Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10395 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

5The Framework sets forth the model risk 

management practices that the Clearing Agencies 

follow to identify, measure, monitor, and manage 

the risks associated with the design, development, 

implementation, use, and validation of quantitative 

models. The Framework is filed as a rule of the 

Clearing Agencies. See Securities Exchange Act 

Release Nos. 81485 (August 25, 2017), 82 FR 41433 

(August 31, 2017) (File Nos. SR–DTC–2017–008, 

SR–FICC–2017–014, SR–NSCC–2017–008) (‘‘2017 

Notice’’); 88911 (May 20, 2020), 85 FR 31828 (May 

27, 2020) (File Nos. SR–DTC–2020–008, SR–FICC– 

2020–004, SR–NSCC–2020–008); and 92379 (July 

13, 2021), 86 FR 38143 (July 19, 2021) (File No. SR– 

DTC–2021–013), 92381 (July 13, 2021), 86 FR 38163 

(July 19, 2021) (File No. SR–NSCC–2021–008), and 

92380 (July 13, 2021), 86 FR 38140 (July 19, 2021) 

(File No. SR–FICC–2021–006) (collectively, the 

‘‘MRMF Filings’’). 

6 17 CFR 240.17Ad–22(e). Each of DTC, NSCC 

and FICC is a ‘‘covered clearing agency’’ as defined 

in Rule 17Ad–22(a)(5) and must comply with Rule 

17Ad–22(e). 

7Pursuant to Section 3.1 of the Framework, the 

Clearing Agencies have adopted the following 

definition of ‘‘model’’: ‘‘[M]odel’’ refers to a 

quantitative method, system, or approach that 

applies statistical, economic, financial, or 

mathematical theories, techniques, and 

assumptions to process input data into quantitative 

estimates. A ‘‘model’’ consists of three components: 

(i) An information input component, which delivers 

assumptions and data to the model; (ii) a processing 

component, which transforms inputs into estimates; 

and (iii) a reporting component, which translates 

the estimates into useful business information. The 

definition of model also covers quantitative 

approaches whose inputs are partially or wholly 

qualitative or based on expert judgment, provided 

that the output is quantitative in nature. See 2017 

Notice, supra note 5. See also Supervisory 

Guidance on Model Risk Management, SR Letter 

11–7 Attachment, dated April 4, 2011, issued by the 

Board of Governors of the Federal Reserve System 

and the Office of the Comptroller of the Currency, 

available at https://www.federalreserve.gov/ 

supervisionreg/srletters/sr1107a1.pdf, page 3. 

8 17 CFR 240.17Ad–22(e)(4), (e)(6) and (e)(7). 

References to Rule 17Ad–22(e)(6) and compliance 

therewith apply to the CCPs only and not to DTC 

because DTC is not a central counterparty. 

9Amending the Framework does not require any 

changes to the Rules, By-Laws and Organization 

Certificate of DTC (available at http://

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

rules/dtc_rules.pdf) (the ‘‘DTC Rules’’), the 

Rulebook of the Government Securities Division of 

FICC (available at https://www.dtcc.com/∼/media/ 

Files/Downloads/legal/rules/ficc_gov_rules.pdf) (the 

‘‘GSD Rules’’), the Clearing Rules of the MortgageBacked Securities Division of FICC (available at 

http://www.dtcc.com/∼/media/Files/Downloads/ 

legal/rules/ficc_mbsd_rules.pdf) (the ‘‘MBSD 

Rules’’), or the Rules & Procedures of NSCC 

(available at http://www.dtcc.com/∼/media/Files/ 

Downloads/legal/rules/nscc_rules.pdf) (the ‘‘NSCC 

Rules,’’ and collectively with the DTC Rules, GSD 

Rules, and MBSD Rules, the ‘‘Rules’’), because the 

Framework is a standalone document. See MRMF 

Filings, supra note 5. 

10See 17 CFR 240.17Ad–22(e)(4), (e)(6) and (e)(7). 

References to Rule 17Ad–22(e)(6) and compliance 

therewith apply to the CCPs only and not to DTC. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94273; File No. SR–DTC– 

2022–001] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Amend 

the Clearing Agency Model Risk 

Management Framework 

February 17, 2022. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on February 

11, 2022, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the clearing agency. DTC filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to the Clearing Agency 

Model Risk Management Framework 

(‘‘Framework’’) of DTC and its affiliates 

that are central counterparties, National 

Securities Clearing Corporation 

(‘‘NSCC’’) and Fixed Income Clearing 

Corporation (‘‘FICC,’’ and together with 

NSCC, the ‘‘CCPs,’’ and the CCPs 

together with DTC, the ‘‘Clearing 

Agencies’’).5 The Framework has been 

adopted by the Clearing Agencies to 

support their compliance with Rule 

17Ad–22(e) (the ‘‘Covered Clearing 

Agency Standards’’) under the Act,6

and, in this regard, applies solely to 

models 7 utilized by the Clearing 

Agencies that are subject to the model 

risk management requirements set forth 

in Rules 17Ad–22(e)(4), (e)(6), and (e)(7) 

under the Act.8

The proposed rule change would 

amend the Framework 9 to (i) harmonize 

the terminology used in the Framework 

relating to model validation, with the 

definition used by the Covered Clearing 

Agency Standards, by deleting ‘‘full’’ 

where it appears as a modifier to 

‘‘model validation’’ in the Framework; 

(ii) provide that provisional approvals of 

models may be extended if approved by 

the Managing Director of Model Risk 

Management (‘‘MRM’’) and notice 

thereof is given to the Group Chief Risk 

Officer; however, in no event shall any 

provisional approval, together with any 

extension(s) granted, exceed one year 

and (iii) make other technical and 

clarifying changes to the text, as 

described below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change would 

amend the Framework to (i) harmonize 

the terminology used in the Framework 

relating to model validation, with the 

definition used by the Covered Clearing 

Agency Standards, by deleting ‘‘full’’ 

where it appears as a modifier to 

‘‘model validation’’ in the Framework; 

(ii) provide that provisional approvals of 

models may be extended if approved by 

the Managing Director of MRM and 

notice thereof is given to the Group 

Chief Risk Officer; however, in no event 

shall any provisional approval, together 

with any extension(s) granted, exceed 

one year and (iii) make other technical 

and clarifying changes to the text, as 

described below. 

