36182 Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 

17 15 U.S.C. 78s(b)(3)(A)(ii). 

18 17 CFR 240.19b–4(f)(2). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Exchange must consider this in its 

pricing discipline in order to 

competitively offer market data 

products. For example, proposing fees 

that are excessively higher than fees for 

potentially similar data products would 

simply serve to reduce demand for the 

Exchange’s data products, which as 

discussed, market participants are under 

no obligation to utilize. In this 

competitive environment, potential 

purchasers are free to choose which, if 

any, similar product to purchase to 

satisfy their need for market 

information. As a result, the Exchange 

believes this proposed rule change 

permits fair competition among national 

securities exchanges. 

The Exchange does not believe the 

proposed rule change would cause any 

unnecessary or inappropriate burden on 

intramarket competition. Particularly, 

the proposed fees apply uniformly to 

any purchaser in that the Exchange does 

not differentiate between subscribers 

that purchase the Simple Order Report 

and/or the Complex Order Report. The 

proposed fees are set at a modest level 

that would allow any interested 

Participant to purchase such data based 

on their business needs. 

The Exchange also believes providing 

a 12 month discounted fee for 

subscribers of both the Simple Order 

Report and the Complex Order Report is 

equitable and reasonable because it 

would enable the Exchange to gauge 

long-term interest in both Reports. The 

Exchange believes that a lower annual 

combined subscription fee may 

incentivize Participants to subscribe to 

both Reports on a long-term basis, 

thereby allowing the Exchange to better 

gauge demand for both Reports over a 

longer period of time. Doing so will 

enable the Exchange to better predict 

the future demand for both Reports. 

This will allow the Exchange to better 

prepare and adjust resources for the 

production and delivery of both Reports 

to Participants, improving the efficiency 

by which the Exchange may deliver 

both Reports over a prolonged and set 

period of time. The Exchange also 

believes that it is reasonable, equitable 

and not unfairly discriminatory to offer 

a 12 month discounted fee for 

Participants that subscribe to both 

Reports because all Participants may 

subscribe to both Reports and receive 

the discounted rate. 

Lastly, the Exchange does not believe 

that the proposed change to rename 

current Section III.C of the BOX Fee 

Schedule from ‘‘Open-Close Data 

Report’’ to ‘‘Reports,’’ and to move 

current Section III.C (Open-Close Data 

Report) to new Section III.C.1 will 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. This 

proposed clarifying change has no 

competitive purpose and is only 

intended to improve the overall 

readability of the BOX Fee Schedule 

and help prevent investor confusion by 

including the fees for all market data 

reports in one place in the BOX Fee 

Schedule. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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)(ii) of the Exchange Act 17

and Rule 19b–4(f)(2) thereunder,18

because it establishes or changes a due, 

or fee. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend the rule change if 

it appears to the Commission that the 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or would otherwise further 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2022–20 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–BOX–2022–20. 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 the Exchange. 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–BOX–2022–20, and should 

be submitted on or before July 6, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12844 Filed 6–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95079; File No. SR–FICC– 

2022–004] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change To 

Amend the Stress Testing Framework 

and Liquidity Risk Management 

Framework 

June 9, 2022. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on May 26, 

2022, Fixed Income Clearing 

Corporation (‘‘FICC’’) filed with the 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 36183 

3Securities Exchange Act Release No. 82368 

(December 19, 2017), 82 FR 61082 (December 26, 

2017) (SR–DTC–2017–005; SR–FICC–2017–009; 

SR–NSCC–2017–006) (‘‘Initial ST Framework 

Filing’’). 

4 17 CFR 240.17Ad–22(e)(4). 

5Securities Exchange Act Release Nos. 82377 

(December 21, 2017), 82 FR 61617 (December 28, 

2017) (File Nos. SR–DTC–2017–004; SR–FICC– 

2017–008; SR–NSCC–2017–005) (‘‘Initial LRM 

Framework Filing’’). 

6 17 CFR 240.17Ad–22(e)(7). 

7See Securities Exchange Act Release No. 88382 

(March 13, 2020), 85 FR 15830 (March 19, 2020) 

(SR–FICC–2020–801) (‘‘MBSD Stress Testing 

Filing’’). 

8 17 CFR 240.17Ad–22(e)(4) and (7). 

9 17 CFR 240.17Ad–22(e)(7)(vi). 

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. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to (1) the Clearing Agency 

Stress Testing Framework (Market Risk) 

(‘‘ST Framework’’) and the Clearing 

Agency Liquidity Risk Management 

Framework (‘‘LRM Framework,’’ and, 

together with the ST Framework, the 

‘‘Frameworks’’) of FICC and its 

affiliates, The Depository Trust 

Company (‘‘DTC’’) and National 

Securities Clearing Corporation 

(‘‘NSCC,’’ and together with FICC and 

DTC, the ‘‘Clearing Agencies’’), and (2) 

the Clearing Rules of the MortgageBacked Securities Division of FICC 

(‘‘MBSD’’), as described below. 

