42524 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

3The GSD QRM Methodology Document was 

filed as a confidential exhibit in the rule filing and 

advance notice for GSD sensitivity VaR. See 

Securities Exchange Act Release Nos. 83362 (June 

1, 2018), 83 FR 26514 (June 7, 2018) (SR–FICC– 

2018–001) and 83223 (May 11, 2018), 83 FR 23020 

(May 17, 2018) (SR–FICC–2018–801). 

4Capitalized terms used herein and not defined 

shall have the meaning assigned to such terms in 

the FICC Government Securities Division (‘‘GSD’’) 

Rulebook (‘‘Rules’’), available at http://

www.dtcc.com/legal/rules-and-procedures.aspx. 

established pursuant to Rule 6h–1 

would be filed with the Commission as 

proposed rule changes pursuant to 

Section 19(b) of the Act and would be 

published in the Federal Register. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following website: 

www.reginfo.gov. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. 

Written comments and 

recommendations for the proposed 

information collection should be sent by 

August 15, 2022 to (i) www.reginfo.gov/ 

public/do/PRAMain and (ii) David 

Bottom, Director/Chief Information 

Officer, Securities and Exchange 

Commission, c/o John Pezzullo, 100 F 

Street NE, Washington, DC 20549, or by 

sending an email to: PRA_Mailbox@

sec.gov. 

Dated: July 11, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–15129 Filed 7–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95256; File No. SR–FICC– 

2022–005] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of a Proposed Rule Change to 

Revise the Formula Used to Calculate 

the VaR Charge for Repo Interest 

Volatility 

July 12, 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 June 29, 

2022, Fixed Income Clearing 

Corporation (‘‘FICC’’) 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. 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 

FICC is proposing to amend the GSD 

Methodology Document—GSD Initial 

Market Risk Margin Model (‘‘QRM 

Methodology Document’’) 3 in order to 

revise the formula used to calculate the 

VaR Charge (as defined below) for repo 

interest volatility and make conforming 

changes to the description of this 

formula. In addition, FICC is proposing 

to amend the QRM Methodology 

Document to make certain technical 

changes, as described in greater detail 

below.4

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 

FICC is proposing to amend the QRM 

Methodology Document to revise the 

formula used to calculate the VaR 

Charge for repo interest volatility and 

make conforming changes to the 

description of this formula. In addition, 

FICC is proposing to amend the QRM 

Methodology Document to make certain 

technical changes. 

(1) Revise the Formula Used To 

Calculate the VaR Charge for Repo 

Interest Volatility and Make Conforming 

Changes 

FICC, through GSD, serves as a central 

counterparty (‘‘CCP’’) and provider of 

clearance and settlement services for the 

U.S. government securities market. A 

key tool that FICC uses to manage its 

credit exposures to its Members is the 

daily collection of margin from each 

Member. The aggregated amount of all 

Members’ margin constitutes the 

Clearing Fund, which FICC would be 

able to 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, 

including a value-at-risk (‘‘VaR’’) charge 

(‘‘VaR Charge’’) designed to capture the 

potential market price risk associated 

with the securities in a Member’s 

portfolio. The VaR Charge is typically 

the largest component of a Member’s 

margin requirement. The VaR Charge is 

designed to cover FICC’s projected 

liquidation losses with respect to a 

defaulted Member’s portfolio at a 99% 

confidence level. 

The VaR Charge includes a 

component that addresses repo interest 

volatility, which the QRM Methodology 

Document refers to as the ‘‘repo interest 

volatility charge.’’ Interest on a 

repurchase (‘‘repo’’) transaction, 

hereinafter referred to as ‘‘repo 

interest,’’ is the difference between the 

repurchase settlement amount and the 

start amount paid on the repo inception 

date. In its role as a CCP in clearing a 

repo transaction, FICC guarantees that 

the borrowers receive their repo 

collateral back at the close of the repo 

transaction while lenders receive the 

start amount paid on the repo inception 

date plus repo interest. The market 

value of interest payments for the 

remaining life of the repo trades are 

subject to the risk of movements of the 

market repo interest rates. Since FICC 

guarantees the repo interest payment to 

the lenders, this risk needs to be 

mitigated. The repo interest volatility 

charge is designed to mitigate such risk, 

i.e., the risk arising out of fluctuations 

in market repo interest rates during the 

margin period of risk (‘‘MPOR’’). MPOR 

is currently set at 3 days for FICC. It 

represents the duration of time when a 

CCP is exposed to market risk postmember default, starting from the time 

of the last successful margin collection 

to the time the market risk exposure is 

effectively mitigated. The repo interest 

volatility charge is a small component of 

the total GSD margin (currently about 

3% at CCP level). 

The QRM Methodology Document 

contains the formula for the calculation 

of the repo interest volatility charge and 

describes the components and 

calculation thereof. 

Currently, the repo interest volatility 

charge is assessed through application 

of a haircut schedule with a single 

haircut rate applied to each risk bucket 

after netting short and long repo interest 


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5FICC has developed its repo interest rate indices 

using FICC delivery-versus-payment repo 

transactions. 

