[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)]
[Rules and Regulations]
[Pages 34508-34510]
[FR Doc No: 2020-12109]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 112

[Docket No. FDA-2020-D-1386]

Temporary Policy During the COVID-19 Public Health Emergency
Regarding the Qualified Exemption From the Standards for the Growing,
Harvesting, Packing, and Holding of Produce for Human Consumption:
Guidance for Industry; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notification of availability.

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SUMMARY: The Food and Drug Administration (FDA, Agency, or we) is
announcing the availability of a final guidance for industry entitled
``Temporary Policy During the COVID-19 Public Health Emergency
Regarding the Qualified Exemption from the Standards for the Growing,
Harvesting, Packing, and Holding of Produce for Human Consumption.''
Given the public health emergency presented by COVID-19, this guidance
document is being implemented without prior public comment because FDA
has determined that prior public participation is not feasible or
appropriate, but it remains subject to comment in accordance with the
Agency's good guidance practices. The guidance communicates the
Agency's intention to exercise

enforcement discretion, in the manner described in the guidance,
regarding sales to qualified end-users when determining eligibility for
the qualified exemption from the Standards for the Growing, Harvesting,
Packing, and Holding of Produce for Human Consumption, due to
disruptions to supply chains, for the duration of the COVID-19 public
health emergency.

DATES: The announcement of the guidance is published in the Federal
Register on June 5, 2020.

ADDRESSES: You may submit either electronic or written comments on
Agency guidances at any time as follows:

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on https://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand Delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket No.
FDA-2020-D-1386 for ``Temporary Policy During the COVID-19 Public
Health Emergency Regarding the Qualified Exemption from the Standards
for the Growing, Harvesting, Packing, and Holding of Produce for Human
Consumption.'' Received comments will be placed in the docket and,
except for those submitted as ``Confidential Submissions,'' publicly
viewable at https://www.regulations.gov or at the Dockets Management
Staff between 9 a.m. and 4 p.m., Monday through Friday.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on https://www.regulations.gov.
Submit both copies to the Dockets Management Staff. If you do not wish
your name and contact information to be made publicly available, you
can provide this information on the cover sheet and not in the body of
your comments and you must identify this information as
``confidential.'' Any information marked as ``confidential'' will not
be disclosed except in accordance with 21 CFR 10.20 and other
applicable disclosure law. For more information about FDA's posting of
comments to public dockets, see 80 FR 56469, September 18, 2015, or
access the information at: https://www.govinfo.gov/content/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852,<PHONE_NUMBER>.
    You may submit comments on any guidance at any time (21 CFR
10.115(g)(5)).
    Submit written requests for single copies of the guidance to the
Office of Compliance, Center for Food Safety and Applied Nutrition,
Food and Drug Administration, 5001 Campus Dr. (HFS-607), College Park,
MD 20740. Send two self-addressed adhesive labels to assist that office
in processing your request. See the SUPPLEMENTARY INFORMATION section
for electronic access to the guidance.

FOR FURTHER INFORMATION CONTACT: Samir Assar, Center for Food Safety
and Applied Nutrition, Food and Drug Administration, 5001 Campus Dr.
(HFS-607), College Park, MD 20740,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    We are announcing the availability of a guidance for industry
entitled ``Temporary Policy During the COVID-19 Public Health Emergency
Regarding the Qualified Exemption from the Standards for the Growing,
Harvesting, Packing, and Holding of Produce for Human Consumption.''
This policy relates to the supply chain disruptions caused by the
public health emergency related to COVID-19, as declared by the
Department of Health and Human Services.
    Given this public health emergency, this guidance is being
implemented without prior public comment because FDA has determined
that prior public participation for this guidance is not feasible or
appropriate. This guidance document is being implemented immediately,
but it remains subject to comment in accordance with the Agency's good
guidance practices.
    This guidance document concerns flexibility for the eligibility
criteria for the qualified exemption from the Standards for the
Growing, Harvesting, Packing, and Holding of Produce for Human
Consumption (part 112 (21 CFR part 112)) due to disruptions to supply
chains due to COVID-19. A farm is eligible for a qualified exemption
and associated modified requirements in a calendar year if during the
previous 3-year period preceding the applicable calendar year, the
average annual monetary value of food the farm sold directly to
qualified end-users exceeded the average annual monetary value of the
food the farm sold to all other buyers during that period, and the
average annual monetary value of all food the farm sold during the 3-
year period was less than $500,000, adjusted for inflation. In order to
provide flexibility to affected farms during the COVID-19 public health
emergency, under the circumstances described in the guidance FDA does
not intend to enforce the criteria regarding the portion of sales that
are made to qualified end-users in 2020 (and any subsequent years that
are affected by the COVID-19 public health emergency). Specifically,

for farms that either met the criteria for the qualified exemption in
2020 based on sales that were made in 2017 to 2019, or that did not
have 3 years of sales prior to 2020, but that met the relevant
requirements during the years they were in operation prior to 2020, FDA
does not intend to enforce the criteria regarding the portion of sales
that are made to qualified end-users in years that are affected by the
COVID-19 public health emergency. This guidance does not affect the
status of farms who continue to sell a majority of their food to
qualified end-users despite COVID-19 supply chain disruptions.
    This guidance is being issued consistent with FDA's good guidance
practices regulation Sec.  10.115(g)(2). The guidance represents the
current thinking of FDA on ``Temporary Policy During the COVID-19
Public Health Emergency Regarding the Qualified Exemption from the
Standards for the Growing, Harvesting, Packing, and Holding of Produce
for Human Consumption.'' It does not establish any rights for any
person and is not binding on FDA or the public. You can use an
alternative approach if it satisfies the requirements of the applicable
statutes and regulations.

II. Paperwork Reduction Act of 1995

    This guidance refers to previously approved FDA collections of
information. These collections of information are subject to review by
the Office of Management and Budget (OMB) under the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3521). The collections of information in
part 112 have been approved under OMB control number 0910-0816.

III. Electronic Access

    Persons with access to the internet may obtain the guidance at
https://www.fda.gov/FoodGuidances, https://www.fda.gov/emergency-preparedness-and-response/mcm-issues/coronavirus-disease-2019-covid-19,
or https://www.regulations.gov. Use the FDA website listed in the
previous sentence to find the most current version of the guidance.

    Dated: May 29, 2020.
Lowell J. Schiller,
Principal Associate Commissioner for Policy.
[FR Doc. 2020-12109 Filed 6-4-20; 8:45 am]
BILLING CODE 4164-01-P


[Federal Register Volume 87, Number 108 (Monday, June 6, 2022)]
[Notices]
[Pages 34339-34345]
[FR Doc No: 2022-12009]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95011; File No. SR-NSCC-2022-003]

Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Introduce Central
Clearing for Securities Financing Transaction Clearing Service

May 31, 2022.

