Document ID: SEC-2021-0027-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2021-01-06T05:00Z

[Federal Register Volume 86, Number 3 (Wednesday, January 6, 2021)]
[Notices]
[Pages 584-591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29251]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90834; File No. SR-FICC-2020-804]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Extension of the Review Period of an Advance 
Notice To Modify the Calculation of the MBSD VaR Floor To Incorporate a 
Minimum Margin Amount

December 31, 2020.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act entitled the Payment, 
Clearing, and Settlement Supervision Act of 2010 (``Clearing 
Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) under the Securities 
Exchange Act of 1934 (``Act''),\2\ notice is hereby given that on 
November 27, 2020, Fixed Income Clearing Corporation (``FICC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
advance notice SR-FICC-2020-804 (``Advance Notice'') as described in 
Items I and II below, which Items have been prepared by the clearing 
agency.\3\ The Commission is publishing this notice to solicit comments 
on the Advance Notice from interested persons and to extend the review 
period of the Advance Notice for an additional 60 days pursuant to 
Section 806(e)(1)(H) of the Clearing Supervision Act.\4\
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ On November 20, 2020, FICC filed this Advance Notice as a 
proposed rule change (SR-FICC-2020-017) with the Commission pursuant 
to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule 19b-4 
thereunder, 17 CFR 240.19b-4. A copy of the proposed rule change is 
available at http://www.dtcc.com/legal/sec-rule-filings.aspx 
(``Proposed Rule Change'').
    \4\ 12 U.S.C. 5465(e)(1)(H).
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    This advance notice of Fixed Income Clearing Corporation (``FICC'') 
is attached [sic] hereto as Exhibit 5 and consists of a proposal to 
modify the calculation of the VaR Floor (as defined below) and the 
corresponding description in the FICC Mortgage-Backed Securities 
Division (``MBSD'') Clearing Rules (``MBSD Rules'') \5\ to incorporate 
a ``Minimum Margin Amount'' as described in greater detail below.
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    \5\ Capitalized terms not defined herein are defined in the MBSD 
Rules, available at http://www.dtcc.com/~/media/Files/Downloads/
legal/rules/ficc_mbsd_rules.pdf.
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    The proposal would necessitate changes to the Methodology and Model 
Operations Document--MBSD Quantitative Risk Model (the ``QRM 
Methodology''), which is attached hereto as Exhibit 5.\6\ FICC is 
requesting confidential treatment of this document and has filed it 
separately with the Secretary of the Commission.\7\
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    \6\ Because FICC requested confidential treatment, the QRM 
Methodology was filed separately with the Secretary of the 
Commission as part of proposed rule change SR-FICC-2016-007 (the 
``VaR Filing''). See Securities Exchange Act Release No. 79868 
(January 24, 2017), 82 FR 8780 (January 30, 2017) (SR-FICC-2016-007) 
(``VaR Filing Approval Order''). FICC also filed the VaR Filing 
proposal as an advance notice pursuant to Section 806(e)(1) of the 
Clearing Supervision Act (12 U.S.C. 5465(e)(1)) and Rule 19b-
4(n)(1)(i) under the Act (17 CFR 240.19b-4(n)(1)(i)), with respect 
to which the Commission issued a Notice of No Objection. See 
Securities Exchange Act Release No. 79843 (January 19, 2017), 82 FR 
8555 (January 26, 2017) (SR-FICC-2016-801). The QRM Methodology has 
been amended following the VaR Filing Approval Order. See Securities 
Exchange Act Release Nos. 85944 (May 24, 2019), 84 FR 25315 (May 31, 
2019) (SR-FICC-2019-001) and 90182 (October 14, 2020) 85 FR 66630 
(October 20, 2020) (SR-FICC-2020-009).
    \7\ 17 CFR 240.24b-2.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Advance Notice

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the Advance Notice 
and discussed any comments it received on the Advance Notice. 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 and B below, of the most significant aspects of such 
statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice 
Received From Members, Participants, or Others

    FICC has not received or solicited any written comments relating to 
this proposal. FICC will notify the Commission of any written comments 
received by FICC.

(B) Advance Notice Filed Pursuant to Section 806(e) of the Clearing 
Supervision Act

Description of Proposed Change
    The purpose of the proposed rule change is to modify the 
calculation of the VaR Floor and the corresponding description in the 
MBSD Rules to incorporate a Minimum Margin Amount.
    The proposed changes would necessitate changes to the QRM 
Methodology. The proposed changes are described in detail below.
(i) Overview of the Required Fund Deposit and Clearing Fund Calculation
    A key tool that FICC uses to manage market risk is the daily 
calculation and collection of Required Fund Deposits from Clearing 
Members. The Required Fund Deposit serves as each Clearing Member's 
margin. The aggregate of all Clearing Members' Required Fund Deposits 
constitutes the Clearing Fund of MBSD, which FICC would access should a 
defaulting Clearing Member's own Required Fund Deposit be insufficient 
to satisfy losses to FICC caused by the liquidation of that Clearing 
Member's portfolio.
    The objective of a Clearing Member's Required Fund Deposit is to 
mitigate

[[Page 585]]

