9094 Federal Register / Vol. 90, No. 24 / Thursday, February 6, 2025 / Notices 

24 15 U.S.C. 78s(b)(2)(B). 

25 Id. 

26 15 U.S.C. 78f(b)(5). 

27See supra note 10 and accompanying text. 

28Section 19(b)(2) of the Act, as amended by the 

Securities Acts Amendments of 1975, Public Law 

94–29 (June 4, 1975), grants the Commission 

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Acts Amendments of 

1975, Senate Comm. on Banking, Housing & Urban 

Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 

(1975). 29 17 CFR 200.30–3(a)(57). 

III. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

NYSEARCA–2024–87 and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 24 to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of proceedings is appropriate 

at this time in view of the legal and 

policy issues raised by the proposed 

rule change. Institution of proceedings 

does not indicate that the Commission 

has reached any conclusions with 

respect to any of the issues involved. 

Rather, the Commission seeks and 

encourages interested persons to 

provide comments on the proposed rule 

change. 

Pursuant to Section 19(b)(2)(B) of the 

Act,25 the Commission is providing 

notice of the grounds for disapproval 

under consideration. The Commission is 

instituting proceedings to allow for 

additional analysis of the proposed rule 

change’s consistency with Section 

6(b)(5) of the Act, which requires, 

among other things, that the rules of a 

national securities exchange be 

‘‘designed to prevent fraudulent and 

manipulative acts and practices’’ and 

‘‘to protect investors and the public 

interest.’’ 26

The Commission asks that 

commenters address the sufficiency of 

the Exchange’s statements in support of 

the proposal, which are set forth in the 

Notice, in addition to any other 

comments they may wish to submit 

about the proposed rule change. In 

particular, with respect to the proposal 

to allow the listing and trading of 

Commodity- and/or Digital Asset-Based 

Investment Interests on the Exchange, 

the Commission seeks comment on 

whether the requirements and 

associated definitions set forth in 

proposed NYSE Arca Rule 8.800–E are 

sufficiently clear and are designed to 

prevent fraudulent and manipulative 

acts and practices. The Commission also 

seeks comment on whether the proposal 

to list and trade Shares of the Grayscale 

Fund, which would hold bitcoin, ether, 

Solana, XRP, Avalanche, and potentially 

other commodities, digital assets, and/or 

Derivative Securities Products, is 

designed to prevent fraudulent and 

manipulative acts and practices. In 

particular, as the proposal would allow 

the listing and trading of securities 

issued by entities, including the 

Grayscale Fund, that hold ‘‘digital 

assets,’’ 27 the Commission seeks 

comment on any new or novel concerns 

not previously contemplated by the 

Commission. 

IV. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposal is consistent with Section 

6(b)(5) or any other provision of the Act, 

and the rules and regulations 

thereunder. Although there do not 

appear to be any issues relevant to 

approval or disapproval that would be 

facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.28

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule change should be 

approved or disapproved by February 

27, 2025. Any person who wishes to file 

a rebuttal to any other person’s 

submission must file that rebuttal by 

March 13, 2025. 

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–2024–87 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–2024–87. 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–2024–87 and should be 

submitted on or before February 27, 

2025. Rebuttal comments should be 

submitted by March 13, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2025–02284 Filed 2–5–25; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–102318; File No. SR–DTC– 

2023–801] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

No Objection to Advance Notice, as 

Modified by Amendment No. 1, To 

Raise Prefunded Liquidity Resources 

Through the Periodic Issuance and 

Private Placement of Senior Notes 

January 31, 2025. 

On August 15, 2023, The Depository 

Trust Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) advance notice SR– 

DTC–2023–801 (‘‘Advance Notice’’) 


khammond on DSK9W7S144PROD with NOTICES
Federal Register / Vol. 90, No. 24 / Thursday, February 6, 2025 / Notices 9095 

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

2 17 CFR 240.19b–4(n)(1)(i). 

3 15 U.S.C. 78a et seq. 

4Securities Exchange Act Release No. 34–98227 

(Aug. 25, 2023), 88 FR 60251 (Aug. 31, 2023) (File 

No. SR–DTC–2023–801) (‘‘Notice of Filing’’). 

5Comments on the Advance Notice are available 

at https://www.sec.gov/comments/sr-dtc-2023-801/ 

srdtc2023801.htm. 

