Proposed Standards for Covered Clearing Agencies

OCC submitted this comment letter on the SEC's proposed Standards for Covered Clearing Agencies (the "Proposal"). On April 16, 2012, the Committee on Payment and Settlement Systems of the Bank for International Settlements and the Technical Committee of the International Organization of Securities Commissions ("CPSS-IOSCO"), published its final Principles for Financial Market Infrastructures (the "PFMI Report"). The PFMI Report adopted standards (the "PFMIs") designed to harmonize and, where appropriate, strengthen the existing international standards for, among others, central counterparties such as OCC. The PFMIs, with few exceptions, "do not prescribe a specific tool or arrangement to achieve their requirements and allow for different means to satisfy a particular principle." The PFMIs were "designed to be applied holistically because of the significant interaction between principles[.]"

On March 12, 2014, the SEC issued the Proposal, which would adopt a new regulatory framework for covered clearing agencies ("CCAs") such as OCC, consistent with Title VIII of the Dodd-Frank Act and the PFMIs. Regulatory authorities around the world, including the CFTC and the Board of Governors of the Federal Reserve System, are in various stages of updating their regulatory regimes to adopt requirements that are consistent with the PFMIs. 

OCC supports the flexible approach taken by the SEC and the implicit recognition by the SEC that a one-size-fits-all approach to regulating a CCA would be impractical and inappropriate. There are several aspects of the Proposal, particularly with respect to the "funded by equity" requirement in proposed Rule 17Ad-22(e)(15), the use of contingent capital in meeting the capital requirements under that proposed rule, and the acceptance of equity securities as collateral under proposed Rule 17Ad-22(e)(5), on which we believe the Proposal could be improved through minor modifications or the issuance of interpretive guidance by the SEC in the final rules release, and we look forward to discussing those aspects of the Proposal with SEC Staff in the near future.

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