6As an initial matter, FICC would take a 

streamlined and prudent approach by setting the 

repo haircut rates for long positions and short 

positions to be the same rate, i.e., the larger of the 

two rates, so that the long and short positions in 

a specific risk bucket would be subject to the same 

repo haircut rate. 

7As an initial matter, FICC would set the repo 

haircut rates for long positions and short positions 

to be the same rate, i.e., the larger of the two rates, 

so that the long and short positions in a specific risk 

bucket would be subject to the same repo haircut 

rate. Supra note 6. Using the new proposed formula 

under this approach, the repo interest volatility 

Continued 

positions within the relevant risk 

bucket. Specifically, under the current 

formula, the repo interest positions for 

a given Member portfolio are put into 

different risk buckets based on (a) 

whether the underlying repo trade is a 

generic repo trade or a special repo 

trade and (b) the time to settlement of 

the underlying repo trade. The total net 

amount of each risk bucket is calculated 

as the sum of the product of repo start 

amount and the time to settlement of 

each repo interest position in that risk 

bucket. If the total net amount is 

positive (long), then the long repo 

haircut rate for that specific risk bucket 

is applied to the total net amount for 

that specific risk bucket to arrive at the 

repo interest volatility charge for that 

specific risk bucket. If the total net 

amount is negative (short), then the 

short repo haircut rate for that specific 

risk bucket is applied to the absolute 

value of the total net amount to arrive 

at the repo interest volatility charge for 

that specific risk bucket. The total repo 

interest volatility charge for the 

portfolio is the sum of the repo interest 

volatility charges of all of the risk 

buckets in the portfolio. As such, the 

current formula reflects a repo interest 

rate index driven approach where a 

single repo haircut rate is applied to the 

absolute value of the total net amount of 

each risk bucket of repo interest 

positions.5

In order to provide FICC with more 

flexibility with respect to the 

calculation of the repo interest volatility 

charge so FICC can respond to rapidly 

changing market conditions more 

quickly and timely, FICC is proposing 

revisions to the current formula. The 

proposed new formula is similar to the 

current formula in certain respects. For 

example, the proposed new formula 

would continue to be repo interest rate 

index driven and would use a similar 

mathematical calculation as the current 

formula. In addition, under the 

proposed new formula, the repo interest 

positions for a given Member portfolio 

would continue to be placed into risk 

buckets based on (a) whether the 

underlying repo trade is a generic repo 

trade or a special repo trade and (b) the 

time to settlement of the underlying 

repo trade. However, unlike the current 

formula, more than one repo haircut rate 

could apply to each risk bucket. This is 

because the repo haircut rate that would 

be applied would no longer be based on 

whether the total net amount for a 

specific risk bucket is long or short. 

Instead, as proposed, the specific repo 

haircut rate to be applied would be 

based on whether the individual repo 

interest position in a specific risk bucket 

is either long or short. Specifically, as 

proposed, FICC would apply a long repo 

haircut rate to all the long positions and 

a short repo haircut rate to all the short 

positions in each risk bucket. The long 

positions and the short positions can 

offset each other within the same risk 

bucket but cannot offset each other 

across different risk buckets. As 

proposed, the repo interest volatility 

charge for a specific risk bucket would 

be the absolute value of the sum of the 

product of repo start amount, time to 

settlement, and repo haircut rate of the 

individual repo interest positions in the 

risk bucket. However, as is the case with 

the current formula, the total repo 

interest volatility charge for the 

portfolio would still be the sum of the 

repo interest volatility charges of all of 

the risk buckets in the portfolio. Doing 

so would provide FICC the flexibility to 

use two haircuts for each risk bucket, 

one for long positions and the other for 

short positions,6 thus allowing FICC to 

respond to rapidly changing market 

conditions more quickly and timely, 

particularly when the long and short 

repo interest positions exhibit very 

different risk profiles. In turn, the 

proposed changes would help better 

ensure that FICC calculates and collects 

adequate margin from Members and 

lead to a better risk management 

practice. 

Based on FICC’s 2020 and 2021 

annual model validation reports, the 

rolling 12-month backtest coverage on 

the sub-portfolios of repo interest only 

positions had been below the 99 percent 

coverage target from June 2019 to 

September 2020. In order to improve the 

backtesting coverage, FICC is also 

proposing to add a repo bid/ask spread 

to each repo haircut rate (one for long 

positions and one for short positions) 

within the same risk bucket. The repo 

bid/ask spread would be calculated 

based on the historical percentile 

movements of the internally constructed 

repo interest rate indices. FICC is 

proposing to add the repo bid/ask 

spread to each repo haircut rate to 

account for the difference observed in 

the repo market between the highest rate 

a repo participant is willing to pay to 

borrow money in a repo trade and the 

lowest rate a repo participant is willing 

to accept to lend money in a repo trade. 

FICC believes adding the repo bid/ask 

spread to each of the repo haircut rates 

would improve backtesting coverage, 

particularly with respect to subportfolios of repo interest only 

positions. 