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

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

Memorandum from the Office of Clearance and 

Settlement, Division of Trading and Markets, titled 

‘‘Commission’s Request for Additional 

Information,’’ available at https://www.sec.gov/ 

comments/sr-dtc-2023-801/srdtc2023801-264099- 

633643.pdf. 

8 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii); 

Memorandum from the Office of Clearance and 

Settlement, Division of Trading and Markets, titled 

‘‘Response to the Commission’s Request for 

Additional Information,’’ available at https://

www.sec.gov/comments/sr-dtc-2023-801/ 

srdtc2023801-547195-1568142.pdf. 

9Securities Exchange Act Release No. 34–101890 

(Dec. 12. 2024), 89 FR 102985 (Dec. 18, 2024) (File 

No. SR–DTC–2023–801) (‘‘Notice of Amendment 

No. 1’’). 

10As noted below, although DTC would not limit 

the potential qualified institutional investors that 

could purchase senior notes, DTC believes the 

investors would include entities that typically 

invest in senior notes, such as insurance 

companies, asset managers, and pension funds. 

11 DTC identifies and describes its liquidity 

resources in the Clearing Agency Liquidity Risk 

Management Framework (‘‘Framework’’). See 

Securities Exchange Act Release Nos. 82377 (Dec. 

21, 2017), 82 FR 61617 (Dec. 28, 2017) (SR–DTC– 

2017–004; SR–FICC–2017–008; SR–NSCC–2017– 

005). DTC, along with its affiliates, National 

Securities Clearing Corporation (‘‘NSCC’’) and 

Fixed Income Clearing Corporation (‘‘FICC,’’ and, 

together with NSCC and DTC, the ‘‘Clearing 

Agencies’’), maintain the Framework which sets 

forth the manner in which each clearing agency 

measures, monitors and manages the liquidity risks 

that arise in or are borne by it. Each of the Clearing 

Agencies is a wholly-owned subsidiary of The 

Depository Trust & Clearing Corporation, which 

operates on a shared service model with respect to 

the Clearing Agencies. Most corporate functions are 

established and managed on an enterprise-wide 

basis pursuant to intercompany agreements under 

which it is generally DTCC that provides relevant 

services to the Clearing Agencies. 

12 DTC’s Participants Fund is a cash fund 

consisting of deposits made by Participants, which 

DTC can use to complete system-wide settlement 

and resolve losses in the event of a Participant’s 

default. See DTC Rule 4; Securities Exchange Act 

Release No. 90368 (Nov. 6, 2020), 85 FR 71973 

(Nov. 12, 2020) (File No. SR–DTC–2020–801) 

(Notice of No Objection To Advance Notice To 

Amend Rule 4). 

13Capitalized terms not defined herein are 

defined in the Rules, By-Laws and Organization 

Certificate of DTC (‘‘Rules’’), available at 

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

rules/dtc_rules.pdf. See also Securities Exchange 

Act Release No. 80605 (May 5, 2017), 82 FR 21850 

(May 10, 2017) (SR–DTC–2017–802; SR–NSCC– 

2017–802). 

14Notice of Amendment No. 1, 89 FR 102986. 

15 Id. In addition to default liquidity, DTC may 

use the proceeds of a Debt Issuance to prepay a 

prior Debt Issuance before maturity but could not 

use the proceeds for any other purpose. 

16Notice of Amendment No. 1, 89 FR 102987. 

17Notice of Amendment No. 1, 89 FR 102986. 

18 17 CFR 240.17Ad–22(a)(14). 

19Notice of Amendment No. 1, 89 FR 102987. 

20 Id. 

21Notice of Amendment No. 1, 89 FR 102986. 

22Notice of Amendment No. 1, 89 FR 102987. 

DTC represents that following the completion of the 

initial issuance and private placement of senior 

notes, the Clearing Agencies would file a proposed 

rule change to amend the Framework to include the 

proceeds of the Debt Issuance as an additional 

qualifying liquidity resource of DTC. See Notice of 

Filing, 88 FR 60251–60252, n.4; Notice of 

Amendment No. 1, 89 FR 102985, n.8. 

23Notice of Amendment No. 1, 89 FR 102985. 