Background 

The Covered Clearing Agency 

Standards require that the Clearing 

Agencies take steps to manage the 

models that they employ in identifying, 

measuring, monitoring, and managing 

their respective credit exposures and 

liquidity risks, including that the 

Clearing Agencies conduct daily 

backtesting of model performance, 

periodic sensitivity analyses of models, 

and annual validation of models.10 The 

Framework is maintained by the 

Clearing Agencies to support their 

compliance with the requirements of the 

Covered Clearing Agency Standards 

relating to model risk management. 

The Framework outlines the 

applicable regulatory requirements 

mentioned above, describes the risks 

that the Clearing Agencies’ model risk 

management program are designed to 

mitigate, and sets forth specific model 

risk management practices and 

requirements adopted by the Clearing 


jspears on DSK121TN23PROD with NOTICES1
10396 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 

11See MRMF Filings, supra note 5, for additional 

information on the contents of the Framework. 

12The term ‘‘model validation’’ means an 

evaluation of the performance of each material risk 

management model used by a covered clearing 

agency (and the related parameters and 

assumptions associated with such models), 

including initial margin models, liquidity risk 

models, and models used to generate clearing or 

guaranty fund requirements, performed by a 

qualified person who is free from influence from 

the persons responsible for the development or 

operation of the models or policies being validated. 

17 CFR 240.17Ad–22(a)(9). 

13See 17 CFR 240.17Ad–22(e)(4)(vii) and 

(e)(7)(vii). 

14See 17 CFR 240.17Ad–22(e)(6)(vii). 

15Pursuant to Section 3.1 of the Framework, the 

‘‘Model Owner’’ is the person designated by the 

applicable business area or support function to be 

responsible for a particular model. The Model 

Owner is recorded in the Model Inventory. 

16Supra note 5. 

17See 17 CFR 240.17Ad–22(e)(4)(vii), (e)(6)(vii) 

and (e)(7)(vii). 

Agencies to ensure compliance with the 

Covered Clearing Agency Standards. 

These practices and requirements 

include, among other things, the 

maintenance of a model inventory 

(‘‘Model Inventory’’), a process for 

rating model materiality and 

complexity, processes for performing 

model validations and resolving 

findings identified during model 

validation, and processes for model 

performance monitoring, including 

backtesting and sensitivity analyses. 

The Framework also describes 

applicable internal ownership and 

governance requirements.11

The proposed rule change would 

harmonize the terminology used in the 

Framework relating to model validation, 

with the definition used by the Covered 

Clearing Agency Standards, by deleting 

‘‘full’’ where it appears as a modifier to 

‘‘model validation’’ in the Framework. 

The proposed rule change would also 

amend the Framework to provide the 

Clearing Agencies with the ability to 

make limited time extensions for 

provisional approvals of models. In this 

regard, the proposed rule change is 

designed to facilitate the Clearing 

Agencies’ ability to prudently manage 

contingencies relating to events or 

changes of circumstance that may 

impact the Clearing Agencies’ 

management of credit risk, margin, and 

liquidity risk management models, in 

accordance with the Framework. 

Additionally, the proposed rule change 

would make technical and clarifying 

changes to the text of the Framework, as 

described below. 

Proposed Rule Change 

Eliminate References to ‘‘Full’’ Model 

Validation 

With respect to model validation, the 

Covered Clearing Agency Standards 

refer to the term simply as ‘‘model 

validation,’’ as defined by Rule 17Ad– 

22(a)(9) under the Act.12 However, the 

Framework refers to model validation 

both as a ‘‘full model validation’’ and 

‘‘model validation,’’ and as an 

undefined and defined term depending 

on usage. For example, Section 1 

(Executive Summary) of the Framework 

describes Section 3 (Model Risk 

Management Framework), among other 

things, as including a discussion on 

‘‘full model validation.’’ Yet, ‘‘Model 

Validation’’ is first defined in Section 3 

as the definition used by the Covered 

Clearing Agency Standards, which does 

not use the modifier ‘‘full.’’ Moreover, 

references to full model validation and 

model validation in the Framework 

have the same meaning, as the 

Framework does not distinguish 

between the two. 

To address these unnecessary 

variations, the Clearing Agencies 

propose to harmonize the terminology 

used in the Framework relating to 

model validation, with the applicable 

term used in the Covered Clearing 

Agency Standards, by deleting ‘‘full’’ in 

all instances where it appears as a 

modifier to ‘‘model validation’’ in the 

Framework. In this regard, the word 

‘‘full’’ preceding ‘‘model validation’’ 

would be deleted from the Framework 

in all instances where it appears, 

including (i) from the reference in 

Section 1 of the Framework, mentioned 

above, (ii) renaming Section 3.3 of the 

Framework, named Full Model 

Validation, as ‘‘Model Validation,’’ and 

(iii) deleting four appearances of the 

word ‘‘full’’ before ‘‘Model Validation’’ 

in the text of Section 3. 

