Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 38143 

29 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 do not apply 

to DTC. 

30 Id. 

31 15 U.S.C. 78s(b)(3)(A). 

32 17 CFR 240.19b–4(f). 

33 17 CFR 200.30–3(a)(12). 

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)(1). 

which are in the custody or control of 

the clearing agency or for which it is 

responsible. As described above, the 

Framework describes the process by 

which the Clearing Agencies identify, 

measure, monitor, and manage the risks 

associated with the design, 

development, implementation, use, and 

validation of quantitative models. The 

quantitative models covered by the 

Framework are utilized by the Clearing 

Agencies, as applicable, to manage risks 

associated with the safeguarding of 

securities and funds that are in their 

custody or control or for which they are 

responsible, and the proposed rule 

change clarifies the applicability of the 

Framework to specific models, thereby 

better supporting the ability of the 

Clearing Agencies to perform these 

important risk management functions 

and comply with other regulatory 

requirements, including Rule 19b–4. 

Rule 17Ad–22(e)(4), (e)(6), and 

(e)(7) 29 requires, 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, 

as applicable. As discussed above, the 

proposed rule change clarifies the 

applicability of the Framework to such 

types of models, thereby better 

supporting the ability of the Clearing 

Agencies to comply with these 

requirements. Therefore, the Clearing 

Agencies believe that the proposed 

changes to the Framework are consistent 

with Rule 17Ad–22(e)(4), (e)(6), and 

(e)(7).30

(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 clarifies the scope 

and administration of the Framework by 

the Clearing Agencies and would not 

effectuate any changes to the Clearing 

Agencies’ model risk management tools 

as they currently apply to their 

respective Members or Participants. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

The Clearing Agencies have not 

solicited or received any written 

comments relating to this proposal. The 

Clearing Agencies will notify the 

Commission of any written comments 

received by the Clearing Agencies. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A) 31 of the Act and paragraph 

(f) 32 of Rule 19b–4 thereunder. 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. 

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– 

FICC–2021–006 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–FICC–2021–006. 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 FICC 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–FICC– 

2021–006 and should be submitted on 

or before August 9, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–15188 Filed 7–16–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92379; File No. SR–DTC– 

2021–013)] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Clearing Agency Model Risk 

Management Framework 

July 13, 2021. 

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 July 7, 

2021, 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)(1) 

thereunder.4 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 


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38144 Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 

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 No. 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’’) and Securities Exchange Act Release No. 

88911 (May 20, 2020), 85 FR 31828 (May 27, 2020) 

(File Nos. SR–DTC–2020–008; SR–FICC–2020–004; 

SR–NSCC–2020–008) (‘‘2020 Notice’’) (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). 

7Amending the Framework does not require any 

changes to the Rules, By-Laws and Organization 

Certificate of DTC, the Rulebook of the Government 

Securities Division of FICC, the Clearing Rules of 

the Mortgage-Backed Securities Division of FICC, or 

the Rules & Procedures of NSCC, because the 

Framework is a standalone document. See MRMF 

Filings, supra note 5. 

8See infra note 16 for the definition of ‘‘model’’ 

as adopted by the Clearing Agencies pursuant to the 

Framework. 

9 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 do not apply 

to DTC. 

10 Id. 

11 Id. 

12See MRMF Filings, supra note 5, for additional 

information on the contents of the Framework. 

13 DTCC operates on a shared services 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 a relevant service to a Clearing Agency. 

14See 2020 Notice, supra note 5. 

15 17 CFR 240.19b–4. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change clarifies the 

scope of the Clearing Agency Model 

Risk Management Framework 

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

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’’).6 The proposed rule 

change 7 would amend the Framework 

to clarify that the Framework applies 

solely to models 8 utilized by the 

Clearing Agencies that are subject to the 

model risk management requirements 

set forth in Rule 17Ad–22(e)(4), (e)(6), 

and (e)(7) under the Act.9 The proposed 

rule change also makes other technical 

and clarifying changes to the text, as 

more fully 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 clarifies the 

scope of the Framework to make clear 

that it applies solely to models that are 

subject to Rule 17Ad–22(e)(4), (e)(6), 

and (e)(7).10 The proposed rule change 

also makes other technical and 

clarifying changes to the text. 