24 Generally, DTC manages liquidity risks by 

maintaining sufficient liquid resources to settle its 

payment obligations under a wide range of 

foreseeable stress scenarios, including the default of 

the participant family that would generate the 

largest aggregate payment obligation for DTC in 

extreme but plausible market conditions. See 

Securities Exchange Act Release No. 99456 (Feb. 1, 

2024), 89 FR 8466 (Feb. 7, 2024) (File No. SR–DTC– 

2023–013) (Order Approving of Proposed Rule 

Change to Modify the DTC Settlement Service 

Guide). 

pursuant to Section 806(e)(1) of Title 

VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

entitled Payment, Clearing and 

Settlement Supervision Act of 2010 

(‘‘Clearing Supervision Act’’) 1 and Rule 

19b–4(n)(1)(i) 2 under the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’) 3 in connection with a proposal to 

raise prefunded liquidity resources 

through the periodic issuance and 

private placement of senior notes (‘‘Debt 

Issuance’’). The Advance Notice was 

published for public comment in the 

Federal Register on August 31, 2023,4

and the Commission has received 

comment regarding the changes 

proposed in the Advance Notice.5 On 

September 26, 2023, the Commission 

requested additional information for 

consideration of the Advance Notice 

from DTC, pursuant to Section 

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

Act,6 which tolled the Commission’s 

period of review of the Advance Notice 

until 60 days from the date the 

Commission received the requested 

information.7 On December 3, 2024, 

DTC filed Amendment No 1. to the 

Advance Notice, and the Commission 

received DTC’s response to the 

Commission’s request for additional 

information.8 Notice of Amendment No. 

1 to the Advance Notice was published 

in the Federal Register on December 18, 

2024.9 This publication serves as notice 

of no objection to the Advance Notice. 

I. The Advance Notice 

DTC is proposing to raise prefunded 

liquidity through the periodic issuance 

and private placement of senior notes to 

qualified institutional investors 10 in an 

aggregate amount not to exceed $3 

billion. Under the proposal, DTC would 

use the proceeds of the proposed Debt 

Issuance as an additional source of 

default liquidity. 

The proceeds of the Debt Issuance 

would supplement DTC’s qualifying 

liquidity resources.11 Such resources 

currently include cash deposits to DTC’s 

Participants Fund 12 and cash that 

would be obtained by drawing upon 

DTC’s committed 364-day credit facility 

with a consortium of banks (‘‘Line of 

Credit’’).13 Having an additional source 

of default liquidity should diversify 

DTC’s sources of default liquidity and 

help to mitigate risk that DTC is unable 

to secure default liquidity resources in 

an amount necessary to meet its 

liquidity needs.14 This could occur, for 

example, if DTC is unable to renew its 

Line of Credit at the targeted amount.15

A. DTC’s Liquidity Risk Management 

DTC needs liquidity for settlement to 

protect DTC against the possibility that 

a Participant may fail to pay its 

settlement obligations on a business 

day.16 DTC’s liquidity risk management 

strategy is to maintain sufficient liquid 

resources to complete system-wide 

settlement on each business day, with a 

high degree of confidence and 

notwithstanding the failure to settle of 

the Participant, or affiliated family of 

Participants, with the largest settlement 

obligation.17 Similarly, DTC’s liquidity 

risk management strategy seeks to 

ensure that DTC meets its requirement 

to hold qualifying liquid resources, as 

such term is defined in Rule 17Ad– 

22(a)(14) under the Exchange Act,18

sufficient to meet its minimum liquidity 

resource requirement in each relevant 

currency for which it has payment 

obligations owed to its Participants.19

DTC considers each of its existing 

default liquidity resources to be 

qualifying liquid resources.20 As 

mentioned above, these resources 

currently include cash deposits to DTC’s 

Participants Fund and cash that would 

be obtained by drawing upon DTC’s 

Line of Credit.21 DTC would consider 

the proceeds from the Debt Issuance to 

be a qualifying liquid resource.22 The 

proceeds from the Debt Issuance would 

supplement these existing default 

liquidity resources and would not be 

used for any other purpose (that is, DTC 

has represented that it would only 

utilize these resources to help complete 

settlement in the event of a default and 

not for some other purpose).23

While DTC believes its current 

available liquidity resources are 

sufficient to satisfy the single-largest 

family default under stressed but 

plausible conditions,24 the Debt 

Issuance would allow DTC to diversify 

its sources of default liquidity and 

mitigate risks that it is unable to secure 


khammond on DSK9W7S144PROD with NOTICES
9096 Federal Register / Vol. 90, No. 24 / Thursday, February 6, 2025 / Notices 

25Notice of Amendment No. 1, 89 FR 102987. 

26Notice of Amendment No. 1, 89 FR 102987. 

27 Id. 

28 Id. 

29 Id. 

30Notice of Amendment No. 1, 89 FR 102986. 

