36014 Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Notices 

1See Docket No. RM2018–3, Order Adopting 

Final Rules Relating to Non-Public Information, 

June 27, 2018, Attachment A at 19–22 (Order No. 

4679). 

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

2 17 CFR 240.19b–4. 

3Capitalized terms not otherwise defined herein 

are defined in the MBSD Rules, as applicable, 

available at http://www.dtcc.com/legal/rules-andprocedures. 

Dated: June 6, 2022. 

For the Nuclear Regulatory Commission. 

Bo M. Pham, 

Director, Division of Operating Reactor 

Licensing, Office of Nuclear Reactor 

Regulation. 

[FR Doc. 2022–12421 Filed 6–13–22; 8:45 am] 

BILLING CODE 7590–01–P 

POSTAL REGULATORY COMMISSION 

[Docket Nos. MC2022–65 and CP2022–71] 

New Postal Products 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice. 

SUMMARY: The Commission is noticing a 

recent Postal Service filing for the 

Commission’s consideration concerning 

a negotiated service agreement. This 

notice informs the public of the filing, 

invites public comment, and takes other 

administrative steps. 

DATES: Comments are due: June 16, 

2022. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http://

www.prc.gov. Those who cannot submit 

comments electronically should contact 

the person identified in the FOR FURTHER

INFORMATION CONTACT section by 

telephone for advice on filing 

alternatives. 

FOR FURTHER INFORMATION CONTACT: 

David A. Trissell, General Counsel, at 

202–789–6820. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Docketed Proceeding(s) 

I. Introduction 

The Commission gives notice that the 

Postal Service filed request(s) for the 

Commission to consider matters related 

to negotiated service agreement(s). The 

request(s) may propose the addition or 

removal of a negotiated service 

agreement from the market dominant or 

the competitive product list, or the 

modification of an existing product 

currently appearing on the market 

dominant or the competitive product 

list. 

Section II identifies the docket 

number(s) associated with each Postal 

Service request, the title of each Postal 

Service request, the request’s acceptance 

date, and the authority cited by the 

Postal Service for each request. For each 

request, the Commission appoints an 

officer of the Commission to represent 

the interests of the general public in the 

proceeding, pursuant to 39 U.S.C. 505 

(Public Representative). Section II also 

establishes comment deadline(s) 

pertaining to each request. 

The public portions of the Postal 

Service’s request(s) can be accessed via 

the Commission’s website (http://

www.prc.gov). Non-public portions of 

the Postal Service’s request(s), if any, 

can be accessed through compliance 

with the requirements of 39 CFR 

3011.301.1

The Commission invites comments on 

whether the Postal Service’s request(s) 

in the captioned docket(s) are consistent 

with the policies of title 39. For 

request(s) that the Postal Service states 

concern market dominant product(s), 

applicable statutory and regulatory 

requirements include 39 U.S.C. 3622, 39 

U.S.C. 3642, 39 CFR part 3030, and 39 

CFR part 3040, subpart B. For request(s) 

that the Postal Service states concern 

competitive product(s), applicable 

statutory and regulatory requirements 

include 39 U.S.C. 3632, 39 U.S.C. 3633, 

39 U.S.C. 3642, 39 CFR part 3035, and 

39 CFR part 3040, subpart B. Comment 

deadline(s) for each request appear in 

section II. 

II. Docketed Proceeding(s) 

1. Docket No(s).: MC2022–65 and 

CP2022–71; Filing Title: USPS Request 

to Add Priority Mail Contract 745 to 

Competitive Product List and Notice of 

Filing Materials Under Seal; Filing 

Acceptance Date: June 8, 2022; Filing 

Authority: 39 U.S.C. 3642, 39 CFR 

3040.130 through 3040.135, and 39 CFR 

3035.105; Public Representative: 

Christopher C. Mohr; Comments Due: 

June 16, 2022. 

This Notice will be published in the 

Federal Register. 

Erica A. Barker, 

Secretary. 

[FR Doc. 2022–12797 Filed 6–13–22; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95070; File No. SR–FICC– 

2022–002] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Granting Approval of Proposed Rule 

Change To Revise the MBSD Clearing 

Rules To Move Certain DRC Items 

(Mark-to-Market Items, Cash Obligation 

Items and Accrued Principal and 

Interest) From the Required Fund 

Deposit Calculation to Cash 

Settlement, Revise Certain Thresholds 

and Parameters in the Intraday Markto-Market Charge, Establish a New 

Intraday VaR Charge and Make Certain 

Other Clarifications 

June 8, 2022. 

