SEC Adopts New Risk Management Requirements for Registered Clearing Agencies

The SEC adopted new rules that require covered clearing agencies ("CCA") to establish (i) risk-based margin systems for central counterparty services and (ii) effective recovery and orderly wind-down plans. (See SEC Fact Sheet.)

Under amendments to Rule 17Ad-22 ("Standards for clearing agencies"), registered clearing agencies must now have policies and procedures that establish risk-based margin systems for central counterparty services. The amendments to Rule 17Ad-22 require that a CCA that provides central counterparty services (i) have procedures to establish a risk-based margin system that monitors intraday credit exposures on an ongoing basis, (ii) have the authority and operational capacity to make intraday margin calls as frequently as circumstances warrant and (iii) document when it determines not to make an intraday call pursuant to its written policies and procedures. In addition, the amendments require the clearing agency to have back-up sources of data that it can use to determine margin requirements when ordinary data sources fail.

Under new Rule 17Ad-26, a CCA must have procedures during a recovery and an orderly wind-down that include elements related to a CCA's core services, critical personnel (and service providers that support them) as well as elements related to "planning, timing, implementation, testing and board approval."

The Commission set the following deadlines upon publication in the Federal Register: (i) 150 days for a CCA to file any required proposed rule changes or advance notices with the Commission; and (ii) 390 days for such proposed rule changes and advance notices to be effective.