potential losses to FICC associated with liquidation of such Clearing 
Member's portfolio in the event that FICC ceases to act for such 
Clearing Member (hereinafter referred to as a ``default''). Pursuant to 
the MBSD Rules, each Clearing Member's Required Fund Deposit amount 
currently consists of the greater of (i) the Minimum Charge or (ii) the 
sum of the following components: The VaR Charge, the Deterministic Risk 
Component, a special charge (to the extent determined to be 
appropriate), and, if applicable, the Backtesting Charge, Holiday 
Charge and Intraday Mark-to-Market Charge.\8\ Of these components, the 
VaR Charge typically comprises the largest portion of a Clearing 
Member's Required Fund Deposit amount.
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    \8\ MBSD Rule 4 Section 2, supra, note 4.
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    The VaR Charge is calculated using a risk-based margin methodology 
that is intended to capture the market price risk associated with the 
securities in a Clearing Member's portfolio. The VaR Charge provides an 
estimate of the projected liquidation losses at a 99% confidence level. 
The methodology is designed to project the potential gains or losses 
that could occur in connection with the liquidation of a defaulting 
Clearing Member's portfolio, assuming that a portfolio would take three 
days to hedge or liquidate in normal market conditions. The projected 
liquidation gains or losses are used to determine the amount of the VaR 
Charge, which is calculated to cover projected liquidation losses at 
99% confidence level.\9\
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    \9\ Unregistered Investment Pool Clearing Members are subject to 
a VaR Charge with a minimum targeted confidence level assumption of 
99.5 percent. See MBSD Rule 4, Section 2(c), supra note 4.
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    On January 24, 2017, the Commission approved FICC's VaR Filing to 
make certain enhancements to the MBSD value-at-risk (``VaR'') margin 
calculation methodology including the VaR Charge.\10\ The VaR Filing 
amended the definition of VaR Charge to, among other things, 
incorporate the VaR Floor.\11\ The VaR Floor is a calculation using a 
percentage of gross notional value of a Clearing Member's portfolio and 
is used as an alternative to the VaR Charge amount calculated by the 
VaR model for Clearing Members' portfolios where the VaR Floor 
calculation is greater than the VaR model-based calculation. The VaR 
Floor currently addresses the risk that the VaR model may calculate too 
low a VaR Charge for certain portfolios where the VaR model applies 
substantial risk offsets among long and short positions in different 
classes of mortgage-backed securities that have a high degree of 
historical price correlation. FICC applies the VaR Floor at the 
Clearing Member portfolio level. The VaR Floor is calculated by 
multiplying the market value of a Clearing Member's gross unsettled 
positions by a designated percentage that is no less than 0.05% and no 
greater than 0.30%.\12\ FICC informs Clearing Members of the applicable 
percentage utilized by the VaR Floor by an Important Notice issued no 
later than 10 Business Days prior to the implementation of such 
percentage.\13\ The percentage currently designated by FICC is 
0.10%.\14\
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    \10\ See VaR Filing Approval Order, supra note 5.
    \11\ The term ``VaR Floor'' is defined within the definition of 
VaR Charge. See MBSD Rule 1, supra note 4.
    \12\ The VaR Floor calculation and percentages are described 
within the definition of VaR Charge. See MBSD Rule 1, supra note 4.
    \13\ See definition of VaR Charge, MBSD Rule 1, supra note 4.
    \14\ See FICC-MBSD Important Notice MBS761-19, dated November 5, 
2019 (notifying Clearing Members that the designated VaR Floor 
percentage is 0.10%).
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    FICC's VaR model did not respond effectively to the recent levels 
of market volatility and economic uncertainty, and the VaR Charge 
amounts that were calculated using the profit and loss scenarios 
generated by FICC's VaR model did not achieve a 99% confidence level 
for the period beginning in March 2020 through the beginning of April 
2020. FICC's VaR model calculates the risk profile of each Clearing 
Member's portfolio by applying certain representative risk factors to 
measure the degree of responsiveness of a portfolio's value to the 
changes of these risk factors. COVID-19 market volatility, borrower 
protection programs, home price outlook, and the Federal Reserve Bank 
of New York (``FRBNY'') authority to buy and sell mortgage-backed 
securities have created uncertainty in forward rates, origination/
refinance pipelines, voluntary/involuntary mortgage prepayments, and 
supply/demand dynamics that are not reflected in the FICC VaR 
historical data set and the FICC VaR model incorporates this historical 
data to calibrate the volatilities of the risk factors and the 
correlations between risk factors. During this period, the market 
uncertainty and FRBNY purchases led to market price changes that 
exceeded the VaR model's projections which yielded insufficient VaR 
Charges--particularly for higher coupon TBAs \15\ where current TBA 
market prices may reflect higher mortgage prepayment risk than implied 
by the VaR model's historical risk factor data in the lookback period.
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    \15\ The vast majority of agency mortgage-backed securities 
trading occurs in a forward market, on a ``to-be-announced'' or 
``TBA'' basis. In a TBA trade, the seller of MBS agrees on a sale 
price, but does not specify which particular securities will be 
delivered to the buyer on settlement day. Instead, only a few basic 
characteristics of the securities are agreed upon, such as the 
mortgage-backed security program, maturity, coupon rate and the face 
value of the bonds to be delivered. This TBA trading convention 
enables a heterogeneous market consisting of thousands of different 
mortgage-backed security pools backed by millions of individual 
mortgages to be reduced--for trading purposes--to a series of liquid 
contracts.
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    In addition, the VaR Floor did not effectively address the risk 
that the VaR model calculated too low a VaR Charge for all portfolios 
during the recent market volatility and economic uncertainty. The VaR 
Floor is currently designed specifically to account for substantial 
risk offsets among long and short positions in different classes of 
mortgage-backed securities that have a high degree of historical price 
correlation. The recent market volatility and economic uncertainty 
resulted in a variance between historical price changes and observed 
market price changes resulting in TBA price changes significantly 
exceeding those implied by the VaR model risk factors as indicated by 
backtesting data.
    FICC employs daily backtesting to determine the adequacy of each 
Clearing Member's Required Fund Deposit.\16\ FICC compares the Required 
Fund Deposit for each Clearing Member with the simulated liquidation 
gains/losses using the actual positions in the Clearing Member's 
portfolio, and the actual historical security returns. During the 
recent market volatility and economic uncertainty, the VaR Charges and 
the Required Fund Deposits yielded backtesting deficiencies beyond 
FICC's risk tolerance.\17\ FICC proposes to introduce a Minimum Margin 
Amount into the VaR Floor to enhance the MBSD VaR model performance and 
improve the backtesting coverage during periods of heightened market 
volatility and economic uncertainty. FICC believes that this proposal 
will increase the margin back-testing performance during periods of 
heightened market volatility by maintaining a VaR Charge that is 
appropriately calibrated to the current market price volatility.
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    \16\ For backtesting comparisons, FICC uses the Required Fund 
Deposit amount, without regard to the actual collateral posted by 
the Clearing Member.
    \17\ MBSD's monthly backtesting coverage ratios for Required 
Fund Deposit was 86.6% in March 2020 and 94.2% in April 2020.
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(ii) Proposed Rule Change To Incorporate the Minimum Margin Amount in 
the VaR Floor
    FICC is proposing to introduce a new calculation called the 
``Minimum

