will have less control over their capital structures, as by
implementing these policies and procedures they would be compelled to
maintain a certain minimum level of liquid net assets despite the
availability of new, less liquid, investment opportunities. Absent
market frictions, such a change in capital structure should have no
effect on the value of a covered clearing agency.\750\ Nevertheless,
the Commission acknowledges that market imperfections such as
asymmetric information, moral hazard, and regulation may imply that
covered clearing agencies that would need to raise additional equity
capital incur opportunity costs for holding this additional capital
rather than investing it in projects or distributing it back to equity
holders who might, in turn, invest in projects.
---------------------------------------------------------------------------

    \749\ The figures in Table 2 are based on quantitative
disclosures published by registered clearing agencies pursuant to
the PFMI. Figures for FICC and NSCC were obtained from CPMI IOSCO
Quantitative Disclosure Results--2016 Q1 (June 30, 2016), available
at http://www.dtcc.com/legal/policy-and-compliance; figures for OCC
were obtained from PFMI Quantitative Disclosure (Mar. 31, 2016),
available at http://www.optionsclearing.com/components/docs/about/corporate-information/pfmi-disclosures/quant-disclosure-janmar2016.pdf; figures for Ice Clear Europe were obtained from ICE
Clear Europe--CDS (2016 Q1) available at https://www.theice.com/clear-europe/regulation#quantitative-disclosures; and figures for
ICE Clear Credit were obtained from Regulatory Disclosures (2016 Q1)
available at https://www.theice.com/clear-credit/regulation.
    \750\ See Franco Modigliani & Merton H. Miller, The Cost of
Capital, Corporation Finance and the Theory of Investment, 48 a.m.
Econ. Rev. 261 (1958) (showing the irrelevance of capital structure
in perfect markets).
---------------------------------------------------------------------------

    Clearing agencies that issue equity to satisfy the new requirements
would additionally face costs related to issuance. The Commission
recognizes that the cost of maintaining additional equity resembles an
insurance premium against the losses associated by market disruption in
the absence of clearing services.
xi. Rule 17Ad-22(e)(16): Custody and Investment Risks
    Rule 17Ad-22(e)(16) requires a covered clearing agency to have
policies and procedures reasonably designed to safeguard both their own
assets as well as the assets of participants, broadening the
requirement applicable to registered clearing agencies in Rule 17Ad-
22(d)(3) to the protection of participants' assets.
    The Commission believes that this may have benefits in terms of
protecting against systemic risk, to the extent that covered clearing
agencies to this point have treated their own assets differently by
applying greater safeguards to those assets than with respect to assets
of their members and members' clients. Protection of member assets is
important to cleared markets because, for example, the assets of a
member in default serve as margin and represent liquidity supplies that
a covered clearing agency may access to cover losses. If covered
clearing agencies can quickly access these liquidity sources, they may
be able to limit losses to non-defaulting members.
    Participants may benefit from Rule 17Ad-22(e)(16) in other ways.
Requiring a covered clearing agency's policies and procedures to
safeguard its assets and participant assets and to invest in assets
with minimal credit, liquidity, and market risk may reduce uncertainty
in the value of participant assets and participants' exposure to
mutualized losses. This may allow participants to deploy their own
capital more efficiently. Furthermore, easy access to their own capital
enables members to more freely terminate their participation in covered
clearing agencies.
    Based on its supervisory experience, the Commission believes that
current practices at covered clearing agencies meet the requirements
under Rule 17Ad-22(e)(16) in most cases, so the additional costs and
benefits flowing from these requirements would be generally limited to
registered clearing agencies that may enter the set of covered clearing
agencies in the future.
xii. Rule 17Ad-22(e)(17): Operational Risk Management
    Because, as noted above, Rule 17Ad-22(e)(17) would require
substantially the same set of policies and procedures as Rule 17Ad-
22(d)(4),\751\ the Commission believes that Rule 17Ad-22(e)(17) would
likely impose limited material additional costs on covered clearing
agencies and produce limited benefits, in line with the general
economic considerations discussed in Part III.B.1.
---------------------------------------------------------------------------

    \751\ See supra Part II.C.17 (discussing the full set of
requirements under Rule 17Ad-22(e)(17)); see also 17 CFR 240.17Ad-
22(d)(4).
---------------------------------------------------------------------------

xiii. Rules 17Ad-22(e)(18) Through (20): Membership Requirements,
Tiered Participation, and Linkages
    As discussed earlier, covered clearing agencies play an important
role in the markets they serve. They often enjoy a central place in
financial networks that enables risk sharing, but may also enable them
to serve as conduits for the transmission of risk throughout the
financial system. Rules (18) through (20) require covered clearing
agencies to have policies and procedures reasonably designed to
explicitly consider and manage the risks associated with the particular
characteristics of their network of direct members, the broader
community of customers, and other parties that rely on the services
provided by the covered clearing agencies or other partners that the
covered clearing agency is connected to through relevant linkages. The
Commission believes that these efforts carry benefits insofar as they
reduce the extent to which covered clearing agencies may impose
negative externalities on financial markets.
    As economies of scale contribute to the business dynamics of
clearing and settlement, there is often only one clearing agency or a
small number of clearing agencies for a particular class of security.
Consequently, membership in a clearing agency may influence competitive
dynamics between members and indirect participants, such as
intermediaries, in cleared markets.

Members and indirect participants may compete for the same set of
customers, but indirect participants must have relationships with
members to access clearing services. Members, therefore, may have
incentives in place to extract economic rents from indirect
participants by imposing higher fees or restricting access to clearing
services.
    Permitting fair and open access to clearing agencies and their
services may promote competition among market participants and may
result in lower costs and efficient clearing and settlement services.
Open access to clearing agencies may reduce the likelihood that credit
and liquidity risk become concentrated among a small number of clearing
members, each of which retain a large number of indirect participants
through tiered arrangements. Further, links between clearing agencies
may facilitate risk management across multiple security classes and
improve the efficiency of collateral arrangements.
(1) Rule 17Ad-22(e)(18): Member Requirements
    While fair and open access to clearing agencies may promote
competition and enhance the efficiency of clearing and settlement
services, these improvements should not come at the expense of prudent
risk management. The soundness of clearing members contributes directly
to the soundness of a clearing agency and mutualization of losses
within clearing agencies expose each clearing member to the default
risk of every other clearing member. Accordingly, it is important for
clearing agencies to control and effectively manage the risks to which
they are exposed by their direct and indirect participants by
establishing risk-related requirements for participation.
    Based on its supervisory experience, the Commission believes that
current practices among most covered clearing agencies involve a mix of
objective financial and business requirements stipulated in publicly-
available rulebooks and discretion exercised by the covered clearing
agency. As a result and based on its supervisory experience, the
Commission believes that some changes to policies and procedures at
covered clearing agencies may be required under the rule.
(2) Rule 17Ad-22(e)(19): Tiered Participation Arrangements
    The Commission believes that Rule 17Ad-22(e)(19) may improve
covered clearing agencies' ability to manage their exposure to market
participants that are not clearing members, but access payment,
clearing, or settlement facilities through their relationships with
clearing members. A covered clearing agency that is able to effectively
manage its exposure to its members but fails to identify, monitor, and
manage its exposures to non-member firms may overlook dependencies that
are critical to the stability of cleared markets. This is particularly
true if indirect participants in the covered clearing agency are large
and might potentially precipitate the default of one or more direct
members.
    The data necessary to compute summary statistics that would be
helpful in quantifying the costs and benefits of the rule, including
those that would indicate the size of indirect participants and the
volume of transactions in which they are involved, are not available.
Nevertheless, the Commission is sensitive to the fact that costs
associated with the rules may result in concentration of clearing
services among fewer clearing members. Part of this process of
consolidation may mean an increase in the volume of trading activity
that involves indirect members, making identification of risks
associated with indirect members even more critical. Based on its
supervisory experience, however, the Commission believes that certain
covered clearing agencies already have policies and procedures in place
that would satisfy the requirements of the rule even in the absence of
such explicit requirements under existing rules. Costs and benefits
from the rule would come from those other registered clearing agencies
that require updates to their policies and procedures to come into
compliance with the rule.
    The Commission is sensitive to the fact that indirect participants
play a key role in maintaining competition in markets for
intermediation of trading in securities insofar as they offer investors
a broader choice of intermediaries to deal with in centrally cleared
and settled securities markets. If elements of policies and procedures
under this rule make indirect participation marginally more costly,
then transactions costs for investors may increase.
(3) Rule 17Ad-22(e)(20): Links
    Links between clearing agencies and their members are only one way
that clearing agencies interface with the financial system. A clearing
agency may also establish links with other clearing agencies and FMUs
through a set of contractual and operational arrangements. For a
clearing agency, the primary purpose of establishing a link would be to
expand its clearing and settlement services to additional financial
instruments, markets, and institutions. Established links among
clearing agencies and FMUs may enable direct and indirect market
participants to have access to a broader spectrum of clearing and
settlement services.
    Sound linkages between clearing agencies that provide CCP services
may also provide their customers with more efficient collateral
arrangements and cross-margining benefits. Cross-margining potentially
relaxes liquidity constraints in the financial system by reducing total
required margin collateral. Resources that would otherwise be posted as
margin may be allocated to more productive investment opportunities.
    A clearing agency that establishes a link or multiple links may
also impose costs on participants in markets it clears by indirectly
exposing them to systemic risk from linked entities. The Commission
acknowledges that clearing agencies that form linkages may be exposed
to additional risks, including credit and liquidity risks, as a
consequence of these links. Links may, however, produce benefits for
members to the extent that diversification and hedging across their
combined portfolio reduces their margin requirements. At the same time,
because such an agreement requires the linked clearing agencies to each
guarantee cross-margining participants' obligations to the other
clearing agency, cross-margining potentially exposes members of one
clearing agency to default risk from members of the other.
    By requiring that covered clearing agencies have policies and
procedures reasonably designed to identify, monitor, and manage risks
related to any link, Rule 17Ad-22(e)(20), like Rule 17Ad-22(d)(7),
reduces the likelihood that such links serve as channels for systemic
risk transmission. Because Rule 17Ad-22(e)(20) differs only marginally
from Rule 17Ad-22(d)(7), the Commission believes that the costs and
benefits flowing from the adopted rule will be incremental, to the
extent that the additional specificity in Rule 17Ad-22(e)(20) causes
covered clearing agencies to modify current practices. The Commission
has aggregated these costs below.
xiv. Rule 17Ad-22(e)(21): Efficiency and Effectiveness
    Rule 17Ad-22(e)(21) would impose on covered clearing agencies
requirements in addition to those currently applied to registered
clearing agencies under Rule 17Ad-22(d)(6) by also requiring covered
clearing agencies to have policies and procedures that ensure that a
covered clearing agency's

management review efficiency and effectiveness in four key areas:
     Efficiency and effectiveness in clearing and settlement
arrangements may reduce participants' transaction costs and enhance
liquidity by reducing the amount of collateral that customers must
provide for transactions and the opportunity cost associated with
providing such collateral. Where appropriate, net settlement
arrangements can reduce collateral requirements. Similarly, clearing
arrangements that include a broad scope of products enable clearing
members to take advantage of netting efficiencies across positions.
     Efficient and effective operating structures, including
risk management policies, procedures, and systems, may reduce the
likelihood of failures that may lead to impairment of a clearing
agency's capacity to complete settlement and interfering with its
ability to monitor and manage credit exposures.
     An efficient scope of products that a clearing agency
clears, settles, or records may provide its participants and customers
with more efficient collateral arrangements and cross-margining
benefits that ultimately reduce transaction costs and improve liquidity
in cleared markets.
     Efficient and effective use of technology and
communication procedures facilitates effective payment, clearing and
settlement, and recordkeeping.
    The Commission believes that requirements related to the efficient
and effective operation of covered clearing agencies are appropriate
given the market power enjoyed by these entities, as discussed in Part
III.B.1.d. Limited competition in the market for clearing services may
blunt incentives for covered clearing agencies to provide high quality
services at low cost to market participants in the absence of
regulation.
    Based on its supervisory experience, the Commission believes that
some covered clearing agencies would be required to make updates to
their policies and procedures as a result of the rule. As a result, the
Commission expects incremental costs and benefits to flow from the
adopted rule only to the extent that this additional specificity causes
covered clearing agencies to modify current practices.
xv. Rule 17Ad-22(e)(22): Communication Procedures and Standards
    Based on its supervisory experience, the Commission believes that
some changes to policies and procedures would be necessary to meet
requirements under Rule 17Ad-22(e)(22).\752\ These costs are included
as a part of implementation costs, as discussed below. However, the
Commission understands that covered clearing agencies already
accommodate internationally accepted communication procedures and
standards and anticipates only incremental costs resulting from the
rule, in addition to the above discussed benefits. Registered clearing
agencies that may become covered clearing agencies in the future may
need to conform their practices to internationally accepted
communication procedures and standards, as well as adopt new policies
and procedures as a result of the rule, resulting in more substantial
costs.
---------------------------------------------------------------------------