I. Introduction 

On April 8, 2022, the Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change SR–FICC–2022– 

002 (‘‘Proposed Rule Change’’) pursuant 

to Section 19(b) of the Securities 

Exchange Act of 1934 (‘‘Exchange 

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

amend the Mortgage-Backed Securities 

Division (‘‘MBSD’’) Clearing Rules 

(‘‘MBSD Rules’’) 3 to (1) move certain 

items from FICC’s collection of margin 

(i.e., the Required Fund Deposit) to its 

cash settlement process, including, 

specifically, deleting the Deterministic 

Risk Component (‘‘DRC’’) from the 

Required Fund Deposit calculation, 

moving certain items currently in the 

DRC (i.e., Mark-to-Market items, cash 

obligation items, and accrued principal 

and interest) to Cash Settlement, and 

retaining the six days’ interest for Fails 

item currently in the DRC calculation as 

a separate part of the Required Fund 

Deposit; (2) revise the definition of 

Intraday Mark-to Market Charge to 

reflect the movement of the DRC items 

to Cash Settlement and to revise certain 

thresholds and parameters; (3) establish 

a new intraday VaR Charge; and (4) 

make other clarifying changes in the 

MBSD Rules, as described in more 

detail below. In addition, it would also 

make certain conforming changes to the 

Methodology and Model Operations 

Document—MBSD Quantitative Risk 


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Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Notices 36015 

4As part of the Proposed Rule Change, FICC filed 

Exhibit 5B—Methodology and Model Operations 

Document MBSD Quantitative Risk Model. 

Pursuant to 17 CFR 240.24b–2, FICC requested 

confidential treatment of Exhibit 5B. 

5Securities Exchange Act Release No. 94745 

(Apr. 19, 2022), 87 FR 24369 (Apr. 25, 2022) (File 

No. SR–FICC–2022–002) (‘‘Notice of Filing’’). 

6The Commission received one comment letter 

that does not bear on the purpose or legal basis of 

the Proposed Rule Change. The comment on the 

Proposed Rule Change is available at https://

www.sec.gov/comments/sr-ficc-2022-002/ 

srficc2022002-20125933-286378.htm. 

7MBSD Rule 1, supra note 3. 

8MBSD Rules 1 and 4 section 2(c)(i), supra note 

3. The VaR Charge is generally the largest 

component of the Required Fund Deposit. It is 

designed to provide an estimate of FICC’s projected 

liquidation losses with respect to a defaulted 

member’s portfolio at a 99 percent confidence level, 

and it is based on the potential price volatility of 

unsettled positions using a sensitivity-based Valueat-Risk model. As an alternative to this calculation, 

FICC also uses a haircut-based calculation as the 

member’s VaR Charge if that charge exceeds the 

amount determined by the model-based calculation. 

Fixed Income Clearing Corporation Disclosure 

Framework for Covered Clearing Agencies and 

Financial Market Infrastructures (‘‘FICC Disclosure 

Framework’’), at 64, available at https:// 

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

policy-and-compliance/FICC_Disclosure_

Framework.pdf; see also Exchange Act Release No. 

92303 (June 30, 2021), 86 FR 35855 (July 7, 2021). 

9MBSD Rule 4, Section 2(c)(iii), supra note 3. 

10MBSD Rules 1 and 4 section 2(c)(iv), supra note 

3. The Backtesting Charge is calculated to mitigate 

exposures to MBSD caused by settlement risks that 

may not be adequately captured by MBSD’s 

portfolio volatility model. FICC Disclosure 

Framework, supra note 8, at 64. 

11The Holiday Charge approximates the exposure 

that a Clearing Member’s trading activity on the 

applicable holiday could pose to FICC. MBSD 

Rule1, supra note 3. 

12The Intraday Mark-to-Market Charge is an 

additional charge that is collected to mitigate FICC’s 

exposures that may arise due to intraday changes 

in the size, composition and constituent security 

prices of such member’s portfolio. MBSD Rule 1, 

supra note 3. 