I. Introduction

    On March 28, 2022, National Securities Clearing Corporation
(``NSCC'') 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\
proposed rule change SR-NSCC-2022-003. The proposed rule change was
published for comment in the Federal Register on April 19, 2022.\3\ For
the reasons discussed below, the Commission is approving the proposed
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 94694 (April 12, 2022),
87 FR 23372 (April 19, 2022) (SR-NSCC-2022-003) (``Notice of
Filing''). NSCC also filed the proposal contained in the Proposed
Rule Change as advance notice SR-NSCC-2022-801 (``Advance Notice'')
with the Commission pursuant to Section 806(e)(1) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act entitled the Payment,
Clearing, and Settlement Supervision Act of 2010 (``Clearing
Supervision Act''). 12 U.S.C. 5465(e)(1); 17 CFR 240.19b-4(n)(1)(i).
Notice of filing of the Advance Notice was published for comment in
the Federal Register on April 19, 2022. Securities Exchange Act
Release No. 94695 (April 12, 2022), 87 FR 23328 (April 19, 2022)
(SR-NSCC-2022-801). On May 27, 2022, the Commission published a
notice of no objection to the Advance Notice. Securities Exchange
Act Release No. 94998 (May 27, 2022). The proposal contained in the
Proposed Rule Change and the Advance Notice shall not take effect
until all regulatory actions required with respect to the proposal
are completed.
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II. Description of the Proposed Rule Change

A. Overview of Proposal

    NSCC proposes to expand its central counterparty (``CCP'') services
to include securities financing transactions (``SFTs''), also referred
to generally as securities lending.\4\ SFTs are transactions in which a
securities lender loans securities to a securities borrower, for a fee.
The borrowers typically use the borrowed securities to cover short
sales or fails to deliver that may result from either short or long
sales.\5\ A lender typically lends securities to generate income
through the fees that it charges.
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    \4\ The Options Clearing Corporation (``OCC'') operates a stock
loan program as a CCP. NSCC's new service is similar to OCC's
service with one key difference: Unlike OCC's service, which only
covers transactions between OCC's direct members (i.e., broker to
broker), NSCC's new service would allow indirect participation by
buy-side clients. See Section II.B.(2).
    \5\ A short sale is any sale of securities that a seller does
not own or has borrowed. See 17 CFR 242.200(a).
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    As a CCP, NSCC would interpose itself between the securities lender
and borrower and become the counterparty to each entity. NSCC would
then be obligated to complete the transaction, that is, to return
loaned securities to the lender and collateral to the borrower, even if
a lender or borrower in an SFT fails to satisfy its obligations,
thereby assuming the risk of each entity's failure to perform to each
other.
    Specifically, NSCC would novate and guarantee SFTs that involve
eligible securities, meaning equity securities (including ETFs) cleared
at NSCC with a particular per share price, initially set at $5 or
greater. The service would be limited to overnight SFTs (i.e., with a
one business day term), with the ability for the parties to extend an
expiring SFT into a new transaction.
    The SFT service would be available to existing NSCC members.\6\ In
addition, NSCC would create two new membership categories that would be
able to submit SFTs for central clearing: Sponsoring Members that would
sponsor institutional clients into NSCC and act as a principal to SFTs
with their clients, and Agent Clearing Members that submit SFTs on
behalf of institutional customers strictly as an agent. These two new
types of membership would allow the proposed service to meet the
existing market practices for SFTs, where different types of entities
employ different trading strategies and relationships to accommodate
their regulatory and other requirements.
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    \6\ Capitalized terms not defined herein are defined in the NSCC
Rules & Procedures (``Rules''), available at http://www.dtcc.com/~/
media/Files/Downloads/legal/rules/nscc_rules.pdf.
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    Consistent with its risk management for all other transactions in
equity securities, NSCC would collect margin from the lender and
borrower for

novated SFTs to address the credit risk arising from such transactions.
NSCC would also identify potential liquidity exposures if an SFT member
were to default and address that potential need in its risk management.
    According to NSCC, the proposed SFT clearing service would provide
several benefits for market participants, including increased balance
sheet netting benefits, capital efficiency opportunities, and
mitigation of fire sale risk.\7\ With respect to balance sheet netting
benefits and capital efficiency opportunities, NSCC states that the SFT
clearing service may allow participants to net down payables and
receivables related to the SFTs on their balance sheets because such
payables and receivables have one counterparty, NSCC. In turn, NSCC
states that because of the capital requirements arising under Basel III
rules that favor a netted balance sheet,\8\ market participants may
reduce the amount of capital they are required to hold under the
applicable leverage requirements.\9\
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    \7\ See Notice of Filing, supra note 3, at 23372-73.
    \8\ See 12 CFR 217.10(c)(4)(ii)(E)-(F).
    \9\ The Basel III capital and leverage requirements, as
implemented by the U.S. banking regulators, mandate banks and
depository institutions to hold certain amounts of capital. See
generally, e.g., 12 CFR part 3; 12 CFR part 217; 12 CFR part 252,
subpart Q; 12 CFR part 324.
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    In addition, NSCC believes that the proposal would reduce the
potential for market disruption from fire sales for a number of
reasons.\10\ First, NSCC believes that it would be able to better
manage default scenarios by conducting a centralized and orderly
liquidation of the defaulter's SFT positions.\11\ NSCC represents that
a centralized and orderly liquidation would result in substantially
less price depreciation and market disruption compared to the multiple
independent non-defaulting parties racing against one another to
liquidate the positions. Second, NSCC would be able to liquidate the
defaulter's net positions instead of gross positions, meaning that a
position that needs to be liquidated would be smaller in size and a
market disruption can be minimized. Third, by guaranteeing SFTs through
central clearing, NSCC believes that it would be able to provide
confidence to market participants in a stressed market scenario,
thereby lessening any inclination to rush to unwind transactions.\12\
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    \10\ See Notice of Filing, supra note 3, at 23373.
    \11\ Id.
    \12\ Id.
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B. Securities Financing Transaction Clearing Service