    \752\ See supra Part II.C.22 (discussing the full set of
requirements under Rule 17Ad-22(e)(22)).
---------------------------------------------------------------------------

xvi. Rule 17Ad-22(e)(23): Disclosure of Rules, Key Procedures, and
Market Data
    Enhanced disclosure may also improve the efficiency of transactions
in cleared products and improve financial stability more generally by
improving the ability of members of covered clearing agencies to manage
risks and assess costs. Additional information would reduce the
potential for uncertainty on the part of clearing members regarding
their obligations to covered clearing agencies. Rule 17Ad-22(e)(23)
requires a covered clearing agency to establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
require specific disclosures. As in Rules 17Ad-22(d)(9) and (11),
covered clearing agencies would be required under Rule 17Ad-22(e)(23)
to disclose default procedures to the public and disclose sufficient
information to participants to allow them to manage the risks, fees,
and other material costs associated with membership.
    Under Rule 17Ad-22(e)(23), a covered clearing agency must
establish, implement, maintain and enforce written policies and
procedures reasonably designed to update, on a biannual basis, public
disclosures that describe the covered clearing agency's market and
activities, along with information about the agency's legal,
governance, risk management, and operating frameworks, including
specifically covering material changes since the last disclosure, a
general background on the covered clearing agency, a rule-by-rule
summary of compliance with Rules 17Ad-22(e)(1) through (22), and an
executive summary. The rule adds a new requirement, relative to
existing requirements for registered clearing agencies under Rule 17Ad-
22(d)(9), to update the disclosure biannually and to include, among
other things, specific data elements, including details about system
design and operations, transaction values and volumes, average intraday
exposure to participants, and statistics on operational reliability.
    Additional transparency may have benefits for participants and
cleared markets more generally. For example, if information about the
systems that support a covered clearing agency is public, investors may
be more certain that the market served by this agency is less prone to
disruption and more accommodating of trade. Furthermore, public
disclosure of detailed operating data may facilitate evaluation of each
covered clearing agency's operating record by market participants.
Further, under Rule 17Ad-22(e)(23)(iv), these disclosures would be made
about specific categories related to the compliance with Rule 17Ad-
22(e) that potentially facilitate comparisons between covered clearing
agencies. Additional availability of information on operations may
increase the likelihood that clearing agencies compete to win market
share from participants that value operational stability. This
additional market discipline may provide additional incentives for
covered clearing agencies to maintain reliability. Finally, updating
the public disclosure every two years or more frequently following
certain changes as required pursuant to Rule 17Ad-22(e)(23)(v) would
support the benefits of enhanced public disclosures by ensuring that
information provided to the public remains up-to-date. The Commission
believes this would reduce the likelihood that market participants are
forced to evaluate covered clearing agencies on the basis of stale
data.
    Clearing members, in particular, may benefit from additional
disclosure of risk management and governance arrangements. These
details potentially have significant bearing on clearing members' risk
management because they may remove uncertainty surrounding members'
potential obligations to a covered clearing agency. In certain
circumstances, additional disclosures may reveal to members that the
expected costs of membership exceed the expected benefits of
membership, and that exit from the clearing agency may be privately
optimal. In addition to the costs of concentration among members
discussed in earlier sections, the Commission also recognizes the
potential for systemic benefits from termination. Member exit on the
basis of

more precise information may reduce the risk posed to other financial
market participants by members who, given additional information, might
prefer to terminate their membership, due to an inability to manage the
risks to which a covered clearing agency exposes them. While exit from
clearing agencies may have consequences for competition among clearing
members, the Commission believes that encouraging the participation of
firms that are not able to bear the risks of membership is not an
appropriate means of mitigating the effects of market power on
participants in cleared markets.
    While it is possible that some covered clearing agencies will
require changes to policies and procedures as a result of the adopted
rules, the Commission believes that the effect of Rule 17Ad-22(e)(23)
will not have a substantial impact on compliance costs because covered
clearing agencies already gather data and information for preparing
their responses to the PFMI quantitative disclosures, which are updated
semiannually.
b. Rule 17Ab2-2
    Rule 17Ab2-2 provides procedures for the Commission to determine
whether a covered clearing agency is systemically important in multiple
jurisdictions or has a complex risk profile and therefore should be
subject to stricter risk management standards under Rule 17Ad-22(e).
The Commission intends for Rule 17Ab2-2 to provide the Commission with
discretion to consider those criteria relevant to the facts and
circumstances of a registered clearing agency when subject to a
determination.
    Rule 17Ab2-2(a) includes criteria the Commission may consider in
determining whether a covered clearing agency is systemically important
in multiple jurisdictions. These criteria are based on input from a set
of other bodies comprised of FSOC and regulators in other
jurisdictions. As a result, it is possible that the flow of costs and
benefits from Rule 17Ad-22(e) may be partially determined by the
decisions of other regulatory bodies.
    Rule 17Ab2-2(b), includes criteria that the Commission may use to
determine that a clearing agency has a complex risk profile. For
example, the Commission may consider the extent to which the clearing
agency clears financial instruments that are characterized by discrete
jump-to-default price changes or that are highly correlated with
potential participant defaults.
    Indirect effects of the determination process may have important
economic effects on the ultimate volume of clearing activity, beyond
the economic effects of the proposed requirements themselves. An
important feature of Rule 17Ab2-2 is providing transparency for the
determinations process. Transparency may allow a registered clearing
agency to plan for resulting obligations under Rule 17Ad-22(e).
    To the extent that Rule 17Ad-22(e) may increase costs for a covered
clearing agency relative to its peers, such clearing agency may have
incentives to restructure its business to avoid a Commission
determination or otherwise exit any services made prohibitively
expensive by such a determination. Such potential consequential effects
would be among the considerations for the Commission to review in
connection with any specific decision under Rule 17Ab2-2. Restructuring
may involve spinning off business lines into separate entities,
limiting the scope of clearing activities to certain markets, or
limiting the scale of clearing activities within a single market. Any
of these outcomes could result in inefficiencies. As discussed in Part
III.B.1.c, registered clearing agencies may incur costs as a result of
restructuring. Registered clearing agencies that break up along product
lines or fail to consolidate when consolidation is efficient may fail
to take advantage of economies of scope and result in inefficient use
of collateral. Similarly, clearing agencies that limit their scale may
provide lower levels of clearing services to the markets that they
serve.
    The impact of adopting Rule 17Ab2-2, which can affect the
application of Rule 17Ad-22(e), could have direct costs on covered
clearing agencies in the form of legal or consulting costs incurred as
a result of seeking a determination from the Commission. In instances
where these clearing agencies choose to apply to the Commission for
status under Rule 17Ab2-2, the Commission believes that a registered
clearing agency's voluntary application would suggest that the
applicant's private benefits from enhanced requirements under Rule
17Ad-22(e) as a result of the Commission's determination that it is
systemically important in multiple jurisdictions justify its costs.
Quantifiable costs related to determinations under Rule a17Ab2-2 are
noted in Part III.B.3.d.
    In response to a comment about establishing a process for a covered
clearing agency to be removed from that status, the Commission has
decided to adopt such procedures in Rule 17Ab2-2(c). Specifically, if a
clearing agency no longer meets the determination of covered clearing
status, it can apply to be removed. This ability to remove the enhanced
requirements can facilitate a clearing agency's ability innovate or
enter new markets. Collectively, this could support the continued
development of the national system for clearance and settlement.
c. Rule 17Ad-22(f)
    Rule 17Ad-22(f) includes a provision that specifies Commission
authority over designated clearing agencies for which it is the
supervisory agency. Since this provision codifies existing statutory
authority, the Commission does not anticipate any economic effects from
this rule.
d. Quantifiable Costs and Benefits
    As discussed above, the amendments to Rule 17Ad-22 and Rule 17Ab2-2
would impose certain costs on covered clearing agencies. As discussed
in Part III.B.3.a.ii, if a covered clearing agency is required to
recruit new directors, the Commission estimates a cost per director of
$73,912.\753\ As discussed in Part I.A.1.a.i(4), the Commission
estimates costs associated with liquidity resources under Rules 17Ad-
22(e)(7) and (a)(15) would likely fall between $122 million and $204
million per year across all covered clearing agencies. As discussed in
Part I.A.1.a.i(5), the Commission believes that startup costs related
to financial risk management systems for existing covered clearing
agencies, related to new testing and model validation requirements to
be between $5 million to $25 million. The Commission also estimates a
lower bound on ongoing costs related to these requirements of $1
million per year. If covered clearing agencies were to hire external
consultants for the purposes of performing model validation required
under Rules 17Ad-22(e)(4) and (7) through policies and procedures, the
Commission estimates the ongoing cost associated with hiring such
consultants would be about $4,509,120 in the aggregate.\754\
---------------------------------------------------------------------------

    \753\ See supra note 709.
    \754\ See supra Part I.A.1.a.i(5), in particular note 739.
---------------------------------------------------------------------------

    In addition, Rules 17Ad-22(e)(3), (4), (6), (7), (15) and (21) all
include elements of review by either a covered clearing agency's board
or its management on an ongoing basis. The Commission estimates the
cost of ongoing review for these adopted rules at approximately $39,376
per year.\755\

The rules would also impose certain implementation burdens and related
costs on covered clearing agencies.\756\ These costs generally include
assessment costs to determine compliance with the adopted rules and
costs related to new policies and procedures and updates to existing
policies and procedures required by the rules. In Part IV.C, the
Commission estimates the burdens of these implementation requirements
for covered clearing agencies.
---------------------------------------------------------------------------

    \755\ To monetize the cost of board review, the Commission used
a recent report by Bloomberg stating that the average director works
250 hours and earns $251,000, resulting in an estimated $1000 per
hour for board review. As a proxy for the cost of management review,
the Commission is estimating $461 per hour, based upon the Director
of Compliance cost data from the SIFMA table, see infra note 756.
The Commission estimates the total cost of review for each clearing
agency as follows: ((Board Review for 32 hours at $1000 per hour) +
(Management Review for 16 hours at $461 per hour)) = $39,376.
    \756\ To monetize the internal costs the Commission staff used
data from the SIFMA publications, Management and Professional
Earnings in the Security Industry--2013, and Office Salaries in the
Securities Industry--2013, modified by the Commission staff to
account for an 1800 hour work-year and multiplied by 5.35
(professionals) or 2.93 (office) to account for bonuses, firm size,
employee benefits and overhead. These figures have been adjusted for
inflation using data published by the Bureau of Labor Statistics.
Commission staff also estimated an hourly rate for a Chief Financial
Officer. The Web site www.salary.com reports that median CFO annual
salaries in 2016 were $306,789. A Grant Thornton LLP survey
estimated that in 2016 public company CFOs will receive an average
annual salary of $303,975. Using an approximate midpoint of these
two estimates of $305,000 per year, and dividing by an 1800-hour
work year and multiplying by the 5.35 factor which normally is used
to include benefits but here is used as an approximation to offset
the fact that New York salaries are typically higher than the rest
of the country, the result is $906 per hour.
---------------------------------------------------------------------------

