UNITED STATES: SEC Proposes Rule Amendments and New Rule to Improve Risk Management and Resilience of Covered Clearing Agencies

Thursday May 18 2023

On 17^th May 2023, the Securities and Exchange Commission (SEC) proposed rule changes that would improve the resilience and recovery and wind-down planning of covered clearing agencies. The proposal would amend the existing rules regarding intraday margin and the use of substantive inputs to a covered clearing agency’s risk-based margin system and add a new rule to establish requirements for the contents of a covered clearing agency’s recovery and wind-down plan.

Specifically, the proposal require that a covered clearing agency have policies and procedures 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, including when risk thresholds specified by the covered clearing agency are breached or when the products cleared or markets served display elevated volatility.

The proposal also includes a new rule, which build upon the existing requirement that a covered clearing agency have a recovery and wind-down plan and specify nine elements that a covered clearing agency would be required to include in its recovery and wind-down plan.

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