    NSCC proposes to introduce central clearing for SFTs by
establishing rules governing (1) key aspects of the SFTs; (2) SFT
participant categories; and (3) SFT risk management, as elaborated
below.
(1) Key Aspects of the SFTs
    Overnight SFTs. The proposed SFT clearing service would apply to
transactions with a one business day term (i.e., overnight SFTs) in
eligible equity securities. NSCC represents that the proposal applies
to overnight SFTs, as opposed to open SFTs, to offer balance sheet
netting and capital efficiency opportunities, which require a scheduled
settlement date.\13\ However, a lender and a borrower would have an
option to extend an expiring SFT by rolling it, or a portion thereof,
into a new, linked SFT. Accordingly, an expiring SFT would be eligible
for renewal every day.
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    \13\ See Notice of Filing, supra note 3, at 23374.
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    Operational Issues. SFTs would be required to be submitted to NSCC
on a locked-in basis and matched between the lender and the
borrower.\14\ NSCC would receive underlying SFT securities from a
lender, send them to a borrower, receive cash collateral equal to no
less than 100% of the market value of the securities from the borrower,
and send it to the lender.\15\
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    \14\ Specifically, the transaction data for an SFT must be
submitted by an entity that the parties have selected, which could
be either a member or a third-party vendor. The SFT members would
select which approved submitter to use, and NSCC would have to
approve any entity serving as an approved submitter.
    \15\ To address regulatory and investment guideline requirements
applicable to certain institutional firms (e.g., Section 17(f) of
the Investment Company Act of 1940 and Rule 17f-2 thereunder), a
participant would be permitted to transfer an additional cash
haircut above 100% (e.g., 102%) to such institutional firms as part
of this initial settlement of the SFT.
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    When an SFT settles, in general, NSCC would essentially reverse the
transaction of the prior day by receiving the underlying SFT securities
from the borrower and returning them to the lender, and receiving the
cash collateral from the lender and returning it to the borrower. NSCC
would also pass through daily interest,\16\ as applicable. If the
parties decide to extend into a linked SFT, instead of transferring the
underlying securities and collateral, NSCC would transfer the daily
interest and calculate and pass through a mark-to-market payment on the
underlying securities, effectively putting the parties in a position of
closing the settling SFT and starting a new SFT.
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    \16\ NSCC refers to this daily interest as a ``Rate Payment.''
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    Eligible Equity Securities. As an initial matter, NSCC would
provide the proposed SFT service for securities that are eligible to be
processed through NSCC's Continuous Net Settlement (``CNS'')
System,\17\ and have a per share price of $5 or more.\18\ If the price
of the underlying securities of a novated SFT falls below the threshold
price established by NSCC, that SFT would continue to be novated to
NSCC, but the margin required for such SFT would be 100% of the market
value of such underlying securities until the per share price of the
underlying securities equals or exceeds the threshold price.
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    \17\ NSCC processes clearance and settlement of equity
securities using the CNS System. Securities are CNS-eligible if they
are eligible for book-entry transfer on the books of DTC, not
subject to certain transfer restrictions, and not subject to certain
corporate actions. NSCC, Disclosure Framework for Covered Clearing
Agencies and Financial Market Infrastructures (December 2021),
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf. (``NSCC Disclosure'').
    NSCC would maintain a list of the securities that may underlie
an SFT that NSCC will accept. Such list would not be a rule but a
separate document maintained by NSCC and available to members,
consistent with NSCC's practice for equity securities. See Notice of
Filing, supra note 3, at 23375; Rule 3 (Lists to be Maintained) of
the Rules, supra note 6.
    \18\ Notice of Filing, supra note 3, at 23375. NSCC selected $5
as the per share price minimum for underlying equity securities
because $5 is a common share price minimum adopted in brokerage
margin eligibility schedules. NSCC may modify the eligible equity
securities' minimum share price and would announce any such change
via notice to its members. See id.
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    Recall, Buy-In, and Accelerated Settlement. Consistent with the
existing bilateral market, NSCC proposes to introduce recall, buy-in,
and accelerated settlement features in its proposed SFT clearing
service. Under the proposal, a lender would have a right to recall an
existing SFT and stop the SFT from being extended.
    Once a lender issues a recall notice, a borrower would be required
to satisfy its final settlement obligations by the recall date, which
would be the second business day following NSCC's receipt of such
notice. If the borrower fails to satisfy its final settlement
obligations by the recall date, the lender could go to the market to
conduct a buy-in in a commercially reasonable manner,\19\ that is, to
purchase some or all of securities equivalent to the underlying
securities that are the subject to the SFT and charge the borrower for
the cost of this purchase or to elect to be deemed to

have purchased such securities.\20\ Similar to a lender's recall right,
a borrower would have a right to accelerate the scheduled final
settlement of an SFT that has been novated to NSCC. NSCC states that
this right is required to ensure that certain borrowers would be able
to satisfy their regulatory requirements.\21\
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    \19\ After a buy-in, the lender would give written notice to
NSCC of its costs to purchase the relevant SFT securities or the
buy-in costs. NSCC would then transfer the costs from the borrower
to the lender, and the SFT would be closed.
    \20\ NSCC states that the requirement that a party exercising
buy-in rights do so in a ``commercially reasonable manner'' is the
current industry standard, as reflected in the Master Securities
Loan Agreement published by Securities Industry and Financial
Markets Association. See Notice of Filing, supra note 3, at 23402;
Section 13.1 of the Master Securities Loan Agreement published by
Securities Industry and Financial Markets Association.
    \21\ Specifically, NSCC states that borrowers may have the need
to accelerate settlement of securities lending transactions if they
lose a ``permitted purpose'' for such loans under Regulation T. See
12 CFR 220.1-220.12.
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(2) SFT Participant Categories
    The proposed SFT clearing service would be available for SFTs
entered into between two current NSCC members. In addition, NSCC
proposes new categories of membership that are designed to accommodate
current bilateral SFT arrangements.\22\
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    \22\ See Notice of Filing, supra note 3, at 23374.
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    First, the Sponsoring Member/Sponsored Member categories would
accommodate principal-style trades, in which a Sponsoring Member acting
as principal for its own account completes a Sponsored Member's trades
using its own inventory. Typically, in these types of arrangements, a
Sponsoring Member can earn a profit from the bid-ask spread differences
between its Sponsored Member trades and any offsetting trades.
    Second, the Agent Clearing Member category would accommodate
transactions by firms who typically conduct trades on an agent basis
for their institutional clients. An Agent Clearing Member would arrange
a transaction on behalf of an institutional client and charge fees for
the services (rather than taking spreads).\23\ Such client firms may,
as part of their business models and agreed-upon investment guidelines,
only permit agented transactions, making the Agent Clearing Member a
better fit.
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    \23\ See Notice of Filing, supra note 3, at 23382.
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    According to NSCC, the costs of clearing that may be passed through
to the institutional clients, whether as Sponsored Members or as
clients to the Agent Clearing Members (``Customers''), by its
intermediary would be largely equivalent.\24\ However, one key
difference between Sponsored Members and Customers would be that
Sponsored Members would have a contractual relationship with NSCC while
the Agent Clearing Member's Customers would not. NSCC states that, from
the perspective of an institutional firm client, whether to become a
Sponsored Member or Customer to an Agent Clearing Member may be
determined based on who the client's current clearing intermediaries
are and the nature of the client's commercial arrangement with its
intermediaries.\25\ NSCC states that giving a choice to institutions to
become a Sponsored Member or Customer should facilitate additional
central clearing of SFTs.\26\
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    \24\ See id.
    \25\ See Notice of Filing, supra note 3, at 23381-82.
    \26\ See Notice of Filing, supra note 3, at 23374.
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    Sponsoring Members. All NSCC members would be eligible to apply to
become Sponsoring Members, so long as they meet the specified
requirements.\27\ For operational and administrative purposes, NSCC
would interact solely with the Sponsoring Member as the agent of its
Sponsored Members, and the Sponsoring Member would be responsible for
posting the required margin on Sponsored Member transactions and for
covering any default loss allocated to Sponsored Members.\28\
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    \27\ If a member is a registered broker-dealer, then such member
would only be eligible to apply to become a Sponsoring Member if it
satisfies certain financial requirements. In addition, NSCC may
require that a person be a member for a time period deemed necessary
by NSCC before that person may be considered to become a Sponsoring
Member, for example, for a new member that has yet to demonstrate a
track record of financial responsibility and operational capability.
Moreover, after becoming a Sponsoring Member, it would be obligated
to notify NSCC if it is no longer compliant with the relevant
standards and qualifications. NSCC would have a right to review the
financial responsibility and operational capability of Sponsoring
Members.
    \28\ NSCC aggregates all members' margin together with certain
other deposits required under NSCC's Rules as its clearing fund.
NSCC would be able to access the clearing fund should a defaulted
member's own margin be insufficient to satisfy losses to NSCC caused
by the liquidation of that member's portfolio. See Rule 4 (Clearing
Fund) and Procedure XV (Clearing Fund Formula and Other Matters) of
the Rules, supra note 6.
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    Sponsoring Members would unconditionally guarantee to NSCC the
payment and performance of their Sponsored Members' obligations under
the Sponsored Member transactions submitted by the Sponsoring Member
for novation. Although Sponsored Members are principally liable to NSCC
for their own settlement obligations under such transactions in
accordance with the proposal, the Sponsoring Member would be required
to satisfy those settlement obligations on behalf of a Sponsored Member
if the Sponsored Member defaults and fails to perform its settlement
obligations. Moreover, Sponsoring Members would be subject to an
activity limit based on the perceived volatility of its portfolio as
compared to its capital.\29\
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    \29\ Specifically, if the sum of the margin charges applied by
NSCC to capture the risks related to market price movement
applicable to its Sponsored Member sub-accounts and its other
accounts at NSCC exceeds its required net assets or equity capital,
the Sponsoring Member would not be permitted to submit new Sponsored
Member transactions, unless otherwise determined by NSCC.
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    Sponsored Members. Sponsored Members would be required to be either
a qualified institutional buyer \30\ or a legal entity that satisfies
the financial requirements necessary to be a qualified institutional
buyer. Sponsored Members would enter into an agreement with NSCC
whereby Sponsored Members would agree to terms and conditions NSCC
identifies as necessary in order to protect NSCC and its members.
Sponsored Members would not be full-service NSCC members, but instead
would be limited members which rely on the Sponsoring Members to access
NSCC's services.
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    \30\ The term qualified institutional buyer is defined by Rule
144A under the Securities Act of 1933, as amended. See 17 CFR
230.144A.
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    A Sponsored Member would only be eligible to submit transactions in
which its respective Sponsoring Member is the counterparty (i.e.,
``done with'' transactions). However, a Sponsored Member can be
sponsored by more than one Sponsoring Member, should it wish to
continue to transact with different entities.
    Agent Clearing Members. Agent Clearing Members would serve as agent
and credit intermediary for its institutional clients. Agent-style
trading is the manner in which such agent lenders are typically
approved to transact in securities lending transactions on behalf of
their Customers. All NSCC members would be eligible to apply to become
Agent Clearing Members in NSCC, so long as they meet the specified
requirements.
    In addition, Agent Clearing Members would be subject to similar
responsibilities as Sponsoring Members. Specifically, an Agent Clearing
Member would be responsible for posting to NSCC the required margin for
its Customers' activity and covering any default loss allocable to its
Customers. Agent Clearing Member transactions would be subject to the
same activity limit applicable to Sponsored Member transactions.
    An Agent Clearing Member would be fully liable for all obligations
of its Customers under the Agent Clearing Member transactions that it
submitted to

