by 

the current sensitivity VaR calculation 

and VaR Floor calculation is lower than 

the market price volatility implied by 

the proposed MMA calculation. In its 

consideration of the proposed MMA, the 

Commission reviewed and analyzed the: 

(1) Proposed Rule Change, including the 

supporting exhibits that provided 

confidential information on the 

proposed MMA calculation, Impact 

Study (including detailed information 

regarding the impact of the proposed 

changes on the portfolios of each FICC 

member over various time periods),67

and backtesting coverage results, (2) 

FICC’s response to the Commission’s 

requests for additional information; 68

(3) public comments and FICC’s 

response; and (4) the Commission’s own 

understanding of the performance of the 

current GSD margin methodology, with 

which the Commission has experience 

from its general supervision of FICC, 

compared to the proposed margin 

methodology. 

Based on the Commission’s review of 

the Impact Study, had the proposed 


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69See Notice, supra note 8 at 43921. 

70See id. 71See Notice, supra note 8 at 43917. 

72See 15 U.S.C. 78q–1(b)(3)(F). 

73See id. 

MMA been in place, both the VaR 

model backtesting coverage and the 

overall margin backtesting coverage 

would have risen above the 99 percent 

confidence level to 99.46 percent and 

99.33 percent, respectively, over the 

time period covered by the Impact 

Study.69 Additionally, the number of 

VaR model backtesting deficiencies and 

overall margin backtesting deficiencies 

would have been reduced by 441 and 

280, respectively.70

The proposed MMA methodology 

would be more likely to apply as the 

VaR Charge during periods of extreme 

market volatility because the MMA 

methodology is more responsive to 

spikes in market volatility than the 

sensitivity VaR calculation. As 

described above in Section I.C.1., the 

MMA calculation relies, in part, on the 

FHS method, which takes historical 

price data, removes the historical 

volatility estimates, and replaces them 

with volatility estimates that reflect 

current market conditions. Additionally, 

as described above in Section I.C.1., the 

decay factor used in the FHS method 

affects: (1) whether and how the MMA 

would apply to determine a member’s 

VaR Charge; (2) the peak level of margin 

increase or the degree of procyclicality; 

and (3) how quickly the margin would 

fall back to pre-stress levels. A faster 

decay (i.e., smaller decay factor value), 

like the one FICC intends to use 

initially, would give more weight to 

more recent market events, while a 

slower decay would give more weight to 

older market events. Thus, when market 

volatility spikes, the MMA calculation 

would generate higher amounts and 

thereby be more likely to apply as the 

VaR Charge (after exceeding the 

sensitivity VaR calculation). Conversely, 

when market volatility subsides, the 

MMA calculation would generate lower 

amounts and be less likely to apply. 

The Impact Study supports this 

analysis. If the proposed MMA 

calculation had been in place during the 

period of the Impact Study, the MMA 

would have applied primarily during 

the recent extreme market volatility 

events (i.e., those in March 2020 and 

commencing in March 2022). In 

contrast, during periods of low to 

moderate market volatility, the MMA 

calculation would generally not be the 

greatest amount of the three calculations 

and thus, would not be invoked. 

Instead, in periods of low to moderate 

market volatility, the sensitivity VaR 

calculation is likely to be the VaR 

Charge for members whose portfolios do 

not contain long and short positions in 

different classes of securities that share 

a high degree of price correlation. For 

such long/short portfolios, in low to 

moderate volatility markets, the VaR 

Floor Percentage Amount calculation is 

more likely to be the VaR Charge. The 

sensitivity VaR calculation and VaR 

Floor Percentage Amount calculations 

are likely to generate sufficient margin 

levels above FICC’s 99 percent 

performance targets during periods of 

low to moderate market volatility. 

Indeed, during the periods of low to 

moderate market volatility from January 

2013 to March 2020, the GSD VaR 

model has generally performed above 

FICC’s 99 percent backtesting 

performance targets.71 Implementing the 

proposed MMA should enable FICC to 

better manage its exposure to its 

members during periods of extreme 

market volatility by generating margin 

levels that meet FICC’s 99 percent 

backtesting performance targets. 

Additionally, FICC proposes to clarify 

that if the Margin Proxy, when invoked, 

is lower than the VaR Floor, then the 

VaR Floor would be utilized as the VaR 

Charge with respect to a member’s 

portfolio. Although Margin Proxy was 

not invoked during the period of the 

Impact Study, had the proposed changes 

been in place during that period, the 

VaR model backtesting coverage would 

have increased from approximately 

98.17 percent to 99.38 percent and the 

VaR model backtesting deficiencies 

would have been reduced by 899 (from 

1,358 to 459). The Commission agrees 

that ensuring the VaR Floor operates as 

a floor for the Margin Proxy would be 

more effective at mitigating risks under 

extreme market volatility because as 

proposed, the VaR Floor would include 

the MMA calculation. 

By helping to ensure that FICC 

collects margin amounts sufficient to 

manage the risk associated with its 

members’ portfolios during periods of 

extreme market volatility, the proposed 

MMA changes and Margin Proxy 

clarifications would help limit FICC’s 

exposure in a member default scenario. 

These proposed changes would 

generally provide FICC with additional 

resources to manage potential losses 

arising out of a member default. Such an 

increase in FICC’s available financial 

resources would decrease the likelihood 

that losses arising out of a member 

default would exceed FICC’s prefunded 

resources resulting in a disruption of 

FICC’s operation of its critical clearance 

and settlement services. Accordingly, 

the MMA should help FICC to continue 

providing prompt and accurate 

clearance and settlement of securities 

transactions in the event of a member 

default, consistent with Section 

17A(b)(3)(F) of the Act.72

In addition, as described above in 

Section I.B., FICC would access the 

mutualized Clearing Fund should a 

defaulted member’s own margin be 

insufficient to satisfy losses to FICC 

caused by the liquidation of that 

member’s portfolio. The MMA should 

help ensure that FICC has collected 

sufficient margin from members, 

thereby limiting non-defaulting 

members’ exposure to mutualized 

losses. By helping to limit the exposure 

of FICC’s non-defaulting members to 

mutualized losses, the MMA should 

help FICC assure the safeguarding of 

securities and funds which are in its 

custody or control, consistent with 

Section 17A(b)(3)(F) of the Act.73

The Proposed Rule Change should 

also help protect investors and the 

public interest by mitigating some of the 

risks presented by FICC as a CCP. 