13The Margin Liquidity Adjustment Charge 

addresses the risk presented to MBSD when a 

member’s portfolio contains large net unsettled 

positions in a particular group of securities with a 

similar risk profile or in a particular asset type. 

FICC Disclosure Framework, supra note 8, at 64; 

MBSD Rule 4, Section 2(c), supra note 3. 

14FICC Disclosure Framework, supra note 8, at 

65. 

15 Id.; see also MBSD Rule 1 (defining DRC) and 

4 Section 2(c)(ii). 

16See Notice of Filing, supra note 5, 87 FR 24372. 

17MBSD Rule 4, Section 2, supra note 3. 

18MBSD Rule 11, supra note 3; FICC Disclosure 

Framework, supra note 8, at 80. 

19 Id. 

20MBSD Rule 4, Section 2, supra note 3. 

21MBSD Rules 1 and 4, Section 2(c)(ii), supra 

note 3. 

22See Notice of Filing, supra note 5, 87 FR 24371. 

23FICC Disclosure Framework, supra note 8, at 

65. 

24A Fail is a transaction the clearing of which has 

not occurred or has not been reported to FICC as 

having occurred on the Contractual Settlement Date 

(or expiration date). See MBSD Rule 1, supra note 

3. 

25See Notice of Filing, supra note 5, 87 FR 

24369–24370. 

26MBSD Rule 11, supra note 3. 

27MBSD Rule 4, Section 2, supra note 3. 

Model 4 to implement the proposed 

changes to the MBSD Rules. 

The Proposed Rule Change was 

published for public comment in the 

Federal Register on April 25, 2022.5

The Commission received no comments 

regarding the substance of the Proposed 

Rule Change.6 This order approves the 

Proposed Rule Change. 

II. Description of the Proposed Rule 

Change 

A. Background 

FICC, through MBSD, serves as a 

central counterparty (‘‘CCP’’) and 

provider of clearance and settlement 

services for the mortgage-backed 

securities markets. A key tool that FICC 

uses to manage its respective credit 

exposures to its members is the daily 

collection of margin from each member, 

which is referred to as each member’s 

Required Fund Deposit. The aggregated 

amount of all members’ margin 

constitutes the Clearing Fund, which 

FICC would access should a defaulted 

member’s own margin be insufficient to 

satisfy losses to FICC caused by the 

liquidation of that member’s portfolio. 

Each member’s margin consists of a 

number of applicable components. 

Specifically, the margin (or Required 

Fund Deposit) currently consists of the 

greater of a minimum charge 7 or the 

sum of the following components: the 

VaR Charge,8 the DRC (discussed further 

below), a special charge (to the extent 

determined to be appropriate, based on 

market conditions and other financial 

and operational capabilities of the 

Member),9 and, if applicable, the 

Backtesting Charge,10 Holiday Charge,11

Intraday Mark-to-Market Charge,12 and 

the Margin Liquidity Adjustment 

Charge.13

The DRC is designed to bring a 

member’s portfolio of open positions to 

market value. It reflects mark-to-market 

results on outstanding positions, 

regardless of settlement date, cash items 

and adjustments that are the result of 

netting, and principal and interest 

exposure on failed positions.14

Specifically, this charge is calculated as 

(i) the Mark-to-Market Debit; minus (ii) 