[[Page 586]]

Margin Amount'' to complement the existing VaR Floor calculation in the 
MBSD Rules. The Minimum Margin Amount would enhance backtesting 
coverage when there are potential VaR model performance challenges 
particularly when TBA price changes significantly exceed those implied 
by the VaR model risk factors as observed during March and April 2020.
    The Minimum Margin Amount would be defined in the MBSD Rules as a 
minimum volatility calculation for specified net unsettled positions, 
calculated using the historical market price changes of such benchmark 
TBA securities determined by FICC. The definition would state that the 
Minimum Margin Amount would cover such range of historical market price 
moves and parameters as FICC from time to time deems appropriate using 
a look-back period of no less than one year and no more than three 
years.
    FICC would set the range of historical market price moves and 
parameters from time to time in accordance with FICC's model risk 
management practices and governance set forth in the Clearing Agency 
Model Risk Management Framework (``Model Risk Management 
Framework'').\18\ Under the proposed changes to the QRM Methodology, 
the Minimum Margin Amount would be computed through a dynamic haircut 
method that is based on observed TBA price moves that would provide a 
more reliable estimate for the portfolio risk level when current market 
conditions deviate from historical observations. The Minimum Margin 
Amount would also improve the responsiveness of the VaR model to a 
volatile market because it would have a shorter look back period from 
the VaR model.
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    \18\ See Securities Exchange Act Release Nos. 81485 (August 25, 
2017), 82 FR 41433 (August 31, 2017) (SR-DTC-2017-008; SR-FICC-2017-
014; SR-NSCC-2017-008); 84458 (October 19, 2018), 83 FR 53925 
(October 25, 2018) (SR-DTC-2018-009; SR-FICC-2018-010; SR-NSCC-2018-
009) and 88911 (May 20, 2020), 85 FR 31828 (May 27, 2020) (SR-DTC-
2020-008; SR-FICC-2020-004; SR-NSCC-2020-008) (``Model Risk 
Management Framework Filings''). The Model Risk Management Framework 
sets forth the model risk management practices adopted by FICC, 
National Securities Clearing Corporation, and The Depository Trust 
Company. The Model Risk Management Framework is designed to help 
identify, measure, monitor, and manage the risks associated with the 
design, development, implementation, use, and validation of 
quantitative models. The Model Risk Management Framework describes 
(i) governance of the Model Risk Management Framework; (ii) key 
terms; (iii) model inventory procedures; (iv) model validation 
procedures; (v) model approval process; and (vi) model performance 
procedures.
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    The MBSD Rules currently define the VaR Floor as an amount 
designated by FICC that is determined by multiplying the sum of the 
absolute values of a Clearing Member's Long Positions and Short 
Positions, at market value, by a percentage designated by FICC that is 
no less than 0.05% and no greater than 0.30%.\19\ FICC is proposing to 
revise the definition of the VaR Floor to incorporate the Minimum 
Margin Amount such that the VaR Floor would be the greater of (i) the 
VaR Floor Percentage Amount and (ii) the Minimum Margin Amount.
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    \19\ See definition of VaR Charge, MBSD Rule 1, supra note 4.
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    The ``VaR Floor Percentage Amount'' would be an amount derived 
using the current VaR Floor percentage calculation in the MBSD Rules: 
An amount designated by FICC that is determined by multiplying the sum 
of the absolute values of a Clearing Member's Long Positions and Short 
Positions, at market value, by a percentage designated by FICC that is 
no less than 0.05% and no greater than 0.30%. As with the existing VaR 
Floor percentage, FICC would determine the percentage within this range 
to be applied based on factors including but not limited to a review 
performed at least annually of the impact of the VaR Floor parameter at 
different levels within the range to the backtesting performance and to 
Clearing Members' margin charges. The VaR Floor percentage currently in 
place is 0.10%.
    Likewise, as with the existing VaR Floor percentage, FICC would 
inform Clearing Members of the applicable percentage used in the VaR 
Floor Percentage Amount by Important Notice issued no later than 10 
Business Days prior to implementation of such percentage. This rule 
change is not proposing to change the VaR Floor percentage or the 
manner in which this component is calculated.
    The proposed Minimum Margin Amount would modify the VaR Floor to 
also cover circumstances where the market price volatility implied by 
the current VaR Charge calculation and the VaR Floor Percentage Amount 
is lower than market price volatility from corresponding price changes 
of the proposed TBA securities benchmarks observed during the lookback 
period. The proposed TBA securities benchmarks to be used in to 
calculate the Minimum Margin Amount in the QRM Methodology would be 
Federal National Mortgage Association (``Fannie Mae'') and Federal Home 
Loan Mortgage Corporation (``Freddie Mac'') conventional 30-year 
mortgage-backed securities (``CONV30''), Government National Mortgage 
Association (``Ginnie Mae'') 30-year mortgage-backed securities 
(``GNMA30''), Fannie Mae and Freddie Mac conventional 15-year mortgage-
backed securities (``CONV15''), and Ginnie Mae 15-year mortgage-backed 
securities (``GNMA15''). These benchmarks were selected because they 
represent the majority of the trading volumes in the market.\20\ This 
proposal would allow offsetting between short and long positions within 
TBA securities benchmarks given that the TBAs aggregated in each 
benchmark exhibit similar risk profiles and can be netted together to 
calculate the Minimum Margin Amount that will cover the observed market 
price changes for each portfolio.
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    \20\ FICC plans to map 10-year and 20-year TBA to the 
corresponding 15-year TBA security benchmark. As of August 31, 2020, 
20-year TBAs account for less than 0.5%, and 10-year TBAs account 
for less than 0.1%, of the positions in MBSD clearing portfolios. In 
the QRM Methodology, these TBAs are not selected as separate TBA 
security benchmarks due to the limited trading volumes in the 
market. FICC will continue to monitor the position exposures in MBSD 
and determine if a modification to the QRM Methodology may be 
required.
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    FICC is proposing to modify the QRM Methodology to specify that the 
Minimum Margin Amount would be calculated per Clearing Member portfolio 
as follows: (i) Risk factors would be calculated using historical 
market prices of benchmark TBA securities and (ii) each Clearing 
Member's portfolio exposure would be calculated on a net position 
across all products and for each securitization program (i.e., CONV30, 
GNMA30, CONV15 and GNMA15). The Minimum Margin Amount would be 
calculated by multiplying a ``base risk factor'' (described below) by 
the absolute value of the Clearing Member's net position across all 
products, plus the sum of each risk factor spread to the base risk 
factor multiplied by the absolute value of its corresponding position.
    Pursuant to the QRM Methodology, FICC calculates an outright risk 
factor for GNMA30 and CONV30. The base risk factor for a portfolio for 
the Minimum Margin Amount would be based on whether GNMA30 or CONV30 
constitutes the larger absolute net market value in each Clearing 
Member's portfolio. If GNMA30 constitute the larger absolute net market 
value in the portfolio, the base risk factor would be equal to the 
outright risk factor for GNMA30. If CONV30 constitute the larger 
absolute new market value in the portfolio, the base risk factor would 
be equal to the outright risk factor for the CONV30.\21\ GNMA30 and 
CONV30 are