Because a defaulting member could 

place stresses on FICC with respect to 

FICC’s ability to meet its clearance and 

settlement obligations upon which the 

broader financial system relies, it is 

important for FICC to maintain a robust 

margin methodology to limit FICC’s 

credit risk exposure in the event of a 

member default. As described above in 

Section I.C.1., the proposed MMA likely 

would function as the VaR Charge 

during periods of extreme market 

volatility. When applicable, the MMA 

would increase FICC’s margin collection 

during such periods of extreme market 

volatility. Therefore, implementing the 

MMA should help improve FICC’s 

ability to collect sufficient margin 

amounts that are commensurate with 

the risks associated with its members’ 

portfolios during periods of extreme 

market volatility. By better enabling 

FICC to collect margin that more 

accurately reflects the risk 

characteristics of its members’ portfolios 

during volatile markets, FICC would be 

in a better position to absorb and 

contain the spread of any losses that 

might arise from a member default. 

Therefore, the MMA should reduce the 

possibility that FICC would need to 

utilize resources from non-defaulting 

members due to a member default, 

which could cause liquidity stress to 

non-defaulting members and inhibit 

their ability to facilitate securities 

transactions. Accordingly, because the 

MMA should help mitigate some of the 

risks presented by FICC as a CCP, the 

Proposed Rule Change is designed to 

protect investors and the public interest, 


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74See id. 

75See Letter from Independent Dealer and Trade 

Association (May 7, 2024) (‘‘IDTA Letter’’) at 5–6. 

76See id. 

77See FICC Letter at 5. 

78See id. 

79See id. 

80See 17 CFR 240.17ad–22(e)(4)(i). 

81See Securities Exchange Act Release No. 78961 

(September 28, 2016), 81 FR 70786, 70866–67 

(October 13, 2016) (S7–03–14) (‘‘CCA Standards 

Adopting Release’’). 

82See 15 U.S.C. 78q–1(b)(3)(F). 

83See IDTA Letter at 5 (discussing trading 

strategies that involve Treasury securities in 

separate maturity buckets, such as buyers at 

Treasury auctions ‘‘rolling backwards’’ ahead of the 

auction by short-selling one issue and buy a 

different outstanding Treasury, Butterfly Spread, 

and ‘‘roll down the curve’’). 

84See id. 

85See FICC Letter at 5. 

86See id. 

87Supra note 38. 

88See FICC Letter at 5. 

89Procyclicality risk with respect to margin 

requirements is the cycle created when a decrease 

in the mark-to-market value of the securities in a 

portfolio triggers an increase in margin 

requirements, which in turn, causes a further 

decrease in portfolio value. 

90See Letter from Robert Toomey, Head of Capital 

Markets, Managing Director/Associate General 

Counsel, Securities Industry and Financial Markets 

Association (May 22, 2024) (‘‘SIFMA Letter’’) at 6– 

7. 

91See SIFMA Letter at 7. 

92See FICC Letter at 5–6. 

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

the Act.74

One commenter states that 

implementation of the MMA would 

increase costs for market participants, 

leading to negative effects on the 

broader U.S. Treasury markets.75

Specifically, the commenter states that 

markets with high margin costs 

generally have fewer market 

participants, decreased market liquidity, 

wider bid/offer spreads, and encourage 

market participants to either exit the 

market or pass additional expenses to 

their customers.76 In response, FICC 

states that the proposed MMA is not 

designed to advantage or disadvantage 

capital formation.77 Instead, FICC states 

that the purpose of the proposed MMA 

is to manage the risk associated with 

member portfolios during periods of 

extreme market volatility.78 FICC states 

that although the Proposed Rule 

Change’s increased margin requirements 

could lessen liquidity for members, it is 

necessary and appropriate to mitigate 

the relevant risks.79

As stated above in Section I.B., during 

the period of the Impact Study, the 

actual GSD VaR model backtesting 

coverage and overall margin backtesting 

coverage both fell below the 99 percent 

confidence level. These shortfalls are 

specifically attributable to the periods of 

extreme market volatility of March 2020 

and commencing in March 2022. The 

Impact Study demonstrates that had the 

proposed MMA calculation been in 

place during that period, margin 

amounts would have exceeded the 99 

percent backtesting coverage levels. 

Thus, implementing the MMA 

calculation would have better enabled 

FICC to calculate and collect margin 

amounts sufficient to mitigate the risks 

presented by its members’ portfolios 

during periods of extreme market 

volatility. 

The Commission acknowledges that 

implementing the proposed MMA 

would increase margin requirements 

during periods of extreme market 

volatility. However, as detailed above in 

Section I.C.1., the Impact Study 

demonstrates that the increased margin 

requirements attributable to the MMA at 

the member-level would represent 

relatively small percentages (i.e., 

typically a fraction of one percent) of 

members’ average Net Capital, which 

tends to indicate that members would 

likely have access to sufficient financial 

resources to meet the increased MMA 

obligation if invoked during periods of 

extreme market volatility. Therefore, the 

comment that the increased margin 

costs attributable to the MMA would 

decrease market liquidity, widen bid/ 

offer spreads, and encourage market 

participants to either exit the market or 

pass additional expenses to their 

customers, do not appear likely based 

on the limited size of increased VaR 

Charges from the Impact Study. 

Additionally, by helping to ensure FICC 

collects sufficient margin to cover its 

exposure to members, implementing the 

MMA would decrease the likelihood of 

loss mutualization in the event of a 

member default, which could encourage 

greater market participation. Moreover, 

FICC has a regulatory obligation to have 

policies and procedures to calculate and 

collect margin amounts sufficient to 

mitigate the relevant risks presented to 

it by its members’ portfolios.80 Indeed, 

FICC’s role as a CCP that reduces 

systemic risk and promotes market 

stability is dependent on effectively 

managing the relevant risks, which 

includes FICC’s collection of sufficient 

margin from its members. 