NSCC as the member.\31\ Unlike Sponsored Members, Customers would not
have any direct relationship with NSCC and would not need to apply to
become a member or enter into an agreement with NSCC. Moreover, the
Agent Clearing Members would be able to submit transactions with a
counterparty other than the Agent Clearing Member, resulting in
transactions ``done away'' from the Agent Clearing Member.
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    \31\ Like a Sponsoring Member, an Agent Clearing Member would be
obligated to notify NSCC if it is no longer in compliance with the
relevant standards and qualifications. NSCC would have a right to
review Agent Clearing Members' financial and operational capability.
---------------------------------------------------------------------------

(3) Risk Management
    Under the proposal, NSCC would centrally manage risks associated
with SFTs in a manner consistent with other transactions in equity
securities that NSCC clears.
    Calculation of Margin. NSCC would require all SFT members to
provide margin with respect to their SFT activity, subject to a
$250,000 minimum amount. NSCC is proposing to calculate an SFT member's
required margin by applying the methodology used to determine margin
for transactions in equity securities. Specifically, the determination
would include certain risk-based margin components \32\ that are
currently applicable to NSCC's equity securities transactions.
---------------------------------------------------------------------------

    \32\ Specifically, it would include the volatility charge, mark-
to-market charge, special charge, margin required differential
component charge, coverage component charge, and margin liquidity
adjustment (``MLA'') charge set forth in NSCC's Rules, as well as
charges for non-returned SFTs, which is similar to the charges that
NSCC for CNS fails under its Rules. A further description of these
charges is available in Procedure XV of NSCC's Rules and in the NSCC
Disclosure. For the volatility charge, NSCC would consider the
potential future exposure of a given portfolio based on historical
price movements and the margin floor, and it would also determine
margin to address the risk due to a high concentration level in a
single stock (``gap risk''). For the MLA charge, NSCC would consider
the risk when a member's portfolio contains large net unsettled
positions in a particular group of securities with a similar risk
profile or in a particular asset type, which could pose particular
liquidation risk in the event of a default.
---------------------------------------------------------------------------

    NSCC would determine an SFT member's required margin independently
of the member's other positions, including its equity securities
transaction positions outside of the SFTs. NSCC would not net a
member's SFT positions with its other positions to determine margin,
except for the margin liquidity adjustment charge component. Because
NSCC would aggregate all members' margins together as its clearing fund
\33\ regardless of whether they are for SFTs or CNS transactions, an
SFT or CNS member default may impact NSCC's clearing fund as a whole.
In other words, a default by an SFT member may impact non-SFT members
and vice versa.
---------------------------------------------------------------------------

    \33\ See supra note 31.
---------------------------------------------------------------------------

    NSCC would require that a certain portion of its margin be a
combination of cash and eligible securities, i.e., the specific
Treasury securities that NSCC accepts as collateral. NSCC would also
have the discretion to require an SFT member to post its margin in a
higher proportion of cash than would otherwise be required, based on
the current market conditions and the SFT member's financial and
operational capabilities.
    For transactions submitted by Sponsoring Members or Agent Clearing
Members, NSCC would require that the Sponsoring Members and Agent
Clearing Members establish an account or accounts for the margin
collected on behalf of Sponsored Members and Customers, respectively.
This account would be separate from the Sponsoring Member or Agent
Clearing Member's proprietary account. NSCC would determine the
required margin for transactions for each Sponsored Member and Customer
on a gross basis, that is, separately without netting. The margin
obligated for a Sponsoring Member or Agent Clearing Member would be the
sum of the individual margin amounts determined for each Sponsored
Member and Customer to ensure that the total margin amount represents
the sum of each individual institutional client's activity.
    Default Management. NSCC's proposed rules would specify the
procedures that it would use to centrally manage the default of that
member,\34\ including liquidating the underlying securities and meeting
the final settlement obligations. If there is an SFT member default,
NSCC would continue paying to and receiving from a non-defaulting SFT
member the difference in market value of the underlying securities with
respect to the novated SFTs until final settlement. By continuing to
process the difference in market value, NSCC would maintain the non-
defaulting SFT member in largely the same position as if the defaulting
SFT member has not defaulted.
---------------------------------------------------------------------------

    \34\ NSCC would be able to take actions listed above when NSCC
``ceases to act'' for an SFT member. The factors NSCC would consider
in making the decision to cease to act include the member's
suspension from any regulatory organization, failure to make a
payment to NSCC, or other financial issues. See Rules 46
(Restrictions on Access to Service) and 18 (Procedures for When the
Corporation Ceases to Act) of the Rules, supra note 6.
---------------------------------------------------------------------------

    In addition, in the event an SFT member defaults, NSCC would have
all the rights and obligations of the defaulting party, whether it was
the lender or borrower in relation to such default-related SFTs. For
example, if a borrower defaults, NSCC would assume all the rights of a
lender and the defaulting borrower, and be able to issue a recall
notice and conduct a buy-in in a commercially reasonable manner.\35\ On
the other hand, if a lender defaults, NSCC would be able to deliver a
recall notice to a borrower to stop the final settlement date of a
default-related SFT from being further delayed.
---------------------------------------------------------------------------