the Mark-to-Market Credit; plus (iii) a 

cash obligation item debit; minus (iv) a 

cash obligation item credit; plus or 

minus (v) accrued principal and 

interest.15 FICC also includes another 

parameter, six days’ interest for Fails, in 

the DRC calculation.16 Currently, when 

collected as part of a member’s Required 

Fund Deposit, the member may pay a 

portion of the DRC in Eligible Clearing 

Fund Securities.17

Cash settlement is a daily process of 

generating a net credit or debit cash 

amount for each Member and settling 

those cash amounts between Members 

and MBSD, as applicable.18 The cash 

settlement process is a cash passthrough process; i.e., those Members 

that are in a net debit position are 

obligated to submit payments that are 

then used to pay Members in a net 

credit position.19

B. Move Mark-to-Market Related 

Charges From the Required Fund 

Deposit Calculation to Cash Settlement 

MBSD calculates, and then collects, 

its members’ margin, including the 

various components thereof, once per 

day, at the start of the day, based on a 

member’s prior end-of-day positions.20

As noted above, one of the components 

of the daily margin is the DRC.21 FICC 

states that this aspect of the margin 

calculation is designed to mitigate the 

risk arising out of the value change 

between the contract/settlement value of 

a Clearing Member’s open positions and 

the market value at the end of the prior 

day.22 Thus, when the DRC is 

calculated, a debit or credit is added to 

the Required Fund Deposit amount of 

each Clearing Member, which raises or 

lowers the amount, respectively.23

FICC proposes to move all of the 

mark-to-market components (i.e., the 

Mark-to-Market Debit and Credit, cash 

obligation items and the accrued 

principal and interest) currently in the 

DRC (except for six days’ interest for 

Fails 24) to Cash Settlement. The six 

days’ interest for Fails in the DRC 

calculations would be added directly to 

the Required Fund Deposit calculation 

and not moved to Cash Settlement. 

FICC states that while these proposed 

changes would impact how Clearing 

Members pay those amounts (i.e., 

through Cash Settlement rather than as 

part of the Required Fund Deposit), 

these changes would not affect the 

manner in which these items are 

calculated or the amounts that Clearing 

Members are paying with respect to 

these items.25 However, all of the items 

that are being moved to Cash Settlement 

would be required to be settled in 

cash.26 As such, the proposed changes 

would require that Clearing Members 

satisfy their DRC obligations in cash as 

part of Cash Settlement, rather than 

through a mix of cash and Eligible 

Clearing Fund Securities as is permitted 

to satisfy Required Fund Deposit 

obligations.27 FICC states that these 

changes would ensure the unrealized 

gains from mark-to-market changes do 


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36016 Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Notices 

28See Notice of Filing, supra note 5, 87 FR 

24369–24370. 29MBSD Rule 1, supra note 3. 30MBSD Rule 1, supra note 3. 31 Id. 32See Notice of Filing, supra note 5, 87 FR 24370. 33 Id. 

34See id., at 24373. 

35See Notice of Filing, supra note 5, 87 FR 24370. 

36MBSD Rule 1, supra note 3. 

37See Notice of Filing, supra note 5, 87 FR 24370. 

38 Id. 

39See Notice of Filing, supra note 5, 87 FR 24370. 

40MBSD Rule 4 Section 2, supra note 3. 

According to FICC, if a member’s portfolio has an 

intraday VaR Charge increase exceeding 100% and 

$1 million from the start-of-day VaR Charge, FICC 

would assess a special charge, typically on 

Securities Industry and Financial Markets 

Association (SIFMA) designated settlement dates, 

and require the member to make an intraday 

payment to the Required Fund Deposit. In addition, 

FICC represents that a member may also be subject 

to an intraday VaR collection on any non-SIFMA 

designated settlement date if the member’s portfolio 

has an intraday VaR Charge increase exceeding 

100% and $1 million and it is deemed by FICC that 

the increase in VaR could lead to a backtesting 

deficiency or push a member below 99% backtest 

coverage. See Notice of Filing, supra note 54, 87 FR 

at 24374. 

41See Notice of Filing, supra note 5, 87 FR 24374. 

42 Id. 

43 Id. 

44See id. at 24370. 

45 15 U.S.C. 78s(b)(2)(C). 

46 15 U.S.C. 78q–1(b)(3)(F). 

not leave the Required Fund Deposit 

insufficient to cover future exposure.28

C. Revise the Intraday Mark-to-Market 

Charge Definition To Reflect Movement 

of Mark-to-Market Charges to Cash 

Settlement and To Revise Thresholds 

and Parameters 

FICC proposes to modify its definition 

of ‘‘Intraday Mark-to-Market Charge’’ to 

reflect the proposed movement of the 

Mark-to-Market items and related items 

to Cash Settlement. The Intraday Markto-Market Charge is an additional charge 

that is collected from a member (unless 

waived or altered by FICC) to mitigate 

FICC’s exposures that may arise due to 

intraday changes in the size, 

composition and constituent security 

prices of such member’s portfolio.29 As 

part of the proposal, FICC would amend 

the definition of the Intraday Mark-toMarket Charge to reflect the movement 

of the particular items (i.e., the mark-tomarket debit and credit, cash obligation 

items, and accrued principal and 

interest) from the calculation of the 

margin due from a particular member to 

the member’s cash settlement process. 