First, the proposed changes would 

amend both the ST Framework and the 

LRM Framework to move descriptions 

of the Clearing Agencies’ liquidity stress 

testing activities from the LRM 

Framework to the ST Framework. In 

connection with this proposed change, 

the Clearing Agencies are also proposing 

to recategorize the stress scenarios used 

for liquidity risk management, such that 

all such stress scenarios are described as 

either regulatory or informational 

scenarios. 

Second, the proposed changes would 

amend the ST Framework to (1) enhance 

stress testing for the Government 

Securities Division of FICC (‘‘GSD’’) to 

obtain certain data utilized in stress 

testing from external vendors and 

implement a back-up stress testing 

calculation that would be utilized in the 

event such data is not supplied by its 

vendors, and amend the ST Framework 

to reflect these practices for both GSD 

and MBSD; (2) reflect that a stress 

testing team is primarily responsible for 

the actions described in the ST 

Framework, and (3) make other 

revisions to update and clarify the 

statements in the ST Framework, as 

further described below. 

Third, the proposed changes would 

amend the LRM Framework to update 

and clarify the statements in the LRM 

Framework, as further described below. 

Finally, the proposed changes would 

amend the Clearing Rules of MBSD 

(‘‘MBSD Rules’’) to remove disclosures 

regarding the stress testing program, 

which would be described in the ST 

Framework, as further 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 Clearing Agencies adopted the ST 

Framework to set forth the manner in 

which they identify, measure, monitor, 

and manage their respective credit 

exposures to participants and those 

arising from their respective payment, 

clearing, and settlement processes by, 

for example, maintaining sufficient 

prefunded financial resources to cover 

its credit exposures to each participant 

fully with a high degree of confidence 

and testing the sufficiency of those 

prefunded financial resources through 

stress testing.3 In this way, the ST 

Framework describes the stress testing 

activities of each of the Clearing 

Agencies and how the Clearing 

Agencies meet the applicable 

requirements of Rule 17Ad–22(e)(4).4

The Clearing Agencies adopted the 

LRM Framework to set forth the manner 

in which they measure, monitor and 

manage the liquidity risks that arise in 

or are borne by each of the Clearing 

Agencies by, for example, (1) 

maintaining sufficient liquid resources 

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 obligation for the Clearing 

Agency in extreme but plausible market 

conditions, and (2) determining the 

amount and regularly testing the 

sufficiency of qualifying liquid 

resources by conducting stress testing of 

those resources.5 In this way, the LRM 

Framework describes the liquidity risk 

management activities of each of the 

Clearing Agencies and how the Clearing 

Agencies meet the applicable 

requirements of Rule 17Ad–22(e)(7).6

The Clearing Agencies currently 

utilize vendor-supplied data in various 

aspects of the stress testing program for 

DTC, NSCC and MBSD. In 2020, in 

connection with enhancing stress 

testing for MBSD to utilize vendorsupplied data, FICC adopted changes to 

the MBSD Rules to describe the key 

components of the stress testing 

program.7 These disclosures are 

redundant of the descriptions of stress 

testing in the ST Framework and create 

a potential risk of having inconsistent 

statements regarding the Clearing 

Agencies’ stress testing program. 

The Clearing Agencies are proposing 

changes to the Frameworks and the 

MBSD Rules, described below, that 

would (1) enhance GSD stress testing, 

(2) reorganize, update and clarify the 

statements and descriptions already set 

forth in the Frameworks and (3) move 

all descriptions of stress testing to the 

ST Framework. While the proposal 

would include certain enhancements to 

the GSD stress testing, the Clearing 

Agencies are not proposing any material 

changes to how they conduct stress 

testing, manage credit exposures and 

liquidity risks, or otherwise comply 

with the requirements of Rules 17Ad– 

22(e)(4) and (7).8

First, the proposed rule change would 

amend both the ST Framework and the 

LRM Framework to move descriptions 

of the Clearing Agencies’ liquidity stress 

testing activities, which are designed to 

comply with the requirements of Rule 

17Ad–22(e)(7)(vi),9 from the LRM 

Framework to the ST Framework. In 

connection with this proposed change, 

the Clearing Agencies are also proposing 

to recategorize the liquidity stress 

scenarios by removing the Level 1, Level 

2 and Level 3 labels and instead 

categorizing all stress scenarios as either 

regulatory or informational. As 

described in greater detail below, this 

proposed change is a change only to the 

categorization of these stress scenarios 

and is not a change to how the Clearing 

Agencies conduct liquidity stress testing 


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36184 Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 

10 17 CFR 240.17Ad–22(e)(7)(vi)(A). 

11 17 CFR 240.17Ad–22(e)(7)(vi). 

