60 Day Notice

Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Notices
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than approximately 13% of
the market share of executed volume of
multiply-listed equity and ETF options
trades.16 Therefore, currently no
exchange possesses significant pricing
power in the execution of multiplylisted equity and ETF options order
flow. More specifically, for the month of
June 2023, the Exchange had a market
share of 3.04% of executed volume of
multiply-listed equity and ETF options
trades.17
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule changes has
become effective pursuant to section
19(b)(3)(A)(ii) of the Act 18 and Rule
19b–4(f)(2) 19 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments

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• 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–
EMERALD–2023–20 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
16 See

supra note 13.
id.
18 15 U.S.C. 78s(b)(3)(A)(ii).
19 17 CFR 240.19b–4(f)(2).
17 See

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Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–EMERALD–2023–20. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (http://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–EMERALD–2023–20 and should be
submitted on or before September 5,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17304 Filed 8–11–23; 8:45 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–146, OMB Control No.
3235–0134]

Proposed Collection; Comment
Request; Extension: Rule 15c1–7
Upon Written Request, Copies Available
From: U.S. Securities and Exchange
Commission, Office of FOIA Services,
100 F St NE, Washington, DC 20549–
2736
20 17

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Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 15c1–7 (17 CFR
240.15c1–7) under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) (‘‘Exchange Act’’). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 15c1–7 states that any act of a
broker-dealer designed to effect
securities transactions with or for a
customer account over which the
broker-dealer (directly or through an
agent or employee) has discretion will
be considered a fraudulent,
manipulative, or deceptive practice
under the federal securities laws, unless
a record is made of the transaction
immediately by the broker-dealer. The
record must include (a) the name of the
customer, (b) the name, amount, and
price of the security, and (c) the date
and time when such transaction took
place.
The Commission estimates that 350
respondents collect information related
to approximately 400,000 transactions
annually under Rule 15c1–7 and that
each respondent would spend
approximately 5 minutes on the
collection of information for each
transaction, for a total time burden of
approximately 33,333 hours per year
(approximately 95.2 hours per
respondent).
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted by
October 13, 2023.
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.
Please direct your written comments
to: David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John

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55100

Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Notices

Pezzullo, 100 F Street NE, Washington,
DC 20549, or send an email to: PRA_
[email protected].
Dated: August 8, 2023.
Sherry R. Haywood,
Assistant Secretary.

II. Description of the Proposed Rule
Change 11

[FR Doc. 2023–17320 Filed 8–11–23; 8:45 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98086; File No. SR–NSCC–
2022–015]

Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving a
Proposed Rule Change To Make
Certain Enhancements to the Gap Risk
Measure and the VaR Charge
August 8, 2023.

I. Introduction
On December 2, 2022, National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change SR–NSCC–2022–
015 (the ‘‘Proposed Rule Change’’)
pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2
The Proposed Rule Change was
published for comment in the Federal
Register on December 21, 2022,3 and the
Commission has received one comment
regarding the changes proposed in the
Proposed Rule Change.4
On January 24, 2023, pursuant to
section 19(b)(2) of the Act,5 the
Commission designated a longer period
within which to approve, disapprove, or
institute proceedings to determine
whether to approve or disapprove the
Proposed Rule Change.6 On March 20,
2023, the Commission instituted
proceedings, pursuant to section
19(b)(2)(B) of the Act,7 to determine
whether to approve or disapprove the
Proposed Rule Change.8 On June 8,
2023, the Commission designated a
longer time period, pursuant to section
1 15

U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 96511
(Dec. 15, 2022), 87 FR 78157 (Dec. 21, 2022) (File
No. SR–NSCC–2022–015) (‘‘Notice of Filing’’).
4 Comments are available at https://www.sec.gov/
comments/sr-nscc-2022-015/srnscc2022015.htm.
5 15 U.S.C. 78s(b)(2).
6 Securities Exchange Act Release No. 96740 (Jan.
24, 2023), 88 FR 5953 (Jan. 30, 2023) (File No. SR–
NSCC–2022–015).
7 15 U.S.C. 78s(b)(2)(B).
8 Securities Exchange Act Release No. 97171
(Mar. 20, 2023), 88 FR 17898 (Mar. 24, 2023) (File
No. SR–NSCC–2022–015).

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19(b)(2)(B)(ii)(II) of the Act,9 to
determine whether to approve or
disapprove the Proposed Rule Change.10
For the reasons discussed below, the
Commission is approving the Proposed
Rule Change.