For example, assuming a portfolio 

contains two repo interest positions, 

both with half a year to settlement, one 

position has a repo start amount of +$1 

million, and the other has a repo start 

amount of ¥$0.8 million. In this 

example, the two repo interest positions 

have the same time to settlement, so 

they would fall into the same risk 

bucket. Let’s further assume that for that 

specific risk bucket, the long repo 

haircut rate is 40 bps and the short repo 

haircut rate is 45 bps. 

Under the current formula, we first 

calculate the total net amount of the risk 

bucket by adding the product of repo 

start amount and the time to settlement 

of the two repo interest positions, i.e., 

(+$1 million*0.5 year) + (¥$0.8 

million*0.5 year). As calculated, the 

total net amount is +$100,000. Given 

that the total net amount is positive 

(long), we apply the long repo haircut 

rate of 40 bps, i.e., $100,000*40 bps, and 

calculate the repo interest volatility 

charge for the portfolio as $400. 

Under the proposed new formula, we 

would calculate the individual repo 

interest positions and apply the 

applicable repo haircut rate at the 

position level. Specifically, we would 

first calculate each repo interest 

position by multiplying the repo start 

amount and the time to settlement, i.e., 

(+$1 million*0.5 year) = +$500,000, and 

then apply the applicable repo haircut 

rate, i.e., because +$500,000 is a long 

position, we would apply the long repo 

haircut rate of 40 bps and calculate the 

amount for that long position as $2,000. 

For the second repo interest position, 

we would first multiply the repo start 

amount (¥$0.8 million) and the time to 

settlement (0.5 year) and get ¥$400,000. 

Given it is a short position, we would 

apply the short repo haircut rate of 45 

bps and calculate the amount for that 

short position as ¥$1,800. For the repo 

interest volatility charge for the 

portfolio, we would take the absolute 

value of the sum of the two amounts 

($2,000+(¥$1,800)) and get $200 as the 

repo interest volatility charge for the 

portfolio using the proposed new 

formula.7 8


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charge for the portfolio would be $450. Instead of 

using 40 bps for long positions and 45 bps for short 

positions, we would apply 45 bps (the larger of the 

two rates) to both the long and short positions in 

the risk bucket, i.e., (+$500,000*45 bps) and 

(¥$400,000*45 bps), and get $2,250 and ¥$1,800 

as the haircut amounts, respectively. The repo 

interest volatility charge for the portfolio would 

then be calculated by adding $2,250 and ¥$1,800, 

i.e., $450. 

8Under the proposed new formula, the repo 

interest volatility charge would always be a positive 

number because the calculation thereof is based on 

the absolute value of the sum of the relevant 

amounts. For example, assuming a portfolio 

contains two repo interest positions, both with half 

a year to settlement, one position has a repo start 

amount of ¥$1 million, and the other has a repo 

start amount of +$0.8 million. In this example, the 

two repo interest positions have the same time to 

settlement, so they would fall into the same risk 

bucket. Let’s further assume that for that specific 

risk bucket, the long repo haircut rate is 45 bps and 

the short repo haircut rate is 40 bps. Under the 

proposed new formula, we would first calculate 

each repo interest position by multiplying the repo 

start amount and the time to settlement, i.e., (¥$1 

million*0.5 year) = ¥$500,000, and then apply the 

applicable repo haircut rate, i.e., because 

¥$500,000 is a short position, we would apply the 

short repo haircut rate of 40 bps and calculate the 

amount for that short position as ¥$2,000. For the 

second repo interest position, we would first 

multiply the repo start amount (+$0.8 million) and 

the time to settlement (0.5 year) and get +$400,000. 

Given it is a long position, we would apply the long 

repo haircut rate of 45 bps and calculate the amount 

for that long position as +$1,800. For the repo 

interest volatility charge for the portfolio, we would 

take the absolute value of the sum of the two 

amounts, i.e., abs(¥$2,000+(+$1,800)) and get $200 

as the repo interest volatility charge for the portfolio 

using the proposed new formula. 

9Pursuant to Section 806(e)(1) of Title VIII of the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act and Rule 19b–4(n)(1)(i) under the 

Act, if a change materially affects the nature or level 

of risks presented by FICC, then FICC is required 

to file an advance notice filing. 12 U.S.C. 5465(e)(1) 

and 17 CFR 240.19b–4(n)(1)(i). 

10The Clearing Agency Model Risk Management 

Framework (‘‘Framework’’) sets forth the model risk 

management practices that FICC and its affiliates 

The Depository Trust Company (‘‘DTC’’) and 

National Securities Clearing Corporation (‘‘NSCC,’’ 

and together with FICC and DTC, the ‘‘Clearing 

Agencies’’) follow to identify, measure, monitor, 

and manage the risks associated with the design, 

development, implementation, use, and validation 

of quantitative models. The Framework is filed as 

a rule of the Clearing Agencies. See Securities 

Exchange Act Release Nos. 81485 (August 25, 

2017), 82 FR 41433 (August 31, 2017) (File Nos. 