Background 

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 

Covered Clearing Agency Standards 

require that the Clearing Agencies take 

a variety of 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.11

The Framework outlines the 

applicable regulatory requirements 

described 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 

Agencies in order to ensure compliance 

with the Covered Clearing Agency 

Standards. These practices and 

requirements include, among other 

things, the maintenance of a 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.12

The Depository Trust & Clearing 

Corporation (‘‘DTCC’’), the parent 

company of the Clearing Agencies, has 

established a robust model risk 

management program, which applies to 

models employed across multiple 

business lines and corporate 

functions.13 DTCC may implement 

changes in its model risk management 

program from time to time, some of 

which changes may impact only lowerrisk, lower-materiality models that are 

not subject to the specific model risk 

management requirements of the 

Covered Clearing Agency Standards. 

The Clearing Agencies previously 

adopted changes to the Framework in 

connection with proposed 

enhancements to their model risk 

management program, which rule 

changes also deleted the defined term 

‘‘Clearing Agency Model’’ on grounds 

that the Framework related solely to 

models of the Clearing Agencies, and it 

was unnecessary to use the modifier 

‘‘Clearing Agency’’.14 In view of 

continued expansion of DTCC’s model 

risk management program, however, the 

Clearing Agencies desire to avoid any 

doubt as to the applicability of the 

Framework to specific models, and 

therefore propose to adopt further 

clarifying changes to the text of the 

Framework. 

Proposed Rule Change 

Section 1 (Executive Summary) of the 

Framework recites the regulatory 

requirements applicable to model risk 

management for credit risk models, 

liquidity risk models, and margin 

models that are set forth in the Covered 

Clearing Agency Standards. The 

proposed rule change clarifies the 

Framework’s scope by (i) amending 

Section 1 of the Framework to add a 

sentence that states that the Framework 

supports the Clearing Agencies in 

complying with their rule filing 

requirements under Rule 19b–4 15

because the Framework itself is a rule 

that governs the Clearing Agencies’ 

management of their credit risk, margin, 

and liquidity risk management models 

and (ii) adding a footnote that states that 

only those models that satisfy the 

definition of ‘‘model’’ set forth in 

Section 3.1 of the Framework, and that 

support the Clearing Agencies’ 

compliance with the Standards, are 

models subject to the Framework and, 

in contrast, models of the Clearing 

Agencies that would satisfy the 

definition of ‘‘model’’ as set forth under 

Section 3.1 of the Framework, but do 

not support the Clearing Agencies’ 

compliance with the Standards, are not 


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16Pursuant 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: 

an information input component, which delivers 

assumptions and data to the model; a processing 

component, which transforms inputs into estimates; 

and 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. 

17Also in this regard, the applicable sentence that 

this reference would be added to would also replace 

the words ‘‘All models (including, without 

limitation, all credit risk models margin models, 

and liquidity risk models)’’ with ‘‘All models.’’ The 

described reference to ‘‘subject to this Framework’’ 

would be added after the newly added text ‘‘All 

models.’’ 

18 In this instance, the new text ‘‘subject to this 

Framework’’ would be preceded with the added 

text ‘‘that is’’ so that the reference to ‘‘model’’ in 

this context reads ‘‘. . . model that is subject to this 

Framework . . . .’’ 

19Similar to the prior reference from Section 3.1, 

the added reference to ‘‘subject to this Framework’’ 

in Section 3.3 would be preceded with the added 

text ‘‘that is’’ so that the reference to ‘‘model’’ in 

this context reads ‘‘. . . new model that is subject 

to this Framework . . . .’’ 