NSCC provides clearing, settlement,
risk management, central counterparty
services, and a guarantee of completion
for virtually all broker-to-broker trades
involving equity securities, corporate
and municipal debt securities, and unit
investment trust transactions in the U.S.
markets. A key tool that NSCC uses to
manage its credit exposure to its
members is collecting an appropriate
amount of margin (i.e., collateral) from
each member.12
A. Overview of NSCC’s Margin
Methodology
A member’s margin is designed to
mitigate potential losses to NSCC
associated with the liquidation of the
member’s portfolio in the event that
member defaults.13 The aggregate of all
members’ margin deposits (together
with certain other deposits required
under the Rules) constitutes NSCC’s
clearing fund. NSCC would access its
clearing fund should a defaulting
member’s own margin and resources at
NSCC be insufficient to satisfy losses to
NSCC caused by the liquidation of that
member’s portfolio.14
NSCC employs daily backtesting to
determine the sufficiency of each
member’s margin, by simulating the
liquidation gains or losses using the
actual unsettled positions in the
member’s portfolio, and the actual
historical returns for each security held
in the portfolio. A backtesting
deficiency would result if the
liquidation losses were greater than the
member’s margin. NSCC investigates the
causes of any backtesting deficiencies,
9 15

U.S.C 78s(b)(2)(B)(ii)(II).
Exchange Act Release No. 97671
(June 8, 2023), 88 FR 38926 (June 14, 2023 (File No.
SR–NSCC–2022–015).
11 Capitalized terms not defined herein are
defined in NSCC’s Rules & Procedures (‘‘Rules’’),
available at https://www.dtcc.com/∼/media/Files/
Downloads/legal/rules/nscc_rules.pdf.
12 Pursuant to its Rules, NSCC uses the term
‘‘Required Fund Deposit’’ to denote margin or
collateral collected from its members. See Rule 4
(Clearing Fund) and Procedure XV (Clearing Fund
Formula and Other Matters) of the Rules, supra note
11.
13 Under NSCC’s Rules, a default would generally
be referred to as a ‘‘cease to act’’ and could
encompass a number of circumstances, such as a
member’s failure to make a margin payment on
time. See Rule 46 (Restrictions on Access to
Services) of the Rules, supra note 11.
14 See Rule 4, supra note 11.
10 Securities

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paying particular attention to members
with backtesting deficiencies that bring
the results for that member below the 99
percent confidence target (i.e., greater
than two backtesting deficiency days in
a rolling twelve-month period) to
determine if there is an identifiable
cause of repeat backtesting
deficiencies.15 NSCC also evaluates
whether multiple members may
experience backtesting deficiencies for
the same underlying reason.16
Each member’s margin consists of a
number of applicable components, each
of which is calculated to address
specific risks faced by NSCC.17 Each
member’s start of day required fund
deposit is calculated overnight, based
on the member’s prior end-of-day net
unsettled positions.18 NSCC notifies
members early the following morning,
and members are required to make
deposits by approximately 10:00 a.m.
EST.19
Generally, the largest portion of a
member’s margin is the volatility
component. The volatility component is
designed to reflect the amount of money
that could be lost on a portfolio over a
given period within a 99th percentile
level of confidence. This component
represents the amount assumed
necessary to absorb losses while
liquidating the member’s portfolio.
NSCC’s methodology for calculating
the volatility component of a member’s
required fund deposit depends on the
type of security and whether the
security has sufficient pricing or trading
history for NSCC to robustly estimate
the volatility component using
statistical techniques. Generally, for
most securities (e.g., equity securities),
NSCC calculates the volatility
component using, among other things, a
parametric Value at Risk (‘‘VaR’’) model,
which results in a ‘‘VaR Charge.’’ 20 The
VaR Charge usually comprises the
largest portion of a member’s required
fund deposit.
B. Current Treatment of Gap Risk in
NSCC’s Margin Methodology
Under NSCC’s current Rules, one of
the potential methods of calculating the
15 See National Securities Clearing Corporation,
Disclosure Framework for Covered Clearing
Agencies and Financial Market Infrastructures, at
61 (Dec. 2022), available at https://www.dtcc.com/
legal/policy-and-compliance.
16 See id.
17 See Procedure XV of the Rules, supra note 11.
18 See Procedure XV, Sections II(B) of the Rules,
supra note 11.
19 See id. The Rules provide that required
deposits to the clearing fund are due within one
hour of demand, unless otherwise determined by
NSCC. Id.
20 See Sections I(A)(1)(a)(i) and I(A)(2)(a)(i) of
Procedure XV of the Rules, supra note 11.

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