    For a new entrant into the set of covered clearing agencies from
the set of registered clearing agencies, the Commission estimates the
startup compliance costs associated with policies and procedures to be
$592,215,\757\ and compliance costs associated with the determinations
process under Rule 17Ab2-2 to be $7,764.\758\ Based on its supervisory
experience, the Commission believes that in many cases registered
clearing agencies are already in compliance with many of the
requirements included in the rules, so this cost represents an upper
bound on upfront costs. Conditioned on its current understanding of
current market practice at covered clearing agencies, the Commission
estimates that the total costs across all existing covered clearing
agencies will be $4,268,075.\759\ The Commission estimates that in the
aggregate existing covered clearing agencies would be subject to
ongoing costs associated with the rule in the amount of approximately
$926,603 per year.\760\
---------------------------------------------------------------------------

    \757\ The total initial cost for an entrant that is not a CSD
and does engage in activities with a more complex risk profile was
calculated as follows: ((Assistant General Counsel for 428 hours at
$440 per hour) + (Compliance Attorney for 365 hours at $334 per
hour) + (Administrative Assistant for 2 hours at $76 per hour) +
(Computer Operations Department Manager for 300 hours at $416 per
hour) + (Senior Business Analyst for 85 hours at $259 per hour) +
(Senior Risk Management Specialist for 114 hours at $338 per hour) +
(Chief Compliance Office for 102 hours at $501 per hour) + (Senior
Programmer for 53 hours at $313 per hour) + (Chief Financial Officer
for 50 hours at $906 per hour) + (Financial Analyst for 70 hours at
$259 per hour)) = $626,850.
    \758\ The total cost associated with determinations under Rule
17Ab2-2 was calculated as follows: ((Assistant General Counsel for 2
hours at $440 per hour) + (Compliance Attorney for 3 hours at $300
per hour) + (Outside Counsel for 5 hours at $400 per hour)) x 2
registered clearing agencies = $7,764.
    \759\ The total initial cost was calculated as follows:
((Assistant General Counsel for 2,906 hours at $440 per hour) +
(Compliance Attorney for 2,475 hours at $334 per hour) +
(Administrative Assistant for 14 hours at $76 per hour) + (Computer
Operations Department Manager for 2,030 hours at $416 per hour) +
(Senior Business Analyst for 565 hours at $259 per hour) + (Senior
Risk Management Specialist for 773 hours at $338per hour) + (Chief
Compliance Office for 699 hours at $501 per hour) + (Senior
Programmer for 361 hours at $313 per hour) + (Chief Financial
Officer for 350 hours at $906 per hour) + (Financial Analyst for 490
hours at $259 per hour) + (Intermediate Accountant for 15 hours at
$162 per hour)) = $4,268,075.
    \760\ The total ongoing cost was calculated as follows:
((Compliance Attorney for 1,851 hours at $334 per hour) +
(Administrative Assistant for 137 hours at $76 per hour) + (Senior
Business Analyst for 151 hours at $259 per hour) + (Senior Risk
Management Specialist for 70 hours at $338 per hour) + (Risk
Management Specialist for 1,251 hours at $188 per hour)) = $926,603.
---------------------------------------------------------------------------

    A benefit of the rules that the Commission is able to quantify is
the impact of QCCP status of OCC to non-U.S. bank clearing members at
OCC. This benefit comes as a result of lower capital requirements
against exposures to QCCPs relative to non-qualifying CCPs. In Part
III.B.1.e, the Commission provided an estimate of the upper bound of
this benefit, $1.2 billion per year, or 0.73% of the aggregate 2015 net
income reported by bank clearing members at OCC. The Commission
believes that the actual benefits flowing from QCCP status would likely
be higher due to benefits for foreign bank members of FICC and ICEEU,
in addition to the benefits with respect to OCC discussed above.\761\
---------------------------------------------------------------------------

    \761\ See supra note 689 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that the rules will result in an increase
in financial stability insofar as they result in minimum standards at
covered clearing agencies that are higher than those standards implied
by current practices at covered clearing agencies. Some of this
increased stability may come as a result of lower activity as the
adopted rules cause participants to internalize a greater proportion of
the costs that their activity imposes on the financial system, reducing
the costs of default, conditional on a default event occurring.
Increased stability may also come as a result of higher risk management
standards at covered clearing agencies that effectively lower the
probability that either covered clearing agencies or their members
default.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') imposes certain
requirements on federal agencies in connection with the conducting or
sponsoring of any ``collection of information.'' \762\ 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 control
number. Further, 44 U.S.C. 3507(a) provides that, before adopting or
revising a collection of information requirement, an agency must, among
other things, publish notice in the Federal Register stating that the
agency has submitted the proposed collection of information to the
Office of Management and Budget (``OMB'') and setting forth certain
required information, including (i) a title for the collection of
information; (ii) a summary of the collection of information; (iii) a
brief description of the need for the information and the proposed use
of the information; (iv) a description of the likely respondents and
proposed frequency of response to the collection of information; (v) an
estimate of the paperwork burden that shall result from the collection
of information; and (vi) notice that comments may be submitted to the
agency and director of OMB.\763\
---------------------------------------------------------------------------

    \762\ See 44 U.S.C. 3501 et seq.; 44 U.S.C. 3502(3).
    \763\ See 44 U.S.C. 3507(a)(1)(D); see also 5 CFR
1320.5(a)(1)(iv).
---------------------------------------------------------------------------

    Certain provisions of Rule 17Ad-22(e) impose new collection of
information requirements under the PRA. The Commission submitted these
collections of information to the OMB for review in accordance with 44
U.S.C. 3507 and 5 CFR 1320.11. Because the Commission is revising the
collection of information under Rule 17Ad-22 to account for new Rule
17Ad-22(e), the Commission will use the same title and control number:
``Clearing Agency Standards for Operation and Governance,'' OMB Control
No. 3235-0695. Since Rule 17Ab2-2 contains a new collection of
information requirement, the title and control number are
``Determinations Affecting Covered Clearing Agencies,'' OMB Control No.
3235-0728.
    The Commission provided notice of the below PRA estimates in the
CCA Standards proposing release and

received no comments in response.\764\ As discussed further below, the
Commission has modified the final PRA estimates to account for the
modifications to Rules 17Ad-22(e) and 17Ab2-2 described in Part II and
to Rule 17Ad-22(c)(1) described in Part I.C.3.
---------------------------------------------------------------------------

    \764\ See CCA Standards proposing release, supra note 5, at
29560-75.
---------------------------------------------------------------------------

A. Summary of Collection of Information and Use of Information

    Below is a summary of the collection of information and the use of
information for Rules 17Ad-22(e) and 17Ab2-2. The Commission received
no comments regarding the summary or the use of information. In
addition, because the Commission is modifying Rule 17Ad-22(c)(1) in
response to comments addressed above, Rule 17Ad-22(c)(1) is also
discussed below.\765\ The Commission notes that the policies and
procedures would also be used by the Commission as part of its ongoing
efforts to monitor and enforce compliance with the federal securities
laws through, among other things, examinations and inspections.
---------------------------------------------------------------------------

    \765\ See supra Part I.C.3.
---------------------------------------------------------------------------

1. Rule 17Ad-22(e)(1)
    As proposed, Rule 17Ad-22(e)(1) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to provide for a well-founded,
clear, transparent and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions. The Commission is adopting
Rule 17Ad-22(e)(1) as proposed.\766\
---------------------------------------------------------------------------

    \766\ See supra Part II.C.1.
---------------------------------------------------------------------------

    The purpose of this information collection is to reduce the
potential for legal risk at covered clearing agencies, such as the risk
that participants face legal uncertainty due to a lack of clarity or
completeness regarding conflicts with applicable laws.
2. Rule 17Ad-22(e)(2)
    As proposed, Rules 17Ad-22(e)(2)(i) through (iii) would require a
covered clearing agency to establish, implement, maintain and enforce
written policies and procedures reasonably designed to provide for
governance arrangements that are clear and transparent, clearly
prioritize the safety and efficiency of the covered clearing agency,
and support the public interest requirements in Section 17A of the
Exchange Act and the objectives of owners and participants. Proposed
Rule 17Ad-22(e)(2)(iv) would require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for governance arrangements
establishing that the board of directors and senior management have
appropriate experience and skills to discharge their duties and
responsibilities.\767\
---------------------------------------------------------------------------

    \767\ See supra Part II.C.2.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(2) with two
modifications, as previously discussed in Part II.C.2.c. First, the
Commission is adding new paragraph (v) to require policies and
procedures that specify clear and direct lines of responsibility. The
Commission believes that clearly delineating lines of responsibility
will help foster accountability of the board of directors and senior
management, a concern expressed by commenters. The Commission also
believes that this requirement complements the requirements in Rule
17Ad-22(e)(iv) addressing the qualifications of the board and
management.\768\ Second, the Commission is adopting new paragraph (vi)
to require a covered clearing agency's governance arrangements to
consider the interests of participants' customers, securities issuers
and holders, and other relevant stakeholders of the covered clearing
agency. The Commission believes that the comments received in response
to Rule 17Ad-22(e)(2), at a general level, express concern as to
whether a covered clearing agency will have governance arrangements
sufficiently robust to incorporate the views of the relevant
stakeholders and to withstand the influence of potentially improper
incentives. The Commission believes that this modification helps
mitigate these concerns by adding a requirement to consider the
interests of the relevant stakeholders. The Commission also believes
that they complement the other requirements in Rule 17Ad-22(e)(2) and
flow from the existing requirements in Section 17A of the Exchange Act,
in particular the fair representation, investor protection, and public
interest requirements discussed previously.\769\
---------------------------------------------------------------------------

    \768\ See supra Part II.C.2.b.iii.
    \769\ See supra Part II.C.2.c.
---------------------------------------------------------------------------

    The purpose of this information collection is to prioritize the
safety and efficiency of covered clearing agencies, to help ensure that
each covered clearing agency's governance arrangements consider the
interests of the relevant stakeholders, to promote the establishment of
boards of directors at covered clearing agencies that are composed of
qualified members with clear and direct lines of responsibility, and to
promote accountability of the board of directors and senior management.
3. Rule 17Ad-22(e)(3)
    As proposed, Rule 17Ad-22(e)(3) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to maintain a sound risk management
framework for comprehensively managing legal, credit, liquidity,
operational, general business, investment, custody, and other risks
that arise in or are borne by the covered clearing agency. Proposed
Rule 17Ad-22(e)(3)(i) would require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for risk management policies,
procedures, and systems designed to identify, measure, monitor, and
manage the range of risks that arise in or are borne by the covered
clearing agency, and subject them to review on a specified periodic
basis and approval by the board of directors annually. Proposed Rule
17Ad-22(e)(3)(ii) would require a covered clearing agency to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to ensure it establishes plans for the recovery and
orderly wind-down of the covered clearing agency necessitated by credit
losses, liquidity shortfalls, losses from general business risk, or any
other losses. Proposed Rule 17Ad-22(e)(iii) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to provide risk management
and internal audit personnel with sufficient authority, resources,
independence from management, and access to the board of directors.
Proposed Rule 17Ad-22(e)(3)(iv) would require a covered clearing agency
to establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide risk management and internal
audit personnel with oversight by and a direct reporting line to a risk
management committee and an audit committee of the board of directors,
respectively. Proposed Rule 17A-22(e)(3)(v) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to provide for an
independent audit committee.
    The Commission is adopting Rule 17Ad-22(e)(3) with one
modification. To make clear that the audit committee described in Rule
17Ad-22(e)(3)(iv) and the independent audit committee described in Rule
17Ad-22(e)(3)(v) are

not separate audit committees, the Commission is adding ``independent''
before audit committee in Rule 17Ad-22(e)(3)(iv).\770\
---------------------------------------------------------------------------