12The parent company of the Clearing Agencies 

is The Depository Trust & Clearing Corporation 

(‘‘DTCC’’). DTCC operates on a shared services 

model with respect to the Clearing Agencies and its 

other subsidiaries. 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 subsidiary, including the Clearing 

Agencies. 

or otherwise meet the requirements of 

Rule 17Ad–22(e)(7)(vi)(A).10

Second, the proposed changes would 

amend the ST Framework to (1) enhance 

stress testing for GSD to obtain certain 

data utilized in stress testing from 

external vendors and implement a backup stress testing calculation that would 

be utilized in the event such data is not 

supplied by its vendors, and amend the 

ST Framework to reflect these practices 

for both GSD and MBSD; (2) reflect that 

a stress testing team is primarily 

responsible for the actions described in 

the ST Framework, and (3) make other 

revisions to update and clarify the 

statements in the ST Framework, as 

further described below. 

Third, the proposed changes would 

amend the LRM Framework to update 

and clarify the statements in the LRM 

Framework, as further described below. 

Finally, the proposed changes would 

amend the MBSD Rules to remove 

disclosures regarding the stress testing 

program, as further described below. 

i. Proposed Amendments To Move 

Activities Related to Stress Testing 

Qualifying Liquid Resources From the 

LRM Framework to the ST Framework 

First, the proposed changes would 

amend both the ST Framework and the 

LRM Framework to move descriptions 

of the Clearing Agencies’ liquidity stress 

testing activities, which are designed to 

comply with the requirements of Rule 

17Ad–22(e)(7)(vi),11 from the LRM 

Framework to the ST Framework. These 

activities are primarily performed by the 

Stress Testing Team within the Group 

Chief Risk Office of DTCC (‘‘GCRO’’), 

which includes members of the Market 

Risk Management and the Liquidity 

Risk Management groups within the 

GCRO.12 The Stress Testing Team, 

which was previously responsible for 

stress testing the Clearing Agencies’ 

prefunded financial resources, as part of 

the market risk management function, 

took over stress testing of the Clearing 

Agencies liquidity resources related to 

liquidity risk management in order to 

centralize stress testing activities and 

related responsibilities under one team. 

By moving the description of the 

Clearing Agencies’ liquidity stress 

testing activities into the ST Framework, 

the proposed change would create a 

clearer, simpler description of the 

Clearing Agencies’ collective stress 

testing activities in one document and 

would reflect the consolidation of these 

activities under the Stress Testing Team. 

In order to implement this proposed 

change, a number of drafting changes 

are being proposed to both the ST 

Framework and the LRM Framework. 

First, Section 1 (Executive Summary) 

and Section 4 (Liquidity Risk 

Management Regulatory Requirements) 

of the LRM Framework would be 

amended to make clear that compliance 

with the requirements of Rule 17Ad– 

22(e)(7)(vi) are not addressed in that 

document, and are addressed in the ST 

Framework. Section 2 (Glossary of Key 

Terms) of the LRM Framework would 

also be amended to include definitions 

of ‘‘Clearing Agency Stress Testing 

Framework’’ and the ‘‘Stress Testing 

Team,’’ and to remove the definition of 

the Enterprise Stress Testing Council, 

which is an internal forum that 

addresses stress testing matters. Finally, 

Section 6 (Liquidity Risk Management) 

of the LRM Framework would be 

amended to describe at a high-level the 

activities related to stress testing of the 

Clearing Agencies’ qualifying liquid 

resources and to state that these 

activities are described in greater detail 

in the ST Framework. 

The proposed change would also 

require revisions throughout the ST 

Framework to include descriptions of 

liquidity stress testing activities that 

support the Clearing Agencies’ 

compliance with the requirements of 

Rule 17Ad–22(e)(7)(vi) within the 

existing sections of the ST Framework. 

These proposed changes would include 

revisions to Section 1 (Executive 

Summary) of the ST Framework to 

clarify that stress testing related to 

liquidity risk management is described 

in this document, and revisions to 

Section 2 (Glossary of Key Terms) to 

include definitions related to these 

activities. These definitions would 

include the Liquidity Risk Management 

group within GCRO and a Clearing 

Agency Liquidity Risk Management 

Framework. Section 4 of the ST 

Framework would be renamed ‘‘Stress 

Testing Requirements’’ and would be 

amended to make clearer which 

requirements in Rules 17Ad–22(e)(4) 

and (7) are addressed in the ST 

Framework, and to identify the 

documents where the requirements not 

addressed in the ST Framework are 

addressed. 

The proposed changes to the ST 

Framework would create a new Section 

6, which would be named ‘‘Qualifying 

Liquid Resources—Liquidity Risk 

Management,’’ to describe at a highlevel how each of the Clearing Agencies 

determine the amount and regularly test 

the sufficiency of their respective 

qualifying liquid resources. This new 

section would include language that is 

substantially identical to language that 

would be removed from Section 6 

(Liquidity Risk Management) of the 

LRM Framework. 