In addition, FICC proposes to revise 

and remove certain thresholds set forth 

in its rules. Currently, the thresholds 

apply to members that (i) experience an 

adverse intraday mark-to-market change 

that equals or exceeds (x) a threshold 

dollar amount of $1,000,000, as 

compared to the member’s start-of-day 

mark-to-market requirement including, 

if applicable, any subsequently 

collected, ark-to-market amount, and (y) 

a threshold percentage of 30 percent as 

compared to the daily VaR Charge, and 

(ii) have 12-month backtesting coverage 

below 99 percent.30

As part of this proposal, FICC would 

identify floors in for the dollar threshold 

and percentage threshold, instead of the 

currently provided specific thresholds, 

and it would also remove the 

backtesting coverage parameter. FICC 

currently has the ability to waive these 

thresholds and the parameter under 

certain circumstances under the MBSD 

Rules.31 FICC represents that, consistent 

with this authority, its current practice 

is to waive or adjust these thresholds 

and parameter in volatile market 

conditions.32 As such, according to 

FICC, the proposed changes to the 

Intraday Mark-to-Market Charge 

definition would align the MBSD Rules 

with FICC’s current practice.33

FICC states that by removing the set 

percentages, and providing a floor of not 

less than $1,000,000 for the Dollar 

Threshold and not less than 10 percent 

of the daily VaR Charge for the 

Percentage Threshold, members would 

have a better understanding of the 

thresholds that FICC is using to 

determine whether to apply the Intraday 

Mark-to-Market Charge, thereby 

providing greater transparency and 

certainty regarding its application.34

Neither the current calculation 

methodology nor the key components of 

the Intraday Mark-to-Market Charge 

would change.35

In addition, the proposed rules would 

remove the Surveillance Threshold 

provision. FICC can collect an Intraday 

Mark-to-Market Charge under certain 

circumstances in which a member meets 

a certain Surveillance Threshold.36

FICC represents that it currently does 

not apply that provision, does not 

intend to apply that provision in the 

future, and does not believe it is 

necessary.37 As such, FICC states that 

removing the provision would align the 

MBSD Rules with FICC’s current 

practice.38

D. Establish a Formal VaR Charge 

FICC proposes to amend the MBSD 

Rules to include a formal Intraday VaR 

Charge.39 FICC currently monitors VaR 

intraday and periodically requires 

intraday VaR collections under certain 

conditions, using its existing authority 

to collect a special charge.40

FICC states that it has occasionally 

observed significant intraday changes to 

market price volatility and significant 

changes to the size and composition of 

members’ portfolios that could cause the 

amount collected as the VaR Charge at 

the start of that Business Day to no 

longer be sufficient to mitigate the 

volatility risks that such positions 

present to FICC.41 FICC therefore 

proposes the ability to adjust the 

percentage amount and dollar threshold 

or other parameters of the Intraday VaR 

Charge from time to time, as 

appropriate, to continue to reflect a 

threshold that mitigates the volatility 

risks that such positions present to 

FICC.42 The proposed rule change 

would not implement substantive or 

material changes to the risk this charge 

is designed to mitigate, or to the overall 

methodology or key components of the 

calculation of this charge.43 FICC 

proposes to remove the discretion to 

apply the Intraday VaR Charge under 

certain circumstances compared to 

when it implements the special charge, 

thereby making application of the 

Intraday VaR Charge more automatic 

and transparent on all dates. According 

to FICC, the introduction of the Intraday 

VaR Charge would result in more 

consistent intraday VaR collections 

when compared to the current practice, 

on both SIFMA designated settlement 

dates and non-SIFMA designated 

settlement dates.44

D. Make Certain Clarifying Changes 

FICC proposes to make certain 

clarifying changes to the MBSD Rules. 

Specifically, FICC proposes to move 

certain definitions so that they are in 

alphabetical order, re-letter certain 

subsections that follow to conform to 

the deletion of certain subsections, and 

update certain cross-references to reflect 

other changes set forth herein. 