    \770\ See supra Part II.C.3.
---------------------------------------------------------------------------

    The purpose of this information collection is to enhance each
covered clearing agency's ability to identify, monitor, and manage the
risks that covered clearing agencies face, including by subjecting the
relevant policies and procedures to regular review, and to facilitate
an orderly recovery and wind-down process in the event that a covered
clearing agency is unable to continue operating as a going concern.
4. Rule 17Ad-22(e)(4)
    As proposed, Rule 17Ad-22(e)(4) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to effectively identify, measure,
monitor, and manage its credit exposures to participants and those
exposures arising from its payment, clearing, and settlement processes.
    Proposed Rule 17Ad-22(e)(4)(i) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to maintain sufficient financial
resources to cover its credit exposure to each participant fully with a
high degree of confidence. Proposed Rule 17Ad-22(e)(4)(ii) would
require a covered clearing agency that provides CCP services, and that
is ``systemically important in multiple jurisdictions'' or ``a clearing
agency involved in activities with a more complex risk profile,'' to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to maintain additional financial
resources, to the extent not already maintained pursuant to proposed
Rule 17Ad-22(e)(4)(i), at a minimum level necessary to enable it to
cover a wide range of foreseeable stress scenarios, including but not
limited to the default of the two participant families that would
potentially cause the largest aggregate credit exposure for the covered
clearing agency in extreme but plausible market conditions (hereinafter
the ``cover two'' requirement). Meanwhile, proposed Rule 17Ad-
22(e)(4)(iii) would require a covered clearing agency that is not
subject to proposed Rule 17Ad-22(e)(4)(ii) to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to maintain additional financial resources, to the extent not
already maintained pursuant to proposed Rule 17Ad-22(e)(4)(i), at the
minimum to enable it to cover a wide range of foreseeable stress
scenarios, including the default of the participant family that would
potentially cause the largest aggregate credit exposure for the covered
clearing agency in extreme but plausible market conditions (hereinafter
the ``cover one'' requirement). Proposed Rule 17Ad-22(e)(4)(iv) would
require a covered clearing agency to establish, implement, maintain and
enforce written policies and procedures reasonably designed to include
prefunded financial resources, excluding assessments for additional
guaranty fund contributions or other resources that are not prefunded,
when calculating the financial resources available to meet the
standards under proposed Rules 17Ad-22(e)(4)(i) through (iii), as
applicable. Proposed Rule 17Ad-22(e)(4)(v) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to maintain the financial
resources required under proposed Rules 17Ad-22(e)(4)(i) through (iii),
as applicable, in combined or separately maintained clearing or
guaranty funds.
    Proposed Rule 17Ad-22(e)(4)(vi) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to test the sufficiency of its total
financial resources available to meet the minimum financial resource
requirements under proposed Rules 17Ad-22(e)(4)(i) through (iii), as
applicable, by conducting a stress test of its total financial
resources at least once each day using standard predetermined
parameters and assumptions. Proposed Rule 17Ad-22(e)(4)(vi) would also
require a covered clearing agency to establish, implement, maintain and
enforce written policies and procedures reasonably designed to conduct
a comprehensive analysis on at least a monthly basis of the existing
stress testing scenarios, models, and underlying parameters and
assumptions, and consider modifications to ensure they are appropriate
for determining the covered clearing agency's required level of default
protection in light of current market conditions. When the products
cleared or markets served by a covered clearing agency display high
volatility or become less liquid, and when the size or concentration of
positions held by the entity's participants increases significantly,
the proposed rule would require a covered clearing agency to have
policies and procedures for conducting comprehensive analyses of stress
testing scenarios, models, and underlying parameters and assumptions
more frequently than monthly. Proposed Rule 17Ad-22(e)(4)(vi) would
also require a covered clearing agency to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to provide for the reporting of the results of this analysis
to the appropriate decision makers at the covered clearing agency,
including its risk management committee or board of directors, and to
require the use of the results to evaluate the adequacy of and to
adjust its margin methodology, model parameters, and any other relevant
aspects of its credit risk management policies and procedures, in
supporting compliance with the minimum financial resources requirements
in proposed Rules 17Ad-22(e)(4)(i) through (iii), as applicable.\771\
---------------------------------------------------------------------------

    \771\ See id. at 29526-27.
---------------------------------------------------------------------------

    Finally, proposed Rule 17Ad-22(e)(4)(vii) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to require a conforming
model validation for its credit risk models to be performed not less
than annually or more frequently as may be contemplated by the covered
clearing agency's risk management policies and procedures. The
Commission also proposed to define ``conforming model validation'' to
mean an evaluation of the performance of each material risk management
model used by a covered clearing agency, including initial margin
models, liquidity risk models, and models used to generate guaranty
fund requirements, along with the related parameters and assumptions
associated with such models. The proposed definition would further
require that the model validation be performed by a qualified person
who is free from influence from the persons responsible for the
development or operation of the models or policies being validated so
that risk models can be candidly assessed.\772\
---------------------------------------------------------------------------

    \772\ See supra Part II.C.4.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(4) with modifications,
as previously discussed in Part II.C.4.c. The Commission is adopting
two modifications to Rule 17Ad-22(e)(4)(vii). First, because the
Commission is modifying the definition of ``conforming model
validation'' by striking ``conforming,'' as previously discussed in
Part II.C.4.c, the Commission is modifying Rule 17Ad-22(e)(4)(vii) to
conform to the revised

definition. Second, to be consistent with the corresponding requirement
for model validation of liquidity risk models in Rule 17Ad-
22(e)(7)(vii), the Commission is modifying Rule 17Ad-22(e)(4)(vii) by
striking ``to be performed.'' \773\
---------------------------------------------------------------------------

    \773\ See supra Part II.C.4.c.
---------------------------------------------------------------------------

    The Commission is also adopting four other modifications to Rule
17Ad-22(e)(4), as previously discussed in Part II.C.4.c. First, the
Commission is modifying Rule 17Ad-22(e)(4)(v) so that it references
only paragraphs (e)(4)(ii) and (iii) (and not paragraph (e)(4)(i)),
consistent with the Commission's discussion of the proposed rule in the
CCA Standards proposing release. Second, to make clear that prefunded
financial resources should be exclusive of assessments for additional
guaranty fund contributions or other resources that are not prefunded,
the Commission is modifying Rule 17Ad-22(e)(4)(iv) to state ``exclusive
of'' assessments rather than ``excluding'' assessments. Third, the
Commission is modifying Rule 17Ad-22(e)(4)(vi)(A) to refer to ``stress
testing'' rather than ``a stress test'' to improve consistency with the
definition of ``stress testing'' in Rule 17Ad-22(a)(17). Fourth, the
Commission is revising Rule 17Ad-22(e)(4)(vi)(C) to replace ``and''
with ``or'' so that the criteria for conducting analysis more
frequently than monthly are disjunctive rather than conjunctive, since
the criteria described may not be correlated to each other. Fifth, the
Commission is correcting a technical error in Rule 17Ad-
22(e)(4)(vi)(D): references to paragraphs (e)(4)(iv)(B) and (C) will be
changed to paragraphs (e)(4)(vi)(B) and (C) respectively. Sixth, the
Commission is moving requirements proposed in Rule 17Ad-22(e)(13) to
Rule 17Ad-22(e)(4) so that all requirements pertinent to a covered
clearing agency's management of credit risk are contained in one rule.
This modification is discussed below in Part IV.A.13.\774\
---------------------------------------------------------------------------

    \774\ See also supra Part II.C.13.c.
---------------------------------------------------------------------------

    The purpose of this information collection is to identify and limit
credit exposures to participants and to satisfy all of its settlement
obligations in the event of a participant default, to address the
allocation of credit losses if collateral and other resources are
insufficient to fully cover its credit exposures following a
participant default, and to describe the covered clearing agency's
process to replenish financial resources following such a default.
5. Rule 17Ad-22(e)(5)
    As proposed, Rule 17Ad-22(e)(5) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to limit the assets it accepts as
collateral to those with low credit, liquidity, and market risks, and
also require policies that set and enforce appropriately conservative
haircuts and concentration limits if the covered clearing agency
requires collateral to manage its own or its participants' credit
exposures. In addition, Rule 17Ad-22(e)(5) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to include a not-less-than-
annual review of the sufficiency of a covered clearing agency's
collateral haircuts and concentration limits. The Commission is
adopting Rule 17Ad-22(e)(5) as proposed.\775\
---------------------------------------------------------------------------

    \775\ See supra Part II.C.5.
---------------------------------------------------------------------------

    The purpose of the information collection is to enable a covered
clearing agency to be able to maintain sufficient collateral by using
appropriately conservative haircuts and concentration limits.
6. Rule 17Ad-22(e)(6)
    As proposed, Rule 17Ad-22(e)(6) would require a covered clearing
agency that provides CCP services to establish, implement, maintain and
enforce written policies and procedures reasonably designed to cover
its credit exposures to its participants by establishing a risk-based
margin system that is monitored by management on an ongoing basis and
regularly reviewed, tested, and verified. Proposed Rule 17Ad-
22(e)(6)(i) would require a covered clearing agency that provides CCP
services to establish, implement, maintain and enforce written policies
and procedures reasonably designed to result in a 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. Proposed Rule 17Ad-22(e)(6)(ii) would require a
covered clearing agency that provides CCP services to establish
implement, maintain and enforce written policies and procedures
reasonably designed to ensure that the margin system would mark
participant positions to market and collect margin, including variation
margin or equivalent charges if relevant, at least daily, and include
the authority and operational capacity to make intraday margin calls in
defined circumstances. Proposed Rule 17Ad-22(e)(6)(iii) would require a
covered clearing agency that provides CCP services to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to calculate margin sufficient to cover its
potential future exposure to participants in the interval between the
last margin collection and the close out of positions following a
participant default. Proposed Rule 17Ad-22(e)(6)(iv) would require a
covered clearing agency that provides CCP services to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to ensure that it uses reliable sources of timely
price data and procedures and sound valuation models for addressing
circumstances in which pricing data are not readily available or
reliable. Proposed Rule 17Ad-22(e)(6)(v) would require a covered
clearing agency that provides CCP services to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to ensure the use of an appropriate method for measuring
credit exposure that accounts for relevant product risk factors and
portfolio effects across products.
    Proposed Rule 17Ad-22(e)(6)(vi) would require a covered clearing
agency that provides CCP services to establish, implement, maintain and
enforce written policies and procedures reasonably designed to
establish a risk-based margin system that is monitored by management on
an ongoing basis. Proposed Rule 17Ad-22(e)(6)(vi) would also require a
covered clearing agency that provides CCP services to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to regularly review, test, and verify its risk-
based margin system by conducting backtests of its margin resources at
least once each day using standard predetermined parameters and
assumptions. Proposed Rule 17Ad-22(e)(6)(vi) would require a covered
clearing agency that provides CCP services to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to regularly review, test, and verify its risk-based margin
system by conducting a conforming sensitivity analysis of its margin
resources and its parameters and assumptions for backtesting on at
least a monthly basis, and considering modifications to ensure the
backtesting practices are appropriate for determining the adequacy of
the covered clearing agency's margin resources. Proposed Rule 17Ad-
22(e)(6)(vi) would require a covered clearing agency that provides CCP

services to establish, implement, maintain and enforce written policies
and procedures reasonably designed to regularly review, test, and
verify its risk-based margin system by conducting a conforming
sensitivity analysis of its margin resources and its parameters and
assumptions for backtesting more frequently than monthly during periods
of time when the products cleared or markets served display high
volatility or become less liquid, and when the size or concentration of
positions held by the covered clearing agency's participants increases
or decreases significantly. Proposed Rule 17Ad-22(e)(6)(vi) would
require a covered clearing agency that provides CCP services to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to regularly review, test, and verify
its risk-based margin system by reporting the results of its analyses
above to appropriate decision makers at the covered clearing agency,
including but not limited to, its risk management committee or board of
directors, and using these results to evaluate the adequacy of and
adjust its margin methodology, model parameters, and any other relevant
aspects of its credit risk management framework.\776\
---------------------------------------------------------------------------