Extension of Provisional Approvals of 

Models 

The Covered Clearing Agency 

Standards require that the Clearing 

Agencies identify, measure, monitor, 

and manage their respective credit 

exposures and liquidity risks by 

performing model validations of their 

respective credit risk and liquidity risk 

models not less than annually or more 

frequently as may be contemplated by 

the applicable Clearing Agency’s 

established risk management 

framework.13 A covered clearing agency 

that is a central counterparty must 

perform a model validation for its 

margin system and related models not 

less than annually or more frequently as 

may be contemplated by such central 

counterparty’s risk management 

framework.14

Section 3.6 of the Framework (Model 

Approval and Control) provides that 

new models, and material changes to 

existing models, shall undergo model 

validation by MRM and then be 

approved by MRM prior to business use. 

In the absence of a Model Validation, 

provisional approvals with respect to 

new models and material changes to 

existing models may be issued to allow 

a model to be used for urgent business 

purposes prior to the completion of 

MRM’s Model Validation. Such 

provisional approval requests must be 

presented by the applicable Model 

Owner 15 to MRM, which may 

provisionally approve the model for a 

limited period not to exceed six months. 

The Framework does not provide for 

extensions of this six-month provisional 

approval period. However, MRM has 

observed, over time and since the 

Framework was initially filed,16 that it 

could take longer than six months to 

complete a model validation in 

accordance with the timeframe set forth 

in Section 3.3 of the Framework. For 

example, a model that has been 

provisionally approved and put into use 

while undergoing further modification 

and/or enhancement by a third-party 

developer, cannot undergo validation by 

MRM until such time as the developer 

has completed its process and made the 

enhanced model available to the 

Clearing Agencies. Considering the 

amount of time it may take for the 

developer to complete and deliver the 

modification and/or enhancement to the 

Clearing Agencies, as well as MRM’s 

validation process itself, it may be 

necessary for the model to operate 

under provisional approval for a period 

greater than six months. 

Therefore, pursuant to the proposed 

rule change, the Clearing Agencies 

would amend Section 3.6 of the 

Framework to provide that provisional 

approvals of models may be extended if 

approved by the Managing Director of 

MRM and notice thereof is given to the 

Group Chief Risk Officer; however, in 

accordance with the Covered Clearing 

Agency Standards requirements that 

credit, liquidity and margin models, as 

applicable, be validated at least 

annually,17 in no event shall any 

provisional approval, together with any 

extension(s) granted, exceed one year. In 

this regard, the proposed rule change 

would accommodate the incorporation 

of any modifications and enhancements 

identified by a developer into a 

provisionally approved model prior to 

model validation, and still allow the 

model validation to be completed 

within a timeframe that would be 

consistent with the requirements of both 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10397 

18 17 CFR 240.17Ad–22(e)(4)(vii). 

19 17 CFR 240.17Ad–22(e)(7)(vii). 

20 17 CFR 240.17Ad–22(e)(3). 21See supra note 7. 

the Framework and the Covered 

Clearing Agency Standards. 

Technical and Clarifying Changes 

Section 1 (Executive Summary) 

A sentence in Footnote 8 under 

Section 1 (Executive Summary) of the 

Framework would be revised for clarity 

and grammatical usage. The footnote 

describes the Model Risk Tolerance 

Statement and the Market Risk 

Tolerance Statement, which are listed in 

Section 1 among a series of documents 

used by the Clearing Agencies to 

support their execution of the 

Framework. In describing the Market 

Risk Tolerance Statement, the footnote 

states: ‘‘. . . the Market Risk Tolerance 

Statement, which articulates, among 

other things, risk tolerance levels 

covering margin backtests covering 

backtest coverage and stress tests 

covering exposure to extreme market 

moves.’’ The proposed rule change 

would eliminate certain repetitive usage 

of ‘‘covering’’ and ‘‘coverage’’ in the text 

quoted above such that the applicable 

text would read as follows: ‘‘. . . the 

Market Risk Tolerance Statement, which 

articulates, among other things, risk 

tolerance levels covering margin 

backtests and stress tests related to 

exposure to extreme market moves.’’ 

Section 2 (Model Risk Management 

Requirements) 

The first paragraph of Section 2 is 

intended by the Clearing Agencies to 

describe that in compliance with Rules 

17Ad–22(e)(4)(vii),18 and (e)(7)(vii) 19 of 

the Covered Clearing Agency Standards, 

each Clearing Agency is required to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to perform model 

validations on its credit risk models and 

liquidity risk models not less than 

annually or more frequently as may be 

contemplated by the Clearing Agency’s 

risk management framework established 

pursuant to Rule 17Ad–22(e)(3).20 The 

main text of the paragraph contains 

typographical errors, in that in place of 

the reference to section (e) in each of the 

three rules citied in the paragraph, it 

instead includes an erroneous reference 

to a section (C). However, the footnotes 

to these references contain the correct 

citations. The Clearing Agencies would 

revise the main text of the paragraph to 

correct the erroneous references to 

section (C) to instead refer to section (e). 

Section 3.1 (Model Inventory) 

Section 3.1 (Model Inventory) (i) sets 

forth the definition of model adopted by 

the Clearing Agencies,21 (ii) defines 

MRM as responsible for model risk 

management as a second-line function 

that is charged with determining 

whether any proposed method, system, 

or approach designed for Clearing 

Agency use meets the definition of 

model, (iii) provides a definition of 

Model Inventory as the definitive list of 

models subject to the Framework, (iv) 

describes a model inventory survey that 

is conducted at least annually across the 

Clearing Agencies to confirm that the 

Model Inventory is current, and (v) 

describes that all models subject to the 

Framework are validated, as described 

in the Framework. 

