The Securities and Exchange Commission on Wednesday approved proposing rules aimed at bolstering covered clearing agencies' resiliency.
The commission unanimously approved issuing the proposal to require covered clearing agencies, or CCAs, which act as a central counterparty — the buyer to every seller and the seller to every buyer in a securities transaction — or as a central securities depository, to enhance their risk management policies and procedures.
Specifically, CCAs would have to establish a risk-based margin system that monitors intraday exposure on an ongoing basis and includes the authority and operational capacity to make intraday margin calls as frequently as circumstances warrant, according to an SEC fact sheet. Also, a CCA's risk-based margin system would have to address the use of substantive inputs, including when such inputs are not readily available or reliable.
Lastly, the proposal requires a CCA have a recovery and wind-down plan that includes specific elements to ensure that the plan provides sufficient identification of how a CCA would operate in a recovery and how it would achieve an orderly wind-down, according to the fact sheet.
"Today's proposal would help ensure the continuity of clearing services during times of significant stress," SEC Chairman Gary Gensler said in a statement. "Well-regulated and well-managed clearinghouses help lower risk for the public. I am pleased to support the proposal because, if adopted, it would help enhance the resiliency of this part of our market plumbing, which is fundamental for the capital markets to operate. That benefits investors, issuers and the markets alike."
The proposal's public comment period will remain open for 60 days following publication on the SEC website or 30 days following publication in the Federal Register, whichever period is longer.