The Commission also acknowledges 

the possibility that, as a result of the 

Proposed Rule Change, some members 

might pass along some of the costs 

related to margin requirements such that 

these costs ultimately are borne, to some 

degree, by their customers. However, a 

non-defaulting member’s exposure to 

mutualized losses resulting from a 

member default, and any consequent 

disruptions to clearance and settlement 

absent the Proposed Rule Change, might 

also increase costs to a member’s 

customers and potentially adversely 

impact market participation, liquidity, 

and access to capital. The Proposed 

Rule Change, by helping to reduce 

counterparty default risk, would allow 

the corresponding portion of transaction 

costs to be allocated to more productive 

uses by members and their customers 

who otherwise would bear those costs.81

Moreover, as discussed above, by 

helping to limit the exposure of nondefaulting members to mutualized 

losses, the Proposed Rule Change 

should help FICC assure the 

safeguarding of securities and funds of 

its members that are in FICC’s custody 

or control, consistent with Section 

17A(b)(3)(F).82

One commenter states that the 

proposed MMA would negatively affect 

markets by having a detrimental effect 

on certain trading strategies that rely on 

margin offsets across maturity 

buckets.83 The commenter states that 

the MMA would eliminate such offsets, 

resulting in gross margining across 

maturity buckets and decreased 

liquidity.84 In response, FICC states that 

the proposed MMA would not eliminate 

such margin offsets across maturity 

buckets.85 Specifically, FICC states that 

the MMA would not differ from the 

current VaR model insofar as the FHS 

approach would likewise offset the 

market risk of long positions in one 

maturity bucket with the market risk of 

short positions in another maturity 

bucket.86 Based on the Commission’s 

review and understanding of FICC’s 

proposed changes to the QRM 

Methodology,87 the Commission agrees 

with FICC’s response that the FHS 

approach allows for similar offsetting as 

the current GSD VaR model regarding 

the market risk of long positions in one 

maturity bucket offsetting the market 

risk of short positions in another 

maturity bucket.88

Another commenter states that FICC’s 

Proposed Rule Change did not 

adequately address the procyclicality 

risk 89 associated with the MMA 

calculation.90 The commenter suggests 

that FICC should consider revising the 

MMA calculation to include antiprocyclical measures that would avoid 

extreme reactions to changes in market 

volatility.91 In response, FICC states that 

it considered and evaluated a number of 

anti-procyclical measures when 

developing the MMA.92 However, FICC 

states that, based on the ‘‘outlook’’ for 

interest rate volatility, FICC determined 

to rely on the decay factor to control the 


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93See id. When referring to the ‘‘outlook for 

interest rate volatility,’’ the Commission 

understands that FICC is not referring to a 

particular analysis of interest rate volatility, but 

rather is referring to the potential for future interest 

rate volatility. 

94FICC could adjust the decay factor in 

accordance with the Model Risk Management 

Framework. FICC would analyze the decay factor to 

evaluate its sensitivity and impact to the model 

performance pursuant to the model performance 

monitoring required under the Model Risk 

Management Framework. Supra note 28. 

95See 15 U.S.C. 78q–1(b)(3)(F). 

96See id. 

97 15 U.S.C. 78q–1(b)(3)(I). 98See Bradford National Clearing Corp., 590 F.2d 

1085, 1105 (D.C. Cir. 1978). 99See IDTA Letter at 2, 6. 100See id. 101See FICC Letter at 6. 102See id. 103See FICC Letter at 6–7. 

104See IDTA Letter at 6. 

105See FICC Letter at 3; Notice, supra note 8 at 

43923–24. 

106See id. 

MMA’s responsiveness to market 

volatility.93

The Commission disagrees with the 

comment that FICC’s proposed MMA 

calculation does not adequately address 

procyclicality risk. The decay factor 

affects, among other things, the speed of 

the MMA calculation’s responsiveness 

to spikes in extreme market volatility, as 

well as the speed with which the MMA 

calculation would generate lower 

numbers after such volatility subsides. 

FICC chose to initially set the decay 

factor at 0.97—a relatively fast decay 

factor—to respond to market volatility 

relatively quickly.94 FICC’s data 

demonstrate that had the MMA been in 

place during the period of the Impact 

Study, the MMA would have been 

invoked in a targeted manner (i.e., 

specifically during periods of extreme 

market volatility, but not during periods 

of low to moderate market volatility). 

Further, the Commission understands 

that FICC would be able to use the 

decay factor to address future interest 

rate volatility that may occur. Thus, the 

Impact Study supports FICC’s assertion 

that including the decay factor in the 

MMA calculation would have mitigated 

any procyclical results. 

Accordingly, the potential impacts of 

the Proposed Rule Change are justified 

by the potential benefits to members 

and the resulting overall improved risk 

management at FICC described above 

(i.e., the prompt and accurate clearance 

and settlement of securities transactions 

and the safeguarding of securities and 

funds based on the collection of margin 

commensurate with the risks presented 

by members’ portfolios), to render the 

Proposed Rule Change consistent with 

the investor protection and public 

interest provisions of Section 

17A(b)(3)(F) of the Act.95

For the reasons discussed above, the 

Proposed Rule Change is consistent 

with the requirements of Section 

17A(b)(3)(F) of the Act.96

B. Consistency With Section 17A(b)(3)(I) 

of the Act 

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

requires that the rules of a clearing 

agency, such as FICC, do not impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the Act.97 Section 17A(b)(3)(I) does 

not require the Commission to make a 

finding that FICC chose the option that 

imposes the least possible burden on 

competition. Rather, the Act requires 

that the Commission find that the 

Proposed Rule Change does not impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act, which 

involves balancing the competitive 

effects of the proposed rule change 

against all other relevant considerations 

under the Act.98

One commenter states that the MMA’s 

increased margin requirements would 

be disproportionately burdensome when 

compared to the MMA’s benefits.99

Specifically, the commenter cites FICC’s 

statement that during the period of the 

Impact Study, the overall margin 

backtesting coverage was approximately 

98.87 percent, which is only 0.13 

percent under the targeted 99 percent 

confidence level.100 In response, FICC 

states that while the overall margin 

backtesting coverage during the Impact 

Study period was 98.87 percent, the 

GSD’s rolling 12-month backtesting 

coverage actually fell below the 99 

percent target in June 2022 and 

remained below 99 percent until June 

2023, with the lowest being 98.33 

percent in November 2022.101 Thus, 

FICC states that the MMA is not 

designed merely to increase overall 

margin backtesting coverage by 0.13 

percent.102 As discussed above, had the 

MMA had been in place during the 

period of the Impact Study, GSD’s 

overall margin backtesting coverage 

would have increased from 

approximately 98.87 percent to 99.33 

percent. FICC states that the proposed 

MMA is part of FICC’s overall risk 

management enhancement program in 

response to the challenges presented by 

the market volatility in 2020 and 2022, 

with MMA specifically designed to 

enhance the GSD VaR model 

performance and improve backtesting 

coverage during periods of extreme 

market volatility.103

The Commission acknowledges that 

the Proposed Rule Change would entail 

increased margin charges in certain 

circumstances. However, increased 

margin requirements do not present an 

undue burden on competition if they are 

necessary or appropriate in furtherance 

of the Act. As stated above, the 

Commission has reviewed FICC’s 

backtesting data, and the Commission 

agrees that it indicates that had the 

MMA been in place during the Impact 

Study period, it would have generated 

margin levels that better reflect the risks 

and particular attributes of the member 

portfolios and help FICC achieve 

backtesting coverage above FICC’s 

targeted confidence level. In turn, the 

Proposed Rule Change would improve 

FICC’s ability to maintain sufficient 

financial resources to cover its credit 

exposures to each member in full with 

a high degree of confidence. 

Specifically, as described above, the 

MMA would better enable FICC to 

calculate the VaR Charge based on the 

risks presented by the securities 

positions in each member’s portfolio 

during periods of extreme market 

volatility. To the extent a member’s VaR 

Charge would increase under the 

Proposed Rule Change, that increase 

would be based on the securities held 

by the member and FICC’s requirement 

to collect margin to appropriately 

address the associated risk. By helping 

FICC to better manage its credit 

exposure, the MMA’s increased margin 

requirements would improve FICC’s 

ability to mitigate the potential losses to 

FICC and its members associated with 

liquidating a member’s portfolio in the 

event of a member default. 

