[Federal Register Volume 90, Number 41 (Tuesday, March 4, 2025)]
[Rules and Regulations]
[Pages 11134-11139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-03351]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 240
[Release No. 34-102487; File No. S7-23-22]
RIN 3235-AN09
Extension of Compliance Dates for Standards for Covered Clearing
Agencies for U.S. Treasury Securities and Application of the Broker-
Dealer Customer Protection Rule With Respect to U.S. Treasury
Securities
AGENCY: Securities and Exchange Commission.
ACTION: Final rule; extension of compliance date.
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[[Page 11135]]
SUMMARY: The Securities and Exchange Commission (``Commission'' or
``SEC'') is extending the compliance date for the amendments to the
rules applicable to covered clearing agencies for U.S. Treasury
securities (``U.S. Treasury securities CCAs''), which require that such
covered clearing agencies have written policies and procedures
reasonably designed to require that every direct participant of the
covered clearing agency submit for clearance and settlement all
eligible secondary market transactions in U.S. Treasury securities to
which it is a counterparty and to identify and monitor its direct
participants' submission of transactions for clearing, including how
the U.S. Treasury securities CCA would address a failure to submit
transactions, that were adopted on December 13, 2023. Specifically, the
Commission is extending the compliance dates by one year, from December
31, 2025, to December 31, 2026, for eligible cash market transactions,
and from June 30, 2026, to June 30, 2027, for eligible repo
transactions.
DATES:
Effective date: The effective date for this release is March 4,
2025. The effective date for the Trade Submission Requirement adopted
on December 13, 2023, remains March 18, 2024.
Compliance dates: The compliance date for Rule 17ad-
22(e)(18)(iv)(A) and (B), published January 16, 2024 at 89 FR 2829, is
extended from December 31, 2025, to December 31, 2026, for eligible
cash market transactions, and from June 30, 2026, to June 30, 2027, for
eligible repo transactions.
FOR FURTHER INFORMATION CONTACT: Elizabeth L. Fitzgerald, Assistant
Director, and Robert Zak, Special Counsel, Office of Clearance and
Settlement, at (202) 551-5777, Division of Trading and Markets,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-7010.
SUPPLEMENTARY INFORMATION: The Commission is extending the compliance
date for Rule 17ad-22(e)(18)(iv)(A) and (B) under the Securities
Exchange Act of 1934 (the ``Exchange Act'').\1\ The Commission is not
extending the compliance date for Rule 17ad-22(e)(18)(iv)(C) or Rule
15c3-3.\2\
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\1\ 17 CFR 240.17ad-22(e)(18)(iv)(A) and (B).
\2\ 17 CFR 240.17ad-22(e)(18)(iv)(C); 17 CFR 240.15c3-3.
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I. Discussion
On December 13, 2023, the Commission adopted, among other things,
Rule 17ad-22(e)(18)(iv)(A) and (B) (together, the ``Trade Submission
Requirement'').\3\ The Trade Submission Requirement is designed to help
reduce contagion risk to U.S. Treasury securities CCAs and bring the
benefits of central clearing to more transactions involving U.S.
Treasury securities.\4\ Under the Trade Submission Requirement, U.S.
Treasury securities CCAs must establish, implement, maintain, and
enforce written policies and procedures reasonably designed to require
that every direct participant of the covered clearing agency submit for
clearance and settlement all eligible secondary market transactions in
U.S. Treasury securities to which it is a counterparty, and to identify
and monitor the U.S. Treasury securities CCA's direct participants'
submission of transactions for clearing, including how the U.S.
Treasury securities CCA would address a failure to submit
transactions.\5\
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\3\ Exchange Act Release No. 34-99149 (Dec. 13, 2023), 89 FR
2714 (Jan. 16, 2024) (``Adopting Release'').
\4\ See id. at 2716.
\5\ See 17 CFR 240.17ad-22(e)(18)(iv)(A) and (B).
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The Commission established the compliance dates for Rule 17ad-
22(e)(18)(iv)(A) and (B) as follows: (1) each U.S. Treasury securities
CCA will be required to file with the Commission any proposed rule
changes regarding those amendments required under Section 19(b) of the
Exchange Act and/or advance notices required under Title VIII of the
Dodd-Frank Act no later than 150 days following January 16, 2024, and
(2) the proposed rule changes must be effective by December 31, 2025,
for cash market transactions encompassed by section (ii) of the
definition of an eligible secondary market transaction, and by June 30,
2026, for repo transactions encompassed by section (i) of the
definition of an eligible secondary market transactions.\6\ Therefore,
compliance by the direct participants of a U.S. Treasury securities CCA
with the requirement to clear eligible secondary market transactions
would not be required until December 31, 2025, and June 30, 2026,
respectively, for cash and repo transactions.\7\
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\6\ Adopting Release, supra note 3, 89 FR at 2771. A U.S.