    \35\ The proposal would specify that in the case of a default-
related SFT, the commercial reasonableness of a buy-in shall be
determined by NSCC based on whether such buy-in would create a
disorderly market in the relevant SFT security, consistent with the
applicable market standard. See supra note 20.
---------------------------------------------------------------------------

    To the extent that an SFT default generates a loss larger than the
resources that the defaulter has provided to NSCC, i.e., its margin and
the proceeds from its liquidated portfolio, NSCC's loss allocation rule
would apply to all members including Sponsoring Members and Agent
Clearing Members.\36\
---------------------------------------------------------------------------

    \36\ Specifically, under NSCC's loss allocation rule, NSCC would
use its own capital (referred to as the ``Corporate Contribution'')
and then allocate losses to members pro rata via rounds of cash
calls. See Rule 4 (Clearing Fund) of the Rules, supra note 6.
---------------------------------------------------------------------------

    Liquidity Risk. The proposal also describes how NSCC manages
potential liquidity exposures arising from clearing SFT transactions.
Currently, NSCC is required to hold sufficient liquidity resources to
cover the largest settlement obligation stemming from the cleared CNS
positions, assuming a member default. Under the proposal, NSCC's
liquidity exposures would also include settlement obligation arising
from SFT positions. Specifically, the liquidity obligations relating to
SFT would include the daily market to market of the underlying
securities as well as any final cash settlement obligation owed by the
defaulting member.
    To account for a potentially higher liquidity need as a result of
the SFT expansion, NSCC is planning to utilize its current suite of
qualifying liquidity resources, including the supplemental liquidity
deposit. NSCC may collect supplemental liquidity deposits from members
whose default would pose the largest liquidity exposure to NSCC.\37\
Accordingly, such deposits may be used to address any heightened
liquidity exposures stemming from clearing SFTs because the deposits,
by design, act to cover the difference between a

member's peak liquidity need and NSCC's liquidity resources.
---------------------------------------------------------------------------

    \37\ See Rule 4A (Supplemental Liquidity Deposits) of the Rules,
supra note 6.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \38\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and rules and regulations thereunder applicable
to such organization. After carefully considering the proposed rule
change, the Commission finds that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to NSCC. In particular, the
Commission finds that the proposed rule change is consistent with
Sections 17A(b)(3)(F) \39\ and (b)(3)(I) \40\ of the Act and Rules
17Ad-22(e)(6), (e)(7), (e)(18), (e)(19), and (e)(21) \41\ for the
reasons described below.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(2)(C).
    \39\ 15 U.S.C. 78q-1(b)(3)(F).
    \40\ 15 U.S.C. 78q-1(b)(3)(I).
    \41\ 17 CFR 240.17Ad-22(e)(6), (e)(7), (e)(18), (e)(19), and
(e)(21).
---------------------------------------------------------------------------

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

    Section 17A(b)(3)(F) of the Act \42\ requires that the rules of a
clearing agency, such as NSCC, be designed to, among other things,
promote the prompt and accurate clearance and settlement of securities
transactions; assure the safeguarding of securities and funds which are
in the custody or control of the clearing agency or for which it is
responsible; and foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission believes that the proposal is consistent with
Section 17A(b)(3)(F) of the Act for the reasons stated below.
(1) Prompt and Accurate Clearance and Settlement
    The Commission believes that NSCC's proposal to introduce the
central clearing of SFTs is designed to promote the prompt and accurate
clearance and settlement of securities transactions, and to protect
investors and the public interest.
    As described above in Section II.A., the proposal would create a
new central clearing service for SFTs. Unlike bilateral transactions,
NSCC as the central counterparty would become a counterparty to all
novated trades, and in essence, replace multiple counterparties as one
counterparty to a market participant. In turn, NSCC would be able to
net a participant's transactions and offset delivery obligations and
reduce the number of securities that need to be delivered on a
settlement date. Central clearing would remove the bilateral exposures
that are scattered among different market participants and consolidate
them into a single net exposure with NSCC, which would increase
operational efficiency and decrease trade processing. The Commission
believes that, by novating and centrally clearing SFTs, the proposal is
designed to promote the prompt and accurate clearance and settlement of
securities.
(2) Fostering Cooperation
    The Commission believes that NSCC's proposal to introduce the
central clearing of SFTs is designed to foster cooperation and
coordination with persons engaged in the clearance and settlement of
securities transactions. As described above in Section II.B., the
proposal is designed to allow the central clearing of SFTs to be
accessible by a wide range of market participants. For example, the
membership categories able to access the service would accommodate
market participants' differing business models and regulatory
requirements, and the accelerated settlement feature would allow
members who need to quickly unwind SFTs to satisfy their applicable
regulatory requirements when needed. NSCC represents that the proposal
reflects the feedback of market participants requesting these
features.\43\ By designing the new SFT clearing service to be
accessible, the proposal is designed to encourage more market
participants to bring SFTs into central clearing from the bilateral
market. And by allowing market participants to centrally clear and
settle SFTs, the Commission believes that the proposal is designed to
foster cooperation and coordination with persons engaged in the
clearance and settlement of securities transactions.
---------------------------------------------------------------------------

    \43\ See Notice of Filing, supra note 3, at 23374.
---------------------------------------------------------------------------

(3) Safeguarding of Securities and Funds
    The Commission believes that NSCC's proposal to introduce the
central clearing of SFTs is 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.
    As described in Section II.B.(3), NSCC proposes to manage risks
associated with the new SFT central clearing service by collecting
margin for each transaction and ensuring that it has sufficient
resources to meet its liquidity needs. First, NSCC would manage its
credit risk with respect to SFTs by requiring minimum margin deposits
and applying specific aspects of its margin methodology to determine
the appropriate margin to cover the risks posed by the SFTs, as well as
by applying an additive margin component designed to address any high
concentration risk posed by SFTs. When calculating margin, NSCC would
not net SFT members' SFT positions with other CNS position, and NSCC
also would not net across Sponsored Member accounts or Customer
accounts, thereby collecting greater amounts of margin and improving
NSCC's overall resilience. NSCC also would specify that a certain
portion of margin be in cash and eligible Treasury clearing fund
securities to protect against market risk of the collateral. Further,
as described in Section II.B.(2), NSCC would apply activity limits to
ensure that SFT members' financial resources are sufficient to meet
their margin requirements.
    Second, as described in Section II.B.(3), NSCC would include an SFT
member's potential liquidity exposures as part of NSCC's potential
liquidity need. This means that, if a member's SFT activity were to
drive NSCC's potential liquidity need, that member would have to
provide supplemental liquidity under NSCC's existing rules, to ensure
that NSCC would maintain adequate resources to satisfy liquidity needs
arising from its SFT settlement obligations.
    Third, the proposal would provide a process to address SFT member
defaults to allow NSCC to take timely action to contain losses and
continue to meet its obligations. Specifically, NSCC would have a right
to close out a defaulting member's positions, assume the rights of the
non-defaulting party in relation to such default-related SFTs, and
apply its loss allocation procedure if the defaulting member's
resources are insufficient to cover a loss.\44\
---------------------------------------------------------------------------

    \44\ See supra note 36.
---------------------------------------------------------------------------

    Taken together, these risk management procedures should minimize
the likelihood that losses arising out of an SFT member default would
exceed NSCC's prefunded resources and threaten the safety and soundness
of NSCC's ongoing operations. Accordingly, the Commission believes that
the proposal is designed to assure the safeguarding of

securities and funds which are in NSCC's custody or control.\45\
---------------------------------------------------------------------------