SR–DTC–2017–008; SR–FICC–2017–014; SR– 

NSCC–2017–008), 88911 (May 20, 2020), 85 FR 

31828 (May 27, 2020) (File Nos. SR–DTC–2020– 

008; SR–FICC–2020–004; SR–NSCC–2020–008), 

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

(File No. SR–FICC–2021–006), 92381 (July 13, 

2021), 86 FR 38163 (July 19, 2021) (File No. SR– 

NSCC–2021–008) and 92379 (July 13, 2021), 86 FR 

38143 (July 19, 2021) (File No. SR–DTC–2021–003). 

The QRM Methodology Document 

also contains a detailed description of 

the repo haircut rate calculation for all 

risk buckets. FICC is proposing to 

eliminate this detailed description from 

the QRM Methodology Document and 

replace it with a more general 

description of the repo haircut rate 

calculation. FICC believes that having a 

more general description would provide 

FICC with more flexibility to respond to 

rapidly changing market conditions 

more quickly and timely by enabling 

FICC to adjust how the repo haircut rate 

is calculated without undergoing a rule 

filing process.9 By being able to quickly 

make adjustments to the calculation of 

the repo haircut rate, FICC would be 

able to better risk manage the repo 

interest positions. Specifically, FICC 

believes this proposed change would 

enable FICC to make appropriate and 

timely adjustments to the repo haircut 

rates based on an evaluation of a 

number of factors, including, but not 

limited to, repo interest rate volatility 

outlook and backtesting coverage 

results. Furthermore, there are certain 

known data availability limitations with 

respect to the current repo interest rate 

index. That is, the current repo interest 

rate index is missing data for a volatile 

period, so repo haircut rates that have 

been calibrated based on the current 

repo interest rate index may not be 

sufficient if the repo market were to 

experience heightened volatility. FICC 

believes the proposed changes would 

therefore also help counterbalance 

potential data availability limitation 

issues by enabling FICC to adjust how 

the repo haircut rate is calculated more 

quickly and timely and thereby provide 

FICC with the flexibility to respond to 

rapidly changing market conditions 

more quickly and effectively. 

FICC would instead describe the 

detailed calculations of the repo haircut 

rates in an internal standalone 

document. Nonetheless, any future 

changes to the repo haircut rate 

calculations would continue to follow 

DTCC’s internal model governance 

procedure as described in the Clearing 

Agency Model Risk Management 

Framework.10 In addition, the repo 

haircut rates would continue to be 

tracked in the monthly model parameter 

report. 

Accordingly, FICC believes that 

revising the formula for the calculation 

of the repo interest volatility charge as 

described above and replacing the 

current specific description with a more 

general description in the QRM 

Methodology Document would 

collectively provide FICC with more 

flexibility and allow FICC to respond to 

rapidly changing market conditions 

more quickly by enabling FICC to adjust 

how the repo haircut rate is calculated 

without a rule filing. In addition, FICC 

believes that the proposed changes 

would enable FICC to better address the 

backtest coverage issue and thereby risk 

manage the repo interest positions more 

effectively. 

Impact Study 

FICC conducted an impact study for 

the period of January 2018 to February 

2022 (‘‘Impact Study’’). The result of the 

Impact Study indicates that, at the CCP 

level, if the proposed changes had been 

in place, the backtesting coverage ratio 

for the repo interest volatility charge 

would have increased from 

approximately 98.7% to 99.2%. 

Specifically, the Impact Study shows 

that had the proposed changes been in 

place from January 2018 to February 

2022, it would have affected 90 out of 

145 (approximately 62%) portfolios of 

GSD Members per day on average, and 

the average daily margin increase of the 

VaR Charge for these Member portfolios 

would have been approximately $0.7 

million (representing approximately 3% 

of their average daily VaR Charge). For 

GSD, the proposed changes would have 

resulted in an average daily VaR Charge 

increase of approximately $86 million 

(representing approximately 0.8% of the 

average daily VaR Charge). 

(2) Technical Changes 

FICC is also proposing to make certain 

technical changes to the QRM 

Methodology Document to enhance 

clarity. 

FICC proposes to revise the term 

‘‘GCF Repo’’ to ‘‘repo’’ in ‘‘2.1 Market 

risks associated with products cleared 

by GSD’’ and ‘‘3.2.4 Repo Interest 

Volatility Charge’’ sections of the QRM 

Methodology Document for clarity. 

In ‘‘2.5.4. Repo Interest Volatility 

Charge’’ and ‘‘3.2.4 Repo Interest 

Volatility Charge’’ sections of the QRM 

Methodology Document, FICC proposes 

to change ‘‘inception date’’ to ‘‘repo 

inception date’’ and ‘‘above’’ to ‘‘in the 

above sections’’ to enhance clarity. FICC 

also proposes to clarify and update 

certain descriptions in the ‘‘2.5.4. Repo 

Interest Volatility Charge’’ and ‘‘3.2.4 

Repo Interest Volatility Charge’’ 

sections. For example, FICC is 

proposing to clarify the description of 

the risk that the repo interest volatility 

charge is designed to address and the 

repo trades that it applies to. In 

addition, FICC is proposing to update 

the paragraphs in ‘‘2.5.4. Repo Interest 

Volatility Charge’’ section describing the 

use of risk buckets to reflect the current 

practice. 