20Similar to the prior reference from Section 3.3, 

the added reference to ‘‘subject to this Framework 

in Section 3.4 would be followed with the added 

text ‘‘that is’’ so that the reference to ‘‘model’’ in 

this context reads ‘‘. . . model subject to this 

Framework that is . . . .’’ 

21The reference to model in this instance also 

refers to a new model or a model change and the 

applicable text reads ‘‘. . . new model or model 

change . . . .’’ To improve the flow of the text, the 

words ‘‘or model change’’ would be deleted and ‘‘or 

changed’’ would be added after ‘‘new.’’ Also, the 

addition of ‘‘subject to this Framework’’ would be 

preceded by newly added words ‘‘that is’’ so that 

the reference to ‘‘model’’ in this case refers to ‘‘. . . 

new or changed model that is subject to this 

Framework . . . .’’ 

22 In this instance the existing text does not use 

the word ‘‘model’’ even though it is referencing the 

escalation of issues relating to models. The 

applicable sentence currently begins with ‘‘[a]ll 

model performance monitoring oversight concerns 

. . . .’’ 

23See MRMF Filings, supra note 5, for additional 

information on the contents of these sections, and 

the Framework in general. 

24Section 1 provides that this documentation 

each of which may be updated, amended, retired, 

or replaced from time to time. In this regard, the 

text would be updated to reflect that (i) ‘‘DTCC 

Model Validation Procedures’’ has been changed to 

‘‘Model Validation Procedures’’, (ii) ‘‘DTCC Model 

Performance Monitoring Procedures’’ has been 

changed to ‘‘DTCC Model Performance Standards & 

Policy’’, and (iii) ‘‘DTCC Backtesting Procedures’’ 

has been changed to ‘‘Clearing Agency Backtesting 

Procedures.’’ Also, the ‘‘Quantitative Risk 

Management Policy’’ and ‘‘Quantitative Risk 

Management Monitoring Procedures’’ would be 

added as supporting documents. 

subject to the Framework.16 In this 

regard, the proposed rule change would 

also amend certain references to models 

in subsequent sections to refer to 

models ‘‘subject to this Framework’’. 

Specifically, the text ‘‘subject to this 

Framework’’ would modify references to 

models in (i) Section 3.1 with respect to 

(a) models to be added to the Clearing 

Agencies’ model inventory and (b) 

models subject to validation as set forth 

in Section 2,17 (ii) Section 3.2 (Model 

Materiality and Complexity) with 

respect to the assignment of complexity 

ratings to models,18 (iii) Section 3.3 

(Full Model Validation) with respect to 

a requirement relating to the validation 

of new models,19 (iv) Section 3.4 

(Periodic Model Validation) with 

respect to periodic validation of 

models,20 (v) Section 3.5 (Model Change 

Management) with respect to models 

that require changes in either structure 

or technique, (vi) Section 3.7 

(Resolution of Model Validation 

Findings) with respect to internal 

tracking and reporting relating to model 

validations 21 and (vii) Section 4.2 

(Escalation) 22 with respect to internal 

escalation of model performance 

monitoring oversight concerns.23

The proposed rule change makes 

several other technical and clarifying 

changes to the text of the Framework. It 

revises a sentence in Section 1 that 

currently states ‘‘FICC/GSD, FICC/ 

MBSD, and NSCC are each a ‘‘Central 

Counterparty’’ or ‘‘CCP’’ and are 

collectively referred to as the ‘‘Central 

Counterparties’’ or ‘‘CCPs’’. The 

proposed revisions to this sentence (i) 

changes the first reference to ‘‘Central 

Counterparty’’ from a capitalized term 

to an uncapitalized term, (ii) deletes the 

second reference to this term in this 

sentence (shown as ‘‘Central 

Counterparties’’) such that ‘‘CCP’’ will 

be the sole defined term used to 

described central counterparties, and 

(iii) adds ‘‘below’’ after the words 

‘‘referred to.’’ 