[[Page 587]]

used as the baseline programs for determining the base risk factors 
because those programs constitute the majority part of the TBA market 
and the majority of positions in MBSD portfolios.
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    \21\ To illustrate the Minimum Margin Amount calculation, 
consider an example where a Clearing Member has a portfolio with a 
net long position across all products of $2 billion and CONV30 
constitutes the larger absolute net market value in its portfolio as 
between GNMA30 and CONV30. Assume that the outright risk factor for 
CONV30 is 0.0096. Further assume the Clearing Member has a net short 
position of $30 million in CONV15, and the corresponding risk factor 
spread to the base risk factor is 0.006; a net short position of 
$500 million in GNMA30, and the corresponding risk factor spread is 
0.005; and a net long position of $120 million in GNMA15, and the 
corresponding risk factor spread is 0.007. In order to generate the 
Minimum Margin Amount, FICC would multiply the base risk factor by 
the absolute value of the Clearing Member's net position across all 
products, plus the sum of each risk factor spread of the subsequent 
products multiplied by absolute value of the position for the 
respective product (i.e., ([base risk factor] * ABS[portfolio net 
position]) + ([CONV15 spread risk factor] * ABS[CONV15 net 
position]) + ([GNMA30 spread risk factor] * ABS[GNMA30 net 
position]) + ([GNMA15 Spread Risk Factor] * ABS[GNMA15 net 
position])). The resulting Minimum Margin Amount would be $22.72 
million.
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    The proposed benchmark TBA securities, historical market price 
moves and parameters to be used to calculate the Minimum Margin Amount 
would be determined by FICC from time to time in accordance with FICC's 
model risk management practices and governance set forth in the 
Clearing Agency Model Risk Management Framework.\22\
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    \22\ See Model Risk Management Framework, supra note 17.
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    FICC is proposing to introduce the Minimum Margin Amount to 
complement the VaR Floor during market conditions when the TBA prices 
are driven by factors outside of those implied by the VaR model. The 
Minimum Margin Amount would use observable TBA prices and would be 
calculated with a shorter lookback period than the VaR model so it 
would be more responsive to current market conditions. This proposal 
provides a more transparent and market price sensitive approach than 
alternatives, such as a VaR model parameter adjustment and VaR model 
add-on, would provide to Clearing Members.\23\
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    \23\ A VaR model parameter adjustment or a VaR model add-on 
would be implemented by estimating how much the VaR model should be 
modified to correspond to the current market price volatility. A 
parameter adjustment would be a modification to one or more VaR 
model risk factors while an add-on would be a percentage adjustment 
to the calculated VaR.
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    The lookback period of the Minimum Margin Amount is intended to be 
shorter than the lookback period used for the VaR model, which is 10 
years, plus, to the extent applicable, one stressed period.\24\ The 
lookback period of the Minimum Margin Amount would be between one to 
three years. Consistent with the VaR methodology outlined in the QRM 
Methodology and pursuant to the model performance monitoring required 
under the Model Risk Management Framework,\25\ the lookback period 
would be analyzed to evaluate its sensitivity and impact to the model 
performance under four distinctive market regimes, epitomized by recent 
observations: (i) Calm markets where the VaR coverage is above 99% 
(e.g., 2018); (ii) moderately volatile markets or external mortgage 
market events (e.g., summer 2013; summer 2019); (iii) at the beginning 
of extreme market volatility (e.g., 2007; COVID-19 in March), and (iv) 
post extreme market stress and mean-reverting to `normal' market 
conditions. The lookback parameter in general affects (i) whether and 
how the floor will be invoked; (ii) the peak level of margin increase 
or the degree of procyclicality; and (iii) how quickly the margin will 
fall back to pre-stress levels. The lookback parameter update is 
intended to be an infrequent event and would typically happen only when 
there is a market regime change. The decision to update the lookback 
parameter would be based on the above-mentioned sensitivity analysis 
with considerations to the impacts to both the VaR Charges and the 
backtesting performance. The shorter lookback would more accurately 
reflect recent market conditions and would provide more responsiveness 
to market condition changes. The initial default lookback period for 
the Minimum Margin Amount calculation would be two years but may be 
adjusted as set forth above in accordance with FICC's model risk 
management practices and governance set forth in the Model Risk 
Management Framework.\26\
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    \24\ FICC maintains the ability to include an additional period 
of historically observed stressed market conditions to a 10-year 
look-back period if FICC observes that (1) the results of the model 
performance monitoring are not within FICC's 99th percentile 
confidence level or (2) the 10-year look-back period does not 
contain sufficient stressed market conditions.
    \25\ The Model Risk Management Framework provides that all 
models undergo ongoing model performance monitoring and backtesting 
which is the process of (i) evaluating an active model's ongoing 
performance based on theoretical tests, (ii) monitoring the model's 
parameters through the use of threshold indicators, and/or (iii) 
backtesting using actual historical data/realizations to test a VaR 
model's predictive power. See Model Risk Management Framework 
Filings, supra note 17.
    \26\ See Model Risk Management Framework, supra note 17.
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    The Model Risk Management Framework would also require FICC to 
conduct model performance reviews of the Minimum Margin Amount 
methodology.\27\ Specifically, FICC would monitor each Clearing 
Member's Required Fund Deposit and the aggregate Clearing Fund 
requirements versus the requirements calculated by the Minimum Margin 
Amount. In order to apply the risk management principles and model 
performance monitoring required under the Model Risk Management 
Framework, FICC's current model risk management practices would provide 
for a review of the robustness of the Required Fund Deposit inclusive 
of the Minimum Margin Amount by comparing the results versus the three-
day profit and loss of each Clearing Member's margin portfolio based on 
actual market price moves. If the backtesting results of Required Fund 
Deposit inclusive of the Minimum Margin Amount did not meet FICC's 99% 
confidence level, FICC could consider adjustments to the Minimum Margin 
Amount, including changing the look-back period (as discussed above) 
and/or applying a historical stressed period to the Minimum Margin 
Amount calibration, as appropriate. Any adjustment to the Minimum 
Margin Amount calibration would be subject to the model risk management 
practices and governance process set forth in the Model Risk Management 
Framework.\28\
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    \27\ See note 24.
    \28\ See Model Risk Management Framework, supra note 17.
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A. Proposed MBSD Rule Changes
    In connection with incorporating the Minimum Margin Amount, FICC 
would modify the MBSD Rules to:
     Add a definition of ``Minimum Margin Amount'' and define 
it as a minimum volatility calculation for specified net unsettled 
positions of a Clearing Member, calculated using the historical market 
price changes of such benchmark TBA securities determined by FICC. The 
definition would specify that the Minimum Margin Amount shall cover 
such range of historical market price moves and parameters as the 
Corporation from time to time deems appropriate using a look-back 
period of no less than one year and no more than three years;
     add a definition of ``VaR Floor Percentage Amount'' which 
would be defined substantially the same as the current calculation for 
the VaR Floor percentage with non-substantive modifications to reflect 
that the calculated amount is a separate defined term; and
     move the defined term VaR Floor out of the definition of 
VaR Charge and define it as the greater of (i) the VaR Floor Percentage 
Amount and (ii) the Minimum Margin Amount.