Furthermore, FICC proposes to change 

‘‘repurchase price’’ to ‘‘repurchase 

settlement amount’’ and ‘‘original sale 

price’’ to ‘‘start amount paid on the repo 

inception date’’ in ‘‘3.2.4 Repo Interest 

Volatility Charge’’ section for clarity. To 

enhance the clarity of the QRM 

Methodology Document, FICC also 

proposes to remove a formula from 


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11 15 U.S.C. 78q–1(b)(3)(F). 

12 Id. 

13 Id. 

14 Id. 

15 Id. 

16 17 CFR 240.17Ad–22(e)(4)(i). 

17 Id. 

18 Id. 

19 17 CFR 240.17Ad–22(e)(6)(i). 

20 Id. 

‘‘3.2.4 Repo Interest Volatility Charge’’ 

section of the QRM Methodology 

Document that is no longer used but had 

been included for historical reference. 

In addition, FICC is proposing to 

clarify the description of the repo 

interest curve in ‘‘3.2.4 Repo Interest 

Volatility Charge’’ section of the QRM 

Methodology Document, including, 

among other things, the description the 

categories that a collateral security in a 

repo trade can be designated as and how 

those categories are treated in the repo 

interest volatility charge calculation, as 

well as how the repo rate indices are 

constructed. FICC also proposes to add 

that any changes or adjustments to the 

repo haircut rate calculation would 

need to go through DTCC’s model 

governance process. 

Lastly, FICC is proposing certain 

grammar-related technical changes in 

‘‘2.1 Market risks associated with 

products cleared by GSD’’ and ‘‘3.2.4 

Repo Interest Volatility Charge’’ sections 

of the QRM Methodology Document. 

Implementation Timeframe 

Subject to approval by the 

Commission, FICC would implement 

the proposed rule changes 

approximately within 30 days following 

such approval and would announce the 

effective date of the proposed change by 

an Important Notice posted to its 

website. 

2. Statutory Basis 

FICC believes this proposal is 

consistent with the requirements of the 

Act, and the rules and regulations 

thereunder applicable to a registered 

clearing agency. Specifically, FICC 

believes that the proposed changes to 

the Rules and the QRM Methodology 

Document described above are 

consistent with Section 17A(b)(3)(F) of 

the Act, for the reasons described 

below.11

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

requires, in part, 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.12

FICC believes that the proposed 

changes to the QRM Methodology 

Document described in Item II.(A)1(1) 

above to revise the formula used to 

calculate the VaR Charge for repo 

interest volatility and make conforming 

changes to the description of this 

formula are designed to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

FICC or for which it is responsible, 

consistent with Section 17A(b)(3)(F) of 

the Act.13 As described above, FICC 

believes these proposed changes would 

provide FICC with more flexibility with 

respect to the calculation of the repo 

interest volatility charge and thus allow 

FICC to respond to rapidly changing 

market conditions more quickly and 

timely, particularly when the long and 

short repo interest positions exhibit very 

different risk profiles. FICC believes that 

having more flexibility with respect to 

this calculation would help better 

ensure that FICC calculates and collects 

adequate margin from Members and 

thereby would assure the safeguarding 

of securities and funds which are in the 

custody and control of FICC or for 

which it is responsible, consistent with 

Section 17A(b)(3)(F) of the Act.14

FICC believes that the proposed 

technical changes described in Item 

II.(A)1(2) above would enhance the 

clarity of the QRM Methodology 

Document for FICC. As the QRM 

Methodology Document is used by FICC 

Risk Management personnel regarding 

the calculation of margin requirements, 

it is therefore important that FICC Risk 

Management has a clear description of 

the calculation of the margin 

methodology. Having a clear description 

of the calculation of the margin 

methodology would promote an 

accurate and smooth functioning of the 

margining process. Having an accurate 

and smooth functioning of the 

margining process would help better 

ensure that FICC calculates and collects 

adequate margin from Members and 

thereby assure the safeguarding of 

securities and funds which are in the 

custody and control of FICC or for 

which it is responsible. As such, FICC 

believes that enhancing the clarity of the 

QRM Methodology Document would 

assure the safeguarding of securities and 

funds which are in the custody or 

control of FICC or for which it is 

responsible, consistent with Section 

17A(b)(3)(F) of the Act.15

Rule 17Ad–22(e)(4)(i) under the Act 16

requires a covered clearing agency 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. FICC 

believes that the proposed changes in 

Item II.(A)1(1) above are consistent with 

the requirements of Rule 17Ad– 

22(e)(4)(i) under the Act.17 As described 

above, FICC believes these proposed 

changes to revise the formula used to 

calculate the VaR Charge for repo 

interest volatility would (i) provide 

FICC with more flexibility with respect 

to the calculation of the repo interest 

volatility charge and (ii) improve 

backtesting coverage. FICC believes that 

having more flexibility with respect to 

the calculation of the repo interest 

volatility charge would allow FICC to 

respond to rapidly changing market 

conditions more quickly and timely. 