    \45\ A large number of commenters expressed concerns that the
proposal is designed to exclusively benefit large institutions by
obscuring and facilitating negligent risky behavior, and the
proposal would hamper a fair and transparent market. See, e.g.,
Letters from David Lincoln and from Joe Jacobs, dated April 19,
2022. The commenters' concerns generally rely on the premise that
SFTs are designed to promote short sales and potentially naked short
sales that such commenters believe should be illegal. See, e.g.,
Letters from Jack Sarken and Duncan Stanley, dated April 19, 2022.
Any SFTs that would be cleared as part of the proposed service are
transactions that occur bilaterally today, and the proposal does not
impact Commission rules applicable to short sales. Because this
proposal is not addressing short sales, and is designed to reduce
risks associated with bilateral SFTs, the Commission believes that
the commenters' concerns related to short sales are outside the
scope of the proposed rule change.
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(6)(i)

    Rule 17Ad-22(e)(6)(i) under the Exchange Act requires that NSCC
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.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------

    As described above in Section II.B.(3)(i), NSCC proposes to
establish margin requirements to cover its credit exposures to the SFT
members. First, NSCC proposes to collect margin from SFT members,
including the application of both a minimum margin amount and of NSCC's
existing margin system that contains multiple component charges
designed to cover various types of risk and meet applicable regulatory
requirements.\47\ Second, NSCC would apply more conservative approaches
to the calculation of SFT, as compared to NSCC's existing margin
system. For example, unlike the current calculation of the volatility
of a member's net unsettled positions, NSCC would apply a more
stringent method to address risks associated with issuer-specific
events affecting the price of the concentrated security within the SFT
portfolio, and risk associated with liquidating a defaulted SFT
member's portfolio with a large position by asset class, relative to
market-wide liquidity.\48\ Further, NSCC would not net SFTs against
other equity transactions at NSCC when determining margin requirements,
to ensure that margins associated with SFTs would not be reduced by
other equity transactions outside of the SFTs. Separately, it would
collect margin on a gross basis for different Sponsored Members or
different Customers, thereby accounting and collecting margin for each
individual Sponsored Member and Customer.
---------------------------------------------------------------------------

    \47\ See supra note 32.
    \48\ See id.
---------------------------------------------------------------------------

    Because NSCC applies its risk-based margin methodology, tailored to
address SFTs, the Commission believes that the proposal is reasonably
designed to cover NSCC's credit exposures from SFT members and
consistent with Rules 17Ad-22(e)(6)(i).

C. Consistency With Rule 17Ad-22(e)(7)

    Rule 17Ad-22(e)(7)(i) under the Exchange Act requires that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to effectively measure, monitor, and
manage the liquidity risk that arises in or is borne by the covered
clearing agency, including measuring, monitoring, and managing its
settlement and funding flows on an ongoing and timely basis, and its
use of intraday liquidity by, at a minimum maintaining sufficient
liquid resources at the minimum in all relevant currencies to effect
same-day and, where appropriate, intraday and multiday settlement of
payment obligations with a high degree of confidence under a wide range
of foreseeable stress scenarios that includes, but is not limited to,
the default of the participant family that would generate the largest
aggregate payment obligation for the covered clearing agency in extreme
but plausible market conditions.\49\
---------------------------------------------------------------------------

    \49\ 17 CFR 240.17Ad-22(e)(7)(i).
---------------------------------------------------------------------------

    As described above in Section II.B.(3)(ii), when calculating its
liquidity need, in addition to liquidity exposures relating to other
equity positions, NSCC would include all the differences in market
value of the underlying securities owed by a defaulting SFT member in
the event an SFT member defaults, as well as all novated open SFT
transactions of a defaulting SFT. This determination of the liquidity
need is designed to ensure that NSCC would cover any liquidity need
associated with its final settlement obligations to non-defaulting SFT
members and members. NSCC currently relies on various liquidity
resources, all of which would be available in the event of a liquidity
shortfall relating to SFTs. The Commission believes that NSCC's
existing liquidity risk management framework, including NSCC's ability
to collect supplemental liquidity if a member's activity, including its
SFT activity, increases NSCC's liquidity need,\50\ would be sufficient
to ensure that NSCC would continue to meet its regulatory obligations.
---------------------------------------------------------------------------

    \50\ NSCC is required to have policies and procedures reasonably
designed to monitor and manage its liquidity risk by maintaining
sufficient liquid resources at the minimum to effect settlement of
payment obligations with a high degree of confidence under a wide
range of foreseeable stress scenarios that includes, but is not
limited to, the default of the participant family that would
generate the largest aggregate payment obligation for the covered
clearing agency in extreme but plausible market conditions, and by
determining that amount and regularly testing the sufficiency of its
liquidity resources. 17 CFR 240.17Ad-22(e)(7)(i) and (vi). Pursuant
to this regulatory requirement, NSCC's Liquidity Risk Management
Framework outlines NSCC's liquidity resources and liquidity risk
management practices. See Securities Exchange Act Release No. 82377
(December 21, 2017), 82 FR 61617 (December 28, 2017).
     One such liquidity resource is NSCC's supplemental liquidity
deposit, which is designed to withstand NSCC's fluctuating peak
liquidity needs and source adequate liquidity at all times. To do
so, NSCC allocates a funding obligation to those members driving
peak liquidity needs that surpass NSCC's available liquidity
resources through SLDs. See Securities Exchange Act Release No.
71000 (December 5, 2013), 78 FR 75400 (December 11, 2013).
---------------------------------------------------------------------------

    The Commission believes that NSCC's proposal to manage its
potential liquidity exposures associated with SFTs by using its
established liquidity resources is reasonably designed to manage the
liquidity risk that may arise in the SFT central clearing service, and
consistent with Rule 17Ad-22(e)(7)(i).\51\
---------------------------------------------------------------------------

    \51\ 17 CFR 240.17Ad-22(e)(7)(i).
---------------------------------------------------------------------------

D. Consistency With Rule 17Ad-22(e)(18)

    Rule 17Ad-22(e)(18) under the Exchange Act requires that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to establish objective, risk-based, and
publicly disclosed criteria for participation, which permit fair and
open access by direct and, where relevant, indirect participants and
other financial market utilities, require participants to have
sufficient financial resources and robust operational capacity to meet
obligations arising from participation in the clearing agency, and
monitor compliance with participation requirements on an ongoing
basis.\52\
---------------------------------------------------------------------------

    \52\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

    First, the Commission believes that the proposal is reasonably
designed to establish objective, risk-based, and publicly-disclosed
criteria for SFT members. As described above, all members would be
eligible to apply to become Sponsoring Members or Agent Clearing
Members subject to such criteria, similar to how NSCC currently
provides membership criteria for its members. For example, if a
Sponsoring

or Agent Clearing Member applicant is a registered broker-dealer, it
would be subject to particular financial resource requirements, as
specified in the proposed rule. Only a qualified institutional buyer or
a legal entity that satisfies the financial requirements necessary to
be a qualified institutional buyer would be eligible to be a Sponsored
Member. In addition, an applicant must provide adequate assurances for
its financial responsibility and operational capability.
    Second, the proposal is reasonably designed to allow direct and
indirect participants to access the new SFT central clearing service by
establishing new membership categories to allow for such access by
particular types of market participants. For example, a participant who
cannot or does not want to meet the requirements to become either a
member, a Sponsoring Member, or an Agent Clearing Member can
participate as a Sponsored Member or as a Customer, the latter of which
does not have a direct relationship with NSCC.
    Third, the proposal is reasonably designed to allow NSCC to monitor
compliance with participation requirements on an ongoing basis. The
proposal would require an SFT member to notify NSCC if it is no longer
in compliance with applicable requirements to be an SFT member, and
allow NSCC to inspect SFT members' financial resources and operational
capability on an ongoing basis.
    For the foregoing reasons, the Commission believes that the
proposal is consistent with Rule 17Ad-22(e)(18).\53\
---------------------------------------------------------------------------