[[Page 588]]

B. Proposed QRM Methodology Changes
    In connection with incorporating the Minimum Margin Amount, FICC 
would modify the QRM Methodology to:
     Describe how the Minimum Margin Amount, as defined in the 
MBSD Rules, would be calculated, including
     establishing CONV30, GNMA30, CONV15 and GNMA15 as proposed 
TBA securities benchmarks for purposes of the calculation and 
calculating risk factors using historical market prices of such 
benchmark TBA securities;
     using a dynamic haircut method that allows offsetting 
between short and long positions within a program and among different 
programs; and
     multiplying a ``base risk factor'' (based on whether 
GNMA30 or CONV30 constitutes the larger absolute net market value in 
each Clearing Member's portfolio) by the absolute value of the Clearing 
Member's net position across all products, plus the sum of each risk 
factor spread to the base risk factor multiplied by the absolute value 
of its corresponding position;
     describe the developmental evidence and impacts to 
backtesting performance and margin charges relating to Minimum Margin 
Amount; and
     make certain technical changes to the QRM Methodology to 
re-number sections and tables, and update certain section titles as 
necessary, to add a new section that describes the proposed Minimum 
Margin Amount and the selection of benchmarks.
C. Impact Studies
    FICC performed an impact study on Clearing Members' portfolios for 
the period beginning February 3, 2020 through June 30, 2020 (``Impact 
Study Period'). If the proposed rule changes had been in place during 
the Impact Study Period compared to the existing MBSD Rules:
     Aggregate average daily aggregate VaR Charges would have 
increased by approximately $2.2 billion or 42%; and
     aggregate average daily Backtesting Charges would have 
decreased by approximately $450 million or 53%.
    Impact studies also indicated that if the proposed rule changes had 
been in place, overall margin backtesting coverage (based on 12-month 
trailing backtesting) would have increased from approximately 99.3% to 
99.6% through January 31, 2020 and approximately 97.3% to 98.5% through 
June 30, 2020.
D. Impacts to Clearing Members Over the Impact Study Period
    On average, at the Clearing Member level, the Minimum Margin Amount 
would have increased the VaR Charge by $27 million over the Impact 
Study Period. The largest percent increase in VaR Charge for any 
Clearing Member would have been 146%, or $22 million. The largest 
dollar increase for any Clearing Member would have been $333 million, 
or 37% increase in the VaR Charge. The top 10 Clearing Members based on 
the size of their VaR Charges would have contributed 69.3% of the 
aggregate VaR Charges during the Impact Study Period had the Minimum 
Margin Amount been in place. The same Clearing Members would have 
contributed to 54% of the increase resulting from the Minimum Margin 
Amount during the Impact Study Period.
    The portfolios that would have observed large percent increases 
were largely made up with concentrations in higher coupon TBAs and GNMA 
positions. However, no Clearing Members would have triggered the Excess 
Capital Premium charge \29\ due to the increase in Required Fund 
Deposits resulting from the Minimum Margin Amount during the Impact 
Study Period.
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    \29\ Excess Capital Premium is assessed when the Clearing 
Member's VaR Charge exceeds the Excess Capital it maintains.
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(iii) Implementation Timeframe
    FICC would implement the proposed changes no later than 20 Business 
Days after the later of the no objection to the advance notice and the 
approval of the related proposed rule change \30\ by the Commission. 
FICC would announce the effective date of the proposed changes by 
Important Notice posted to its website.
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    \30\ Supra note 3.
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Anticipated Effect on and Management of Risk
    FICC believes that the proposed change, which consists of a 
proposal to modify the calculation of the VaR Floor and the 
corresponding description in the MBSD Rules to incorporate a Minimum 
Margin Amount, would enable FICC to better limit its exposure to 
Clearing Members arising out of the activity in their portfolios. As 
stated above, the proposed charge is designed to enhance the MBSD VaR 
model performance and improve the backtesting coverage during periods 
of heightened market volatility and economic uncertainty. The proposed 
charge would help ensure that FICC maintains an appropriate level of 
margin to address its risk management needs.
    Specifically, the proposed rule change seeks to remedy potential 
situations that are described above where FICC's VaR model, including 
the existing VaR Floor, does not respond effectively to increased 
market volatility and economic uncertainty and the VaR Charge amounts 
do not achieve a 99% confidence level. Therefore, by enabling FICC to 
collect margin that more accurately reflects the risk characteristics 
of its Clearing Members, the proposal would enhance FICC's risk 
management capabilities.
    By providing FICC with a more effective limit on its exposures, the 
proposed change would also mitigate risk for Members because lowering 
the risk profile for FICC would in turn lower the risk exposure that 
Members may have with respect to FICC in its role as a central 
counterparty. Further, the proposal is designed to meet FICC's risk 
management goals and its regulatory obligations, as described below.
Consistency With the Clearing Supervision Act
    Although Title VIII of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act entitled the Payment, Clearing, and Settlement 
Supervision Act of 2010 (``Clearing Supervision Act'') does not specify 
a standard of review for an advance notice, its stated purpose is 
instructive: To mitigate systemic risk in the financial system and 
promote financial stability by, among other things, promoting uniform 
risk management standards for systemically important financial market 
utilities and strengthening the liquidity of systemically important 
financial market utilities.\31\
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    \31\ See 12 U.S.C. 5461(b).
---------------------------------------------------------------------------