It defines a term for ‘‘Clearing Agency 

Model Documentation’’ to reduce the 

repetition of listing numerous 

documents that are subordinate to the 

Framework with respect to model risk 

management. The proposed rule change 

updates the titles of certain Clearing 

Agency Model Documentation.24 It also 

consolidates a reference to 

supplementary model risk 

documentation applicable to the 

Clearing Agencies that may be created 

from time to time into the newly 

defined term ‘‘Clearing Agency Model 

Documentation’’. The proposed rule 

change adds this defined term to three 

sentences in Section 1 to replace 

references in the section to specifically 

named model documentation and 

supplemental model documentation. It 

also consolidates two references that 

respectively provide that the 

documentation that is specifically 

named in the Framework, and the 

supplemental documentation that may 

be created, are subordinate to the 

Framework and are reasonably and 

fairly implied by the Framework, into 

one such reference with respect to 

Clearing Agency Model Documentation. 

The proposed rule change updates 

prior references to the Model Validation 

& Control unit (defined in the 

Framework as ‘‘MVC’’), the name of 

which has recently changed, to instead 

refer generically to the unit within the 

Clearing Agencies’ Group Chief Risk 

office that performs second-line model 

risk management functions. This generic 

reference to this unit would be defined 

as ‘‘MRM’’ in the Framework and, 

therefore, all references to ‘‘MVC’’ 

would be replaced with ‘‘MRM’’ 

beginning from the first use of ‘‘MVC’’ 

in Section 3, and with respect to all 

subsequent references to ‘‘MVC,’’ 

through and including the last reference 

to ‘‘MVC’’ in the second to last 

paragraph of Section 5. 

In addition, a sentence in Section 3.1 

that states ‘‘[a]ll Model Validations are 

performed by MVC, which consists of 

qualified persons who are free from 

influence from the persons responsible 

for the development or operation of the 

models being validated, as required by 

the risk management standards 

described in Section 2[.]’’ would be 

revised to delete the clause ‘‘as required 

by the risk management standards 

described in Section 2’’ and the comma 

immediately preceding that clause 

would be deleted. This clause is 

unnecessary because it follows in a 

paragraph that already makes reference 

to the referenced ‘‘risk management 

standards’’ in a similar context. 

Also, a sentence in Section 3.8 

describes that as part of model 

performance monitoring, on at least a 

monthly basis, a sensitivity analysis is 

performed on each CCP’s margin 

models, the key parameters and 

assumptions for backtesting of such 

margin models are reviewed, and 

modifications will be considered to 

ensure the backtesting practices are 

appropriate for determining the 

adequacy of such CCP’s margin 

resources. This sentence ends with a 

clause that states ‘‘which Quantitative 

Risk Management (‘‘QRM’’) performs as 

required by the risk management 

standards described in Section 2.’’ The 

reference to the requirements of Section 


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38146 Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 

25As noted above, pursuant to Section 3.1 of the 

Framework, the term ‘‘model’’ 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. 

26 15 U.S.C. 78q–1(b)(3)(F). 

27 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 do not apply 

to DTC. 

28 15 U.S.C. 78q–1(b)(3)(F). 

29 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 do not apply 

to DTC. 

30 Id. 

31 15 U.S.C. 78s(b)(3)(A). 

32 17 CFR 240.19b–4(f). 

2 is unnecessary when naming the 

group that performs these tasks. 

Therefore, Clearing Agencies will delete 

the clause referencing these 

requirements, and a comma that 

proceeds it, from the sentence in 

Section 3.8 described immediately 

above, and add a new sentence, to 

follow the existing sentence, stating that 

Quantitative Risk Management performs 

these functions, without referencing the 

requirements described in Section 2. 

The new sentence will read 

‘‘Quantitative Risk Management 

(‘‘QRM’’) performs these functions.’’ In 

addition, in this same sentence, the 

proposed rule change will delete ‘‘a’’ 

that currently appears before the words 

‘‘sensitivity analysis’’. 