The new Section 7 (Stress Testing 

Methodologies) (previously numbered 

Section 6) of the ST Framework would 

be updated to include descriptions of 

the methodologies used in liquidity 

stress testing. Such methodologies 

would not change substantively, and the 

language used in the revisions to this 

section would be substantively identical 

to language that would be removed from 

Section 6 (Liquidity Risk Management) 

of the LRM Framework. As described in 

greater detail below, the Clearing 

Agencies are proposing to revise the 

categorization of the liquidity stress 

scenarios, and those revisions would be 

reflected in this Section 7 of the ST 

Framework. 

Finally, the new Section 8 of the ST 

Framework (previously numbered 

Section 7), which would be renamed 

‘‘Stress Testing Governance and 

Escalation Procedures,’’ would be 

amended to include matters related to 

liquidity stress testing. More 

specifically, the new Section 8.1 would 

address governance and oversight of 

stress testing, which is set forth in a 

number of internal documents, and 

overseen by a stress testing committee, 

the Management Risk Committee and 

the Risk Committee of the Board of 

Directors of the Clearing Agencies. The 

new Section 8.2 would describe the 

daily monitoring for threshold breaches 

and liquidity shortfalls, and the 

escalations and actions that would 

follow those breaches. More 

specifically, the Clearing Agencies 

monitor for breaches of a ‘‘Cover One 

Ratio,’’ which is defined as the ratio of 

a family of affiliated Members’ 

deficiency over the total value of the 

applicable Clearing Agencies’ Clearing 

Fund or Participants Fund, excluding 

the sum value of the applicable family’s 

required deposit to the Clearing Fund or 

Participants Fund, as applicable. With 

respect to liquidity stress testing, the 

Clearing Agencies monitor daily for 

liquidity shortfalls, which trigger a 

series of escalations and remediation 

actions, which would be identified in 

this new Section 8.2. 

The new Section 8.3 would address 

comprehensive analyses of stress 

scenarios, which occur on at least a 

monthly basis and are designed to 

comply with the requirements of Rules 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 36185 

13See supra note 7. 

14 GSD Rulebook, available at https://

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

rules/ficc_gov_rules.pdf. 

15These key components of stress testing are also 

described in the Initial ST Framework Filing. See 

supra note 3. 

17Ad–22(e)(4)(vi)(B) and (C), and 

(7)(vi)(B) and (C). These analyses 

include (1) daily stress testing results, 

model parameters, model assumptions, 

and model performance, and (2) each 

stress scenario set for its 

comprehensiveness and relevance, 

including any changes or updates to 

such scenarios for the period. The new 

Section 8.4 would address the 

escalations and reporting of the monthly 

analyses of stress scenarios, which are 

designed to comply with the 

requirements of Rules 17Ad– 

22(e)(4)(vi)(D) and (7)(vi)(D). Finally, 

the new Section 8.5 would address the 

regular escalation of the results of stress 

testing, including any concerns related 

to those results, which are also designed 

to comply with Rules 17Ad– 

22(e)(4)(vi)(D) and (7)(vi)(D). 

Each of these subsections would 

address stress testing related to market 

risk, using language that is currently in 

the ST Framework, and would include 

language to address liquidity stress 

testing that would be substantially 

similar to the language removed from 

the LRM Framework. Revisions to the 

language removed from the LRM 

Framework would be primarily drafting 

revisions, as the Clearing Agencies are 

not proposing changes to how they 

conduct liquidity stress testing. 

ii. Proposed Amendments To ReCategorize the Stress Scenarios Used for 

Liquidity Stress Testing 

In connection with the changes 

described above, the proposed 

amendments would also reflect the 

recategorization of liquidity stress 

scenarios. Previously, liquidity stress 

scenarios were categorized as Level 1, 2 

and 3 scenarios. Level 1 scenarios 

described qualifying liquid resources 

under normal market conditions and 

were considered ‘‘baseline’’ scenarios. 

Level 2 scenarios assumed a wide range 

of foreseeable stress scenarios that 

included, but were not limited to, the 

default of the family of affiliated 

Members that would generate the largest 

aggregate payment obligation for each 

Clearing Agency in extreme but 

plausible market conditions. These 

scenarios were designed to identify the 

qualifying liquid resources each 

Clearing Agency should maintain to 

meet compliance with Rule 17Ad– 

22(e)(7)(i). Finally, the Level 3 scenarios 

were divided into either (1) regulatory 

scenarios, which were designed to meet 

the requirements of Rule 17Ad– 

22(e)(7)(vi)(A), and (2) informational 

scenarios, which were designed to be 

performed for informational and 

monitoring purposes using stress 

scenarios that exceed the requirements 

of Rule 17Ad–22(e)(7)(vi)(A). 