Having the ability to respond to rapidly 

changing market conditions more 

quickly and timely would in turn help 

FICC better measure, monitor, and 

manage its credit exposures to 

participants and those exposures arising 

from its payment, clearing, and 

settlement processes. Moreover, as the 

result of the Impact Study indicates, 

having the proposed changes would 

increase the backtesting coverage ratio 

for the repo interest volatility charge 

beyond 99% and thereby help ensure 

that FICC maintains sufficient financial 

resources to cover its credit exposure to 

each participant fully with a high degree 

of confidence. Therefore, FICC believes 

that the proposed changes described in 

Item II.(A)1(1) above are consistent with 

the requirements of Rule 17Ad– 

22(e)(4)(i) under the Act.18

Rule 17Ad–22(e)(6)(i) under the Act 19

requires a covered clearing agency to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to cover, if the 

covered clearing agency provides 

central counterparty services, 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. FICC believes that the proposed 

changes in Item II.(A)1(1) above are 

consistent with the requirements of Rule 

17Ad–22(e)(6)(i).20

Specifically, FICC believes the 

proposed new formula to allow FICC the 

flexibility to apply two separate repo 

haircut rates (one for long positions and 

the other for short positions) within the 

same risk bucket would enable FICC to 

be better equipped to respond to rapidly 

changing market conditions, 


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42528 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 

21 Id. 

22 Id. 

23 17 CFR 240.17Ad–22(e)(6)(v). 

24 Id. 

25 Id. 

26 Id. 

27 15 U.S.C. 78q–1(b)(3)(I). 

particularly when the long and short 

repo interest positions exhibit very 

different risk profiles. FICC believes 

having this flexibility would help lead 

to a better risk management practice 

because it would enable FICC to refine 

its calculation of the repo interest 

volatility charge in response to fast 

changing market conditions. Being able 

to refine its calculation of the repo 

interest volatility charge in response to 

fast changing market conditions would 

help FICC cover its credit exposures to 

its participants by allowing FICC to 

continue to produce margin levels 

commensurate with the risks and 

particular attributes of each relevant 

product, portfolio, and market. 

Therefore, FICC believes this proposed 

change is consistent with Rule 17Ad– 

22(e)(6)(i) under the Act.21

Similarly, FICC believes that the 

proposed changes to replace the current 

detailed description of the repo haircut 

rate calculation for all risk buckets with 

a more general description, as described 

above, would also provide FICC with 

more flexibility to respond to rapidly 

changing market conditions more 

quickly and timely because FICC would 

be able to make adjustments to the repo 

haircut rate calculation without a rule 

filing. Having this flexibility would 

enable FICC to better risk manage the 

repo interest positions because FICC 

would then be able to make appropriate 

and timely adjustments to the repo 

haircut rates, as described above. 

Furthermore, as described above, FICC 

believes these proposed changes would 

also help counterbalance potential data 

availability limitation issues by enabling 

FICC to adjust how the repo haircut rate 

is calculated more quickly and timely. 

Being able to adjust its calculation of the 

repo haircut rate quickly and timely 

would help FICC cover its credit 

exposures to its participants by allowing 

FICC to continue to produce margin 

levels commensurate with the risks and 

particular attributes of each relevant 

product, portfolio, and market. 

Therefore, FICC believes this proposed 

change is consistent with Rule 17Ad– 

22(e)(6)(i) under the Act.22

Rule 17Ad–22(e)(6)(v) under the 

Act 23 requires a covered clearing 

agency to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

cover, if the covered clearing agency 

provides central counterparty services, 

its credit exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, uses an appropriate 

method for measuring credit exposure 

that accounts for relevant product risk 

factors and portfolio effects across 

products. FICC believes that the 

proposed changes in Item II.(A)1(1) 

above are consistent with the 

requirements of Rule 17Ad– 

22(e)(6)(v).24

Specifically, FICC believes the 

proposed new formula to allow FICC the 

flexibility to apply two separate repo 

haircut rates (one for long positions and 

the other for short positions) within the 

same risk bucket would enable FICC to 

be better equipped to respond to rapidly 

changing market conditions, 

particularly when the long and short 

repo interest positions exhibit very 

different risk profiles. FICC believes 

having this flexibility would help lead 

to a better risk management practice 

because it would enable FICC to refine 

its calculation of the repo interest 

volatility charge in response to fast 

changing market conditions. Being able 

to refine its calculation of the repo 

interest volatility charge in response to 

fast changing market conditions would 

help FICC cover its credit exposures to 

its participants by allowing FICC to 

continue to produce margin levels 

commensurate with relevant product 

risk factors and portfolio effects across 

products. Therefore, FICC believes this 

proposed change is consistent with Rule 

17Ad–22(e)(6)(v) under the Act.25

Similarly, FICC believes that the 

proposed changes to replace the current 

detailed description of the repo haircut 

rate calculation for all risk buckets with 

a more general description, as described 

above, would also provide FICC with 

more flexibility to respond to rapidly 

changing market conditions more 

quickly and timely because FICC would 

be able to make adjustments to the repo 

haircut rate calculation without a rule 

filing. Having this flexibility would 

enable FICC to better risk manage the 

repo interest positions because FICC 

would then be able to make appropriate 

and timely adjustments to the repo 

haircut rates, as described above. 