The proposed rule change also makes 

certain technical and grammatical 

corrections, including elimination of 

unused or misapplied defined terms. 

The proposed rule change deletes the 

text ‘‘in compliance with applicable 

legal requirements’’ from sentence in 

Section 1 (Executive Summary) that 

states that Section 3 of the Framework 

describes key aspects of the Framework 

in terms of the manner in which the 

Clearing Agencies identify, measure, 

monitor, and manage model risk. 

Referring to compliance with applicable 

legal requirements with respect to an 

individual section is unnecessary, 

because Section 1 contains a separate 

reference indicating that the Framework 

itself is designed to support compliance 

with the legal requirements set forth 

under the Covered Clearing Agency 

Standards relating to model risk 

management. The proposed rule change 

would also modify the beginning of the 

sentence described immediately above 

that currently includes the text ‘‘Section 

3 describes key aspects of the 

Framework in terms of the manner in 

which the Clearing Agencies identify, 

measure, monitor, and manage model 

risk . . .’’ to delete the words 

‘‘Framework in terms of the’’ to simplify 

the text by deleting a clause that does 

not enhance the meaning of the 

sentence. 

Finally, the proposed rule change 

replaces a reference to ‘‘quantitative 

models’’ to ‘‘models’’ in the Executive 

Summary under Section 1. This use of 

‘‘quantitative’’ is redundant because, by 

definition, models covered by the 

Framework are quantitative in nature.25

2. Statutory Basis 

DTC believes that the proposed rule 

change is consistent with Section 

17A(b)(3)(F) of the Act,26 as well as Rule 

17Ad–22(e)(4), (e)(6), and (e)(7) 

thereunder,27 for the reasons described 

below. 

Section 17A(b)(3)(F) of the Act 28

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 

Framework describes the process by 

which the Clearing Agencies identify, 

measure, monitor, and manage the risks 

associated with the design, 

development, implementation, use, and 

validation of quantitative models. The 

quantitative models covered by the 

Framework are utilized by the Clearing 

Agencies, as applicable, to manage risks 

associated with the safeguarding of 

securities and funds that are in their 

custody or control or for which they are 

responsible, and the proposed rule 

change clarifies the applicability of the 

Framework to specific models, thereby 

better supporting the ability of the 

Clearing Agencies to perform these 

important risk management functions 

and comply with other regulatory 

requirements, including Rule 19b–4. 

Rule 17Ad–22(e)(4), (e)(6), and 

(e)(7) 29 requires, 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, 

as applicable. As discussed above, the 

proposed rule change clarifies the 

applicability of the Framework to such 

types of models, thereby better 

supporting the ability of the Clearing 

Agencies to comply with these 

requirements. Therefore, the Clearing 

Agencies believe that the proposed 

changes to the Framework are consistent 

with Rule 17Ad–22(e)(4), (e)(6), and 

(e)(7).30

(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 clarifies the scope 

and administration of the Framework by 

the Clearing Agencies and would not 

effectuate any changes to the Clearing 

Agencies’ model risk management tools 

as they currently apply to their 

respective Members or Participants. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

The Clearing Agencies have not 

solicited or received any written 

comments relating to this proposal. The 

Clearing Agencies will notify the 

Commission of any written comments 

received by the Clearing Agencies. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A) 31 of the Act and paragraph 

(f) 32 of Rule 19b–4 thereunder. 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. 

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–2021–013 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–2021–013. This file 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 38147 

33 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3An ‘‘Order Attribute’’ is a set of variable 

instructions that may be associated with an Order 

to further define how it will behave with respect to 

pricing, execution, and/or posting to the Exchange 

Book when submitted to the System. See Equity 1, 

Section 1(b)(7). 