    \53\ Id.
---------------------------------------------------------------------------

E. Consistency With Rule 17Ad-22(e)(19)

    Rule 17Ad-22(e)(19) under the Exchange Act requires a covered
clearing agency to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to identify, monitor, and
manage the material risks to the covered clearing agency arising from
arrangements in which firms that are indirect participants in the
covered clearing agency rely on the services provided by direct
participants to access the covered clearing agency's payment, clearing,
or settlement facilities.\54\
---------------------------------------------------------------------------

    \54\ 17 CFR 240.17Ad-22(e)(19).
---------------------------------------------------------------------------

    The proposal allows Sponsoring Members to submit Sponsored Members'
transactions to NSCC, and Agent Clearing Members to submit its
Customers' transactions to NSCC. In both cases, Sponsoring Members and
Agent Clearing Members would be ultimately responsible to NSCC for
Sponsored Members' and Customers' transactions and liable to satisfy
all settlement obligations. Both Sponsoring Members and Agent Clearing
Members serve as the processing agent for all the Sponsored Member and
Customer transactions responsible for posting margin and satisfying any
losses arising from the client transactions. Sponsoring Members and
Customers do not have any direct mechanism to submit their own margin
or settle transactions directly with NSCC. Moreover, even though
Sponsored Members would be principally liable for their own settlement
obligations, Sponsoring Members' guaranty requires Sponsoring Members
to satisfy settlement obligations on behalf of its Sponsored Members.
    By calculating and collecting margins for Sponsored Members' and
Customers' transactions and providing certainty that Sponsoring Members
and Agent Clearing Members would be responsible for their Sponsored
Members' and Customers' transactions, the Commission believes that the
proposal is consistent with Rule 17Ad-22(e)(19).\55\
---------------------------------------------------------------------------

    \55\ Id.
---------------------------------------------------------------------------

F. Consistency With Rule 17Ad-22(e)(21)

    Rule 17Ad-22(e)(21) under the Exchange Act requires a covered
clearing agency to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to be efficient and
effective in meeting the requirements of its participants and the
markets it serves, including the clearing agency's clearing and
settlement arrangements and the scope of products cleared or
settled.\56\
---------------------------------------------------------------------------

    \56\ 17 CFR 240.17Ad-22(e)(21).
---------------------------------------------------------------------------

    As described above in Section II.B.(1) and (2), the proposal is
designed to reflect the current structure of the bilateral securities
lending market, ensuring that relevant features and market participants
subject to differing regulatory requirements and existing contractual
relationships can be accommodated as part of the service provided by
NSCC. For example, the proposal would allow for central clearing of
SFTs with a one business day term, in order to provide a scheduled
settlement date so that the transaction may be eligible for balance
sheet netting benefit as explained in Section II.(B)(1). Second, the
proposal would allow accelerated settlement so that certain market
participants are able to quickly unwind their SFTs to satisfy
applicable regulatory requirements. Third, the proposed membership
categories would accommodate principal and agency trading to allow
different types of market participants to enter into the new SFT
central clearing service, consistent with their business models and
applicable regulatory requirements.
    Accordingly, the Commission believes that the proposal is
reasonably designed to be efficient and effective in meeting the
requirements of its participants and the market it serves, and
consistent with Rule 17Ad-22(e)(21).\57\
---------------------------------------------------------------------------

    \57\ Id.
---------------------------------------------------------------------------

VI. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular with the requirements of Section 17A of the Act \58\ and
the rules and regulations promulgated thereunder.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\59\ that proposed rule change SR-NSCC-2022-003, be, and hereby is,
APPROVED.\60\
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78s(b)(2).
    \60\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f). See also Section II.B.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\61\
---------------------------------------------------------------------------

    \61\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12009 Filed 6-3-22; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: January 22, 2007 (Volume 72, Number 13)]
[Notices]
[Page 2680-2681]
[DOCID:fr22ja07-59]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OECA-2006-0432, FRL-8271-7]

Agency Information Collection Activities; Submission to OMB for
Review and Approval; Comment Request; NESHAP for Primary Magnesium
Refining (Renewal); EPA ICR Number 2098.03, OMB Control Number 2060-
0536

AGENCY: Environmental Protection Agency.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: In compliance with the Paperwork Reduction Act (PRA) (44
U.S.C. 3501 et seq.), this document announces that an Information
Collection Request (ICR) has been forwarded to the Office of Management
and Budget (OMB) for review and approval. This is a request to renew an
existing approved collection. The ICR which is abstracted below
describes the nature of the information collection and its estimated
burden and cost.

DATES: Additional comments may be submitted on or before February 21,
2007.

ADDRESSES: Submit your comments, referencing docket ID number HQ-OECA-
2006-0432, to (1) EPA online using http://www.regulations.gov (our preferred method), by e-mail to<EMAIL_ADDRESS>or by mail to: EPA Docket

Center (EPA/DC), Environmental Protection Agency, Enforcement and
Compliance Docket and Information Center, mail code 2201T, 1200
Pennsylvania Avenue, NW., Washington, DC 20460, and (2) OMB at: Office
of Information and Regulatory Affairs, Office of Management and Budget
(OMB), Attention: Desk Officer for EPA, 725 17th Street, NW.,
Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Leonard Lazarus, Compliance Assessment
and Media Programs Division (CAMPD), Office of Compliance, (2223A),
Environmental Protection Agency, 1200 Pennsylvania Avenue, NW.,
Washington, DC 20460; telephone number:<PHONE_NUMBER>; fax number:
(202) 564-0050; e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: EPA has submitted the following ICR to OMB
for review and approval according to the procedures prescribed in 5 CFR
1320.12. On June 21, 2006 (71 FR 35652), EPA sought comments on this
ICR pursuant to 5 CFR 1320.8(d). EPA received no comments. Any
additional comments on this ICR should be submitted to EPA and OMB
within 30 days of this notice.
    EPA has established a public docket for this ICR under docket ID
number EPA-HQ-OECA-2006-0432, which is available for online viewing at
http://www.regulations.gov, in person viewing at the Enforcement and

Compliance Docket and Information Center in the EPA Docket Center (EPA/
DC), EPA

West, Room 3334, 1301 Constitution Avenue, NW., Washington, DC. The
EPA/DC Public Reading Room is open from 8 a.m. to 4:30 p.m., Monday
through Friday, excluding legal holidays. The telephone number for the
Reading Room is<PHONE_NUMBER>, and the telephone number for the
Enforcement and Compliance Docket and Information Center Docket is
(202) 566-1514.
    Use EPA's electronic docket and comment system at http://www.regulations.gov
, to submit or view public comments; access the

index listing of the contents of the docket; and to access those
documents in the docket that are available electronically. Once in the
system, select ``docket search,'' then key in the docket ID number
identified above. Please note that EPA's policy is that public
comments, whether submitted electronically, or in paper, will be made
available for public viewing at http://www.regulations.gov as EPA

receives them and without change, unless the comment contains
copyrighted material, CBI, or other information whose public disclosure
is restricted by statute. For further information about the electronic
docket, go to http://www.regulations.gov.