    FICC believes that the proposal is consistent with the Clearing 
Supervision Act, specifically with the risk management objectives and 
principles of Section 805(b), and with certain of the risk management 
standards adopted by the Commission pursuant to Section 805(a)(2), for 
the reasons described below.
(i) Consistency With Section 805(b) of the Clearing Supervision Act
    Section 805(b) of the Clearing Supervision Act \32\ states that the 
objectives and principles for the risk management standards prescribed 
under Section 805(a) shall be to, among other things, promote robust 
risk management, promote safety and soundness, reduce systemic risks, 
and support the stability of the broader financial system. For the 
reasons described below, FICC believes that the

[[Page 589]]

proposed changes in this advance notice are consistent with the 
objectives and principles of the risk management standards as described 
in Section 805(b) of the Clearing Supervision Act.
---------------------------------------------------------------------------

    \32\ See 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

    FICC is proposing to modify the calculation of the VaR Floor and 
the corresponding description in the MBSD Rules and QRM Methodology to 
incorporate a Minimum Margin Amount which would enable FICC to better 
limit its exposure to Clearing Members arising out of the activity in 
their portfolios. FICC believes the proposed changes are consistent 
with promoting robust risk management because the changes would better 
enable FICC to limit its exposure to Clearing Members in the event of a 
Clearing Member default by collecting adequate prefunded financial 
resources to cover its potential losses resulting from the default of a 
Clearing Member and the liquidation of a defaulting Clearing Member's 
portfolio. Specifically, the proposed Minimum Margin Amount would 
modify the VaR Floor to cover circumstances, such as market volatility 
and economic uncertainty, where the current VaR Charge calculation and 
the Var Floor is lower than market price volatility from corresponding 
TBA securities benchmarks. The proposed changes are designed to more 
effectively measure and address risk characteristics in situations 
where the risk factors used in the VaR method do not adequately predict 
TBA prices. As reflected in backtesting studies, FICC believes the 
proposed changes would appropriately limit FICC's credit exposure to 
Clearing Members in the event that the VaR model yields too low a VaR 
Charge in such situations. Such backtesting studies indicate that 
average daily Backtesting Charges would have decreased by approximately 
$450 million or 53% during the Impact Study Period and the overall 
margin backtesting coverage (based on 12 month trailing backtesting) 
would have improved from approximately 97.3% to 98.5% through June 30, 
2020 if the Minimum Margin Amount calculation had been in place. 
Improving the overall backtesting coverage level would help FICC ensure 
that it maintains an appropriate level of margin to address its risk 
management needs.
    The use of the Minimum Margin Amount would reduce risk by allowing 
FICC to calculate the exposure in each portfolio using the risk spread 
based on observed TBA price moves of TBA positions within each 
portfolio. As reflected by backtesting studies during the Impact Study 
Period, using observed market prices of such benchmark TBA securities 
to set risk exposure would provide a more reliable estimate than the 
FICC VaR historical data set for the portfolio risk level when current 
market conditions deviate from historical observations. This proposal 
would allow offsetting between short and long positions within TBA 
securities benchmarks given that the TBAs aggregated in each benchmark 
exhibit similar risk profiles and can be netted together to calculate 
the Minimum Margin Amount that will cover the observed market price 
changes for each portfolio. Adding the Minimum Margin Amount to the VaR 
Floor would help to ensure that the risk exposure during periods of 
market volatility and economic uncertainty is adequately captured in 
the VaR Charges. FICC believes that would help to ensure that FICC 
continues to accurately calculate and assess margin and in turn, 
collect sufficient margin from its Clearing Members and better enable 
FICC to limit its exposures that could be incurred when liquidating a 
portfolio.
    For these reasons, FICC believes the proposed changes would help to 
promote MBSD's robust risk management, which, in turn, is consistent 
with reducing systemic risks and supporting the stability of the 
broader financial system, consistent with Section 805(b) of the 
Clearing Supervision Act.\33\
---------------------------------------------------------------------------

    \33\ Id.
---------------------------------------------------------------------------