The proposed rule change would 

make technical and clarifying changes 

to the second paragraph of this section, 

which states: 

The Model unit within the Group Chief 

Risk Office that is responsible for model risk 

management as a second-line function 

(‘‘MRM’’) is charged with determining 

whether any proposed method, system, or 

approach designed for Clearing Agency use 

meets the above definition. All models 

subject to this Framework will be added to 

the definitive list of models (‘‘Model 

Inventory’’) and tracked by MRM. A Model 

Inventory Survey is conducted at least 

annually across the Clearing Agencies to 

confirm the Model Inventory is current 

(‘‘Annual Model Inventory Survey’’). During 

the Annual Model Inventory Survey, any 

business area or support function intending 

to have a model developed for Clearing 

Agency use will submit materials relevant to 

such proposed model for MRM to review and 

assess whether such proposed model will be 

added to the Model Inventory. The person 

designated by the applicable business area or 

support function to be responsible for a 

particular model (‘‘Model Owner’’) is 

recorded as the Model Owner for such model 

by MRM in the Model Inventory. 

First, for enhanced clarity, the first 

sentence of the paragraph would be 

revised to replace the initial reference to 

‘‘The Model’’ with ‘‘Model Risk 

Management’’ and define the term as 

‘‘MRM’’ directly after it is mentioned, 

rather than after additional descriptive 

text that follows in the sentence. The 

proposed rule change would also 

eliminate the reference to MRM as a 

‘‘unit’’ because this reference is 

redundant given the context describing 

the functionality of MRM implies that it 

is a unit or group. Conforming 

grammatical changes would also be 

made to delete ‘‘that’’ after ‘‘Group Chief 

Risk Office’’ and add ‘‘and’’ after 

‘‘second-line function.’’ The third 

sentence of the paragraph would be 

revised to make the initial letters in the 

words ‘‘Model Inventory Survey’’ lower 

case (i.e., ‘‘model inventory survey’’) as 

the term is not defined, but rather the 

reference is part of the description of the 

defined term ‘‘Annual Model Inventory 

Survey’’ that appears at the end of the 

sentence. The fourth sentence of the 

paragraph would be revised for 

consistency by replacing ‘‘business area 

or support function’’ with ‘‘business 

line or functional unit,’’ as the latter 

reflects usage of text in underlying 

MRM internal procedures. 

Second, the Clearing Agencies believe 

that adding to the Model Inventory 

certain methodologies used to 

implement configuration choices made 

by the Clearing Agencies, such as data 

sources, model parameters, and model 

performance monitoring, including but 

not limited to backtesting, that are not 

inherent to model selection or design 

and that do not materially impact a 

model’s results, and are not models 

subject to this Framework, may provide 

benefits for the Clearing Agencies in 

terms of monitoring and tracking of 

such methodologies. In this regard, the 

Clearing Agencies would add text to 

reflect that such methodologies may be 

added to the Model Inventory at MRM’s 

discretion. 

Finally, in the third paragraph of this 

section, the Clearing Agencies would 

change a reference to ‘‘risk management 

standards’’ to ‘‘Standards’’ to conform to 

the defined term for the Covered 

Clearing Agency Standards used 

throughout the Framework. 

Section 3.2 (Model Materiality and 

Complexity) 

Section 3.2 of the Framework 

describes that a model’s output can 

affect decision making (e.g., decisions 

with respect to Clearing Fund/ 

Participants Fund, backtesting, and 

stress testing measures), which may 

have a material impact on the Clearing 

Agency, and that each model subject to 

the Framework is assigned a materiality/ 

complexity rating in this regard. The 

section states that ‘‘[m]ateriality/ 

complexity index assignments are made 

at the time the applicable model is 

added to the Model Inventory and are 

used by MRM for Model Validation 

prioritization. All model materiality/ 

complexity index assignments are 

reviewed at least annually by MRM, as 

well as by the Model Risk Governance 

Council (‘‘MRGC’’), the forum for review 

of model risk matters.’’ Pursuant to the 

proposed rule change, the Clearing 

Agencies would replace both 

appearances of the words ‘‘index 

assignments’’ in these two sentences 


jspears on DSK121TN23PROD with NOTICES1
10398 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 

22Specifically, the Clearing Agencies use the 

‘‘DTCC Model Development Standards,’’ which is a 

document describing that materiality and 

complexity scores for a model, which scores are 

based on certain factors, underlie the determination 

of the materiality/complexity rating of the model. 

In accordance with the DTCC Model Development 

Standards, factors relating to the materiality score 

include model usage, model hierarchy and model 

exposure. The factors relating to the complexity 

score include structural complexity, and data 

availability and treatment. 

23The Clearing Agencies’ current grading scale 

consists of three grades—‘‘A,’’ ‘‘B,’’ and ‘‘C.’’ Any 

Clearing Agency may add or remove grading levels 

in its discretion, the parameters of which shall be 

reflected in written procedures established by such 

Clearing Agency. 

24See 17 CFR 240.17Ad–22(e)(4)(vii). 

25See 17 CFR 240.17Ad–22(e)(7)(vii). 

26See 17 CFR 240.17Ad–22(e)(6)(vii). 

with ‘‘scores.’’ This change would align 

the text of the Framework with MRM’s 

practice, whereby MRM reviews 

materiality and complexity scores of a 

model, which directly determine the 

applicable materiality/complexity 

rating, at least annually.22

Section 3.3 (Full Model Validation) 

In addition to deleting ‘‘full’’ where it 

appears as a modifier to ‘‘model 

validation’’ in Section 3.3 of the 

Framework, as described above, 

including in the title of the section, the 

proposed rule change would make other 

technical and clarifying changes to this 

section. 