While the Clearing Agencies continue 

to maintain a wide range of stress 

scenarios that are designed to comply 

with the requirements of Rules 17Ad– 

22(e)(7), in order to simplify the 

descriptions of its liquidity stress 

scenarios and align them with the 

categorization of market risk stress 

scenarios, the Clearing Agencies have 

re-categorized the liquidity stress 

scenarios and eliminated the Level 1, 

Level 2 and Level 3 categories. Instead, 

all stress scenarios would be described 

in Section 6 of the ST Framework as 

being either (1) regulatory stress 

scenarios, which are designed to comply 

with the requirements of Rules 17Ad– 

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

22(e)(7)(i) and (vi)(A); or (2) 

informational stress scenarios, which 

may utilize parameters and assumptions 

that exceed the requirements of Rules 

17Ad–22(e)(4)(vi)(A) and (7)(vi)(A) and 

are utilized for informational, analytical 

and/or monitoring purposes only. 

iii. Proposed Amendments to the ST 

Framework 

The proposed changes would amend 

the ST Framework to (1) enhance stress 

testing for GSD to obtain certain data 

utilized in stress testing from external 

vendors and implement a back-up stress 

testing calculation that would be 

utilized in the event such data is not 

supplied by its vendors, and amend the 

ST Framework to reflect these practices 

for both GSD and MBSD; (2) reflect that 

a stress testing team is primarily 

responsible for the actions described in 

the ST Framework, and (3) make other 

revisions to update and clarify the 

statements in the ST Framework, as 

further described below. 

1. Enhance GSD Stress Testing To Use 

Vendor-Sourced Data 

First, the proposed changes would 

enhance GSD stress testing to utilize 

vendor-supplied historical risk factor 

time series data (‘‘Historical Data’’) and 

vendor-supplied security-level risk 

sensitivity data (‘‘Security-Level Data’’) 

in the stress testing program. This 

proposed enhancement would be 

similar to the approach utilized in 

MBSD stress testing.13

The vendor-sourced Historical Data 

would include data regarding (1) 

interest rate, (2) implied inflation rate, 

(3) agency spread, (4) mortgage option 

adjusted spread, (5) interest rate 

volatility, and (6) mortgage basis. The 

vendor-sourced Security-Level Data 

would include data regarding (1) 

sensitivity to interest rates, (2) implied 

inflation rate, (3) agency spread, (4) 

convexity, (5) sensitivity to mortgage 

option adjusted spread, (6) sensitivity to 

interest rate volatility, and (7) 

sensitivity to mortgage basis. FICC 

currently utilizes the Historical Data 

and Security-Level Data in GSD’s valueat-risk (‘‘VaR’’) model, which calculates 

the VaR Charge component of GSD’s 

Clearing Fund (referred to in the GSD 

Rulebook as Required Fund Deposit).14

FICC would use this same data set in 

GSD’s stress testing program. 

As described in greater detail in the 

ST Framework,15 stress testing involves 

three key components: (1) risk 

identification, (2) scenario development, 

which involves the construction of 

comprehensive and relevant sets of 

extreme but plausible historical and 

hypothetical stress scenarios; and (3) 

risk measurement and aggregation, in 

which risk metrics are calculated to 

estimate the profits and losses in 

connection with the hypothetical close 

out of a participant’s portfolio in certain 

stress scenarios. 

FICC would utilize the vendorsourced data in the development of 

historical stress scenarios and in the risk 

measurement and aggregation process of 

the GSD stress testing program. More 

specifically, the Historical Data would 

be used to identify the largest historical 

changes of risk factors that influence the 

pricing of product cleared by GSD, in 

connection with the development of 

stress scenarios. The vendor-sourced 

Historical Data would identify stress 

risk exposures under broader and more 

varied market conditions than the data 

currently available to FICC. 

FICC would utilize both the Historical 

Data and the Security-Level Data in the 

risk measurement and aggregation 

process of stress testing. FICC believes 

that the vendor-sourced Security-Level 

Data is more stable and robust than the 

data currently utilized by FICC for GSD 

stress testing. Because the stress profits 

and losses calculation that occur in 

connection with the risk measurement 

and aggregation process in stress testing 

would include Security-Level Data, 

FICC believes that the calculated results 

would be improved and would reflect 

results that are closer to actual price 

changes for government securities 

during larger market moves which are 

typical of stress testing scenarios. 

Finally, the proposed changes to 

enhance GSD stress testing would also 


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36186 Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 

16Tail risk generally refers to risks of outcomes 

that are caused by extreme or rare events. 

17The Liquidity Risk Tolerance Statement is 

liquidity risk management control that, among other 

things, (1) defines liquidity risk and describes how 

liquidity risk would materialize for each Clearing 

Agency specifically, (2) sets forth how liquidity risk 

is monitored by the Clearing Agencies, and (3) 

describes the various risk tolerance levels and 

thresholds for each the Clearing Agency. 

implement a back-up calculation that 

GSD would utilize in the event that the 

vendor fails to provide such data to 

GSD. Specifically, if the vendor fails to 

provide any data or a significant portion 

of data in accordance with the 

timeframes agreed to by FICC and the 

vendor, FICC would use the most 

recently available data on the first day 

that such disruption occurs in its stress 

testing calculations. Subject to 

discussions with the vendor, if FICC 

determines that the vendor would 

resume providing data within five (5) 

Business Days, FICC would determine 

whether the daily stress testing 

calculation should continue to be 

calculated by using the most recently 

available data or whether the back-up 

calculation (as described below) should 

be invoked. Subject to discussions with 

the vendor, if FICC determines that the 

data disruption would extend beyond 

five (5) Business Days, the back-up 

calculation would be employed for daily 

stress testing, subject to appropriate 

internal governance. 