One commenter states that the MMA’s 

increased margin requirements would 

unfairly burden smaller FICC members. 

The commenter further suggests that the 

MMA should be applied to either the 

largest FICC members only, or to FICC 

members in proportion to the risk posed 

by different segments of the market.104

In response, FICC refers to its analysis 

in the Notice regarding whether the 

Proposed Rule Change would impose a 

burden on competition.105 Specifically, 

FICC acknowledges that during the 

Impact Study period, the MMA would 

have increased members’ SOD and noon 

VaR Charges by an average of 

approximately $22.43 million, or 17.56 

percent, and $23.25 million, or 17.43 

percent, respectively, and that the 

Proposed Rule Change could impose a 

burden on competition.106 Additionally, 

FICC states that members may be 

affected disproportionately by the MMA 

because members with lower operating 

margins or higher costs of capital than 

other members are more likely to be 


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107See id. 

108See Notice, supra note 8 at 43923–24; FICC 

Letter at 3–4; 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 

240.17Ad–22(e)(4)(i) and (e)(6)(i). 

109See FICC Letter at 4. 

110See id. 

111See id. 

112See CCA Standards Adopting Release at 

70870, supra note 81. In addition, when 

considering the benefits, costs, and effects on 

competition, efficiency, and capital formation, the 

Commission recognized that a covered clearing 

agency, such as FICC, might pass incremental costs 

associated with compliance on to its members, and 

that such members may seek to terminate their 

membership with that CCA. See id. at 70865. 

113These potential burdens are not fixed, and 

affected members may choose to restructure their 

liquidity sources, costs of capital, or business 

model, thereby moderating the potential impact of 

the Proposed Rule Change. 

114See 17 CFR 240.17Ad–22(e)(6)(i). 

115See FICC GSD Membership Directory, 

available at https://www.dtcc.com/client-center/ 

ficc-gov-directories. 

116See 15 U.S.C. 78q–1(b)(3)(F). 

117See 17 CFR 240.17Ad–22(e)(4)(i) and (e)(6)(i). 

118See IDTA Letter at 4–5; SIFMA Letter at 5–6 

(referring to other recent margin changes at FICC, 

including, e.g., the imposition of a special charge 

at volatile market events) (citing Memo from FICC 

to Government Securities Division Members (Apr. 

12, 2024)). See also GSD Rule 4, Section 1b(a)(vii) 

(defining ‘‘special charge’’), supra note 13. 

119See FICC Letter at 8–9. 

120See id. On April 12, 2024, FICC published on 

its website an Important Notice indicating that as 

of April 15, 2024, FICC would collect a special 

charge equal to 10 percent of a Netting Member’s 

VaR Charge on the two days prior to, and on the 

day of, certain volatile market events specified in 

the Important Notice, if certain conditions are met. 

The Important Notice is available at https://

www.dtcc.com/-/media/Files/pdf/2024/4/12/ 

impacted.107 However, FICC states that 

any burden on competition from the 

Proposed Rule Change is necessary and 

appropriate in furtherance of FICC’s 

obligations under the Act, because the 

Proposed Rule Change would change 

the GSD Rules to better: (1) assure the 

safeguarding of securities and funds that 

are in FICC’s custody, control, or 

responsibility, consistent with section 

17A(b)(3)(F) of the Act; and (2) enable 

FICC to collect sufficient margin 

amounts that are commensurate with 

the risks presented by its member 

portfolios, consistent with Rules 17Ad– 

22(e)(4)(i) and 17Ad–22(e)(6)(i).108

Furthermore, FICC states that the 

methodology for computing the MMA 

does not take into consideration the 

member’s size or overall mix of business 

relative to other members.109 Any effect 

the Proposed Rule Change would have 

on a particular member’s margin 

requirement is solely a function of the 

default risk posed to FICC by the 

member’s activity at FICC—firm size or 

business model is not pertinent to the 

assessment of that risk.110 Accordingly, 

FICC states that the Proposed Rule 

Change does not discriminate against 

members or affect them differently on 

either of those bases.111

As stated above, the Commission 

acknowledges that the Proposed Rule 

Change would entail increased margin 

charges in certain circumstances. In 

considering the costs and benefits of the 

requirements of Rule 17Ad–22(e)(6), the 

Commission expressly acknowledged 

that ‘‘since risk-based initial margin 

requirements may cause market 

participants to internalize some of the 

costs borne by the CCP as a result of 

large or risky positions, ensuring that 

margin models are well-specified and 

correctly calibrated with respect to 

economic conditions will help ensure 

that they continue to align the 

incentives of clearing members with the 

goal of financial stability.’’ 112

Nevertheless, in response to the 

comment that the Proposed Rule Change 

would disproportionately affect smaller 

FICC members, the Commission 

understands that the impact of the 

MMA would be entirely determined by 

a member’s portfolio composition and 

trading activity rather than the 

member’s size or type. Specifically, as 

described above, the MMA would better 

enable FICC to calculate the VaR Charge 

based on the risks presented by the 

securities positions in each member’s 

portfolio during periods of extreme 

market volatility. To the extent a 

member’s VaR Charge would increase 

under the Proposed Rule Change, that 

increase would be based on the 

securities held by the member and 

FICC’s requirement to collect margin to 

appropriately address the associated 

risk. 

In addition, as discussed above, the 

Commission acknowledges that the 

impact of a higher margin requirement 

may present higher costs on some 

members relative to others due to a 

number of factors, such as access to 

liquidity resources, cost of capital, 

business model, and applicable 

regulatory requirements. These higher 

relative burdens may weaken certain 

members’ competitive positions relative 

to other members.113 However, in this 

instance, any competitive burden 

stemming from a higher impact on some 

members than on others is necessary or 

appropriate in furtherance of the Act. 

FICC is required to establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to cover its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, considers and 

produces margin levels commensurate 

with the risks and particular attributes 

of each relevant product, portfolio, and 

market.114 FICC’s members include a 

large and diverse population of entities 

with a range of ownership structures.115

By participating in FICC, each member 

is subject to the same margin 

requirements, which are designed to 

satisfy FICC’s regulatory obligation to 

manage the risks presented by its 

members. As discussed in more detail in 

Section II.D. below, the Proposed Rule 

Change is designed to ensure that FICC 

collects margin that is commensurate 

with the risks presented by each 

member’s portfolio during periods of 

extreme market volatility. 