31 Id. 

32Notice of Amendment No. 1, 89 FR 102986. 

33 Id. 

34 Id. 

35 Id. 

36 Id. 

37 Id. 

38 Id. 

39Notice of Amendment No. 1, 89 FR 102986. 

40 Id. 

41 Id. 

42Notice of Amendment No. 1, 89 FR 102987. See 

Securities Exchange Act Release Nos. 79528 (Dec. 

12, 2016), 81 FR 91232 (Dec. 16, 2016) (SR–DTC– 

2016–007, SR–FICC–2016–005, SR–NSCC–2016– 

003); 84949 (Dec. 21, 2018), 83 FR 67779 (Dec. 31, 

2018) (SR–DTC–2018–012, SR–FICC–2018–014, 

SR–NSCC–2018–013). DTC represents that 

following the issuance of a Notice of No Objection 

by the Commission of this proposal, the Clearing 

Agencies would file a proposed rule change to 

amend the Clearing Agency Investment Policy to 

include the proceeds as default liquidity funds, 

within the definition of ‘‘Investable Funds,’’ as such 

term is defined therein, and provide that such 

amounts would be held in bank deposits at eligible 

commercial banks or at DTC’s cash deposit account 

at the FRBNY. See Notice of Filing, 88 FR 60253, 

n.13; Notice of Amendment No. 1, 89 FR 102987, 

n.16. 

43Notice of Amendment No. 1, 89 FR 102987. 

44See 12 U.S.C. 5461(b). 

45 12 U.S.C. 5464(a)(2). 

46 12 U.S.C. 5464(b). 

47 12 U.S.C. 5464(c). 

48 17 CFR 240.17Ad–22. See Securities Exchange 

Act Release No. 68080 (October 22, 2012), 77 FR 

66220 (November 2, 2012) (S7–08–11). See also 

Securities Exchange Act Release No. 78961 

(September 28, 2016), 81 FR 70786 (October 13, 

2016) (S7–03–14) (‘‘Covered Clearing Agency 

Standards’’). The Commission established an 

effective date of December 12, 2016, and a 

compliance date of April 11, 2017 for the Covered 

Clearing Agency Standards. DTC is a ‘‘covered 

clearing agency’’ as defined in Rule 17Ad–22(a)(5). 