In a paragraph that describes Model 

Validation activities performed for new 

models: 

(i) A reference to ‘‘model development 

documentation and testing’’ would be 

changed to ‘‘model documentation and 

development testing’’; 

(ii) a reference to ‘‘evaluation of data 

inputs and parameters’’ would be changed to 

‘‘evaluation of model inputs and 

parameters’’; 

(iii) a reference to ‘‘review of numerical 

implementation (including replication for 

certain key model components, which will 

vary from model to model)’’ would be 

changed to ‘‘review of model implementation 

for consistency with documentation’’; 

(iv) a reference to ‘‘independent testing: 

sensitivity analysis, stress testing, and 

benchmarking, as appropriate’’ would be 

changed to ‘‘independent testing: model 

output evaluation, backtesting, sensitivity 

analysis, stress testing, and benchmarking, as 

appropriate’’; and 

(v) a reference to ‘‘evaluation of model 

outputs, model performance, and back 

testing’’ would be changed to ‘‘evaluation of 

model performance monitoring (or ‘‘MPM’’) 

plan and results.’’ Similarly, a reference to 

‘‘model performance monitoring reports’’ in 

Section 3.8 of the Framework (Model 

Performance Monitoring) would be revised to 

consider the definition of the term MPM 

described above. In this regard, this reference 

in Section 3.8 would be revised to instead 

refer to ‘‘MPM reports.’’ 

In the second paragraph of this 

section, the third sentence states: ‘‘The 

Application Development Department 

for the Clearing Agencies will perform 

certain production release quality 

assurance checks (e.g., user acceptance 

testing/systems integration testing 

(UAT/SAT)).’’ Pursuant to the proposed 

rule change, this sentence would be 

revised to delete ‘‘Application 

Development Department for the’’ and 

‘‘(UAT/SAT)’’. This change would 

generalize the text to eliminate the need 

to revise the document in the event the 

name of the area that performs such 

testing changes. 

The Clearing Agencies would also 

revise this paragraph with respect to 

text relating to ratings assigned to a 

model upon validation. In this regard, 

the Framework currently describes that 

the result of each Model Validation is a 

model validation report prepared by 

MRM (‘‘Model Validation Report’’), a 

key section of which is the summary of 

all findings and recommendations 

ranked according to the findings’ 

severity level, inclusive of any 

identified model limitations and 

compensating controls for the model. 

This text would be revised to remove 

the reference to recommendations as 

part of the Model Validation Report 

because, pursuant to MRM’s procedures, 

while the Model Validation Report 

includes findings, it does not include 

recommendations. In addition, the 

severity level of the findings is 

described in this section to be classified 

as H, M or L, which the Clearing 

Agencies intend as abbreviations for 

‘‘High,’’ ‘‘Medium,’’ and ‘‘Low.’’ 

However, as these abbreviations are not 

otherwise defined in the Framework, 

the Clearing Agencies would replace the 

abbreviations with the full spelling of 

the classifications, such that the 

instances in the text of ‘‘H,’’ ‘‘M,’’ and 

‘‘L’’ would be replaced with ‘‘High,’’ 

‘‘Medium,’’ and ‘‘Low,’’ respectively. 

This paragraph also describes that 

MRM will provide an overall 

assessment for each model having 

undergone a Model Validation (‘‘Model 

Grade’’).23 The Clearing Agencies 

propose to clarify this text such that it 

describes each model that has been 

approved, as being rated (in the form of 

a Model Grade) by MRM, rather than 

providing an overall assessment. 

This paragraph states further that the 

Model Grade, together with the model 

materiality/complexity index 

assignment, serves to provide context 

for MRM’s overall assessment of the 

model’s suitability and performance for 

its intended purpose. As with the 

revision described immediately above, 

the Clearing Agencies would remove the 

reference to a Model Grade as 

representing an overall assessment of 

the model. In its place, the proposed 

rule change would provide a description 

that the Model Grade outlines the 

overall assessed quality of the model 

developer’s efforts to develop the model 

and the extent to which the model 

developer has effectively reduced model 

risk during model development. 

In addition, it is the Model Grade that 

rates these development quality 

considerations and risk factors, and the 

Model Grade does not depend on the 

model materiality/complexity index 

assignment and is not intended to 

signify the overall suitability of the 

model for its intended purpose. 

Therefore, the Clearing Agencies would 

clarify this point to remove the 

reference to model materiality and 

complexity as being a factor in 

determining the Model Grade, as well as 

delete text that indicates the Model 

Grade reflects the suitability of a model 

for its intended purpose. 

Section 3.4 (Periodic Model Validation) 

Section 3.4 of the Framework 

describes that MRM shall perform a 

Model Validation for each model subject 

to this Framework that is approved for 

use in production not less than annually 

(or more frequently as may be 

contemplated by such Clearing Agency’s 

established risk management 

framework), including each credit risk 

model,24 each liquidity risk model,25

and each CCP’s margin systems and 

related models,26 as required by the risk 

management standards set forth in the 

Framework. This type of Model 

Validation is referred to generally in the 

Framework as ‘‘periodic’’ Model 

Validation. In this regard, for the sake of 

clarity, the Clearing Agencies would 

insert the word ‘‘periodic’’ as a modifier 

for Model Validation in the first 

sentence of the first paragraph of this 

section. 

In addition, the Clearing Agencies 

would delete a paragraph from this 

section that states: ‘‘Periodic Model 

Validations follow full Model 

Validation standards. In certain cases, 

MRM may determine extra Model 

Validation activities are warranted 

based on previous Model Validation 

work and findings, changes in market 

conditions, or because performance 

monitoring of a particular model 

warrants extra validation.’’ This text 

would be deleted because, as noted 

above, the Framework recognizes one 

definition of Model Validation and the 

provisions relating to how Model 

Validation is conducted apply to all 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10399 

27The Depository Trust & Clearing Corporation 

(‘‘DTCC’’) is the parent company of the Clearing 

Agencies. 

28See 17 CFR 240.17Ad–22(e)(6). 

29See supra note 8. 

30MRC refers to the Management Risk Committee 

of the Boards of Directors of the Clearing Agencies. 

models regardless of timing, and it is 

unnecessary to state that periodic Model 

Validation follows the same standards 

as ‘‘full’’ Model Validation since there is 

only one concept of Model Validation. 