    \776\ See id. at 29530.
---------------------------------------------------------------------------

    Finally, proposed Rule 17Ad-22(e)(6)(vii) would require a covered
clearing agency that provides CCP services to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to require not less than annually a conforming model
validation of the covered clearing agency's margin system and related
models.\777\
---------------------------------------------------------------------------

    \777\ See supra Part II.C.6.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(6) with modifications,
as previously discussed in Part II.C.6.c. First, the Commission is
modifying Rule 17Ad-22(e)(6) to remove references to ``conforming''
consistent with the modification to the definitions of ``sensitivity
``analysis'' discussed in Part II.C.6.c and of ``model validation''
discussed in Part II.C.4.c. Second, to improve clarity, the Commission
is modifying Rule 17Ad-22(e)(6)(v) to require policies and procedures
that use reliable sources of timely price data and that ``use''
procedures and sound valuation models for addressing circumstances in
which pricing data are not readily available or reliable. Third,
because backtests are conducted with respect to the margin model and
not margin resources, the Commission is modifying Rule 17Ad-
22(e)(6)(vi)(A) to replace the phrase ``margin resources'' with
``margin model.'' Fourth, to avoid conflating sensitivity analysis with
backtesting, the Commission is modifying Rules 17Ad-22(e)(6)(vi)(B) and
(C) to clarify that a sensitivity analysis should be conducted of the
margin model and not of margin resources. Fifth, the Commission is
modifying Rule 17Ad-22(e)(6)(vi)(C) to replace ``and'' with ``or'' so
that the criteria for conducting analysis more frequently than monthly
are disjunctive rather than conjunctive, since the criteria described
may not be correlated to each other.
    The purpose of the information collection is to enable a covered
clearing agency to be able to collect sufficient margin subject to
regular sensitivity analysis, monthly backtesting, and an annual model
validation.
7. Rule 17Ad-22(e)(7)
    As proposed, Rule 17Ad-22(e)(7) would require a covered clearing
agency to 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 it, by meeting,
at a minimum, the ten requirements specified in the rule.
    Proposed Rule 17Ad-22(e)(7)(i) would require that a covered
clearing agency's policies and procedures be reasonably designed to
ensure that it maintains sufficient liquid resources 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 potential stress scenarios that
includes the default of the participant family that would generate the
largest aggregate payment obligation for it in extreme but plausible
market conditions.
    Proposed Rule 17Ad-22(e)(7)(ii) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure that it holds qualifying
liquid resources sufficient to meet the minimum liquidity resource
requirement in each relevant currency for which the covered clearing
agency has payment obligations owed to clearing members.
    Proposed Rule 17Ad-22(e)(7)(iii) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure it uses accounts and
services at a Federal Reserve Bank, pursuant to Section 806(a) of the
Clearing Supervision Act, or other relevant central bank, when
available and where determined to be practical by the board of
directors of the covered clearing agency, to enhance its management of
liquidity risk.
    Proposed Rule 17Ad-22(e)(7)(iv) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure it undertakes due
diligence to confirm that it has a reasonable basis to believe each of
its liquidity providers, whether or not such liquidity provider is a
clearing member, has sufficient information to understand and manage
the liquidity provider's liquidity risks, and the capacity to perform
as required under its commitments to provide liquidity.
    Proposed Rule 17Ad-22(e)(7)(v) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure that the covered clearing
agency maintains and, on at least an annual basis, tests with each
liquidity provider, to the extent practicable, its procedures and
operational capacity for accessing each type of relevant liquidity
resource.
    Proposed Rule 17Ad-22(e)(7)(vi)(A) through (C) would require a
covered clearing agency to establish, implement, maintain and enforce
written policies and procedures reasonably designed to determine the
amount and regularly test the sufficiency of the liquid resources held
for purposes of meeting the minimum liquid resource requirement of
proposed Rule 17Ad-22(e)(7)(i) by (A) conducting a stress test of its
liquidity resources at least once each day using standard and
predetermined parameters and assumptions; (B) conducting a
comprehensive analysis of the existing stress testing scenarios,
models, and underlying parameters and assumptions used in evaluating
liquidity needs and resources, and considering modifications to ensure
they are appropriate for determining the covered clearing agency's
identified liquidity needs and resources in light of current and
evolving market conditions at least once each month; and (C) conducting
a comprehensive analysis of the existing stress testing scenarios,
models, and underlying parameters and assumptions used in evaluating
liquidity needs and resources more frequently when products cleared or
markets served display high volatility or become less liquid, when the
size or concentration of positions held by participants increases
significantly, or in other circumstances described in the covered
clearing agency's policies and procedures. Proposed Rule 17Ad-
22(e)(7)(vi)(D) would also require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures

reasonably designed to result in reporting the results of the analyses
performed under proposed Rule 17Ad-22(e)(7)(vi)(B) and (C) to
appropriate decision makers, including the risk management committee or
board of directors, at the covered clearing agency for use in
evaluating the adequacy of and adjusting its liquidity risk management
framework.
    Proposed Rule 17Ad-22(e)(7)(vii) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to result in performing an annual or
more frequent conforming model validation of its liquidity risk
models.\778\
---------------------------------------------------------------------------

    \778\ See id.; see also supra notes 275-305 and accompanying
text (discussing generally the requirements accompanying the
definition of ``model validation'').
---------------------------------------------------------------------------

    Proposed Rule 17Ad-22(e)(7)(viii) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to address foreseeable liquidity
shortfalls that would not be covered by its liquid resources and seek
to avoid unwinding, revoking, or delaying the same-day settlement of
payment obligations.
    Proposed Rule 17Ad-22(e)(7)(ix) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to describe its process for
replenishing any liquid resources that it may employ during a stress
event.
    Finally, proposed Rule 17Ad-22(e)(7)(x) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to ensure that it, at least
once a year, evaluates the feasibility of maintaining sufficient liquid
resources at a 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 two participant families that would potentially cause
the largest aggregate credit exposure for the covered clearing agency
in extreme but plausible market conditions if the covered clearing
agency provides CCP services and is either systemically important in
multiple jurisdictions or a clearing agency involved in activities with
a more complex risk profile.\779\
---------------------------------------------------------------------------

    \779\ See supra Part II.C.7.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(7) with modifications,
as previously discussed in Part II.C.7.c. First, the Commission is
modifying Rule 17Ad-22(e)(7)(vi)(A) to refer to ``stress testing''
rather than ``a stress test'' to improve consistency with the
definition of ``stress testing'' in Rule 17Ad-22(a)(17). Second, the
Commission is modifying Rule 17Ad-22(e)(7)(vi)(C) in two ways. To
improve consistency with Rule 17Ad-22(e)(4)(vi)(C), the Commission is
adding ``or'' to link ``display high volatility'' with ``become less
liquid'' because these concepts are intended to describe events related
to the products cleared or markets served. The Commission is also
replacing ``and'' with ``or'' in Rule 17Ad-22(e)(7)(vi)(C) so that the
criteria for conducting analysis more frequently than monthly are
disjunctive rather than conjunctive, since the list of criteria is open
to other appropriate circumstances described in a covered clearing
agency's policies and procedures and may not be correlated. Third, the
Commission is making two modifications in adopting Rule 17Ad-
22(e)(7)(vi)(D) to correct technical errors in the proposed rule text:
(i) References to paragraphs (e)(6)(vii)(B) and (C) will be changed to
paragraphs (e)(7)(vi)(B) and (C) respectively; and (ii) the rule will
refer to the covered clearing agency's ``liquidity'' risk management
framework, rather than its ``credit'' risk management framework.
Fourth, the Commission is striking ``conforming'' from Rule 17Ad-
22(e)(7)(vii) to be consistent with the modifications to the definition
of ``model validation'' discussed in Part II.C.4.c.
    The purpose of this information collection is to identify and limit
liquidity risk so that a covered clearing agency can satisfy its
settlement obligations on an ongoing and timely basis by holding a
sufficient amount of qualifying liquid resources and performing regular
stress testing of its liquid resources. The purpose of this information
collection is also to help ensure that a covered clearing agency
addresses foreseeable liquidity shortfalls and can replenish any liquid
resources that it may employ in a stress event. The purpose of this
information collection is also to help ensure that a covered clearing
agency manages the risks posed by its liquidity providers.
8. Rule 17Ad-22(e)(8)
    As proposed, Rule 17Ad-22(e)(8) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to define the point at which
settlement is final no later than the end of the day on which the
payment or obligation is due and, where necessary or appropriate,
intraday or in real time.\780\
---------------------------------------------------------------------------

    \780\ See supra Part II.C.8.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(8) with one
modification, as previously discussed in Part II.C.8.c. To remove
potential ambiguity as to the timing of settlement finality under the
rule, the Commission is modifying Rule 17Ad-22(e)(8) to state that the
point at which settlement is final is ``to be'' no later than the end
of the day on which the payment or obligation is due and, where
necessary or appropriate, intraday or in real time.
    The purpose of this information collection is to promote consistent
standards of timing and reliability in the settlement process.
9. Rule 17Ad-22(e)(9)
    As proposed, Rule 17Ad-22(e)(9) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to conduct its money settlements in
central bank money, where available and determined to be practical by
the board of directors of the covered clearing agency, and minimizes
and manages credit and liquidity risk arising from conducting its money
settlements in commercial bank money if central bank money is not used
by the covered clearing agency. The Commission is adopting Rule 17Ad-
22(e)(9) as proposed.\781\
---------------------------------------------------------------------------

    \781\ See supra Part II.C.9.
---------------------------------------------------------------------------

    The purpose of this information collection is to promote
reliability in a covered clearing agency's settlement operations.
10. Rule 17Ad-22(e)(10)
    As proposed, Rule 17Ad-22(e)(10) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to establish and maintain
transparent written standards that state its obligations with respect
to the delivery of physical instruments and operational practices that
identify, monitor, and manage the risk associated with such physical
deliveries. The Commission is adopting Rule 17Ad-22(e)(10) as
proposed.\782\
---------------------------------------------------------------------------

    \782\ See supra Part II.C.10.
---------------------------------------------------------------------------

    The purpose of this information collection is to provide a covered
clearing agency's participants with the information necessary to
evaluate the risks and costs associated with participation in the
covered clearing agency.
11. Rule 17Ad-22(e)(11)
    As proposed, Rule 17Ad-22(e)(11)(i) would require a covered
clearing agency

that provides CSD services to establish, implement, maintain and
enforce written policies and procedures reasonably designed to maintain
securities in an immobilized or dematerialized form for their transfer
by book entry, ensure the integrity of securities issues, and minimize
and manage the risks associated with the safekeeping and transfer of
securities. Proposed Rule 17Ad-22(e)(11)(ii) would require a covered
clearing agency that provides CSD services to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to implement internal auditing and other controls to safeguard
the rights of securities issuers and holders and prevent the
unauthorized creation or deletion of securities, and conduct periodic
and at least daily reconciliation of securities issues it maintains.
Proposed Rule 17Ad-22(e)(11)(iii) would require a covered clearing
agency that provides CSD services to establish, implement, maintain and
enforce written policies and procedures reasonably designed to protect
assets against custody risk through appropriate rules and procedures
consistent with relevant laws, rules, and regulations in jurisdictions
where it operates. The Commission is adopting Rule 17Ad-22(e)(11) as
proposed.\783\
---------------------------------------------------------------------------

    \783\ See supra Part II.C.11.
---------------------------------------------------------------------------