49 Id. 

default liquidity resources in an amount 

necessary to meet its liquidity needs.25

More specifically, the proposal would 

provide DTC with the flexibility to 

reduce its reliance on the Line of Credit, 

which is renewed annually and 

dependent on continued lender interest, 

and meet any increased liquidity needs 

it may face in the future.26

The Debt Issuance could also 

diversify DTC’s sources of qualifying 

liquid resources.27 Although DTC 

would not limit the potential qualified 

institutional investors that purchase 

senior notes, meaning it would not 

specify that only certain entities could 

purchase senior notes, DTC believes the 

investors would include, for example, 

insurance companies, asset managers, 

and pension funds.28 Thus, while DTC 

is not able to ensure that the Debt 

Issuance would reduce concentration 

risk, given that the types of entities who 

typically invest in senior notes are 

generally not Participants of DTC or 

lenders under the Line of Credit, the 

proposed Debt Issuance could reduce 

the concentration risk related to DTC’s 

liquidity providers.29

B. General Terms of the Debt Issuance 

DTC is proposing to issue up to an 

aggregate amount of $3 billion in senior 

notes, as DTC deems reasonable, or as 

necessitated by liquidity needs.30 While 

currently DTC would not need to issue 

up to the aggregate amount of $3 billion, 

DTC believes that it is advisable to 

authorize up to this aggregate amount.31

Doing so would help DTC to satisfy 

future liquidity needs if those needs 

increase and help manage the risk that 

DTC is unable to obtain requisite 

amounts from its other sources of 

default liquidity.32

While the anticipated material terms 

and conditions of a future Debt Issuance 

are summarized below, the actual terms 

of a future Debt Issuance would depend 

on a number of factors, including DTC’s 

liquidity needs and the debt market 

conditions at the time of issuance.33

Therefore, the anticipated terms 

summarized below are reasonable 

estimates and may not reflect the actual 

terms of a future Debt Issuance.34

The senior notes would be 

represented by unsecured, 

unsubordinated, and non-convertible 

medium-term and long-term global 

notes held in the name of DTC (as the 

central securities depository) or its 

nominee, Cede & Co.35 DTC would issue 

and transfer the notes only through its 

book-entry system.36 The senior notes 

would bear interest at either fixed or 

floating rates that are set at market rates 

customary for such type of debt and 

reflective of the creditworthiness of 

DTC.37

DTC expects that the average maturity 

of the senior notes issued under the 

Debt Issuance would be no shorter than 

approximately two years and no longer 

than approximately ten years, because 

these are the typical lengths of mediumterm and long-term debt.38 DTC does 

not believe maturities over ten years 

would be suitable as debt with longer 

maturities are generally more expensive 

to issue and may present higher risks 

related to interest rates.39 DTC would 

time each debt issuance and stagger 

maturity dates of each issuance in order 

to ladder the maturities.40 DTC would 

have the option to prepay any amount 

of principal owed on the issued senior 

notes before such payment is due.41

DTC would hold the proceeds from 

the Debt Issuance in either its cash 

deposit account at the Federal Reserve 

Bank of New York (‘‘FRBNY’’) or in 

accounts at other creditworthy financial 

institutions in accordance with the 

Clearing Agency Investment Policy.42

These amounts would be available to 

draw to complete settlement as 

needed.43

II. Discussion and Commission 

Findings 

Although the Clearing Supervision 

Act does not specify a standard of 

review for an advance notice, the stated 

purpose of the Clearing Supervision Act 

is instructive: to mitigate systemic risk 

in the financial system and promote 

financial stability by, among other 

things, promoting uniform risk 

management standards for systemically 

important financial market utilities 

(SIFMUs) and strengthening the 

liquidity of SIFMUs.44

Section 805(a)(2) of the Clearing 

Supervision Act authorizes the 

Commission to prescribe regulations 

containing risk management standards 

for the payment, clearing, and 

settlement activities of designated 

clearing entities engaged in designated 

activities for which the Commission is 

the supervisory agency.45 Section 805(b) 

of the Clearing Supervision Act 

provides the following objectives and 

principles for the Commission’s risk 

management standards prescribed under 

Section 805(a): 46

• to promote robust risk management; 

• to promote safety and soundness; 

• to reduce systemic risks; and 

• to support the stability of the 

broader financial system. 

Section 805(c) provides, in addition, 

that the Commission’s risk management 

standards may address such areas as 

risk management and default policies 

and procedures, among other areas.47

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act and Section 17A of the Exchange 

Act (the ‘‘Clearing Agency Rules’’).48

The Clearing Agency Rules require, 

among other things, each covered 

clearing agency to establish, implement, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to meet certain minimum 

requirements for its operations and risk 

management practices on an ongoing 

basis.49 As such, it is appropriate for the 

Commission to review advance notices 

against the Clearing Agency Rules and 

the objectives and principles of these 

risk management standards as described 

in Section 805(b) of the Clearing 

Supervision Act. As discussed below, 

the proposal in the Advance Notice is 


khammond on DSK9W7S144PROD with NOTICES
Federal Register / Vol. 90, No. 24 / Thursday, February 6, 2025 / Notices 9097 

50 12 U.S.C. 5464(b). 

51 17 CFR 240.17Ad–22(e)(7). 

52 12 U.S.C. 5464(b). 

53For example, DTC may be exposed to interest 

rate risk, which is the risk that a change in interest 

rates could cause an increase to the net cost of carry 

of the Debt Issuance. DTC would mitigate this risk 

by issuing senior notes at different maturities and 

at both fixed interest rates and floating interest 

rates. DTC could also face a related financial risk 

that the expense of a Debt Issuance exceeds DTC’s 

income and may have a negative impact on DTC’s 

financial health or its creditworthiness. DTC would 

mitigate this risk by evaluating the expected net 

cost of carry (discussed above) of a Debt Issuance 

prior to issuing any debt, and if the financing costs 

for the issuance of senior notes increase, such that 

it is not financially advisable to issue additional 

senior notes, then DTC may determine to use its 

alternative liquidity resources to meet its liquidity 

needs during those market conditions. See Notice 

of Filing, 88 FR 60254; Notice of Amendment No. 

1, 89 FR 102988. 

54 DTC’s other liquidity tools include the Net 

Debit Cap and the Collateral Monitor. These two 

controls work together to protect the DTC 

settlement system in the event of a Participant 

default. The Collateral Monitor requires net debit 

settlement obligations, as they accrue intraday, to 

be fully collateralized and the Net Debit Cap limits 

the amount of any Participant’s net debit settlement 

obligation to an amount that can be satisfied with 

DTC’s default liquidity resources. A description of 

the calculation of each Participant’s Net Debit Cap 

and Collateral Monitor is available in the 

Settlement Service Guide. See DTC Settlement 

Service Guide, available at www.dtcc.com/-/media/ 

Files/Downloads/legal/service-guides/ 

Settlement.pdf. See also Notice of Filing, 88 FR 

60252; Notice of Amendment No. 1, 89 FR 102986, 

n.13. 