Additionally, as discussed above, the 

Commission has reviewed FICC’s 

backtesting data and agrees that it 

indicates that had the MMA been in 

place during the Impact Study period, it 

would have generated margin levels that 

better reflect the risks and particular 

attributes of the member portfolios and 

help FICC achieve backtesting coverage 

closer to FICC’s targeted confidence 

level. In turn, the Proposed Rule Change 

would improve FICC’s ability to 

maintain sufficient financial resources 

to cover its credit exposures to each 

member in full with a high degree of 

confidence. By helping FICC to better 

manage its credit exposure, the 

Proposed Rule Change would improve 

FICC’s ability to (1) mitigate the 

potential losses to FICC and its members 

associated with liquidating a member’s 

portfolio in the event of a member 

default, in furtherance of FICC’s 

obligations under Section 17A(b)(3)(F) 

of the Act,116 and (2) collect sufficient 

margin amounts that are commensurate 

with the risks presented by its members’ 

portfolios, consistent with Rules 17Ad– 

22(e)(4)(i) and 17Ad–22(e)(6)(i).117

Commenters also expressed concerns 

about the cumulative burdens of the 

Proposed Rule Change in conjunction 

with recent changes to the GSD Rules 

regarding margin requirements, 

including an announced special charge 

that FICC collects in connection with 

certain volatile market events (‘‘VME 

Special Charge’’).118

In response, FICC states that each of 

the GSD margin components is 

specifically designed to mitigate a 

different risk and limit FICC’s 

exposures.119 FICC states that it 

announced the VME Special Charge on 

April 12, 2024 to supplement a 

member’s margin requirement for the 

days immediately surrounding five 

scheduled economic indicator release 

dates if a forward looking indicator were 

to signal potential heightened market 

volatility.120 FICC further states that the 


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121See FICC Letter at 8. 

122See id. 

123See Securities Exchange Act Release No. 

97342 (April 21, 2023), 88 FR 25721 (April 27, 

2023) (SR–FICC–2023–003) (Order Granting 

Proposed Rule Change to Revise the Description of 

the Stressed Period Used to Calculate the VaR 

Charge and Make Other Changes) (‘‘Stressed Period 

Order’’); see FICC Letter at 8. 

124See Securities Exchange Act Release No. 

98494 (Sept. 25, 2023), 88 FR 67394 (Sept. 29, 2023) 

(SR–FICC–2023–011) (Order Approving Proposed 

Rule Change, as Modified by Amendment No. 1, to 

Adopt a Portfolio Differential Charge as an 

Additional Component to the GSD Required Fund 

Deposit) (‘‘Portfolio Differential Order’’). FICC also 

states that the Impact Study was generated based on 

the assumption that the Portfolio Differential 

Charge was in effect during the entirety of the 

Impact Study Period. See FICC Letter at 8. 

125Supra note 15. 

126See GSD Rule 4 (Clearing Fund and Loss 

Allocation), supra note 13. 

127Supra note 120. 

128 17 CFR 240.17Ad–22(e)(6)(i). 

129See Portfolio Differential Order, supra note 

124 at 67396. 

130See id. 

131See Securities Exchange Act Release No. 

98160 (Aug. 17, 2023), 88 FR 57485, 57488 (Aug. 

23, 2023) (SR–FICC–2023–011) (Notice of Filing of 

Proposed Rule Change, as Modified by Amendment 

No. 1, to Adopt a Portfolio Differential Charge as 

an Additional Component to the GSD Required 

Fund Deposit). 

132See Portfolio Differential Order, supra note 

124 at 67397. 

133See id. 

134See Stressed Period Order, supra note 123. 

135See id. at 25722. 

136See id. at 25722–24. 

137See Stressed Period Order, supra note 123 at 

25724. 

138See SIFMA Letter at 8; Securities Exchange 

Act Release No. 99149 (Dec. 13, 2023), 89 FR 2714 

Continued 

VME Special Charge is designed to 

complement the Proposed Rule Change. 

Specifically, FICC states that the VME 

Special Charge is designed to cover the 

periods leading up to the market events 

that can impact the market, while the 

Proposed Rule Change, in contrast, is 

specifically designed to respond to 

observed market volatility and 

supplement the VaR model following 

the observation of extreme market 

volatility.121 FICC states that by 

applying the VME Special Charge as 

disclosed in the Important Notice, it 

expects that its VaR model, in 

conjunction with the proposed MMA, 

would be able to respond to observed 

market volatility, removing the need for 

additional special charges.122

FICC also describes a number of other 

recent changes to the GSD margin 

model, although commenters did not 

specify any other recent changes to the 

GSD Rules beyond the VME Special 

Charge. Specifically, FICC states that in 

July 2023, FICC revised the stressed 

period used to calculate the VaR Charge 

in order to provide better risk coverage 

on the short-end of the curve.123 FICC 

also states that in October 2023, FICC 

adopted a Portfolio Differential Charge 

in order to mitigate the risk presented to 

FICC by period-over-period fluctuations 

in a member’s portfolio.124

As stated above in Section I.A., each 

member’s Required Fund Deposit 

consists of a number of components, 

which are calculated to address specific 

risks faced by FICC.125 Each Required 

Fund Deposit component, when 

applicable, may increase a member’s 

margin requirements. However, the 

various margin components are 

designed to generate margin amounts 

commensurate with the relevant risks 

associated with the content of member 

portfolios. For example, the special 

charge is an additional margin 

component specifically provided for in 

the GSD Rules and designed to address 

risks associated with market conditions 

or other financial and operational 

factors.126 In particular, the VME 

Special Charge is necessary to mitigate 

risks—not mitigated by other margin 

components—regarding potentially 

heightened market volatility for the days 

immediately surrounding five 

scheduled economic indicator release 

dates, including the two days prior to 

the event when the volatility would not 

yet be captured by the current VaR 

model.127 Although cumulative, these 

margin components are consistent with 

FICC’s obligation to maintain a riskbased margin system that considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market.128

The Portfolio Differential Charge is 

designed to mitigate the risks 

attributable to intraday margin 

fluctuations in certain member 

portfolios as those members execute 

trades throughout the day.129

Specifically, since FICC generally 

novates and guarantees trades upon 

trade comparison, a member’s trading 

activity may result in coverage gaps due 

to large unmargined intraday portfolio 

fluctuations that remain unmitigated 

from the time of novation until the next 

scheduled margin collection.130 The 

impact of the Portfolio Differential 

Charge depends on the period-overperiod change in the size and 

composition of a member’s portfolio.131

In approving FICC’s Portfolio 

Differential proposed rule change, the 

Commission determined, among other 

things, that implementing the Portfolio 

Differential Charge would better enable 

FICC to collect margin amounts 

commensurate with FICC’s intraday 

credit exposures to its members.132 The 

Commission also considered the 

proposed Portfolio Differential Charge’s 

impact on competition and found the 

proposal to be consistent with the 

Act.133 Although the Portfolio 

Differential Charge, when applicable, 

and the VaR Charge are cumulative to 

one another, both margin components 

are designed to mitigate different risks. 