The proposed back-up calculation 

would include the following 

calculations: (1) calculate each Netting 

Member’s portfolio net exposures, (2) 

calculate the historical stress return, and 

(3) calculate each Netting Member’s 

stress profits and losses. FICC would 

use publicly available indices as the 

data source for the stress return 

calculations. This calculation would be 

referred to as the Back-up Stress Testing 

Calculation in the ST Framework. 

The Clearing Agencies would describe 

the use of vendor-sourced data in stress 

testing for GSD and MBSD and the 

Back-up Stress Testing Calculation, as 

described above, in a new Section 7.1 of 

the ST Framework. 

2. Identify the Stress Testing Team as 

Responsible for Stress Testing 

As described above, stress testing for 

the Clearing Agencies is primarily 

performed by the Stress Testing Team, 

which includes members of both Market 

Risk Management and Liquidity Risk 

Management of DTCC within GCRO. 

The Stress Testing Team took over stress 

testing responsibilities related to 

liquidity risk management in late 2019 

to centralize stress testing and related 

responsibilities under one team. 

Therefore, the Clearing Agencies are 

proposing to include a general statement 

in Section 1 (Executive Summary) of the 

ST Framework that, unless otherwise 

specified, actions in the ST Framework 

related to stress testing are performed by 

the Stress Testing Team. The proposed 

changes would also amend Section 3 

(Framework Ownership and Change 

Management) of the ST Framework to 

make it clear that the Stress Testing 

Team owns and manages the ST 

Framework and is responsible for 

reviewing the ST Framework no less 

frequently than annually. 

In connection with this proposed 

change, the ST Framework would also 

be updated to describe actions related to 

stress testing without specifically 

identifying the group responsible for 

those actions. These proposed changes 

would simplify the descriptions in the 

ST Framework, while clarifying the 

team responsible for conducting these 

actions in a general statement in the ST 

Framework. 

3. Update and Clarify the ST Framework 

Finally, the proposed changes would 

also make immaterial revisions to 

update and clarify the ST Framework. 

For example, the proposed changes 

would update the names of certain 

documents that support the ST 

Framework to refer to the Clearing 

Agencies, rather than DTCC, in the 

document titles. These documents were 

renamed to conform to internal 

document naming conventions. The 

proposed changes would also amend 

Section 2 (Glossary of Key Terms) of the 

ST Framework to clarify and simplify 

the use of certain key terms. For 

example, the proposed changes would 

move the definitions of ‘‘Members’’ and 

‘‘Participants’’ from a footnote in 

Section 4 to this Section 2, and would 

update the definition of ‘‘BRC,’’ which 

refers to the Risk Committee of the 

Boards of Directors of the Clearing 

Agency, to be more descriptive. 

The proposed amendments would 

update Section 4 (Stress Testing 

Requirements) of the ST Framework to 

(1) more clearly state which 

requirements under Rules 17Ad– 

22(e)(4) and (7) are addressed in the ST 

Framework, (2) identify the separate 

documents that describe the 

requirements that are not addressed in 

the ST Framework, and (3) identify the 

requirements that are not applicable to 

the Clearing Agencies and, therefore, 

not described in any document. 

Finally, the proposed change would 

also revise the description of reverse 

stress testing to more clearly describe 

the goal and purpose of this testing.16

Specifically, reverse stress testing is 

used to identify tail risks by using 

extreme stress scenarios. In this way, 

reverse stress testing, which is 

conducting semi-annually, can be used 

to inform regular stress testing activities. 

The proposed changes would provide 

more transparency into the purpose of 

reverse stress testing conducted by the 

Clearing Agencies. 

None of these proposed changes 

would make substantive revisions to the 

ST Framework or reflect material 

changes to how the Clearing Agencies 

conduct the activities described in the 

ST Framework but would update and 

clarify those descriptions. 

iv. Proposed Amendments To Update 

and Clarify the LRM Framework 

In addition to removing descriptions 

of stress testing activities from the LRM 

Framework, the proposed changes 

would also make immaterial revisions to 

update and clarify the LRM Framework. 

For example, the proposed changes 

would update the name of the team 

within the GCRO that is responsible for 

liquidity risk management from the 

Liquidity Product Risk Unit, or LPRU, to 

Liquidity Risk Management. This 

proposed change would reflect a recent 

organizational change to the name of 

this group. 