55See comment from Reflex Entertainment (Aug. 

15, 2023), available at https://www.sec.gov/ 

comments/sr-dtc-2023-801/srdtc2023801- 

542582.htm. Although this comment overall 

opposed the proposed changes, the comment also 

expressed concerns unrelated to the substance of 

the filing. The Commission received an additional 

comment, that, although submitted to the file for 

this Advance Notice (DTC–2023–801), did not 

relate to the substance of the Advance Notice. 

Comments on the Advance Notice are available at 

https://www.sec.gov/comments/sr-dtc-2023-801/ 

srdtc2023801.htm. 

consistent with the objectives and 

principles described in Section 805(b) of 

the Clearing Supervision Act,50 and in 

the Clearing Agency Rules, in particular 

Rule 17Ad–22(e)(7).51

A. Consistency With Section 805(b) of 

the Clearing Supervision Act 

For the reasons discussed 

immediately below, the proposal 

described in the Advance Notice is 

consistent with the stated objectives and 

principles of Section 805(b) of the 

Clearing Supervision Act.52

Specifically, as discussed below, the 

Advance Notice is consistent with 

promoting robust risk management, 

promoting safety and soundness, 

reducing systemic risks, and supporting 

the stability of the broader financial 

system. 

The proposal described in the 

Advance Notice is consistent with 

promoting robust risk management 

because the Debt Issuance would 

provide DTC with an additional liquid 

resource that DTC could access in the 

event of a Participant default. The Debt 

Issuance would supplement DTC’s 

existing default liquidity resources and 

diversify the type and source of such 

resources. The proposal to issue debt up 

to an aggregate amount of $3 billion, 

and use the proceeds as a default 

liquidity resource, is designed to 

promote robust liquidity risk 

management at DTC by diversifying the 

set of liquid resources available to DTC 

in the event of a Participant default. 

Doing so would, in turn, allow DTC to 

maintain sufficient liquid resources to 

complete system-wide settlement on 

each business day, with a high degree of 

confidence and notwithstanding the 

failure to settle of the Participant, or 

affiliated family of Participants, with the 

largest settlement obligation. While the 

Debt Issuance could bring certain 

financial risks,53 in the event such risks 

were to materialize, the ability of DTC 

to use other liquidity tools 54 helps 

promote DTC’s ability to manage 

liquidity risk through an overall 

diversified range of risk management 

tools. 

The Debt Issuance would promote 

safety and soundness by enabling DTC 

to obtain additional and diversified 

liquid resources to cover a liquidity gap 

that could arise in the event of a 

Participant default. By covering such a 

gap, the proposal complements DTC’s 

ability to meet its settlement obligations 

in the event of a Participant default, 

thereby reducing the risk of loss 

contagion (i.e., the risk of losses arising 

at other Participants if DTC is unable to 

complete system-wide settlement). 

Reducing the risk of loss contagion 

during a Participant default, in turn, 

reduces the possibility that losses will 

compromise the ability of DTC and its 

Participants to continue operations. 

This enhances the ability of DTC and its 

Participants to continue to provide 

stability and safety to the financial 

markets they serve. Therefore, by 

enhancing DTC’s ability to address 

losses and liquidity pressures that 

otherwise might cause financial distress 

to DTC or its Participants, the proposal 

described in the Advance Notice 

promotes safety and soundness. 

One commenter stated that the 

changes were ridiculous, and that DTC 

could not mitigate risk via debt.55 The 

Debt Issuance would diversify DTC’s 

sources of liquidity and provide DTC 

additional resources to be used to 

complete system-wide settlement if a 

Participant defaults. Although the Debt 

Issuance would not eliminate all risks 

faced by DTC, providing an additional 

source of liquidity reduces potential 

concentration risk that could arise from 

DTC using one source of, or similarly 

situated sources of, liquidity. Moreover, 

the Debt Issuance would provide DTC 

additional resources, thereby improving 

its ability to complete system-wide 

settlement if a Participant defaults. 

While the Debt Issuance would not 

eliminate these potential risks, it should 

reduce DTC’s exposure to such risks. 