Furthermore, as described above, FICC 

believes these proposed changes would 

also help counterbalance potential data 

availability limitation issues by enabling 

FICC to adjust how the repo haircut rate 

is calculated more quickly and timely. 

Being able to adjust its calculation of the 

repo haircut rate quickly and timely 

would help FICC cover its credit 

exposures to its participants by allowing 

FICC to continue to product margin 

levels commensurate with relevant 

product risk factors and portfolio effects 

across products. Therefore, FICC 

believes this proposed change is 

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

under the Act.26

(B) Clearing Agency’s Statement on 

Burden on Competition 

FICC believes that the proposed 

changes described in Item II.(A)1(1) 

above may have an impact on 

competition because these changes 

could result in Members being assessed 

a higher margin than they would have 

been assessed using the current formula 

in calculation of the repo interest 

volatility charge. FICC believes that the 

proposed change could burden 

competition by potentially increasing 

these Members’ operating costs. 

Nonetheless, FICC believes any burden 

on competition imposed by the 

proposed changes described in Item 

II.(A)1(1) would not be significant and, 

regardless of whether such burden on 

competition could be deemed 

significant, would be necessary and 

appropriate, as permitted by Section 

17A(b)(3)(I) of the Act for the reasons 

described in this filing and further 

below.27

FICC believes any burden on 

competition imposed by the proposed 

changes described in Item II.(A)1(1) 

would not be significant. As the result 

of the Impact Study indicates, had the 

proposed changes been in place, 

approximately 62% of the GSD Member 

portfolios would have had an increase 

of approximately 3% in their average 

daily VaR Charge, and at a GSD level the 

increase would have been 

approximately 0.8% of the average daily 

VaR Charge. 

However, even if the burden on 

competition imposed by the proposed 

changes described in Item II.(A)1(1) 

were deemed significant, FICC believes 

that any such burden on competition 

would be necessary because, as 

described above, the proposed changes 

would provide FICC with more 

flexibility with respect to the 

calculation of the repo interest volatility 

charge and allow FICC to respond to 

rapidly changing market conditions 

more quickly and timely, particularly 

when the long and short repo interest 

positions exhibit very different risk 

profiles. Having more flexibility with 

respect to this calculation would thus 

help better ensure that FICC calculates 

and collects adequate margin from 

Members and thereby assure the 

safeguarding of securities and funds 

which are in the custody and control of 

FICC or for which it is responsible, 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 42529 

28 15 U.S.C. 78q–1(b)(3)(F) 

29 17 CFR 240.17Ad–22(e)(4)(i). 

30 17 CFR 240.17Ad–22(e)(6)(i) and (e)(6)(v). 

31The proposed changes described in Item 

II.(A)1(1) could result in Members being assessed a 

lower margin than they would have been assessed 

using the current calculation of the repo interest 

volatility charge. As illustrated by the example in 

Item II.(A)1(1) above, when using the current 

formula, the repo interest volatility charge for the 

portfolio in the example is $400, but when using 

the proposed new formula, the repo interest 

volatility charge for the portfolio is reduced to $200 

instead. 

consistent with Section 17A(b)(3)(F) of 

the Act.28

In addition, FICC believes the 

proposed changes described in Item 

II.(A)1(1) are necessary to support 

FICC’s compliance with Rules 17ad– 

22(e)(4)(i), (e)(6)(i), and (e)(6)(v) under 

the Act. Specifically, as described 

above, FICC believes these proposed 

changes would provide FICC with more 

flexibility with respect to the 

calculation of the repo interest volatility 

charge. Having more flexibility with 

respect to the calculation of the repo 

interest volatility charge would allow 

FICC to respond to rapidly changing 

market conditions more quickly and 

timely. Having the ability to respond to 

rapidly changing market conditions 

more quickly and timely would in turn 

help FICC better measure, monitor, and 

manage its credit exposures to 

participants and those exposures arising 

from its payment, clearing, and 

settlement processes, consistent with 

the requirements of Rules 17ad– 

22(e)(4)(i) under the Act.29

FICC also believes these proposed 

changes would enable FICC to be better 

equipped to respond to rapidly 

changing market conditions, 

particularly when the long and short 

repo interest positions exhibit very 

different risk profiles. FICC believes 

having this flexibility would help lead 

to a better risk management practice 

because it would enable FICC to refine 

its calculation of the repo interest 

volatility charge in response to fast 

changing market conditions. Being able 

to refine its calculation of the repo 

interest volatility charge in response to 

fast changing market conditions would 

help FICC cover its credit exposures to 

its participants, consistent with the 

requirements of Rule 17Ad–22(e)(6)(i) 

and (e)(6)(v) under the Act.30

FICC also believes that any burden on 

competition imposed by the proposed 

changes described in Item II.(A)1(1) 

would be appropriate in furtherance of 

the Act because these proposed changes 

have been specifically designed to 

assure the safeguarding of securities and 

funds which are in the custody and 

control of FICC or for which it is 

responsible, as required by Section 

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

above, FICC believes these proposed 

changes would help better ensure that 

FICC calculates and collects adequate 

margin from Member, thus enable FICC 

to produce margin levels more 

commensurate with the risks it faces as 

a CCP. Accordingly, FICC believes these 

proposed changes are appropriately 

designed to meet its risk management 

goals and regulatory obligations. 