Additionally, not all margin 

components are cumulative to one 

another. For example, in addition to the 

Portfolio Differential Charge discussed 

above, one of the margin components 

recently changed relates to FICC’s 

Stressed Period Order,134 which 

involves a VaR Charge calculation that 

would be an alternative to the MMA 

rather than in addition to the MMA. As 

described above in Section I.C.1., the 

sensitivity VaR methodology 

incorporates a lookback period of 10 

years to capture periods of historical 

volatility. As described in the Stressed 

Period Order, the GSD VaR 

methodology allows FICC to include an 

additional period of historically 

observed stressed market events if the 

10-year lookback period does not 

contain a sufficient number of stressed 

events.135 Although FICC’s decision to 

adjust the stressed period could increase 

a member’s VaR Charge, that increase 

would be in direct relation to the 

specific risks presented by the member’s 

portfolio.136 The ability to quickly 

adjust the stressed period provides FICC 

with the flexibility to timely respond to 

rapidly changing market conditions and 

better ensure that the sensitivity VaR 

calculation results in margin amounts 

that sufficiently risk manage FICC’s 

credit exposures to its members’ 

portfolios during such market 

conditions.137 However, as described 

above in Section I.C., a member’s VaR 

Charge would be the greater of three 

calculations (i.e., sensitivity VaR, VaR 

Floor Percentage Amount, and MMA). 

The sensitivity VaR calculation, even if 

increased pursuant to the Stressed 

Period Order, and MMA are not 

cumulative. 

One commenter states that the 

Commission’s approval of the Proposed 

Rule Change should be delayed until 

after conducting further analysis, 

including analyses that incorporate 

expected increases in cleared volumes 

and the totality of changes to margin 

requirements associated with FICC’s 

upcoming implementation of its 

requirement to facilitate access to 

clearance and settlement services of all 

eligible secondary market transactions 

in U.S. Treasury securities.138 The 


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(Jan. 16, 2024) (the rules adopted therein are 

referred to as the ‘‘Treasury Clearing Rules’’). 

139 15 U.S.C. 78s(b)(2)(C). 

140 15 U.S.C. 78q–1(b)(3)(I). 

141 17 CFR 240.17Ad–22(e)(4)(i). 

142See id. 

143See 17 CFR 240.17Ad–22(e)(4)(i). 

144 17 CFR 240.17ad–22(e)(6)(i). 

145FICC could adjust the decay factor in 

accordance with the Model Risk Management 

Framework. FICC would analyze the decay factor to 

evaluate its sensitivity and impact to the model 

performance pursuant to the model performance 

monitoring required under the Model Risk 

Management Framework. Supra note 28. 146SIFMA Letter at 6. 147See IDTA Letter at 3 (arguing that calculating 

averages using a two-year period instead of a ninemonth period decreases the average 2.66 times). 

148See IDTA Letter at 3. 

Commission disagrees that the 

commenter’s requested additional 

analyses are necessary for the 

Commission to evaluate the Proposed 

Rule Change for consistency with the 

Act and the rules thereunder. As stated 

above in the preamble to Section II., the 

standard of review under Section 

19(b)(2)(C) of the Act 139 is for the 

Commission to approve a proposed rule 

change of a self-regulatory organization 

upon finding that such proposed rule 

change is consistent with the 

requirements of the Act and rules and 

regulations thereunder applicable to 

such organization. In this Section II., the 

Commission describes its review of the 

Proposed Rule Change for consistency 

with the Act and regulations 

thereunder, along with the 

Commission’s rationale for approving 

the Proposed Rule Change. The 

Commission will separately evaluate 

any proposed rule change that FICC files 

in connection with implementing 

FICC’s obligations under the Treasury 

Clearing Rules. 

Therefore, for the reasons stated 

above, the Proposed Rule Change is 

consistent with the requirements of 

Section 17A(b)(3)(I) of the Act.140

C. Consistency With Rule 17Ad– 

22(e)(4)(i) 

Rule 17Ad–22(e)(4)(i) under the Act 

requires that FICC establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

effectively identify, measure, monitor, 

and manage its credit exposures to 

participants and those arising from its 

payment, clearing, and settlement 

processes, including by maintaining 

sufficient financial resources to cover its 

credit exposure to each participant fully 

with a high degree of confidence.141

The Proposed Rule Change is 

consistent with Rule 17ad–22(e)(4)(i) 

under the Exchange Act.142 As 

described above in Section I.C.1., the 

current GSD VaR model generated 

margin amounts that were not sufficient 

to mitigate FICC’s credit exposure to its 

members’ portfolios at the 99 percent 

backtesting confidence level during 

periods of extreme market volatility, 

particularly during March 2020 and 

beginning in March 2022. The Impact 

Study demonstrates that had the 

proposed MMA calculation been in 

place during that period, margin 

amounts would have exceeded the 99 

percent backtesting coverage levels. 

Therefore, adding the MMA calculation 

to the GSD margin methodology should 

better enable FICC to calculate and 

collect margin amounts that are 

sufficient to mitigate FICC’s credit 

exposure to its members’ portfolios 

during periods of extreme market 

volatility. 

Additionally, FICC proposes to clarify 

that if the Margin Proxy, when invoked, 

is lower than the VaR Floor, then the 

VaR Floor would be utilized as the VaR 

Charge with respect to a member’s 

portfolio. Although Margin Proxy was 

not invoked during the period of the 

Impact Study, had the proposed changes 

been in place during that period, the 

VaR model backtesting coverage would 

have been increased to exceed the 99 

percent backtesting coverage level. 

Therefore, the proposed clarifications 

regarding the applicability of the VaR 

Floor when Margin Proxy is invoked 

would help ensure FICC’s ability to 

manage its credit exposures to members 

by maintaining sufficient financial 

resources to cover such exposures fully 

with a high degree of confidence. 

Accordingly, for the reasons 

discussed above, the proposed MMA 

changes and Margin Proxy clarifications 

are reasonably designed to enable FICC 

to effectively identify, measure, 

monitor, and manage its credit exposure 

to participants, consistent with Rule 

17ad–22(e)(4)(i).143

D. Consistency With Rules 17Ad– 

22(e)(6)(i) 

Rules 17Ad–22(e)(6)(i) requires that 

FICC establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to cover 

its credit exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market, and calculates margin sufficient 

to cover its potential future exposure to 

participants.144

The Proposed Rule Change is 

consistent with Rule 17ad–22(e)(6)(i). 

As described above in Section I.C., the 

Impact Study demonstrates that the 

current VaR model generated margin 

deficiencies during periods of extreme 

market volatility, whereas implementing 

the proposed MMA changes and Margin 

Proxy clarifications would result in VaR 

Charges that reflect the risks of member 

portfolios during such periods better 

than the current GSD VaR model. 