    FICC also believes the changes proposed in this advance notice are 
consistent with promoting safety and soundness, which, in turn, is 
consistent with reducing systemic risks and supporting the stability of 
the broader financial system, consistent with Section 805(b) of the 
Clearing Supervision Act.\34\ As described above, the proposed changes 
are designed to help ensure that FICC is collecting adequate prefunded 
financial resources to cover its potential losses resulting from the 
default of a Clearing Member and the liquidation of a defaulting 
Clearing Member's portfolio in times of market volatility and economic 
uncertainty. Because the proposed changes would better position FICC to 
limit its exposures to Clearing Members in the event of a Clearing 
Member's default, FICC believes the proposed changes are consistent 
with promoting safety and soundness, which, in turn, is consistent with 
reducing systemic risks and supporting the stability of the broader 
financial system.
---------------------------------------------------------------------------

    \34\ Id.
---------------------------------------------------------------------------

(ii) Consistency With 805(a)(2) of the Clearing Supervision Act
    Section 805(a)(2) of the Clearing Supervision Act \35\ authorizes 
the Commission to prescribe risk management standards for the payment, 
clearing and settlement activities of designated clearing entities, 
like FICC, and financial institutions engaged in designated activities 
for which the Commission is the supervisory agency or the appropriate 
financial regulator. The Commission has adopted risk management 
standards under Section 805(a)(2) of the Clearing Supervision Act \36\ 
and Section 17A of the Securities Exchange Act of 1934 (the ``Act'') 
\37\ (the risk management standards are referred to as the ``Covered 
Clearing Agency Standards'').\38\
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    \35\ See 12 U.S.C. 5464(a)(2).
    \36\ See 12 U.S.C. 5464(a)(2).
    \37\ See 15 U.S.C. 78q-1.
    \38\ See 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------

    The Covered Clearing Agency Standards require registered clearing 
agencies to establish, implement, maintain, and enforce written 
policies and procedures that are reasonably designed to be consistent 
with the minimum requirements for their operations and risk management 
practices on an ongoing basis.\39\ FICC believes that this proposal is 
consistent with Rules 17Ad-22(e)(4)(i) and (e)(6)(i), each promulgated 
under the Act,\40\ for the reasons described below.
---------------------------------------------------------------------------

    \39\ Id.
    \40\ 17 CFR 240.17Ad-22(e)(4), (e)(6) and (e)(23)(ii).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(4)(i) under the Act \41\ 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. As described above, FICC believes that the proposed changes 
would enable it to better identify, measure, monitor, and, through the 
collection of Clearing Members' Required Fund Deposits, manage its 
credit exposures to Clearing Members by maintaining sufficient 
resources to cover those credit exposures fully with a high degree of 
confidence. More specifically, as indicated by backtesting studies, 
implementation of a Minimum Margin Amount by changing the MBSD Rules 
and QRM Methodology as described herein would allow FICC to limit its

[[Page 590]]

credit exposures to Clearing Members in the event that the current VaR 
model yields too low a VaR Charge for such portfolios and improve 
backtesting performance. As indicated by the backtesting studies, 
aggregate average daily aggregate VaR Charges would have increased by 
approximately $2.2 billion or 42%, average aggregate daily Backtesting 
Charges would have decreased by approximately $450 million or 53% 
during the Impact Study Period and the overall margin backtesting 
coverage (based on 12-month trailing backtesting) would have improved 
from approximately 97.3% to 98.5% through June 30, 2020 if the Minimum 
Margin Amount calculation had been in place. By identifying and 
providing for appropriate VaR Charges, adding the Minimum Margin Amount 
to the VaR Floor would help to ensure that the risk exposure during 
periods of market volatility and economic uncertainty is adequately 
identified, measured and monitored. As a result, FICC believes that the 
proposal would enhance FICC's ability to effectively identify, measure 
and monitor its credit exposures and would enhance its ability to 
maintain sufficient financial resources to cover its credit exposure to 
each participant fully with a high degree of confidence, consistent 
with the requirements of Rule 17Ad-22(e)(4)(i) of the Act.\42\
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    \41\ See 17 CFR 240.17Ad-22(e)(4)(i).
    \42\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(i) under the Act \43\ requires a covered 
clearing agency to establish, implement, maintain and enforce written 
policies and procedures reasonably designed to cover its credit 
exposures to its participants by establishing a risk-based margin 
system that, at a minimum, 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 
to adjust the VaR Floor to include the Minimum Margin Amount by 
changing the MBSD Rules and QRM Methodology as described herein are 
consistent with the requirements of Rule 17Ad-22(e)(6)(i) cited above. 
The Required Fund Deposits are made up of risk-based components (as 
margin) that are calculated and assessed daily to limit FICC's credit 
exposures to Clearing Members. FICC is proposing changes that are 
designed to more effectively measure and address risk characteristics 
in situations where the risk factors used in the VaR method do not 
adequately predict TBA prices. As reflected in backtesting studies, 
FICC believes the proposed changes would appropriately limit FICC's 
credit exposure to Clearing Members in the event that the VaR model 
yields too low a VaR Charge in such situations. Such backtesting 
studies indicate that aggregate average daily aggregate VaR Charges 
would have increased by approximately $2.2 billion or 42%, aggregate 
average daily Backtesting Charges would have decreased by approximately 
$450 million or 53% during the Impact Study Period and the overall 
margin backtesting coverage (based on 12-month trailing backtesting) 
would have improved from approximately 97.3% to 98.5% through June 30, 
2020 if the Minimum Margin Amount calculation had been in place. By 
identifying and providing for appropriate VaR Charges, adding the 
Minimum Margin Amount to the VaR Floor would help to ensure that margin 
levels are commensurate with the risk exposure of each portfolio during 
periods of market volatility and economic uncertainty. The proposed 
changes would therefore allow FICC to continue to produce margin levels 
commensurate with the risks and particular attributes of each relevant 
product, portfolio, and market. As such, FICC believes that the 
proposed changes are consistent with the requirements of Rule 17Ad-
22(e)(6)(i) of the Act.\44\
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    \43\ See 17 CFR 240.17Ad-22(e)(6)(i).
    \44\ Id.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Advance Notice and Timing for 
Commission Action

    The proposed change may be implemented if the Commission does not 
object to the proposed change within 60 days of the later of (i) the 
date that the proposed change was filed with the Commission or (ii) the 
date that any additional information requested by the Commission is 
received,\45\ unless extended as described below. The clearing agency 
shall not implement the proposed change if the Commission has any 
objection to the proposed change.\46\
---------------------------------------------------------------------------