III. Discussion and Commission 

Findings 

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

Act directs the Commission to approve 

a proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Exchange 

Act and the rules and regulations 

thereunder applicable to such 

organization.45 After carefully 

considering the Proposed Rule Change, 

the Commission finds that the proposal 

is consistent with the requirements of 

the Exchange Act and the rules and 

regulations thereunder applicable to 

FICC. More specifically, the 

Commission finds that the Proposed 

Rule Change is consistent with Section 

17A(b)(3)(F) of the Exchange Act,46 and 

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


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47 17 CFR 240.17Ad–22(e)(4)(i), (e)(6)(i) and (iii). 

48 15 U.S.C. 78q–1(b)(3)(F). 

49The Commission also reviewed and considered 

confidential analyses provided by FICC which 

analyzed the impact that these specified changes 

would have on margin collected by FICC. (As part 

of the Proposed Rule Change, FICC filed Exhibit 3— 

Confidential Supporting Information. Pursuant to 

17 CFR 240.24b–2, FICC requested confidential 

treatment of Exhibit 3.) The Commission generally 

believes that the impact analyses, as summarized by 

FICC in the Notice, see Notice of Filing, supra note 

5, 87 FR at 24369, further support its findings with 

respect to the consistency of the proposed changes 

with Section 17A(b)(3)(F) in that the changes set 

forth in Sections II.C and D above with respect to 

the Intraday Mark-to-Market Charge and Intraday 

VaR Charge would increase the amount of resources 

collected by FICC and that, with respect to the 

changes set forth in II.B regarding the movement of 

certain DRC items to cash settlement, the changes 

would have some impact on the amount of 

resources collected in cash. 

50 Id. 

51 Id. 

52 17 CFR 240.17Ad–22(e)(4)(i). 

(e)(6)(iii), each promulgated under the 

Act,47 as described in detail below. 

A. Consistency With Section 

17A(b)(3)(F) 

Section 17A(b)(3)(F) of the Exchange 

Act requires, among other things, that 

the rules of a clearing agency, such as 

NSCC, be designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions and 

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.48

As described in Section II B above, 

FICC proposes to move certain mark-tomarket components items from its 

margin collection (as part of a member’s 

Required Fund Deposit) to Cash 

Settlement. The Commission believes 

that moving these specified items (i.e., 

the mark-to-market debit and credit, 

cash obligation items, and accrued 

principal and interest) from the 

calculation of margin due from a 

particular member to the member’s cash 

settlement process would better 

segregate the unrealized gains or losses 

associated with the member’s portfolio 

from the portion of the margin that 

measures potential future exposure and 

limit the build-up of systemic risk. 

Currently, because of the fact that these 

items are collected with the member’s 

margin, in the Required Fund Deposit, 

the overall amount collected may be 

reduced by credits relating to unrealized 

mark-to-market gains. During the time 

between the last margin collection and 

the close out of a Clearing Member’s 

position, however, such gains may 

reduce without a corresponding 

increase in the Required Fund Deposit, 

leaving the Required Fund Deposit 

insufficient to cover the future 

exposure. As such, the proposed rule 

change would ensure the unrealized 

gains from mark-to-market changes do 

not leave the Required Fund Deposit 

insufficient to cover future exposure. 

These changes would help ensure that 

FICC collects sufficient margin and thus 

more effectively cover its credit 

exposures to its members. 

In addition, as described in Section 

II.C above, the proposed rule change to 

revise the Intraday Mark-to-Market 

Charge to remove the specific thresholds 

and provide a floor for the Dollar 

Threshold and the Percentage 

Threshold, remove the Coverage Target 

from the definition, and remove the 

Surveillance Threshold from the 

definition, provides the ability for FICC 

to adjust the application of the Intraday 

Mark-to-Market Charge default 

thresholds more quickly, effectively, 

and flexibly in response to adverse or 

changes in market conditions, thereby 

helping to ensure that FICC collects 

sufficient resources to cover its 

exposures to its members in volatile 

market conditions. Further, as described 

in Section II.D above, FICC proposes to 

establish a formal Intraday VaR Charge. 

This proposed change enables FICC to 

better address any changes to market 

price volatility or the size of a member’s 

portfolio that occur intraday such that, 

in the event of a member default, FICC’s 

operations would not be disrupted, and 

non-defaulting Members would not be 

exposed to losses they cannot anticipate 

or control. Accordingly, the 

Commission believes the proposed rule 

would allow FICC to mitigate changes in 

in volatility that could occur intraday.49

For these reasons, the Commission 

believes that implementing these 

changes set forth in Sections II.B, C, and 

D should help ensure that, in the event 

of a member default, FICC’s operation of 

its critical clearance and settlement 

services would not be disrupted because 

of insufficient financial resources. 