    Title: NESHAP for Primary Magnesium Refining (Renewal)
    ICR Numbers: EPA ICR Number 2098.03, OMB Control Number 2060-0536.
    ICR Status: This ICR is scheduled to expire on January 31, 2007.
Under OMB regulations, the Agency may continue to conduct, or sponsor
the collection of information while this submission is pending at OMB.
An Agency may not conduct, or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid OMB control number. The OMB control numbers for EPA's regulations
in Title 40 of the CFR, after appearing in the Federal Register when
approved, are listed in 40 CFR part 9, are displayed either by
publication in the Federal Register, or by other appropriate means,
such as on the related collection instrument, or form, if applicable.
The display of OMB control numbers in certain EPA regulations is
consolidated in 40 CFR part 9.
    Abstract: Respondents are owners or operators of primary magnesium
refining operations. Owners, or operators of the affected facilities
described must make initial reports when a source becomes subject to
the standard; conduct and report on a performance test; demonstrate and
report on continuous monitor performance; and maintain records of the
occurrence and duration of any startup, shutdown, or malfunction in the
operation of an affected facility. Semiannual reports of excess
emissions are required. These notifications, reports, and records are
essential in determining compliance and are required, in general, of
all sources subject to National Emission Standards for Hazardous Air
Pollutants (NESHAP). Any owner, or operator subject to the provisions
of this part shall maintain a file of these measurements and retain the
file for at least five years following the date of such measurements,
maintenance reports, and records. All reports are sent to the delegated
state or local authority. In the event that there is no such delegated
authority, the reports are sent directly to the EPA regional office.
    An agency may not conduct, or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9 and are identified on
the form and/or instrument, if applicable.
    Burden Statement: The annual public reporting and recordkeeping
burden for this collection of information is estimated to average 156
hours per response. Burden means the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to, or for, a Federal agency. This
includes the time needed to review instructions; develop, acquire,
install, and utilize technology and systems for the purposes of
collecting, validating, and verifying information, processing and
maintaining information, and disclosing and providing information;
adjust the existing ways to comply with any previously applicable
instructions and requirements which have subsequently changed; train
personnel to be able to respond to a collection of information; search
data sources; complete and review the collection of information; and
transmit or otherwise disclose the information.
    Respondents/Affected Entities: Owners or operators of primary
magnesium refining operations.
    Estimated Number of Respondents: 1.
    Frequency of Response: Initially, On Occasion, Semiannually.
    Estimated Total Annual Hour Burden: 612.
    Estimated Total Annual Cost: $52,948, includes no capital/startup
costs and $1,200 annualized O&M costs.
    Changes in the Estimates: There is a decrease of 119 hours in the
total estimated burden currently identified in the OMB Inventory of
Approved ICR Burdens. The decrease in burden reflects completion of
activities that do not need to be repeated to comply with the rule. The
increase in O&M costs is due to maintenance of equipment used to verify
compliance with the rule requirements.

    Dated: January 12, 2007.
Oscar Morales,
Director, Collection Strategies Division.
[FR Doc. E7-816 Filed 1-19-07; 8:45 am]

BILLING CODE 6560-50-P


Janet Cakir/RTP/USEPA/US

12/05/2007 05:04 PM

To

<EMAIL_ADDRESS> cc

Ron Evans/RTP/USEPA/US@EPA

Subject

Cancellation of Thrusday (tomorrow's) meeting

Rob,

    Our internal discussions for extrapolated costs are still ongoing and we need to defer our discussion with you for another week.  We will not be able to fill the time slot with another topic, so we should just cancel the meeting tomorrow Thursday the 6th.  Are you and the rest of the interagency group available on Thursday the 13th from 3-4?  Hopefully we'll be able to have our extrapolated cost discussion on that date, or, at the very least, pick up where we left off on our briefing today.  Let me know if that will work for you.

Thanks,

-Janet

_______________________________________

Janet F. Cakir, Ph.D.

Environmental Protection Specialist

Air Benefits Cost Group

109 TW Alexander Dr., (C439-02)

Research Triangle Park, NC 27711

Tel:<PHONE_NUMBER>

Fax:<PHONE_NUMBER>

email<EMAIL_ADDRESS>


[Federal Register: January 14, 2010 (Volume 75, Number 9)]
[Notices]
[Page 2176-2177]
[DOCID:fr14ja10-112]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61309; File No. SR-NYSE-2009-133]

Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To
Modify the Liquidity Credits Paid to Supplemental Liquidity Providers

January 7, 2010.

    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on December 30, 2009, New York Stock Exchange LLC (the
``NYSE'' or the ``Exchange'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule changes as described
in Items I, II and III below, which items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule changes from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its schedule of credits paid to
Supplemental Liquidity Providers (``SLPs'') (i) to clarify that the
current credits paid to SLPs relate only to transactions in securities
with a trading price of $1.00 or more and (ii) to establish a liquidity
credit for transactions in securities with a trading

price of less than $1.00. The text of the proposed rule change is
available on the Exchange's Web site (http://www.nyse.com), at the
Exchange's Office of the Secretary, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
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 NYSE has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The NYSE pays credits to SLPs for providing liquidity in
transactions in securities with a trading price of $1.00 or more. There
are several different tiers at which these credits are paid, based on
(i) whether the SLP has met the 3% average or more quoting requirement
(the ``Quoting Requirement'') in Rule 107B for the applicable security
and (ii) the amount of the SLPs average daily trading volume (``ADV'')
in the security in the applicable month. While the Exchange has always
applied its existing credits for SLPs only to transactions in
securities with a trading price of $1.00 or more, this is not apparent
on the face of the price list. Therefore, the Exchange proposes to
clarify the price list by amending it to specify that the current SLP
liquidity credits apply only to transactions in securities with a
trading price of $1.00 or more. In addition, the Exchange is adopting a
new $0.0005 per share credit which will be paid to SLPs when they add
liquidity in a security with a trading price of less than $1.00 with
respect to which they have met the Quoting Requirement for the
applicable month.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 \4\ of the Act in general and Section
6(b)(4) of the Act \5\ in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees and other charges
among its members and other persons using its facilities. The Exchange
believes that the proposal does not constitute an inequitable
allocation of dues, fees and other charges, as the liquidity provided
by SLPs is an important part of the NYSE market model and it is
therefore appropriate to structure credits to incent liquidity
provision by SLPs.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act.

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 change is effective upon filing pursuant to
Section 19(b)(3)(A) \6\ of the Act and Rule 19b-4(f)(2) \7\ thereunder.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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

     Use the Commission's Internet comment form http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File No. SR-NYSE-2009-133 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSE-2009-133. This file
number should be included on the subject line if e-mail 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 Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission,\8\ 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 inspection and
copying 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 such filing also will be available for
inspection and copying at the principal office of NYSE. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. SR-NYSE-2009-133 and should be
submitted on or before February 4, 2010.\9\
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    \8\ The text of the proposed rule change is available on the
Commission's Web site at
    http://www.sec.gov.
    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-543 Filed 1-13-10; 8:45 am]
BILLING CODE 8011-01-P