    \45\ 12 U.S.C. 5465(e)(1)(G).
    \46\ 12 U.S.C. 5465(e)(1)(F).
---------------------------------------------------------------------------

    Pursuant to Section 806(e)(1)(H) of the Clearing Supervision 
Act,\47\ the Commission may extend the review period of an advance 
notice for an additional 60 days, if the changes proposed in the 
advance notice raise novel or complex issues, subject to the Commission 
providing the clearing agency with prompt written notice of the 
extension.
---------------------------------------------------------------------------

    \47\ 12 U.S.C. 5465(e)(1)(H).
---------------------------------------------------------------------------

    Here, as the Commission has not requested any additional 
information, the date that is 60 days after FICC filed the Advance 
Notice with the Commission is January 26, 2021. However, the Commission 
is extending the review period of the Advance Notice for an additional 
60 days under Section 806(e)(1)(H) of the Clearing Supervision Act \48\ 
because the Commission finds the Advance Notice is both novel and 
complex, as discussed below.
---------------------------------------------------------------------------

    \48\ Id.
---------------------------------------------------------------------------

    The Commission believes that the changes proposed in the Advance 
Notice raise novel and complex issues. Specifically, FICC developed 
this proposal as a direct response to lessons learned during the 
pandemic-related market volatility experienced in March and April 2020. 
As noted above, the TBA price changes significantly exceeded those 
implied by the VaR model risk factors, which resulted in insufficient 
VaR Charges during that time period. Moreover, because of the variance 
between historical price changes and the observed market price changes 
in March and April 2020, the current VaR Floor did not effectively 
address the risk that the margin model calculated too low a VaR Charge 
for all portfolios during that time period. Therefore, FICC has 
developed the proposal described in the Advance Notice to provide a 
more reliable estimate for the portfolio risk level when current market 
conditions deviate from historical observations, as occurred in March 
and April 2020. Determining the appropriate method to address this 
particular set of circumstances in the context of FICC's VaR Model 
presents novel and complex issues.
    Moreover, the Commission understands that comments likely would 
assert that the changes to FICC's risk management practices described 
in the Advance Notice would have a significant and lasting impact on 
the market participants in the mortgage market.\49\ Currently, there is 
the

[[Page 591]]

potential for additional economic uncertainty in the mortgage market 
due to, among other things, uncertainty associated with the effects of 
the Federal Reserve Bank of New York asset purchases of MBS and CARES 
Act mortgage forbearance programs.\50\ The Commission believes that the 
potential impact on the mortgage market arising from this proposal also 
presents novel and complex issues.
---------------------------------------------------------------------------

    \49\ See Letter from Kelli McMorrow, Head of Government Affairs, 
American Securities Association, dated December 18, 2020, to Vanessa 
Countryman, Secretary, Commission, available at https://www.sec.gov/comments/sr-ficc-2020-017/srficc2020017-8173139-227003.pdf (``ASA 
Letter''); Letter from Pete Mills, Senior Vice President, Mortgage 
Bankers Association, dated December 17, 2020, to Jay Clayton, 
Chairman, Commission, available at https://www.sec.gov/comments/sr-ficc-2020-017/srficc2020017-8155338-226778.pdf (``MBA Letter''); 
Letter from Christopher Killian, Managing Director, Securities 
Industry and Financial Markets Association, dated December 16, 2020, 
to Vanessa Countryman, Secretary, Commission, available at https://www.sec.gov/comments/sr-ficc-2020-017/srficc2020017-8154310-226759.pdf (``SIFMA Letter''); Letter from Curtis Richins, President 
& CEO, Mortgage Capital Trading, Inc., dated December 15, 2020, to 
Vanessa Countryman, Secretary, Commission, available at https://www.sec.gov/comments/sr-ficc-2020-017/srficc2020017-8156568-226839.pdf (``MCT Letter''); and Letter from James Tabacchi, 
Chairman, Independent Dealer and Trader Association, dated December 
10, 2020, to Vanessa Countryman, Secretary, Commission, available at 
https://www.sec.gov/comments/sr-ficc-2020-017/srficc2020017-8127766-226454.pdf (``IDTA Letter''). In addition, commenters stated that 
the Commission should expect to receive additional comments that 
will assert substantive issues with the proposal. Id. Because the 
proposals contained in the Advance Notice and Proposed Rule Change 
raise the same substantive issues, supra note 3, the Commission 
considers all public comments received on the proposal regardless of 
whether the comments were submitted to the Advance Notice or the 
Proposed Rule Change.
    \50\ See generally Agency MBS Historical Operational Results and 
Planned Purchase Amounts, https://www.newyorkfed.org/markets/ambs/ambs_schedule; Consumer Finance Protection Bureau information site, 
https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/mortgage-relief/.
---------------------------------------------------------------------------

    Accordingly, pursuant to Section 806(e)(1)(H) of the Clearing 
Supervision Act,\51\ the Commission is extending the review period of 
the Advance Notice to March 27, 2021, which is the date by which the 
Commission shall notify the clearing agency of any objection regarding 
the Advance Notice, unless the Commission requests further information 
for consideration of the Advance Notice (SR-FICC-2020-804).\52\
---------------------------------------------------------------------------

    \51\ 12 U.S.C. 5465(e)(1)(H).
    \52\ This extension extends the time periods under Sections 
806(e)(1)(E) and (G) of the Clearing Supervision Act. 12 U.S.C. 
5465(e)(1)(E) and (G).
---------------------------------------------------------------------------

    The clearing agency shall post notice on its website of proposed 
changes that are implemented.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the Advance 
Notice is consistent with the Clearing Supervision 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-2020-804 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-2020-804. 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 Advance Notice that are filed with the 
Commission, and all written communications relating to the Advance 
Notice 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-rule-filings.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-2020-804 and should be submitted on 
or before January 29, 2021.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-29251 Filed 1-5-21; 8:45 am]
BILLING CODE 8011-01-P