Additionally, the proposed changes 

would update Section 10 (Liquidity Risk 

Tolerances) of the LRM Framework to 

state that an officer in Liquidity Risk 

Management is responsible for 

reviewing the Liquidity Risk Tolerance 

Statement.17 The LRM Framework 

currently identifies the specific title of 

the individual who is responsible for 

reviewing the Liquidity Risk Tolerance 

Statement on at least an annual basis. 

The proposed change would provide the 

Clearing Agencies with flexibility to 

change the title of the person 

responsible for this review. 

v. Proposed Amendments to MBSD 

Rules To Remove Stress Testing 

Descriptions 

Finally, the proposed rule change 

would remove descriptions of stress 

testing from the MBSD Rules, which 

would be duplicative of statements 

added to the ST Framework, described 

above. The Clearing Agencies do not 

believe that it is necessary to describe 

its stress testing program in multiple 

places in its rules, and that duplicative 

disclosures create a risk of 

inconsistencies. The ST Framework was 

designed to, among other things, 

describe the manner in which the 

Clearing Agencies test the sufficiency of 

their respective prefunded financial 

resources through stress testing and, 


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Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 36187 

18 15 U.S.C. 78q–1(b)(3)(F). 

19 17 CFR 240.17Ad–22(e)(4). 

20 Id. 21 Id. 

22 17 CFR 240.17Ad–22(e)(4). 

23 17 CFR 240.17Ad–22(e)(4)(i). 

24 Id. 

therefore, the Clearing Agencies believe 

this is the appropriate rule for these 

disclosures. 

As such, the proposed change would 

remove the duplicative descriptions of 

the MBSD stress testing program from 

the MBSD Rules by deleting the 

definition of ‘‘Back-up Stress Testing 

Calculation’’ from MBSD Rule 1 and 

Section 13 of MBSD Rule 4. As 

described above, the matters being 

removed from the MBSD Rules in this 

proposal would be addressed in the ST 

Framework. 

vi. Implementation Timeframe 

Subject to approval by the 

Commission, the proposal to enhance 

GSD stress testing to use vendor-sourced 

data and the proposal to remove 

descriptions of stress testing from the 

MBSD Rules would be implemented no 

later than November 30, 2022. The 

remaining proposals would be 

implemented upon approval by the 

Commission. 

2. Statutory Basis 

The Clearing Agencies believe that the 

proposed changes are consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a registered clearing 

agency. In particular, the Clearing 

Agencies believe that the proposed 

changes are consistent with Section 

17A(b)(3)(F) of the Act,18 and Rule 

17Ad–22(e)(4) under the Act,19 for the 

reasons described below. 

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

requires, in part, that the rules of a 

registered clearing agency 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, for the reasons described 

below.20 As described above, the 

proposed changes would (1) amend both 

the ST Framework and the LRM 

Framework to move the descriptions of 

liquidity stress testing from the LRM 

Framework to the ST Framework; (2) 

simplify the categorization of the 

liquidity stress scenarios; (3) amend the 

ST Framework to reflect that the Stress 

Testing Team is primarily responsible 

for stress testing activities; (4) update 

and clarify descriptions within the ST 

Framework; and (5) update and clarify 

descriptions within the LRM 

Framework, as described above. 

The ST Framework currently 

describes how each of the Clearing 

Agencies carry out a market risk 

management strategy to maintain 

sufficient prefunded financial resources 

to cover fully its exposures to each 

participant fully with a high degree of 

confidence. As such, the market risk 

management strategy of the Clearing 

Agencies addresses their respective 

market risk exposures and allows them 

to continue the prompt and accurate 

clearance and settlement of securities 

and can continue to assure the 

safeguarding of securities and funds 

which are in their custody or control or 

for which they are responsible 

notwithstanding those risks. 

The LRM Framework describes how 

each of the Clearing Agencies carry out 

its liquidity risk management strategy 

such that, with respect to FICC and 

NSCC, they maintain liquid resources 

sufficient to meet the potential amount 

of funding required to settle outstanding 

transactions of a defaulting participant 

or family of affiliated participants in a 

timely manner, and with respect to 

DTC, it maintains sufficient available 

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. As such, the Clearing 

Agencies’ liquidity risk management 

strategies address the Clearing Agencies’ 

maintenance of sufficient liquid 

resources, which allow them to 

continue the prompt and accurate 

clearance and settlement of securities 

and can continue to assure the 

safeguarding of securities and funds 

which are in their custody or control or 

for which they are responsible 

notwithstanding the default of a 

participant or family of affiliated 

participants. 