4The RASH (Routing and Special Handling) 

Order entry protocol is a proprietary protocol that 

allows members to enter Orders, cancel existing 

Orders and receive executions. RASH allows 

participants to use advanced functionality, 

including discretion, random reserve, pegging and 

routing. See http://nasdaqtrader.com/content/ 

technicalsupport/specifications/TradingProducts/ 

rash_sb.pdf. 

5The OUCH Order entry protocol is a proprietary 

protocol that allows subscribers to quickly enter 

orders into the System and receive executions. 

OUCH accepts limit Orders from members, and if 

there are matching Orders, they will execute. Nonmatching Orders are added to the Limit Order Book, 

a database of available limit Orders, where they are 

matched in price-time priority. OUCH only 

provides a method for members to send Orders and 

receive status updates on those Orders. See https:// 

www.nasdaqtrader.com/Trader.aspx?id=OUCH. 

6The Exchange designed the OUCH protocol to 

enable members to enter Orders quickly into the 

System. As such, the Exchange developed OUCH 

with simplicity in mind, and it therefore lacks more 

complex order handling capabilities. By contrast, 

the Exchange specifically designed RASH to 

support advanced functionality, including 

discretion, random reserve, pegging and routing. 

Once the System upgrades occur, then the Exchange 

intends to propose further changes to its Rules to 

permit participants to utilize OUCH, in addition to 

RASH, to enter order types that require advanced 

functionality. 

7The Exchange notes that its sister exchange, The 

Nasdaq Stock Market, LLC (‘‘Nasdaq’’), has already 

filed similar proposed rule changes with the 

Commission. See Securities Exchange Act Release 

No. 34–92180 (June 15, 2021), 86 FR 33420 (June 

24, 2021) (SR–NASDAQ–2021–044). 

8See Securities Exchange Act Release No. 34– 

91263 (March 5, 2021), 86 FR 13950 (March 11, 

2021) (SR–Phlx–2021–11); Securities Exchange Act 

Release No. 34–90558 (December 3, 2020), 85 FR 

79231 (December 9, 2020) (SR–Phlx–2020–51). 

9See Rule 3301B(d). 

10See Rule 3301B(l). 

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– 

2021–013 and should be submitted on 

or before August 9, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–15187 Filed 7–16–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92377; File No. SR–Phlx– 

2021–40] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Equity 4, 

Rules 3301A and 3301B 

July 13, 2021. 

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 July 2, 

2021, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Equity 4, Rule 3301B, as described 

further below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/phlx/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange 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 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Presently, the Exchange is making 

functional enhancements and 

improvements to specific Order 

Attributes 3 that are currently only 

available via the RASH Order entry 

protocol.4 Specifically, the Exchange 

will be upgrading the logic and 

implementation of these Order Types 

and Order Attributes so that the features 

are more streamlined across the 

Exchange Systems and order entry 

protocols, and will enable the Exchange 

to process these Orders more quickly 

and efficiently. Additionally, this 

System upgrade will pave the way for 

the Exchange to enhance the OUCH 

Order entry protocol 5 so that 

Participants may enter such Order 

Types and Order Attributes via OUCH, 

in addition to the RASH Order entry 

protocols.6 The Exchange plans to 

implement its enhancement of the 

OUCH protocol sequentially, by Order 

Type and Order Attribute.7

To support and prepare for these 

upgrades and enhancements, the 

Exchange recently submitted two rule 

filings to the Commission that amended 

its rules pertaining to, among other 

things, Market Maker Peg Orders and 

Orders with Reserve Size.8 The 

Exchange now proposes to further 

amend its Rules governing Order 

Attributes, at Rule 3301B. In particular, 

the Exchange proposes to adjust the 

current functionality of the Pegging 9

and Trade Now Attributes,10 as 

described below, so that they align with 

how the System, once upgraded, will 

handle these Order Attributes going 

forward. The Exchange also proposes to 

amend the Midpoint Peg Post-Only 

Order Type, at Rule 3301A, to 

accommodate changes to the Trade Now 

Attribute. 


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