Moreover, FICC’s inclusion of the decay 

factor in the MMA calculation 

appropriately limits invoking the MMA 

as the VaR Charge to periods of extreme 

market volatility. The decay factor 

affects, among other things, the peak 

level of margin increase or the degree of 

procyclicality and how quickly the 

margin would fall back to pre-stress 

levels. FICC chose to initially set the 

decay factor at 0.97—a relatively fast 

decay factor—to be quickly responsive 

to market volatility.145 FICC’s data 

demonstrate that had the MMA been in 

place during the period of the Impact 

Study, the MMA would have been 

invoked in a targeted manner (i.e., 

specifically during periods of extreme 

market volatility, but not during periods 

of low to moderate market volatility). 

Thus, the MMA is specifically designed 

to enable FICC to collect margin 

amounts commensurate with the 

relevant risks associated with member 

portfolios during periods of extreme 

market volatility. The Proposed Rule 

Change would provide FICC with a 

margin methodology better designed to 

enable FICC to cover its credit 

exposures to its members by enhancing 

FICC’s risk-based margin system to 

produce margin levels commensurate 

with the relevant risks during periods of 

extreme market volatility. 

Several commenters addressed FICC’s 

Impact Study. Specifically, one 

commenter states that the Impact Study 

is too limited, providing backtesting 

data with extremely uneven daily 

impacts, thereby rendering it impossible 

to properly assess the MMA’s 

impacts.146 Another commenter states 

that FICC underestimates the MMA’s 

impacts by using the full two-year 

period of the Impact Study to calculate 

average impacts when the actual period 

of increased volatility only covers a 

nine-month period.147 This commenter 

states that while FICC expressed the 

increase in margin requirements in 

terms of long-term averages, brokerdealers actually plan for capitalization 

based on meeting their largest margin 

requirement rather than their average 

capital usage.148 The commenters state 

that while FICC’s impact analysis cited 

examples of members with the largest 

average percentage and dollar increases 

resulting from the MMA, those market 


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149See IDTA Letter at 3; SIFMA Letter at 6. 

150See e.g., IDTA Letter at 3–4 (contrasting FICC’s 

Impact Study analysis that expresses the largest 

member increase that would have resulted from the 

MMA as 0.21 percent of net capital, against the 

average margin increase that the MMA would have 

added for IDTA members of 5.1 percent of net 

capital, or 16.0 percent of net capital for the top 100 

days in terms of margin increases); see SIFMA 

Letter at 6. 

151See IDTA Letter at 3–4, 7; SIFMA Letter at 6. 

For example, one commenter suggests that FICC 

should express the impact as the average percent 

increase for the top 100 most stressful days. See 

IDTA Letter at 3–4 (stating that the average 

percentage increase for the top 100 most stressful 

days in terms of margin increases for IDTA 

members, the more relevant metric in terms of 

capital planning in actual practice was 37.23 

percent or $27.52 million). The other commenter 

suggests that a better measure of liquidity impact 

than average daily data would be the peak aggregate 

additional margin that would be required for both 

a 1-day and 5-day period. See SIFMA Letter at 6. 

152See FICC Letter at 7. 

153See id. 

154See FICC Letter at 6. 

155See supra note 67. 

156Supra notes 3, 7, 68. 

157Supra notes 3, 7. 

158These comments include regarding: FICC’s use 

of the two-year period of the Impact Study instead 

of the 9-month period of extreme market volatility 

when presenting average impacts (see IDTA Letter 

at 3); FICC’s use of long-term average margin 

increases instead of maximum margin increases 

resulting from implementing the MMA (see id.); 

FICC’s examples of members with the largest 

average percentage and dollar increases resulting 

from the MMA (see IDTA Letter at 3; see SIFMA 

Letter at 6); and preferred alternative impact 

measurements (see IDTA Letter at 3–4; see SIFMA 

Letter at 6). 

159See FICC Letter at 7. 

160See id. 

161See id. 

162See id. 

participants are either too small or too 

large to be representative of the 

Proposed Rule Change’s impact on other 

members.149 The commenters state that 

the actual effects of the MMA on 

middle-market dealers will be higher 

than FICC’s cited examples.150 The 

commenters suggest that alternative 

impact measurements would provide a 

more accurate analysis of the proposed 

MMA’s impacts.151

In response to these comments, FICC 

states that due to confidentiality 

restrictions on releasing member-level 

data, the public-facing Proposed Rule 

Change filing narrative analyzed the 

Impact Study using anonymized data 

and averages of maximum dollar and 

percentage changes.152 However, FICC 

provided the Commission with 

expanded and detailed daily memberlevel Impact Study data confidentially, 

as part of the Proposed Rule Change 

filing in Exhibit 3.153 FICC further states 

that both prior and subsequent to filing 

the Proposed Rule Change, FICC 

actively engaged with members on 

multiple occasions, conducting outreach 

to each member in order to provide 

notice of the Proposed Rule Change 

along with individualized anticipated 

impacts for each member.154

In considering the comments critical 

of the Impact Study and FICC’s analyses 

thereof, the Commission considered the 

Proposed Rule Change (including the 

Impact Study 155 and other 

confidentially filed data 156), comment 

letters, FICC’s response letter, and the 

Commission’s own understanding of the 

GSD margin methodology based on its 

general supervision of FICC. Based on 

the Commission’s review and analysis 

of these materials, the Commission 

disagrees with the comments suggesting 

that FICC’s Impact Study and analyses 

are inaccurate and/or misleading. In the 

Proposed Rule Change narrative, FICC 

described the Impact Study in 

anonymized terms, highlighting 

averages and maximum dollar and 

percentage changes, due to the 

confidential nature of the member-level 

transactions that comprise the 

underlying data. However, FICC filed 

the confidential member-level data with 

the Commission in Exhibit 3 to the 

Proposed Rule Change filing. FICC also 

provided relevant confidential data in 

its response to the Commission’s 

requests for additional information with 

respect to the Advance Notice.157

Additionally, in the Commission’s 

supervisory role, the Commission 

routinely collects confidential marginrelated data from FICC. These data 

sources enable the Commission to 

evaluate the effects of the MMA on a 

member-by-member basis. 

The purpose of the Impact Study and 

FICC’s analyses thereof in the publicly 

available Proposed Rule Change filing 

materials is to highlight comparisons of 

the GSD VaR model’s performance with 

and without incorporating the MMA 

and to highlight the Proposed Rule 

Change’s general impacts on members 

using anonymized data and averages of 

maximum dollar and percentage 

changes. FICC did not state that its 

public discussion of the Impact Study 

was the sole source of data for the 

Commission and the public to utilize in 

evaluating the Proposed Rule Change. 

Rather, FICC provided additional 

detailed member-level data 

confidentially, both to members and the 

Commission, to more fully evaluate the 

impacts of the Proposed Rule Change. 