In addition, the reference to extra Model 

Validation activities is duplicative as 

the Framework contains other text 

indicating that Model Validations may 

be performed for a given model more 

frequently than on the minimum annual 

basis. 

Section 3.5 (Model Change 

Management) 

Section 3.5 of the Framework 

describes provisions relating to changes 

in models. The text of this section refers 

to a ‘‘version change’’ of a model in 

describing changes to third-party 

models. The section is intended to 

apply to any changes to a model and it 

is unnecessary to modify the word 

change, including with ‘‘version.’’ 

Therefore, the Clearing Agencies would 

delete the word ‘‘version’’ where it 

appears before ‘‘change’’ in this section. 

Section 3.6 (Model Approval and 

Control) 

In addition to the proposed change 

described above to extend the period 

allowable for a provisional approval to 

remain in effect, the Clearing Agencies 

would revise a sentence in Section 3.6 

of the Framework that states: 

‘‘Provisional approval requests along 

with appropriate control measures must 

be presented by the applicable Model 

Owner to MRM.’’ The sentence as 

written is duplicative as the first 

paragraph of Section 3.6 states that 

models must be submitted to MRM for 

approval. However, given the focus of 

this section on the approval of models, 

the Clearing Agencies believe that the 

section should more clearly state where 

the approval authority resides for 

provisional models. As stated above, it 

is MRM’s responsibility to approve 

models. Therefore, the Clearing 

Agencies would revise the sentence 

described above to read: ‘‘Provisional 

approval requests along with 

appropriate control measures must be 

approved by MRM.’’ 

A sentence that states: ‘‘All new 

models, and all material changes to 

existing models, shall undergo Model 

Validation by MRM and then be 

approved by MRM prior to business 

use’’ would be revised to replace the 

word ‘‘then’’ with ‘‘must’’ to clarify the 

requirement that a model must be 

approved by MRM prior to use. 

Section 3.7 (Resolution of Model 

Validation Findings) 

Consistent with the proposed change 

described above to remove the 

description of a group within the Group 

Chief Risk Office as a ‘‘unit,’’ the 

Clearing Agencies would revise a 

reference to ‘‘the Operational Risk 

Management unit’’ to delete the word 

‘‘unit’’ from this reference. Also, the 

Clearing Agencies would delete the 

word ‘‘the’’ before ‘‘Operational Risk’’ 

because it would not be grammatically 

correct when ‘‘unit’’ is deleted. In 

addition, the group name of 

‘‘Operational Risk Management,’’ as set 

forth in this reference, would be revised 

to ‘‘Operational Risk’’ to reflect a recent 

name change of this group from 

Operational Risk Management to 

Operational Risk. In connection with 

this name change, the term ‘‘ORM’’ that 

is used in this section to define 

‘‘Operational Risk Management’’ would 

be deleted. Also, in this regard, two 

subsequent references to ORM in the 

Framework, which appear in Section 3.7 

and Section 4.2, respectively, would be 

removed and replaced with 

‘‘Operational Risk.’’ 

Section 3.8 (Model Performance and 

Monitoring) 

In addition to a change relating to the 

definition of MRM described above, the 

Clearing Agencies would revise a 

footnote in Section 3.8 of the 

Framework. The footnote 29 describes 

the role Quantitative Risk Management 

(‘‘QRM’’) performs with respect to the 

CCPs’ margin models. A sentence 

within the note states that a 

representative of QRM self-elects as the 

owner of a margin model. In fact, the 

CCPs’ procedures would require the 

representative to be appointed as the 

owner of a model. Therefore, the 

Clearing Agencies would revise this 

footnote to reflect that a representative 

of QRM is appointed as the owner of a 

model. 

This section also contains a statement 

that MRM is responsible for providing 

oversight of model performance 

monitoring activities by setting 

organizational standards and providing 

critical analysis for identifying model 

issues and/or limitations. This 

statement has a footnote that states the 

organizational standards apply to 

DTCC’s 27 subsidiaries, as applicable. 

This footnote is unnecessary because 

the Framework applies only to the 

Clearing Agencies and no other 

subsidiaries of DTCC, and the mention 

to DTCC’s subsidiaries in general is 

extraneous. Therefore, pursuant to the 

proposed rule change, the Clearing 

Agencies would delete this footnote. 

Section 3.9 (Backtesting) 

Section 3.9 of the Framework contains 

a description of backtesting performed 

by the Clearing Agencies. Pursuant to 

the proposed rule change, this section 

would be revised to delete references to 

backtesting performed by DTC and 

related text, including applicable 

metrics and thresholds, and a related 

footnote that describes the designation 

of DTC account families by DTC 

Participants for purposes of managing 

Collateral Monitor and Net Debit Cap. 

The proposed change would be 

consistent with the Covered Clearing 

Agency Standards, which pursuant to 

Rule 17Ad–22(e)(6) 28 requires certain 

backtesting to be performed by the 

CCPs. As indicated above, this rule does 

not apply to DTC.29 In this regard, a 

reference to a backtesting metric 

(Collateral Group Collateral Monitor 

Coverage) mentioned in Section 4.2 of 

the Framework (Escalation) would also 

be deleted. 

Section 4.2 (Escalation) 

A paragraph within Section 4.2 of the 

Framework states: ‘‘On at least a 

monthly basis, the key metrics 

identified in Section 3.9 are reviewed by 

the Market and Liquidity Risk 

Management unit within the Group 

Chief Risk Office and reported to the 

MRC30 by the group within the Group 

Chief Risk Office responsible for risk 

reporting. Threshold breaches will be 

reviewed by the Managing Directors 

within the Financial Risk Management 

area (including the Market and 

Liquidity Risk Management unit) of the 

Group Chief Risk Office, and in the case 

of CFR Coverage breaches by the CCPs 

and Collateral Group Collateral Monitor 

Coverage by DTC, escalated to the BRC 

in accordance with the applicable Risk 

Tolerance Statement.’’ 