At the same time, as noted above, the 

Debt Issuance could bring certain 

financial risks, such as interest rate risk 

and the financial risk that the expense 

of a Debt Issuance exceeds DTC’s 

income and affects DTC’s financial 

health or its creditworthiness. Taking on 

additional indebtedness presents 

additional risks to DTC and while DTC 

may have additional cash resources, it 

also will have corresponding obligations 

to repay the principal plus interest. DTC 

would mitigate this risk by evaluating 

the expected net cost of carry of a Debt 

Issuance prior to issuing any debt. If the 

financing costs for the issuance of senior 

notes increase prior to an issuance, DTC 

may determine not to issue any debt. 

Moreover, DTC would have the option 

to prepay any amount of principal owed 

on the issued senior notes before such 

payment is due, should DTC determine 

that doing so is necessary to reduce 

costs and/or financial risks. Thus, DTC 

recognizes the potential financial risks 

associated with the Debt Issuance and 

would take steps to mitigate and reduce 

such risks. Given that, and the benefits 

to the debt issuance discussed above, 

the Debt Issuance would still promote 

robust risk management and safety and 

soundness. 

The commenter also stated that, as an 

alternative, DTC ‘‘liquidate and sell the 

bad assets like any other functioning 

business’’ and questioned why DTC 

finds itself undercapitalized. On the 

first point, to the extent the comment is 

referring to the potential need for DTC 

to complete system-wide settlement if a 

Participant defaults, the Debt Issuance 

would help achieve this purpose. The 

proceeds from the Debt Issuance would 

provide DTC with additional, 

prefunded, and readily available 

qualifying liquid resources to be used to 

complete system-wide settlement if a 

Participant defaults. The proposal 

described in the Advance Notice does 

not include any provision related to the 

liquidation and sale of bad assets, and 

accordingly, the Commission is not 

addressing any changes related to those 

approaches. On the second point, DTC 

would use the proceeds from the Debt 

Issuance as additional, prefunded, and 

readily available qualifying liquid 


khammond on DSK9W7S144PROD with NOTICES
9098 Federal Register / Vol. 90, No. 24 / Thursday, February 6, 2025 / Notices 

56 12 U.S.C. 5464(b). 

57 17 CFR 240.17Ad–22(e)(7). 

58 17 CFR 240.17Ad–22(e)(7). 

59 17 CFR 240.17Ad–22(e)(7)(i). 

60 17 CFR 240.17Ad–22(e)(7)(i). 

61 17 CFR 240.17Ad–22(e)(7)(ii). 

62 17 CFR 240.17Ad–22(a)(14). 

63 17 CFR 240.17Ad–22(a)(14) (‘‘Qualifying liquid 

resources means, for any covered clearing agency, 

. . . (i) cash held either at the central bank of issue 

or at creditworthy commercial banks . . .’’). 

64 17 CFR 240.17Ad–22(e)(7)(ii). 

resources to be used to complete 

system-wide settlement if a Participant 

defaults. The proposal does not indicate 

that DTC is undercapitalized; the 

proposed Debt Issuance is not designed 

to fill any sort of capital gap, but is 

instead designed, as discussed here, to 

diversify DTC’s liquidity resources. 

The proposal described in the 

Advance Notice is consistent with 

promoting safety and soundness, 

reducing systemic risks, and supporting 

the stability of the broader financial 

system. Reducing the risk of loss 

contagion would attenuate the 

transmission of financial shocks from 

defaulting Participants to non-defaulting 

Participants. Accordingly, the proposal 

would support the stability of the 

broader financial system. Thus, the 

proposal described in the Advance 

Notice is consistent with the stated 

objectives and principles of Section 

805(b) of the Clearing Supervision 

Act.56

B. Consistency With Rule 17Ad–22(e)(7) 

The proposal described in the 

Advance Notice is consistent with the 

requirements of Rule 17Ad–22(e)(7) 

under the Exchange Act.57 Rule 17Ad– 

22(e)(7) requires DTC to establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to effectively 

measure, monitor, and manage liquidity 

risk that arises in or is borne by DTC, 

including measuring, monitoring, and 

managing its settlement and funding 

flows on an ongoing and timely basis, 

and its use of intraday liquidity, as 

specified in the rule.58

1. Consistency With Rule 17Ad– 

22(e)(7)(i) 