Regarding the comments that FICC’s 

analysis of the Impact Study data 

presented an inaccurate picture of the 

MMA’s impacts,158 the Commission 

recognizes that FICC provided 

individual impact studies for each 

member that included the average 

impact for the entire period of the 

Impact Study as well as the average 

impact on those days that the proposed 

MMA would have been applied for each 

member.159 Therefore, the commenters’ 

concerns regarding the Impact Study do 

not take into account that both the 

Commission and FICC’s members also 

reviewed more detailed confidential 

data to better understand the specific 

member-level impacts of the Proposed 

Rule Change. The comment that FICC’s 

public discussion of the Impact Study 

presented limited data, rendering it 

impossible to properly evaluate the 

MMA’s impacts, does not take into 

account that FICC provided more 

comprehensive confidential data to the 

Commission and members that was 

sufficient to properly assess the MMA’s 

impacts. Specifically, such data 

includes, among other things, actual 

daily VaR Charge for each member, 

hypothetical daily VaR Charge for each 

member had the MMA been in place, 

hypothetical daily VaR Charge for each 

member had Margin Proxy been 

invoked, analyses of increases 

attributable to the MMA, and numerous 

backtesting analyses. The comment that 

FICC’s public discussion of the Impact 

Study underestimated the MMA’s 

impacts by calculating the average 

impacts based on the full two-year 

period rather than the nine-month 

period of volatility does not take into 

account that FICC confidentially 

provided individual impact studies for 

each member that included average 

impacts on each day that the MMA 

would have applied to the member.160

Similarly, the comment that FICC’s 

public discussion of the Impact Study 

expressed the increase in margin 

requirements in terms of long-term 

averages as opposed to largest margin 

requirements does not take into account 

that FICC confidentially provided 

individual impact studies for each 

member indicating maximum margin 

increases on each day that the MMA 

would have applied to the member.161

The comment that FICC’s public 

discussion of the Impact Study cited 

impacted members that are not 

representative and underestimate the 

MMA’s impacts on middle-market 

participants does not take into account 

that FICC provided member-level 

impact data to each member.162

One commenter also states that FICC 

should expand the Impact Study to 

cover the March 2020 period of stress in 

light of FICC’s statements that the 

Proposed Rule Change was driven, in 

part, by the VaR model’s 

underperformance during that 


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163See SIFMA Letter at 6. 

164See FICC Letter at 6. 

165 17 CFR 240.17Ad–22(e)(6)(i). 

166 17 CFR 240.17ad–22(e)(23)(ii). 

167See SIFMA Letter at 7–8. 

168See id. 

169See FICC Letter at 7. 

170See id. 

171See id. 

172See id. 

173See id. 

174See id. 

175 17 CFR 240.17Ad–22(e)(23)(ii). 

176 15 U.S.C. 78q–1. 

177 15 U.S.C. 78s(b)(2). 

178 In approving the proposed rule change, the 

Commission considered the proposals’ impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). See also Sections II.A. and II.B. 

179 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

period.163 In response, FICC states that 

inclusion of that data is not necessary 

because the Impact Study’s two-year 

period achieves the purpose of 

demonstrating the effectiveness of the 

proposed MMA during periods of both 

low and high market volatility.164 The 

Commission agrees that the Impact 

Study’s two-year period sufficiently 

demonstrates the performance of the 

proposed MMA during periods of both 

low and high market volatility, as the 

two-year study period also included 

periods of both low and high market 

volatility. Inclusion of March 2020 in 

the Impact Study is not required for the 

Commission to evaluate the 

responsiveness of the MMA. 

Accordingly, the Proposed Rule 

Change is consistent with Rule 17ad– 

22(e)(6)(i) because the new MMA 

margin calculation and Margin Proxy 

clarifications should better enable FICC 

to establish a risk-based margin system 

that considers and produces relevant 

margin levels commensurate with the 

risks associated with liquidating 

participant portfolios in a default 

scenario during periods of extreme 

market volatility.165

E. Consistency With Rule 17Ad– 

22(e)(23)(ii) 

Rule 17Ad–22(e)(23)(ii) requires that 

FICC 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 FICC.166

One commenter states that the 

Proposed Rule Change lacks 

transparency, quick implementation, 

and tools and resources to support 

market preparedness to identify risks 

and costs associated with how FICC 

calculates margin amounts.167

Specifically, the commenter urges FICC 

to provide members with (1) daily VaR 

calculations, (2) an MMA calculator, 

and (3) a phased implementation of the 

MMA, including a parallel run period 

where the MMA is calculated but not 

invoked.168

In response, FICC states that it 

provides tools and resources to enable 

members to determine their margin 

requirements and the impact of FICC’s 

proposals.169 Specifically, FICC 

maintains the Real Time Matching 

Report Center, Clearing Fund 

Management System, FICC Customer 

Reporting Service, and FICC Risk Client 

Portal which are client accessible 

websites for accessing risk reports and 

other risk disclosures.170 These 

resources enable members to view 

Clearing Fund requirement information 

and margin component details, 

including portfolio breakdowns by 

CUSIP and amounts attributable to the 

sensitivity-based VaR model.171

Members are also able to view data on 

market amounts for current clearing 

positions and associated VaR 

Charges.172 Additionally, the FICC 

Client Calculator enables members to, 

among other things, enter ‘‘what-if’’ 

position data to determine hypothetical 

VaR Charges before trade execution. 

FICC states that as of June 24, 2024, 

FICC is in the process of enhancing the 

FICC Client Calculator to incorporate 

the MMA and FICC expects the 

enhancement to be available to members 

prior to implementation of the MMA, 

subject to the Commission’s 

approval.173 FICC also states that it is 

currently developing a tool that would 

enable non-members to assess potential 

VaR Charges (including MMA) as 

well.174

The extensive tools and resources that 

FICC makes available to members 

should enable members to obtain 

individualized information to determine 

their Clearing Fund requirements, 

margin component details, and assess 

the impact of FICC’s proposals. 

Additionally, FICC’s multiple member 

outreach efforts (before and after 

development of the Proposed Rule 

Change) provided members with 

relevant individualized impact analyses 

with which to evaluate the Proposed 

Rule Change. Accordingly, FICC has 

provided tools and resources sufficient 

for its members to evaluate their daily 

VaR and other margin-related 

calculations, rendering a phased 

implementation of the proposed MMA 

unwarranted. 

Based on the foregoing, FICC has 

provided sufficient information, tools, 

and resources to enable members to 

identify and evaluate the relevant risks 

and costs associated with the Proposed 

Rule Change, consistent with Rule 

17ad–22(e)(23)(ii).175

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular with the requirements of 

Section 17A of the Act 176 and the rules 

and regulations promulgated 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 177 that 

proposed rule change SR–FICC–2024– 

003, be, and hereby is, approved.178

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.179

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–26531 Filed 11–13–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101543; File No. SR–Phlx– 

2024–50] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change to Lower the Current 

Options Regulatory Fee (ORF) and 

Adopt a New Approach to ORF in 2025 

November 7, 2024. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on October 

31, 2024, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Phlx’s Pricing Schedule at Options 7, 

Section 6D, Options Regulatory Fee. 

While the changes proposed herein 

are effective upon filing, the Exchange 


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