Accordingly, the Commission finds that 

the changes to the DRC should help 

FICC to continue providing prompt and 

accurate clearance and settlement of 

securities transactions in the event of a 

member default, consistent with Section 

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

Moreover, as described above in 

Section I.A., FICC would access the 

mutualized Clearing Fund should a 

defaulted member’s own margin be 

insufficient to satisfy losses to FICC 

caused by the liquidation of that 

member’s portfolio. The changes of 

moving the DRC to the cash passthrough, amending the definition of the 

Intraday Mark-to-Market Charge, and 

instituting a regular Intraday VaR 

Charge should help ensure that FICC 

has collected sufficient margin from 

members, thereby limiting nondefaulting members’ exposure to 

mutualized losses. The Commission 

believes that by helping to limit the 

exposure of FICC’s non-defaulting 

members to mutualized losses, the 

minimum margin amount should help 

FICC assure the safeguarding of 

securities and funds which are in its 

custody or control, consistent with 

Section 17A(b)(3)(F) of the Act.50

Finally, as described in Sections II.B, 

C, and D, the proposed rule changes 

would amend the Rules to improve 

transparency. Such changes provide 

clarifications to Clearing Members 

regarding the definitions and 

applications of Rules. For instance, as 

described in Section II.C, by removing 

set percentages and providing a floor of 

not less than $1,000,000 for the Dollar 

Threshold and not less than 10 percent 

of the daily VaR Charge for the 

Percentage Threshold, the Commission 

believes that Clearing Members will 

have better understanding of the default 

thresholds that FICC is using to 

determine whether to apply the Intraday 

Mark-to-Market Charge. The 

Commission believes that such changes 

would ensure that the Rules are accurate 

and clear to Members, thus promoting 

prompt and accurate clearance and 

settlement, which is consistent with 

Section 17A(b)(3)(F) of the Act.51

B. Consistency With Rule 17Ad– 

22(e)(4)(i) 

Rule 17Ad–22(e)(4)(i) under the Act 52

requires a covered clearing agency, like 

FICC, to establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to 

effectively identify, measure, monitor, 

and manage its credit exposures to 

participants and those exposures arising 

from its payment, clearing, and 

settlement processes by maintaining 

sufficient financial resources to cover its 

credit exposure to each participant fully 

with a high degree of confidence. 

As discussed above in Section II.D, 

FICC is introducing an Intraday VaR 

Charge, which FICC would charge the 

Intraday VaR Charge on both SIFMA 

designated settlement dates and nonSIFMA designated settlement dates if 

the thresholds are crossed, regardless of 

whether the increase in VaR could lead 

to a backtesting deficiency or push a 

Clearing Member below 99% backtest 

coverage. As such, the Commission 

believes that the introduction of the 

Intraday VaR Charge would result in 

more consistent intraday VaR 

collections when compared to the 


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36018 Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Notices 

53 Id. 

54 17 CFR 240.17Ad–22(e)(6)(i). 

55The Commission also reviewed and considered 

the results of FICC’s impact analyses and believes 

that the analyses further support its findings 

regarding the consistency of the proposed changes 

with Rule 17Ad–22(e)(6)(i), for the reasons 

discussed in note 49 supra. 

56 Id. 

57 17 CFR 240.17Ad–22(e)(6)(iii). 

58 Id. 

59 In approving this Proposed Rule Change, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

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

60 15 U.S.C. 78s(b)(2). 

61 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. 94370 

(March 7, 2022), 87 FR 14071. 

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

5See Securities Exchange Act Release No. 94778, 

87 FR 25069 (April 27, 2022). The Commission 

designated June 9, 2022 as the date by which the 

Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

disapprove, the proposed rule change. 

current practice, on both SIFMA 

designated settlement dates and nonSIFMA designated settlement dates. The 

Commission also believes that the 

proposed Intraday VaR Charge would 

effectively mitigate the risks related to 

intraday increases in volatility and 

would address the increased risks FICC 

may face related to liquidating a 

Clearing Member’s portfolio following 

that Clearing Member’s default. 