In particular, Rule 17Ad–22(e)(7)(i) 

under the Exchange Act requires that 

DTC establish, implement, maintain, 

and enforce written policies and 

procedures reasonably designed to 

‘‘effectively measure, monitor, and 

manage the liquidity risk that arises in 

or is borne by [it], including measuring, 

monitoring, and managing its settlement 

and funding flows on an ongoing and 

timely basis, and its use of intraday 

liquidity by . . . [m]aintaining 

sufficient liquid resources at the 

minimum in all relevant currencies to 

effect same-day . . . settlement of 

payment obligations with a high degree 

of confidence under a wide range of 

foreseeable stress scenarios that 

includes, but is not limited to, the 

default of the participant family that 

would generate the largest aggregate 

payment of obligation for the covered 

clearing agency in extreme but plausible 

conditions.’’ 59

As described above, the Debt Issuance 

would increase the liquidity resources 

available to DTC to continue to meet its 

liquidity obligations in a timely fashion 

in the event of a Participant’s default. 

These funds should help DTC to 

maintain sufficient liquidity resources 

to effect same-day settlement of 

payment obligations with a high degree 

of confidence under a wide range of 

foreseeable stress scenarios. 

Additionally, the Debt Issuance is 

designed to help ensure that DTC has 

sufficient, readily available qualifying 

liquid resources to complete systemwide settlement on each business day, 

with a high degree of confidence and 

notwithstanding the failure to settle of 

the Participant, or affiliated family of 

Participants, with the largest settlement 

obligation. Therefore, the Commission 

finds that the proposal is consistent 

with Rule 17Ad–22(e)(7)(i).60

2. Consistency With Rule 17Ad– 

22(e)(7)(ii) 

Rule 17Ad–22(e)(7)(ii) under the 

Exchange Act requires each covered 

clearing agency to establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

‘‘effectively measure, monitor, and 

manage the liquidity risk that arises in 

or is borne by [it], including measuring, 

monitoring, and managing its settlement 

and funding flows on an ongoing and 

timely basis, and its use of intraday 

liquidity by . . . holding qualifying 

liquid resources sufficient’’ to satisfy 

payment obligations owed to clearing 

members.61 Rule 17Ad–22(a)(14) under 

the Exchange Act defines ‘‘qualifying 

liquid resources’’ to include, among 

other things, cash held either at the 

central bank of issue or at creditworthy 

commercial banks.62

As described above, the Debt Issuance 

would enable DTC to hold additional 

cash proceeds from the issuance of the 

debt in a cash deposit account at the 

FRBNY or in accounts at other 

creditworthy financial institutions in 

accordance with the Clearing Agency 

Investment Policy. Because the funds 

would be held at the FRBNY or a 

creditworthy commercial bank, they 

would be a qualifying liquid resource, 

as that term is defined in Rule 17Ad– 

22(a)(14).63 Therefore, the proposal is 

consistent with Rule 17Ad– 

22(e)(7)(ii).64

III. Conclusion 

It is therefore noticed, pursuant to 

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

Supervision Act, that the Commission 

does not object to Advance Notice (SR– 

DTC–2023–801), as modified by 

Amendment No. 1, and that DTC is 

authorized to implement the proposed 

change as of the date of this notice. 

By the Commission. 

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2025–02288 Filed 2–5–25; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

35464] 

Deregistration Under Section 8(f) of the 

Investment Company Act of 1940 

January 31, 2025. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’) 

ACTION: Notice of Applications for 

Deregistration Under Section 8(f) of the 

Investment Company Act of 1940. 

The following is a notice of 

applications for deregistration under 

section 8(f) of the Investment Company 

Act of 1940 for the month of January 

2025. A copy of each application may be 

obtained via the Commission’s website 

by searching for the applicable file 

number listed below, or for an applicant 

using the Company name search field, 

on the SEC’s EDGAR system. The SEC’s 

EDGAR system may be searched at 

https://www.sec.gov/edgar/searchedgar/ 

companysearch.html. You may also call 

the SEC’s Office of Investor Education 

and Advocacy at (202) 551–8090. An 

order granting each application will be 

issued unless the SEC orders a hearing. 

Interested persons may request a 

hearing on any application by emailing 

the SEC’s Secretary at SecretarysOffice@sec.gov and serving the relevant 

applicant with a copy of the request by 

email, if an email address is listed for 

the relevant applicant below, or 

personally or by mail, if a physical 

address is listed for the relevant 

applicant below. Hearing requests 

should be received by the SEC by 5:30 


khammond on DSK9W7S144PROD with NOTICES