On March 12, the Securities and Exchange Commission voted to propose new rules that would enhance the oversight of registered clearing agencies that: (1) have been designated as systemically important by the Financial Stability Oversight Council and for which the SEC is the supervisory agency pursuant to the Clearing Supervision Act; (2) provide central counterparty services for security-based swaps or are involved in activities the SEC determines to have a more complex risk profile, where in either case the Commodity Futures Trading Commission is not the supervisory agency for such clearing agency (as defined in Section 803(8) of the Clearing Supervision Act); or (3) are otherwise determined to be covered clearing agencies by the SEC (Covered Clearing Agencies). These proposed rules would establish more robust requirements for Covered Clearing Agencies and would apply the existing rules for all other registered clearing agencies. Entities operating pursuant to an exemption from registration will not be subject to the proposed rules.
Under the proposed rules, Covered Clearing Agencies would be required to establish, implement, maintain and enforce policies and procedures covering many of the topics currently required by the SEC’s existing oversight program, including settlement, central securities depositories and settlement systems, default management, operational risk management and transparency, and communication efficiency. In addition to the aforementioned topics, the proposed rules would require Covered Clearing Agencies to address the following new topics in such policies and procedures: (1) governance and comprehensive risk management (including establishing qualifications of members of board of directors or senior management); (2) financial risk management (including liquidity risk, credit risk, margin and collateral); and (3) general business risk management (including a requirement to hold liquid net assets funded by equity equal to at least six months of current operating expenses).
The proposed rules would permit the SEC to make the determination of whether a clearing agency falls within the scope of a Covered Clearing Agency. Upon such determination, the SEC would publish a notice of such preliminary determination and provide the public with at least 30 days to comment prior to any final determination.
The public will have 60 days to comment on the proposed rules beginning from the date the proposed rules are published in the Federal Register.
The proposed rule is available here.