FICC believes that the proposed 

changes described in Item II.(A)1(1) 

above may also promote competition 

because these changes could also result 

in Members being assessed a lower 

margin than they would have been 

assessed using the current calculation of 

the repo interest volatility charge, and 

thereby could potentially lower 

operating costs for Members.31

With respect to the proposed changes 

described in Item II.(A)1(2) above to 

make technical changes to the QRM 

Methodology Document, FICC does not 

believe these proposed changes would 

have any impact on competition 

because these proposed changes would 

only enhance the clarity of the QRM 

Methodology Document, which would 

promote an accurate and smooth 

functioning of the margining process at 

FICC and would not affect the 

substantive rights of Members. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

FICC has not received or solicited any 

written comments relating to this 

proposal. If any additional 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. 

FICC reserves the right not to 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–2022–005 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–2022–005. 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 


jspears on DSK121TN23PROD with NOTICES1
42530 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 

32 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. 94982 

(May 25, 2022), 87 FR 33250. 

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

5 Id. 

6 17 CFR 200.30–3(a)(31). 

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). 

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– 

2022–005 and should be submitted on 

or before August 5, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–15179 Filed 7–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95257; File No. SR– 

CboeBZX–2022–031] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of 

Designation of a Longer Period for 

Commission Action on a Proposed 

Rule Change To List and Trade Shares 

of the ARK 21Shares Bitcoin ETF 

Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares 

July 12, 2022. 

On May 13, 2022, Cboe BZX 

Exchange, Inc. (‘‘BZX’’) 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 

list and trade shares of the ARK 

21Shares Bitcoin ETF under BZX Rule 

14.11(e)(4), Commodity-Based Trust 

Shares. The proposed rule change was 

published for comment in the Federal 

Register on June 1, 2022.3 The 

Commission has received no comments 

on the proposed rule change. 

Section 19(b)(2) of the Act 4 provides 

that within 45 days of the publication of 

notice of the filing of a proposed rule 

change, 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 shall either 

approve the proposed rule change, 

disapprove the proposed rule change, or 

institute proceedings to determine 

whether the proposed rule change 

should be disapproved. The 45th day 

after publication of the notice for this 

proposed rule change is July 16, 2022. 

The Commission is extending this 45- 

day time period. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to take action on the 

proposed rule change so that it has 

sufficient time to consider the proposed 

rule change and the issues raised 

therein. Accordingly, pursuant to 

Section 19(b)(2) of the Act,5 the 

Commission designates August 30, 

2022, as the date by which the 

Commission shall either approve or 

disapprove, or institute proceedings to 

determine whether to disapprove, the 

proposed rule change (File No. SR– 

CboeBZX–2022–031). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–15180 Filed 7–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95244; File No. SR–ICC– 

2022–009] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to the Risk 

Management Framework and the Risk 

Management Model Description 

July 11, 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 June 30, 

2022, ICE Clear Credit LLC (‘‘ICC’’) 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 primarily by ICC. 

ICC filed the proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(1) thereunder,4

such that the proposed rule change was 

immediately effective upon filing with 

the Commission. 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 principal purpose of the 

proposed rule change is to revise the 

ICC Risk Management Framework 

(‘‘RMF’’) and the ICC Risk Management 

Model Description (‘‘RMMD’’) 

(collectively, the ‘‘Risk Management 

Policies’’). These revisions do not 

require any changes to the ICC Clearing 

Rules (the ‘‘Rules’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, ICC 

included statements concerning the 

purpose of and basis for the proposed 

rule change, security-based swap 

submission, or advance notice and 

discussed any comments it received on 

the proposed rule change, securitybased swap submission, or advance 

notice. The text of these statements may 

be examined at the places specified in 

Item IV below. ICC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(a) Purpose 

ICC proposes revisions to the Risk 

Management Policies. The proposed 

amendments consist of clarifications 

that are intended to promote 

consistency across related provisions in 

ICC’s Rules and procedures and would 

not change any current risk 

methodologies, practices, or 

requirements. ICC believes the proposed 

changes will facilitate the prompt and 

accurate clearance and settlement of 

securities transactions and derivative 

agreements, contracts, and transactions 

for which it is responsible. ICC proposes 

to make such changes effective shortly 

after filing with the Commission, on or 

about July 18, 2022. The proposed rule 

change is described in detail as follows. 

ICC proposes language clarifications 

to the Risk Management Policies to 

ensure consistency with the ICC Rules. 

Under ICC Rule 801(a)(ii), the required 

contribution to the Guaranty Fund 


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