Pursuant to the proposed rule change, 

first, the reference to a Market and 

Liquidity Risk Management unit would 

be revised to reflect only the Market 

Risk Management unit. Today, the 

Market Risk Management and Liquidity 

Risk Management areas are under 

separate management, and Market Risk 

Management is the area that performs 

the review of key metrics described in 

the paragraph. 


jspears on DSK121TN23PROD with NOTICES1
10400 Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 

31 15 U.S.C. 78q–1(b)(3)(F). 

32 17 CFR 240.17Ad–22(e)(4), (e)(6), and (e)(7). 

References to Rule 17Ad–22(e)(6) and compliance 

therewith apply to the CCPs only and not to DTC. 

33 15 U.S.C. 78q–1(b)(3)(F). 

34 17 CFR 240.17Ad–22(e)(4), (e)(6), and (e)(7). 

References to Rule 17Ad–22(e)(6) and compliance 

therewith apply to the CCPs only and not to DTC. 

35 Id. 

36 15 U.S.C. 78s(b)(3)(A). 

37 17 CFR 240.19b–4(f)(6). 

Second, the Clearing Agencies would 

revise the paragraph to remove the 

parenthetical that states, ‘‘including the 

Market and Liquidity Risk Management 

unit,’’ after a reference to the Financial 

Risk Management area’s role in the 

review of threshold breaches of key 

metrics, as both units are part of 

Financial Risk Management, and 

therefore the parenthetical is 

unnecessary. In this regard, the 

proposed modification would enhance 

readability. 

Third, the Clearing Agencies would 

remove the text ‘‘by the group within 

the Group Chief Risk Office responsible 

for risk reporting’’ as it is unnecessary 

since it can be inferred that reports 

would be provided by the group 

responsible for such reporting. 

2. Statutory Basis 

The Clearing Agencies believe that the 

proposed rule change is consistent with 

Section 17A(b)(3)(F) of the Act,31 as 

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

(e)(7) thereunder,32 for the reasons 

described below. 

Section 17A(b)(3)(F) of the Act 33

requires, inter alia, that the rules of a 

clearing agency be designed to assure 

the safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible. As described above, the 

proposed rule change enhances (i) the 

Clearing Agencies’ ability to complete 

modifications to a provisionally 

approved model prior to the 

performance of a model validation and 

(ii) the text of the Framework to 

facilitate clarity for the areas within the 

Clearing Agencies that perform 

responsibilities with regard to model 

risk management and compliance with 

the Framework. By enhancing the 

Framework in this regard, the proposed 

rule change supports the Clearing 

Agencies’ performance of their 

responsibilities under the Framework, 

including but not limited to assuring 

that models developed function as 

intended to support the Clearing 

Agencies in identifying, measuring, 

monitoring, and managing their 

respective credit exposures, liquidity 

risks and, as applicable, the 

maintenance of sufficient margin to 

cover these risks. In this regard, the 

proposed rule change would promote 

the safeguarding of securities and funds 

which are in the custody or control of 

the Clearing Agencies or for which they 

are responsible, by promoting the ability 

of the Clearing Agencies to manage 

credit exposures and liquidity risk that 

may impact the safeguarding of those 

funds and securities. 

Rules 17Ad–22(e)(4), (e)(6), and (e)(7) 

under the Act 34 require, inter alia, that 

a covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to manage risks 

associated with its credit risk 

management models, margin models, 

and liquidity risk management models, 

respectively, as applicable. As discussed 

above, the proposed rule change 

enhances (i) the Clearing Agencies’ 

ability to complete modifications to a 

provisionally approved model prior to 

the performance of a model validation 

and (ii) the text of the Framework to 

facilitate clarity for the areas within the 

Clearing Agencies that perform 

responsibilities with regard model risk 

management and compliance with the 

Framework. By enhancing the 

Framework in this regard, the proposed 

rule change supports the Clearing 

Agencies’ performance of their 

responsibilities under the Framework, 

including but not limited to assuring 

that models developed function as 

intended to support the Clearing 

Agencies in identifying, measuring, 

monitoring, and managing their 

respective credit exposures, liquidity 

risks and, as applicable, the 

maintenance of sufficient margin to 

cover these risks. Therefore, the 

Clearing Agencies believe that the 

proposed changes to the Framework are 

consistent with Rules 17Ad–22(e)(4), 

(e)(6), and (e)(7).35

(B) Clearing Agency’s Statement on 

Burden on Competition 

The Clearing Agencies do not believe 

that the proposed rule change would 

have any impact, or impose any burden, 

on competition because the proposed 

rule change simply modifies the 

Framework governing the management 

of model risk by the Clearing Agencies 

and (a) would not effectuate any 

changes to the Clearing Agencies’ model 

risk management tools as they apply to 

their respective Members or Participants 

and (b) would not have an effect with 

respect to the obligations of participants 

utilizing Clearing Agency services. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

The Clearing Agencies have not 

received or solicited any written 

comments relating to this proposal. If 

any written comments are received, they 

will be publicly filed as an Exhibit 2 to 

this filing, as required by Form 19b–4 

and the General Instructions thereto. 

Persons submitting comments are 

cautioned that, according to Section IV 

(Solicitation of Comments) of the 

Exhibit 1A in the General Instructions to 

Form 19b–4, the Commission does not 

edit personal identifying information 

from comment submissions. 

Commenters should submit only 

information that they wish to make 

available publicly, including their 

name, email address, and any other 

identifying information. 

