SEC Seeks Comment on Clearing Agency Proposal to Adopt Risk Policies
The SEA "requires, inter alia, that the rules of a clearing agency 'promote the prompt and accurate clearance and settlement of . . . derivatives agreements, contracts, and transactions’ and ‘assure the safeguarding of securities and funds that are in its custody or control or for which it is responsible.'"
SEC Notice of Filing of Proposed Rule Change
The SEA "requires, inter alia, that the rules of a clearing agency 'promote the prompt and accurate clearance and settlement of . . . derivatives agreements, contracts, and transactions’ and ‘assure the safeguarding of securities and funds that are in its custody or control or for which it is responsible.'"
SEC Notice of Filing of Proposed Rule Change
The SEC requested comment on approval of a clearing agency's new risk management policies under Securities Exchange Act rules on clearance and settlement of securities transactions.
According to the notice, published in the Federal Register, the clearing agency proposes the adoption of six risk management policies designed to clarify governance roles and ensure consistency with SEA Section 17A ("National system for clearance and settlement of securities transactions").
The specific policies included in the proposal are:
- Default Management Policy: This policy sets minimum standards for managing a clearing member's default, clarifying the authority of the CEO and CRO to initiate default proceedings and requiring regular "fire drill" tests to ensure readiness.
- Investment Risk Policy: Focusing on capital preservation and liquidity, this policy restricts eligible investment counterparties to high-quality entities—such as sovereign governments and central banks—and establishes specific limits on credit, market, and liquidity risks.
- Liquidity Risk Policy: This policy establishes standards to ensure the clearing agency maintains sufficient liquid resources to meet financial obligations under "extreme but plausible" stress scenarios, including the "default of the participant family [generating] the largest aggregate payment obligation."
- Settlement, Payment and Custody Risk Policy: This policy outlines standards for mitigating risks associated with intermediaries used for settlement and custody, establishing a clear preference for central banks over commercial credit institutions and mandating strict concentration limits.
- Model Governance, Validation and Review Policy: This framework governs the lifecycle of risk models, requiring independent validation at least every 12 months and daily backtesting of margin models to ensure they perform adequately.
- Contract and Market Acceptability Policy: This policy describes the principles and assessment factors—such as pricing reliability, liquidity, and operational risk—that the agency will apply when determining whether to accept new contracts, products, or markets for clearing.
Comments on the proposed rule change are due by January 26, 2026.