    The purpose of this information collection is to reduce securities
transfer processing costs and the risks associated with securities
settlement and custody, as well as increase the speed and efficiency of
the settlement process.
12. Rule 17Ad-22(e)(12)
    As proposed, Rule 17Ad-22(e)(12) would require a covered clearing
agency, for transactions that involve the settlement of two linked
obligations, to establish, implement, maintain and enforce written
policies and procedures reasonably designed to eliminate principal risk
by conditioning the final settlement of one obligation upon the final
settlement of the other, regardless of whether the covered clearing
agency settles on a gross or net basis and when finality occurs. The
Commission is adopting Rule 17Ad-22(e)(12) as proposed.\784\
---------------------------------------------------------------------------

    \784\ See supra Part II.C.12.
---------------------------------------------------------------------------

    The purpose of this information collection is to promote the
elimination of principal risk in transactions with linked obligations.
13. Rule 17Ad-22(e)(13)
    As proposed, Rule 17Ad-22(e)(13) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure that the covered clearing
agency has the authority and operational capacity to take timely action
to contain losses and liquidity demands and continue to meet its
obligations in the event of a participant default. Proposed rule 17Ad-
22(e)(13)(i) would require a covered clearing agency to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to address the allocation of credit losses it may
face if its collateral and other resources are insufficient to fully
cover its credit exposures, including the repayment of any funds the
covered clearing agency may borrow from liquidity providers. Proposed
Rule 17Ad-22(e)(13)(ii) would require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to describe its process to replenish any
financial resources it may use following a member default or other
event in which use of such resources is contemplated. Finally, proposed
Rule 17Ad-22(e)(13)(iii) would require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to require the covered clearing agency's
participants and, when practicable, other stakeholders to participate
in the testing and review of its default procedures, including any
close-out procedures, at least annually and following material changes
thereto.\785\
---------------------------------------------------------------------------

    \785\ See supra Part II.C.13.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(13) with modifications,
as previously discussed in Part II.C.13.c and noted in Part IV.A.4. The
Commission is moving the requirements in proposed Rules 17Ad-
22(e)(13)(i) and (ii) to Rules 17Ad-22(e)(4)(viii) and (ix),
respectively, to consolidate requirements for management of a covered
clearing agency's default waterfall within a single rule. The
Commission believes this modification improves consistency between
Rules 17Ad-22(e)(4) and (7). Specifically, Rule 17Ad-22(e)(4) includes
requirements intended to facilitate the management of credit risk, and
proposed Rules 17Ad-22(e)(13)(i) and (ii) include requirements to
address the allocation of credit losses and the replenishment of funds.
Similarly, Rule 17Ad-22(e)(7) includes requirements intended to
facilitate the management of liquidity risk, and Rules 17Ad-
22(e)(7)(viii) and (ix) include requirements to address liquidity
shortfalls and replenish liquid resources. In contrast, Rule 17Ad-
22(e)(13) is intended to ensure that a covered clearing agency has
policies and procedures addressing its authority and operational
capacity to take timely action to contain losses and liquidity demands,
and proposed Rule 17Ad-22(e)(13)(iii) includes requirements related to
the testing of default procedures.
    The purpose of this information collection is to facilitate the
functioning of a covered clearing agency in the event that a
participant fails to meet its obligations, as well as limit the extent
to which a participant's failure can spread to other participants or
the covered clearing agency itself.
14. Rule 17Ad-22(e)(14)
    As proposed, Rule 17Ad-22(e)(14) would require a covered clearing
agency that is a security-based swap clearing agency or a complex risk
profile clearing agency to establish, implement, maintain and enforce
written policies and procedures reasonably designed to enable the
segregation and portability of positions of a member's customers and
the collateral provided to the covered clearing agency with respect to
those positions, and effectively protect such positions and related
collateral from the default or insolvency of that member. The
Commission is adopting Rule 17Ad-22(e)(14) as proposed.\786\
---------------------------------------------------------------------------

    \786\ See supra Part II.C.14.
---------------------------------------------------------------------------

    The purpose of this information collection is to facilitate the
safe and effective holding and transfer of customers' positions and
collateral in the event of a participant's default or insolvency.
15. Rule 17Ad-22(e)(15)
    As proposed, Rule 17Ad-22(e)(15) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to identify, monitor, and manage its
general business risk and hold sufficient liquid net assets funded by
equity to cover potential general business losses so that the covered
clearing agency can continue operations and services as a going concern
if those losses materialize. Proposed Rule 17Ad-22(e)(15)(i) would
require a covered clearing agency to establish, implement, maintain and
enforce written policies and procedures reasonably designed to
determine the amount of liquid net assets funded by equity based upon
its general business risk profile and the length of time required to
achieve a recovery or orderly wind-down, as

appropriate, of its critical operations and services if such action is
taken. Proposed Rule 17Ad-22(e)(15)(ii) would require a clearing agency
to establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for holding liquid net assets
funded by equity equal to the greater of either six months of its
current operating expenses or the amount determined by the board of
directors to be sufficient to ensure a recovery or orderly wind-down of
critical operations and services of the covered clearing agency, as
contemplated by the plans established under Rule 17Ad-22(e)(3)(ii).
Additionally, proposed Rule 17Ad-22(e)(15)(ii) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to provide for monitoring
its business operations and reducing the likelihood of losses. Proposed
Rule 17Ad-22(e)(15)(iii) would require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for maintaining a viable
plan, approved by the board of directors and updated at least annually,
for raising additional equity should its equity fall close to or below
the amount required by the rule, as discussed above. The Commission is
adopting Rule 17Ad-22(e)(15) as proposed.\787\
---------------------------------------------------------------------------

    \787\ See supra Part II.C.15.
---------------------------------------------------------------------------

    The purpose of this information collection is to mitigate the
potential impairment of a covered clearing agency as a result of a
decline in revenues or increase in expenses.
16. Rule 17Ad-22(e)(16)
    As proposed, Rule 17Ad-22(e)(16) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to safeguard its own and its
participants' assets and minimize the risk of loss and delay in access
to these assets. Proposed Rule 17Ad-22(e)(16) would also require a
covered clearing agency to establish, implement, maintain and enforce
written policies and procedures reasonably designed to invest such
assets in instruments with minimal credit, market, and liquidity risks.
The Commission is adopting Rule 17Ad-22(e)(16) as proposed.\788\
---------------------------------------------------------------------------

    \788\ See supra Part II.C.16.
---------------------------------------------------------------------------

    The purpose of this information collection is to improve the
ability of a covered clearing agency to meet its settlement
obligations.
17. Rule 17Ad-22(e)(17)
    As proposed, Rule 17Ad-22(e)(17) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to manage the covered clearing
agency's operational risk. Proposed Rule 17Ad-22(e)(17)(i) would
require a covered clearing agency to establish, implement, maintain and
enforce written policies and procedures reasonably designed to identify
the plausible sources of operational risk, both internal and external,
and mitigate their impact through the use of appropriate systems,
policies, procedures, and controls. Proposed Rule 17Ad-22(e)(17)(ii)
would require a covered clearing agency to establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to ensure that systems have a high degree of security,
resiliency, operational reliability, and adequate, scalable capacity.
Finally, proposed Rule 17Ad-22(e)(17)(iii) would require a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to provide for a business
continuity plan that addresses events posing a significant risk of
disrupting operations.
    The Commission is adopting Rule 17Ad-22(e)(17) with one
modification: Because the text in Rule 17Ad-22(e)(17)(ii) for
``establishing and maintaining policies and procedures reasonably
designed'' is duplicative of the requirement under Rule 17Ad-22(e) to
have policies and procedures reasonably designed to establish,
maintain, implement, and enforce the requirements thereunder, the
Commission is removing the duplicative text.\789\
---------------------------------------------------------------------------

    \789\ See supra Part II.C.17.
---------------------------------------------------------------------------

    The purpose of this information collection is to limit operational
disruptions that may impede the proper functioning of a covered
clearing agency.
18. Rule 17Ad-22(e)(18)
    As proposed, Rule 17Ad-22(e)(18) would require a covered clearing
agency to 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 FMUs. Proposed Rule 17Ad-22(e)(18) would also require that a
covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to require
participants to have sufficient financial resources and robust
operational capacity to meet obligations arising from participation in
the clearing agency and to monitor compliance with participation
requirements on an ongoing basis. The Commission is adopting Rule 17Ad-
22(e)(18) as proposed.\790\
---------------------------------------------------------------------------

    \790\ See supra Part II.C.18.
---------------------------------------------------------------------------

    The purpose of this information collection is to enable a covered
clearing agency to ensure that only entities with sufficient financial
and operational capacity are direct participants in the covered
clearing agency, while still ensuring that all qualified persons can
access a covered clearing agency's services. The purpose of this
information collection is also to enable a covered clearing agency to
monitor that participation requirements are met on an ongoing basis and
to identify a participant experiencing financial difficulties before
the participant fails to meet its settlement obligations.
19. Rule 17Ad-22(e)(19)
    As proposed, Rule 17Ad-22(e)(19) would require 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 in the
covered clearing agency to access the covered clearing agency's
payment, clearing, or settlement facilities (hereinafter ``tiered
participation arrangements''). In addition, proposed Rule 17Ad-
22(e)(19) would also require that a covered clearing agency establish,
implement, maintain and enforce written policies and procedures
reasonably designed to regularly review the material risks to the
covered clearing agency arising from such tiered participation
arrangements. The Commission is adopting Rule 17Ad-22(e)(19) as
proposed.\791\
---------------------------------------------------------------------------

    \791\ See supra Part II.C.19.
---------------------------------------------------------------------------

    The purpose of this information collection is to enable a covered
clearing agency to identify and manage risks posed by non-member
entities, such as the customers of clearing members.
20. Rule 17Ad-22(e)(20)
    As proposed, Rule 17Ad-22(e)(20) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures

reasonably designed to identify, monitor, and manage risks related to
any link with one or more other clearing agencies, FMUs, or trading
markets.\792\ The Commission is adopting Rule 17Ad-22(e)(20) as
proposed.
---------------------------------------------------------------------------

    \792\ See supra Part II.C.20.
---------------------------------------------------------------------------

    The purpose of this information collection is to enable a covered
clearing agency to identify and manage risks posed by linkages to other
entities, such as other clearing agencies, FMUs, or trading markets.
21. Rule 17Ad-22(e)(21)
    As proposed, Rule 17Ad-22(e)(21) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure that it is efficient and
effective in meeting the requirements of its participants and the
markets it serves. Proposed Rule 17Ad-22(e)(21) would also require a
covered clearing agency's management to regularly review the efficiency
and effectiveness of its (i) clearing and settlement arrangements; (ii)
operating structure, including risk management policies, procedures,
and systems; (iii) scope of products cleared, settled, or recorded; and
(iv) use of technology and communication procedures.
    The Commission is adopting Rule 17Ad-22(e)(21) with one
modification: the Commission is removing reference to ``recorded''
products under Rule 17Ad-22(e)(21)(iii) because recording products is
not a function of covered clearing agencies.\793\
---------------------------------------------------------------------------

    \793\ See supra Part II.C.21.
---------------------------------------------------------------------------

    The purpose of this information collection is to ensure that the
services provided by a covered clearing agency do not become
inefficient and to promote the sound operation of a covered clearing
agency.
22. Rule 17Ad-22(e)(22)
    As proposed, Rule 17Ad-22(e)(22) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure that it uses, or at a
minimum accommodates, relevant internationally accepted communication
procedures and standards in order to facilitate efficient payment,
clearing, and settlement. The Commission is adopting Rule 17Ad-
22(e)(22) as proposed.\794\
---------------------------------------------------------------------------

    \794\ See supra Part II.C.22.
---------------------------------------------------------------------------