All prospective commenters should 

follow the Commission’s instructions on 

how to submit comments, available at 

https://www.sec.gov/regulatory-actions/ 

how-to-submit-comments. General 

questions regarding the rule filing 

process or logistical questions regarding 

this filing should be directed to the 

Main Office of the Commission’s 

Division of Trading and Markets at 

tradingandmarkets@sec.gov or 202– 

551–5777. 

The Clearing Agencies reserve the 

right to not respond to any comments 

received. 

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 36 and Rule 19b–4(f)(6) 

thereunder.37

At any time within 60 days of the 

filing of the 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. 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10401 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92206 

(June 17, 2021), 86 FR 33402 (‘‘Notice’’). Comments 

on the proposed rule change can be found at: 

https://www.sec.gov/comments/sr-box-2021-14/ 

srbox202114.htm. The Commission received one 

comment letter that expresses opposition to the 

proposal but without specificity as to why. See 

Letter from David (September 23, 2021). 

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

5See Securities Exchange Act Release No. 92556, 

86 FR 43572 (August 9, 2021). The Commission 

designated September 22, 2021, as the date by 

which the Commission shall approve or disapprove, 

or institute proceedings to determine whether to 

approve or disapprove, the proposed rule change. 

6 In Amendment No. 1, the Exchange revised the 

proposal to: (1) Adopt the BSTX LLC Third 

Amended and Restated Limited Liability Company 

Agreement prior to the commencement of 

operations of BSTX as a facility of the Exchange, 

which, among other things, (a) changes the legal 

name of the facility from ‘‘Boston Security Token 

Exchange LLC’’ to ‘‘BSTX LLC,’’ (b) modifies certain 

defined terms, including ‘‘BSTX Product’’ and 

‘‘Competing Business,’’ (c) defines the term 

‘‘Governmental Authority’’ and modifies certain 

provisions to permit access to certain confidential 

information by any such authority, and (d) adds a 

provision that would, among other things, require 

an effective rule filing pursuant to Section 19 of the 

Exchange Act prior to any Member, or Related 

Person of such Member, becoming a BSTX 

Participant if such Member, alone or together with 

any Related Persons of such Member, has the right 

to appoint more than 20% of the BSTX Directors 

entitled to vote; (2) provide additional information 

about ownership of non-voting Class B Units; (3) 

clarify how limitations on voting of interests in 

BOX Holdings are implemented by reallocating 

voting rights to other BOX Holdings owners, and 

how a similar provision in the BSTX LLC 

Agreement would operate; (4) discuss certain 

provisions and associated definitions in the BSTX 

LLC Agreement that are the same or different from 

those that currently apply to BOX Holdings and 

BOX Options, particularly with respect to the board 

structure, intellectual property, and automatic 

admission of Class B Units as Members; (5) provide 

additional description of limitations on voting and 

ownership of interests in the Exchange; (6) provide 

additional description of the roles, obligations, and 

authorities of BOX Digital, tZERO, and the 

Exchange with respect to BSTX; (7) describe the 

funding of operations of BSTX; (8) clarify 

representation of BSTX Participants on the 

Exchange’s Board and committees, and how those 

representatives would be appointed at the 

commencement of operations; and (9) make other 

technical, clarifying and conforming changes. 

7 15 U.S.C. 78s(b)(2)(B). 

8See Securities Exchange Act Release No. 93094, 

86 FR 53365 (September 27, 2021) (Notice of Filing 

of Amendment No. 1 and Order Instituting 

Proceedings) (‘‘OIP’’). 

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

10See Securities Exchange Act Release No. 93786, 

86 FR 72296 (December 21, 2021). 

11 In Amendment No. 2, the Exchange revised the 

proposal to: (1) Revise the BSTX LLC Agreement by, 

among other things, (a) introducing certain defined 

terms, including ‘‘Shortfall Amount,’’ ‘‘Statutory 

Disqualification,’’ and ‘‘Tax Matters 

Representative,’’ (b) converting existing class A and 

class B units of BSTX to economic units and voting 

units of BSTX, (c) prohibiting events that would 

Continued 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

DTC–2022–001 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–DTC–2022–001. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of DTC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–DTC– 

2022–001 and should be submitted on 

or before March 17, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03875 Filed 2–23–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94278; File No. SR–BOX– 

2021–14] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing of 

Amendment No. 2 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 2, in Connection With 

the Proposed Establishment of BSTX 

LLC as a Facility of the Exchange 

February 17, 2022. 

I. Introduction 

On June 7, 2021, BOX Exchange LLC 

(‘‘Exchange’’ or ‘‘BOX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

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

19b–4 thereunder,2 a proposed rule 

change in connection with the proposed 

commencement of operations of BSTX 

LLC (‘‘BSTX’’) as a facility of the 

Exchange. The proposed rule change 

was published for comment in the 

Federal Register on June 24, 2021.3 On 

August 3, 2021, pursuant to Section 

19(b)(2) of the Exchange Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 On September 

16, 2021, the Exchange filed 

Amendment No. 1 to the proposed rule 

change (‘‘Amendment No. 1’’), which 

replaced and superseded the proposed 

rule change as originally filed.6 On 

September 21, 2021, the Commission 

published notice of Amendment No. 1 

and instituted proceedings pursuant to 

Section 19(b)(2)(B) of the Exchange 

Act 7 to determine whether to approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1.8 On 

December 15, 2021, pursuant to Section 

19(b)(2) of the Exchange Act,9 the 

Commission designated a longer period 

for Commission action on the proposed 

rule change, as modified by Amendment 

No. 1.10 On January 18, 2022, the 

Exchange filed Amendment No. 2, 

which replaced and superseded the 

proposed rule change, as modified by 

Amendment No. 1.11 The Commission 


jspears on DSK121TN23PROD with NOTICES1