Accordingly, the Commission believes 

the proposed rule would enhance 

FICC’s ability to effectively identify, 

measure and monitor its credit 

exposures and would enhance its ability 

to maintain sufficient financial 

resources to cover its credit exposure to 

each participant fully with a high degree 

of confidence, consistent with Rule 

17Ad–22(e)(4)(i) under the Act.53

C. Consistency With Rule 17Ad– 

22(e)(6)(i) 

Rule 17Ad–22(e)(6)(i) 54 under the Act 

requires, in part, a clearing agency 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to cover its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market. 

A member’s margin (in the form of its 

Required Fund Deposit) is made up of 

risk-based components that are 

calculated and assessed daily to limit 

FICC’s credit exposures to its members. 

As discussed in Section II.B, FICC 

proposes to move DRC items to Cash 

Settlement. The Commission believes 

that the proposed rule change should 

help ensure that FICC produces margin 

levels commensurate with, the risks and 

particular attributes of each relevant 

product, portfolio, and market by better 

segregating the unrealized gains or 

losses associated with a Clearing 

Member’s margin portfolio from the 

portion of the margin that measures 

potential future exposure. Further, as 

discussed in Section II.C, FICC proposes 

to amend and remove certain thresholds 

and parameters in its determination of 

the Intraday Mark-to-Market Charge, 

and as discussed in Section II.D, FICC 

proposes to introduce an Intraday VaR 

Charge, which is designed to more 

effectively address the risks presented 

by significant intraday changes to 

market price volatility or a clearing 

member’s portfolio. The Commission 

believes these changes should enable 

FICC to assess a more appropriate level 

of margin that accounts for increases in 

these risks that may occur intraday.55

Accordingly, the Commission believes 

the proposed change is consistent with 

Rule 17Ad–22(e)(6)(i) under the Act.56

D. Consistency With 17Ad–22(e)(6)(iii) 

Rule 17Ad–22(e)(6)(iii) under the 

Act 57 requires a covered clearing 

agency to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

cover its credit exposures to its 

participants by establishing a risk-based 

margin system that, at a minimum, 

calculates margin sufficient to cover its 

potential future exposure to participants 

in the interval between the last margin 

collection and the close out of positions 

following a participant default. 

As discussed above in Section II.B, 

FICC proposes to move certain DRC 

items to Cash Settlement. The 

Commission believes the proposed rule 

change would better segregate the 

unrealized gains or losses associated 

with a Clearing Member’s margin 

portfolio from the portion of the margin 

that measures potential future exposure 

and limit the build-up of systemic risk. 

By segregating the unrealized mark-tomarket gains and losses from the 

Required Fund Deposit, the Commission 

believes that the proposed changes 

would allow FICC to calculate amounts 

that are sufficient to cover FICC’s 

potential future exposure to Clearing 

Members in the interval between the 

last margin collection and the close out 

of positions following a participant 

default. Therefore, the Commission 

believes the proposed change is 

consistent with Rule 17Ad–22(e)(6)(iii) 

under the Act.58

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Exchange Act, and 

in particular, the requirements of 

Section 17A of the Exchange Act 59 and 

the rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,60

that the Proposed Rule Change (SR– 

FICC–2022–002) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.61

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12733 Filed 6–13–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95069; File No. SR– 

NASDAQ–2022–017] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Order 

Approving Proposed Rule Change, as 

Modified by Amendment No. 1, To 

Modify Equity 4, Rule 4120 To Add 

Categories of Regulatory and 

Operational Halts, To Reorganize the 

Remaining Text of the Rule, and To 

Make Conforming Changes to Related 

Rules 

June 8, 2022. 

I. Introduction 

On February 22, 2022, The Nasdaq 

Stock Market LLC (‘‘Nasdaq’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

modify Equity 4, Rule 4120 to add 

categories of regulatory and operational 

halts, to reorganize the remaining text of 

the rule, and to make conforming 

changes to related rules. The proposed 

rule change was published for comment 

in the Federal Register on March 11, 

2022.3 On April 21, 2022, pursuant to 

Section 19(b)(2) of the 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 April 29, 

2022, the Exchange filed Amendment 

No. 1 to the proposed rule change, 

which amended and superseded the 


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