    The purpose of this information collection is to ensure the prompt
and accurate clearance and settlement of securities transactions by
enabling participants to communicate with a clearing agency in a
timely, reliable, and accurate manner.
23. Rule 17Ad-22(e)(23)
    As proposed, Rule 17Ad-22(e)(23) would require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to maintain clear and comprehensive
rules and procedures that provide for the specific disclosures
enumerated in the rule, as discussed below. Proposed Rule 17Ad-
22(e)(23) would require such policies and procedures to specifically
require a covered clearing agency to (i) publicly disclose all relevant
rules and material procedures, including key aspects of its default
rules and procedures; (ii) provide sufficient information to enable
participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in the covered clearing
agency; and (iii) publicly disclose relevant basic data on transaction
volume and values.
    Rule 17Ad-22(e)(23)(iv) would require a covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to maintain clear and comprehensive
rules and procedures that provide for a comprehensive public disclosure
of its material rules, policies, and procedures regarding governance
arrangements and legal, financial, and operational risk management,
accurate in all material respects at the time of publication, including
(i) a general background of the covered clearing agency, including its
function and the market it serves, basic data and performance
statistics on its services and operations, such as basic volume and
value statistics by product type, average aggregate intraday exposures
to its participants, and statistics on the covered clearing agency's
operational reliability, and a description of its general organization,
legal and regulatory framework, and system design and operations; (ii)
a standard-by-standard summary narrative for each applicable standard
set forth in proposed Rules 17Ad-22(e)(1) through (22) with sufficient
detail and context to enable the reader to understand its approach to
controlling the risks and addressing the requirements in each standard;
(iii) a summary of material changes since the last update of the
disclosure; and (iv) an executive summary of the key points regarding
each. Rule 17Ad-22(e)(23)(v) would also require a covered clearing
agency to establish, implement, maintain and enforce written policies
and procedures reasonably designed to ensure the comprehensive public
disclosure required under proposed Rule 17Ad-22(e)(23)(iv) is updated
not less than every two years, or more frequently following changes to
its system or the environment in which it operates to the extent
necessary, to ensure statements previously provided remain accurate in
all material respects.\795\
---------------------------------------------------------------------------

    \795\ See supra Part II.C.23.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ad-22(e)(23) with three
modifications, as previously discussed in Part II.C.23.c. First, the
Commission is striking the language ``maintain clear and comprehensive
rules and procedures'' under Rule 17Ad-22(e)(23) because Rule 17Ad-
22(e) already requires that a covered clearing agency have written
policies and procedures reasonably designed to establish, implement,
maintain and enforce the requirements thereunder. Consistent with this
change, the Commission is also striking ``providing'' from Rule 17Ad-
22(e)(23)(iv). Second, the Commission is modifying Rule 17Ad-
22(e)(23)(iv) so that the language more closely tracks the categories
of requirements in Rule 17Ad-22(e). The purpose of this modification is
to make clear that the comprehensive public disclosure is intended to
describe the material rules, policies and procedures of the covered
clearing agency related to compliance with Rule 17Ad-22(e), rather than
require a complete disclosure of all rules, policies, and procedures.
As adopted, Rule 17Ad-22(e)(23)(iv) will require policies and
procedures providing for a comprehensive public disclosure that
describes the covered clearing agency's material rules, policies, and
procedures regarding its legal, governance, risk management, and
operating framework, accurate in all material respects at the time of
publication. Third, the Commission is also modifying paragraph (iv)(D)
to correct technical errors in the proposed rule text so that it refers
to the standards set forth in paragraphs (e)(1) through (23) (rather
than (e)(1) through (22)). The Commission believes that providing a
summary narrative for Rule 17Ad-22(e)(23) is appropriate because Rule
17Ad-22(e)(23) requires policies and procedures to (i) publicly
disclose all relevant rules and material procedures, including key
aspects of its default rules and procedures; (ii) provide sufficient
information to enable participants to identify and evaluate the risks,
fees, and other material costs they incur by participating in the
covered clearing agency; and (iii) publicly disclose relevant basic
data on transaction

volume and values, in addition to requiring the standard-by-standard
summary narrative required by Rule 17Ad-22(e)(23)(iv)(D).
    The purpose of this information collection is to ensure that
participants and prospective participants in a covered clearing agency
are provided with a complete picture of the covered clearing agency's
operations and risk management so that they can understand the risks
and responsibilities of participation in the covered clearing agency.
24. Rule 17Ab2-2
    Proposed Rule 17Ab2-2 would establish procedures for the Commission
to make determinations affecting covered clearing agencies in three
cases:
     Pursuant to proposed Rule 17Ab2-2(a), the Commission may,
if it deems appropriate, upon application by any registered clearing
agency or member thereof or on its own initiative, determine whether a
registered clearing agency should be considered a covered clearing
agency.
     Pursuant to proposed Rule 17Ab2-2(b), the Commission may,
if it deems appropriate, upon application by any clearing agency or
member thereof, or on its own initiative, determine whether a covered
clearing agency meets the definition of ``systemically important in
multiple jurisdictions.''
     Pursuant to proposed Rule 17Ab2-2(c), the Commission may,
if it deems appropriate, determine whether any of the activities of a
clearing agency providing central counterparty services, in addition to
clearing agencies registered with the Commission for the purpose of
clearing security-based swaps, have a more complex risk profile.
    Under proposed Rule 17Ab2-2(e), in each of the above cases, the
Commission would publish notice of its intention to consider such
determinations, together with a brief statement of the grounds under
consideration, and provide at least a 30-day public comment period
prior to any determination. The Commission may also provide the
clearing agency subject to the proposed determination opportunity for
hearing regarding the proposed determination. Under proposed Rule
17Ab2-2(f), in each of the above cases, notice of determinations would
be given by prompt publication thereof, together with a statement of
written reasons supporting the determination.\796\
---------------------------------------------------------------------------

    \796\ See supra Part II.D.
---------------------------------------------------------------------------

    The Commission is adopting Rule 17Ab2-2 with modifications. First
the Commission has determined not to adopt proposed Rule 17Ab2-2(a).
Second, with respect to proposed Rules 17Ab2-2(b) and (c),\797\ the
Commission is removing the factors that reference such other
characteristics or factors that the Commission deems appropriate in the
circumstances. Third, the Commission is adopting a new paragraph to
provide for a process to rescind any determination made pursuant to
Rule 17Ab2-2. This new rule includes the same procedural elements as
for determinations for application of covered clearing agency status,
including publication with a 30-day comment period. Because the
Commission is not adopting Rule 17Ab2-2(a), the Commission is also
renumbering the remaining paragraphs accordingly.
---------------------------------------------------------------------------

    \797\ Because the Commission has determined not to adopt
proposed Rule 17Ab2-2(a), the Commission is renumbering Rule 17Ab2-2
accordingly, and proposed Rules 17Ab2-2(b) and (c) will therefore
appear in Rules 17Ab2-2(a) and (b) respectively. See infra Part VI.
---------------------------------------------------------------------------

    The purpose of this information collection is to enable
determinations by the Commission regarding the status of a registered
clearing agency or a covered clearing agency, as applicable and as
described above.
25. Rule 17Ad-22(c)(1)
    Rule 17Ad-22(c)(1) requires that, each fiscal quarter (based on
calculations made as of the last business day of the clearing agency's
fiscal quarter), or at any time upon Commission request, a registered
clearing agency that performs CCP services shall calculate and maintain
a record, in accordance with Rule 17a-1 under the Exchange Act,\798\ of
the financial resources necessary to meet the requirements of paragraph
(b)(3) of Rule 17Ad-22, and sufficient documentation to explain the
methodology it uses to compute such financial resource requirement.
---------------------------------------------------------------------------

    \798\ See 17 CFR 240.17a-1.
---------------------------------------------------------------------------

    In response to the comments received,\799\ the Commission is
modifying Rule 17Ad-22(c)(1) to require a registered clearing agency
that performs CCP services to calculate and maintain a record of
financial and qualifying liquid resources necessary to also meet
paragraphs (e)(4) and (e)(7), as applicable, in addition to paragraph
(b)(3). Because calculations under Rule 17Ad-22(b)(3) and (e)(4) would
refer to the same financial resources at a covered clearing agency, the
Commission anticipates that the calculations for each would be the same
and would involve adjustments needed to synthesize and format existing
information in a manner sufficient to explain the methodology the
clearing agency uses to meet the requirements of the rule.
---------------------------------------------------------------------------

    \799\ See supra Part I.C.3.
---------------------------------------------------------------------------

    The purpose of this information collection is to require a CCP to
calculate and document its financial and qualifying liquid resources
necessary under Rules 17Ad-22.

B. Respondents

    In the CCA Standards proposing release, the Commission estimated
that the majority of the requirements in Rule 17Ad-22(e) would have
then applied to five registered clearing agencies, each of which met
the definition of ``covered clearing agency.'' \800\ The Commission
estimated that two additional entities might seek to register with the
Commission and that, of those, one might be a security-based swap
clearing agency. The Commission also noted that the number of covered
clearing agencies subject to Rule 17Ad-22(e) could increase further if
either (i) the FSOC were to designate additional clearing agencies as
systemically important or (ii) Commission determinations under Rule
17Ab2-2 found additional clearing agencies to be covered clearing
agencies. The Commission noted, however, that it could not predict
whether the FSOC might exercise such authority or whether such
determinations under Rule 17Ab2-2 would be appropriate, and therefore
estimated, for PRA purposes, that a majority of the requirements under
Rule 17Ad-22(e) would have seven respondents, of which (i) six would be
CCPs and one would be a CSD and (ii) two would be security-based swap
clearing agencies. The Commission then further clarified that Rule
17Ad-22(e)(6) would only have six respondents because it only applies
to CCPs, Rule 17Ad-22(e)(11) would only have one respondent because it
only applies to CSDs, and Rule 17Ad-22(e)(14) would only have two
respondents because it only applies to security-based swap clearing
agencies.
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    \800\ See CCA Standards, supra note 5, at 29566. Specifically,
under the definition, four registered clearing agencies would have
been designated clearing agencies for which the Commission is the
supervisory agency, and one registered clearing agency would have
been a security-based swap clearing agency. Because of modifications
to Rule 17Ad-22(a), the definition of ``covered clearing agency'' is
being moved to Rule 17Ad-22(a)(5). See infra Part VI.
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    With regard to Rule 17Ab2-2, the Commission estimated, for PRA
purposes, that two registered clearing agencies or their members on
their behalf might apply for a Commission determination or be subject
to a Commission-initiated determination

regarding whether the registered clearing agency is a covered clearing
agency, whether the registered clearing agency is involved in
activities with a more complex risk profile, or whether the registered
clearing agency, as a covered clearing agency, is systemically
important in multiple jurisdictions.\801\
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    \801\ See id. at 29567.
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    With respect to Rule 17Ad-22(c)(1), which the Commission is
modifying in response to comments received,\802\ the affected
respondents would only be covered clearing agencies because the
modifications to Rule 17Ad-22(c)(1) refer to requirements that only
apply to covered clearing agencies subject to Rule 17Ad-22(e).
Accordingly, the affected respondents are the same as under Rule 17Ad-
22(e).
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    \802\ See supra Part I.C.3.
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    The Commission received no comment regarding the estimates for
Rules 17Ad-22(e) and 17Ab2-2 and continues to believe that the above
estimates are appropriate for the below discussion of total annual
reporting and recordkeeping burdens.