The proposed changes to reorganize 

the Frameworks, simplify the 

categorization of stress scenarios, and 

make other updates to improve the 

clarity and accuracy of the descriptions 

within the Frameworks, as described in 

this filing, would assist the Clearing 

Agencies in carrying out their stress 

testing and liquidity risk management 

functions. Therefore, the Clearing 

Agencies believe the proposed changes 

are consistent with the requirements of 

Section 17A(b)(3)(F) of the Act.21

The proposal to enhance the GSD 

stress testing to utilize vendor-sourced 

data and implement a back-up stress 

testing calculation is designed to be 

consistent with Rule 17Ad–22(e)(4) 

under the Act, which requires, in part, 

that a covered clearing agency establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to effectively 

identify, measure, monitor, and manage 

its credit exposures to participants and 

those arising from its payment, clearing, 

and settlement processes.22 Rule 17Ad– 

22(e)(4)(i) under the Act requires that a 

covered clearing agency maintain 

sufficient financial resources to cover its 

credit exposure to each participant fully 

with a high degree of confidence.23

FICC believes that the proposal to 

utilize Historical Data in the 

development of historical stress 

scenarios would incorporate a broad 

range of risk factors that enables GSD’s 

model to better understand a Member’s 

exposure to these risk factors. FICC also 

believes that the proposal to utilize 

Historical Data and Security-Level Data 

in the calculation of stress profits and 

losses for Members’ portfolios would 

provide for calculated amounts that are 

closer to actual price changes for 

securities cleared at GSD during larger 

market moves in an effort to test the 

adequacy of GSD’s prefunded resources. 

Lastly, FICC believes that the proposal 

to use a back-up calculation would help 

to ensure that FICC has a methodology 

in place that allows it to continue to 

measure the adequacy of GSD’s 

prefunded financial resources in the 

event that the vendor fails to provide 

data. For these reasons, FICC believes 

that the proposed changes to utilize the 

vendor-sourced Historical Data and 

Security-Level Data in GSD stress 

testing would improve GSD’s stress 

testing program, which is used to test 

the sufficiency of GSD’s prefunded 

resources daily to support compliance 

with Rule 17Ad–22(e)(4)(i). 

Furthermore, the proposal to adopt a 

back-up stress testing calculation in 

circumstances when the vendor-sourced 

data is unavailable would support 

GSD’s stress testing program by 

ensuring that the program utilizes a 

predetermined calculation in the event 

of a disruption to its data source. 

As such, FICC believes that these 

proposed changes are designed to be 

consistent with the requirements of Rule 

17Ad–22(e)(4)(i) under the Act.24

(B) Clearing Agency’s Statement on 

Burden on Competition 

The Clearing Agencies do not believe 

the proposed changes to the 

Frameworks described above would 

have any impact, or impose any burden, 


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36188 Federal Register / Vol. 87, No. 115 / Wednesday, June 15, 2022 / Notices 

25 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

on competition. As described above, the 

proposed changes would reorganize the 

Frameworks to improve the clarity 

regarding the Clearing Agencies’ stress 

testing activities and would make other 

updates and enhancements that would 

improve the clarity and accuracy of the 

descriptions of the Clearing Agencies’ 

stress testing and liquidity risk 

management functions. Therefore, the 

proposed changes are technical and 

non-material in nature, relating mostly 

to the operation of the Frameworks 

rather than the risk management 

functions described therein. 

Further, the proposed changes to 

enhance GSD stress testing to utilize 

vendor-sourced data and establish a 

back-up stress testing calculation would 

not have any impact, or impose any 

burden, on competition because this 

proposal does not affect the respective 

rights or obligations of Members that 

utilize GSD’s services. 

As such, the Clearing Agencies do not 

believe that the proposed rule changes 

would have any impact on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

The Clearing Agencies have not 

received or solicited any written 

comments relating to this proposal. If 

any written comments are received, they 

will be publicly filed as an Exhibit 2 to 

this filing, as required by Form 19b-4 

and the General Instructions thereto. 

Persons submitting comments are 

cautioned that, according to Section IV 

(Solicitation of Comments) of the 

Exhibit 1A in the General Instructions to 

Form 19b-4, the Commission does not 

edit personal identifying information 

from comment submissions. 

Commenters should submit only 

information that they wish to make 

available publicly, including their 

name, email address, and any other 

identifying information. 

All prospective commenters should 

follow the Commission’s instructions on 

how to submit comments, available at 

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

how-to-submit-comments. General 

questions regarding the rule filing 

process or logistical questions regarding 

this filing should be directed to the 

Main Office of the SEC’s Division of 

Trading and Markets at 

tradingandmarkets@sec.gov or 202– 

551–5777. 

The Clearing Agencies reserve the 

right to not respond to any comments 

received. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FICC–2022–004 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–2022–004. 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– 

2022–004 and should be submitted on 

or before July 6, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12842 Filed 6–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95077; File No. SR–Phlx– 

2022–25] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Options 4A, 

Section 12, Terms of Index Options 

Contracts 

June 9, 2022. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on June 6, 

2022, 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 

certain rule text within Options 4A, 

Section 12, Terms of Index Options 

Contracts, related to the listing of 

options on the Nasdaq-100® Volatility 

Index. 

The Exchange also proposes to amend 

the Short Term Option Series Program 

within Options 4A, Section 12(b)(4). 

The text of the proposed rule change 

is available on the Exchange’s website at 


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