C. Total Annual Reporting and Recordkeeping Burdens

    As described in the CCA Standards proposing release, the Commission
believes the information collected pursuant to Rule 17Ad-22(e)
reflects, to a degree, existing policies and procedures at covered
clearing agencies, but in some instances a covered clearing agency will
be required to develop new policies and procedures. Thus, when a
covered clearing agency reviews and updates its policies and procedures
pursuant to Rule 17Ad-22(e), the Commission believes that the PRA
burden may vary across the requirements under Rule 17Ad-22(e),
depending on the complexity of the requirement in question and the
extent to which a covered clearing agency already has policies and
procedures consistent with the requirement. As a general matter, the
portions of Rule 17Ad-22(e) for which the Commission expects a higher
PRA burden are those provisions including requirements not comparable
to any existing requirements under Rule 17Ad-22(d). Where the
requirements do not reflect existing practices or the normal course of
a covered clearing agency's activity, the PRA burden may entail, in
addition to ongoing burdens, initial one-time burdens to develop new
policies and procedures. The Commission received no comments regarding
the accuracy of the estimated annual reporting and recordkeeping
burdens for Rules 17Ad-22(e) or 17Ab2-2.
    As described in the CCA Standards proposing release,\803\ the
Commission continues to believe that Rules 17Ad-22(e)(1), (8) through
(10), (12), (14), (16), and (22) contain requirements either
substantially similar to those in Rule 17Ad-22(d) or reflect current
practices at covered clearing agencies. The Commission believes that a
covered clearing agency may need to make only limited changes to its
policies and procedures pursuant to the requirements in these rules.
For example, a covered clearing agency may need to conduct a comparison
of its existing policies and procedures against each rule to confirm
that its policies and procedures are consistent with the requirements
therein.
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    \803\ See CCA Standards proposing release, supra note 5, at
29567 & nn.440-443.
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    The Commission also continues to believe that Rules 17Ad-22(e)(2),
(3), (5), (11), (13), (17), (18), (20), and (21) contain provisions
that are similar to those in Rule 17Ad-22(d) but would also impose
additional requirements not found in Rule 17Ad-22(d). The Commission
believes that a covered clearing agency may need to make changes to
update its policies and procedures pursuant to the requirements in
these rules. For example, a covered clearing agency may need to review
and amend its existing rules, policies, and procedures but may not need
to develop, design, or implement new operations or practices pursuant
to these rules.
    For Rules 17Ad-22(e)(4), (6), (7), (15), (19), and (23), for which
no comparable pre-existing requirements under Rule 17Ad-22 have been
identified, the Commission continues to believe that a covered clearing
agency may need to make more extensive changes to its policies and
procedures, may need to implement new policies and procedures, and may
need to take other steps pursuant to the requirements in these rules.
For example, a covered clearing agency may need to develop, design, and
implement new operations and practices. In these cases, the PRA burden
is greater since these requirements may not reflect established
practices or the normal course of a covered clearing agency's
activities. Further, the PRA burden for these rules may entail both
initial one-time burdens, such as create new policies and procedures,
as well as ongoing burdens, such as requirements to make certain
disclosures or perform certain types of review, on a periodic basis.
1. Rule 17Ad-22(e)(1)
    As described in Part IV.A.1, the Commission is adopting Rule 17Ad-
22(e)(1) as proposed. The burden estimates for the rule are unchanged
from the CCA Standards proposing release.\804\
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    \804\ See CCA Standards proposing release, supra note 5, at
29567-68.
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    Rule 17Ad-22(e)(1) contains substantially similar provisions to
Rule 17Ad-22(d)(1).\805\ The Commission therefore expects that a
respondent clearing agency has written rules, policies, and procedures
substantially similar to the requirements in the rule and that the PRA
burden includes the incremental burdens of reviewing current policies
and procedures and revising them, where appropriate, pursuant to the
rule. Accordingly, based on the similar provisions and the
corresponding burden estimates previously made by the Commission for
Rule 17Ad-22(d)(1),\806\ the Commission estimates that respondent
clearing agencies will incur an aggregate one-time burden of
approximately 56 hours to review and revise existing policies and
procedures.\807\
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    \805\ See 17 CFR 240.17Ad-22(d)(1); see also supra Part II.C.1.
    \806\ See Clearing Agency Standards adopting release, supra note
5, at 66260.
    \807\ This figure was calculated as follows: ((Assistant General
Counsel for 2 hours) + (Compliance Attorney for 6 hours)) = 8 hours
x 7 respondent clearing agencies = 56 hours.
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    Rule 17Ad-22(e)(1) also imposes ongoing burdens on a respondent
clearing agency. The rule requires ongoing monitoring and compliance
activities with respect to its policies and procedures under the rule.
Based on the Commission's previous estimates for ongoing monitoring and
compliance burdens with respect to Rule 17Ad-22,\808\ the Commission
estimates that the ongoing activities required by Rule 17Ad-22(e)(1)
impose an aggregate annual burden on respondent clearing agencies of 21
hours.\809\
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    \808\ See Clearing Agency Standards adopting release, supra note
5, at 66260-63.
    \809\ This figure was calculated as follows: (Compliance
Attorney for 3 hours) x 7 respondent clearing agencies = 21 hours.
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2. Rule 17Ad-22(e)(2)
    As described in Part IV.A.2, the Commission is adopting Rule 17Ad-
22(e)(2) with modifications. In consideration of these modifications,
the burden estimates for the rule have been modified from the
preliminary estimates in the CCA Standards proposing release, as
described below.
    Rule 17Ad-22(e)(2) contains similar provisions to Rule 17Ad-
22(d)(8) but also adds additional requirements that

do not appear in Rule 17Ad-22(d).\810\ The Commission therefore expects
that a respondent clearing agency may have written rules, policies, and
procedures similar to the requirements in the rule and that the PRA
burden includes the incremental burdens of reviewing and revising
current policies and procedures and creating new policies and
procedures, as necessary, pursuant to the rule. Accordingly, based on
the similar provisions and the corresponding burden estimates
previously made by the Commission for Rule 17Ad-22(d)(8),\811\ the
Commission preliminarily estimated that respondent clearing agencies
would incur an aggregate one-time burden of approximately 154 hours to
review and revise existing policies and procedures and to create new
policies and procedures, as necessary.\812\ Because the modifications
to Rule 17Ad-22(e)(2) noted above will require updating current
policies and procedures or establishing new policies and procedures to
ensure compliance, the Commission estimates that respondent clearing
agencies will incur an aggregate one-time burden of approximately 175
hours to review and revise existing policies and procedures and to
create new policies and procedures, as necessary.\813\
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    \810\ See 17 CFR 204.17Ad-22(d)(8); see also supra Part II.C.2.
    \811\ See Clearing Agency Standards adopting release, supra note
5, at 66260.
    \812\ See CCA Standards proposing release, supra note 5, at
29568. This figure was calculated as follows: ((Assistant General
Counsel for 12 hours) + (Compliance Attorney for 10 hours)) = 22
hours x 7 respondent clearing agencies = 154 hours.
    The Commission notes that the CCA Standards proposing release
correctly identified the number of initial burden hours as 154 hours
but incorrectly stated the burden estimate for Assistant General
Counsel as 24 rather than 12 hours. See id.
    \813\ This figure was calculated as follows: ((Assistant General
Counsel for 14 hours) + (Compliance Attorney for 11 hours)) = 25
hours x 7 respondent clearing agencies = 175 hours.
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    Rule 17Ad-22(e)(2) also imposes ongoing burdens on a respondent
clearing agency. The rule requires ongoing monitoring and compliance
activities with respect to its policies and procedures under the rule.
Based on the Commission's previous estimates for ongoing monitoring and
compliance burdens with respect to Rule 17Ad-22,\814\ the Commission
preliminarily estimated that the ongoing activities required by Rule
17Ad-22(e)(2) would impose an aggregate annual burden on respondent
clearing agencies of 28 hours.\815\ Because the modifications to Rule
17Ad-22(e)(2) noted above will require updating current policies and
procedures or establishing new policies and procedures to ensure
compliance, the Commission estimates that the ongoing activities
required by Rule 17Ad-22(e)(2) will impose an aggregate annual burden
on respondent clearing agencies of 35 hours.\816\
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    \814\ See Clearing Agency Standards adopting release, supra note
5, at 66260-63.
    \815\ See CCA Standards proposing release, supra note 5, at
29568. This figure was calculated as follows: (Compliance Attorney
for 4 hours) x 7 respondent clearing agencies = 28 hours.
    \816\ This figure was calculated as follows: (Compliance
Attorney for 5 hours) x 7 respondent clearing agencies = 35 hours.
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3. Rule 17Ad-22(e)(3)
    As described in Part IV.A.3, the Commission is adopting Rule 17Ad-
22(e)(3) with one modification. Because this modification is only
technical or clarifying in nature, the Commission does not believe they
will alter the PRA burdens described in the CCA Standards proposing
release. The burden estimates below are unchanged from the CCA
Standards proposing release.\817\
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    \817\ See CCA Standards proposing release, supra note 5, at
29568.
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    While Rule 17Ad-22(d) requires registered clearing agencies to have
policies and procedures to manage certain risks,\818\ Rule 17Ad-
22(e)(3) requires a comprehensive framework for risk management, under
which policies and procedures for risk management are designed
holistically, are consistent with each other, and work effectively
together. Accordingly, the PRA burden requires a respondent clearing
agency to revise its written rules, policies, and procedures to
include, among other things, periodic review and plans for the recovery
and orderly wind-down of the covered clearing agency. As a result, the
Commission estimates that respondent clearing agencies will incur an
aggregate one-time burden of 399 hours to review and revise existing
policies and procedures and to create new policies and procedures, as
necessary.\819\
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    \818\ See 17 CFR 240.17Ad-22(d).
    \819\ This figure was calculated as follows: ((Assistant General
Counsel for 25 hours) + (Compliance Attorney for 18 hours) + (Senior
Risk Management Specialist for 7 hours) + (Computer Operations
Manager for 7 hours)) = 57 hours x 7 respondent clearing agencies =
399 hours.
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    Rule 17Ad-22(e)(3) also imposes ongoing burdens on a respondent
clearing agency. The rule requires ongoing monitoring and compliance
activities with respect to its policies and procedures created in
response to the rule and activities related to facilitating a periodic
review of the risk management framework. Based on the Commission's
previous estimates for ongoing monitoring and compliance burdens with
respect to Rule 17Ad-22,\820\ the Commission estimates that the ongoing
activities required by Rule 17Ad(22)(e)(3) impose an aggregate annual
burden on respondent clearing agencies of 343 hours.\821\ Additionally,
the Commission notes that the estimated ongoing burden for Rule 17Ad-
22(e)(3) is similar to the initial one-time burden because the rule
requires policies and procedures for review on a specified periodic
basis and approval by the board of directors annually.
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    \820\ See Clearing Agency Standards adopting release, supra note
5, at 66260-63.
    \821\ This figure was calculated as follows: ((Compliance
Attorney for 8 hours) + (Administrative Assistant for 3 hours) +
(Senior Business Analyst for 5 hours) + (Risk Management Specialist
for 33 hours)) = 49 hours x 7 respondent clearing agencies = 343
hours.
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4. Rule 17Ad-22(e)(4)
    As described in Part IV.A.4, the Commission is adopting Rule 17Ad-
22(e)(4) with modifications. While some of these modifications are only
technical or clarifying in nature, the burden estimates for the rule,
as described below, have been modified from the preliminary estimates
in the CCA Standards proposing release to reflect that Rules 17Ad-
22(e)(13)(i) and (ii) are being adopted under Rule 17Ad-22(e)(4) as new
Rules 17Ad-22(e)(4)(viii) and (ix).\822\
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    \822\ The Commission notes that because the modifications to
Rules 17Ad-22(e)(4) and (13) reflect only the moving of requirements
from Rule 17Ad-22(e)(13) to Rule 17Ad-22(e)(4), the burden hours
across the two rules remains unchanged.
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    The Commission estimates that the PRA burdens for Rule 17Ad-
22(e)(4) are more significant than in other cases under Rule 17Ad-22(e)
and may require a respondent clearing agency to make substantial
changes to its written rules, policies, and procedures pursuant to the
rule.\823\ In addition, Rule 17Ad-22(e)(4) will require a respondent
clearing agency to make one-time systems adjustments so that it has the
capability to test the sufficiency of its financial resources and to
perform an annual model validation. As a result, the Commission
preliminarily estimated that respondent clearing agencies would incur
an aggregate one-time burden of 1,400 hours.\824\ Because the