Treasury securities CCA, the Fixed Income Clearing Corporation
(``FICC''), made such a filing on June 12, 2024. See Self-Regulatory
Organizations; Fixed Income Clearing Corporation; Notice of Filing
of Proposed Rule Change to Modify the GSD Rules Relating to the
Adoption of a Trade Submission Requirement, Exchange Act Release No.
34-100417 (June 25, 2024), 89 FR 54602 (July 1, 2024) (FICC-2024-
009). On Aug. 12, 2024, the Commission designated a longer period
for Commission action on this proposed rule change. See Self-
Regulatory Organizations; Fixed Income Clearing Corporation; Notice
of Designation of Longer Period for Commission Action on Proposed
Rule Change to Modify the GSD Rules Relating to the Adoption of a
Trade Submission Requirement, Exchange Act Release No. 34-100693
(Aug. 12, 2024), 89 FR 66746 (Aug. 26, 2024). On Sept. 26, 2024, the
Commission issued an order instituting proceedings to determine
whether to approve or disapprove this proposed rule change. See
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Instituting Proceedings to Determine Whether to Approve or
Disapprove a Proposed Rule Change to Modify the GSD Rules Relating
to the Adoption of a Trade Submission Requirement, Exchange Act
Release No. 34-101194 (Sept. 26, 2024), 89 FR 80296 (Oct. 2, 2024).
On Dec. 11, 2024, the Commission designated a longer period for
Commission action on this proposed rule change. See Self-Regulatory
Organizations; Fixed Income Clearing Corporation; Notice of
Designation of Longer Period for Commission Action on Proceedings to
Determine Whether to Approve or Disapprove a Proposed Rule Change,
as Modified by Partial Amendment No. 1, Relating to the Adoption of
a Trade Submission Requirement, Exchange Act Release No. 34-101880
(Dec. 11, 2024), 89 FR 102207 (Dec. 17, 2024). The deadline for
Commission action on this proposed rule change is Feb. 26, 2025. Id.
\7\ Adopting Release, supra note 3, 89 FR at 2771.
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Since the Trade Submission Requirement was adopted, Commission
staff has been working with market participants, including the current
U.S. Treasury securities CCA and applicants to become U.S. Treasury
securities CCAs to address certain operational questions relating to
implementation of these rules. As part of these efforts, Commission
staff has become aware, through telephonic meetings and letters, that
certain market participants believe that additional time to implement
Rule 17ad-22(e)(18)(iv)(A) and (B) would be appropriate. In this
regard, a group of trade associations representing different types of
market participants submitted a letter requesting that the Commission
extend the compliance dates established in the Adopting Release by at
least one year, and a separate trade association submitted a letter
requesting that the Commission extend the compliance dates for the
submission of repo transactions established in the Adopting Release by
24 months.\8\
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\8\ See Letter from the Securities Industry and Financial
Markets Association (``SIFMA''), SIFMA's Asset Management Group,
Managed Funds Association, Futures Industry Association (``FIA''),
FIA Principal Traders Group, International Swaps and Derivatives
Association, Alternative Investment Management Association, and The
Institute of International Bankers (collectively, the
``Associations''), dated Jan. 24, 2025 (``Associations' Letter''),
available at, e.g., https://www.sifma.org/wp-content/uploads/2025/01/SIFMA-Extension-Request-US-Treasury-Clearing-Mandate-FINAL-Clean.pdf; Letter from the Investment Company Institute, dated Feb.
21, 2025 (``ICI Letter'').
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The Associations stated that they are concerned that, without an
extension, the transition to central clearing will be seriously
compromised and will inevitably lead to disruptions in the cash and
repo markets in U.S. Treasury securities to the detriment of the
[[Page 11136]]
financial system.\9\ The Associations identified ongoing industry work
in a number of areas that requires additional time for completion,
including: the development of a ``done-away'' market structure, both
with respect to an efficient approach to trading and the establishment
of new entrants for clearing and trading; the development of standard
documentation and supporting legal opinions to facilitate the robust
liquidity in cleared Treasury markets; and a significant onboarding
process that dealers and clients must undertake (including negotiation
and execution of clearing agreements) that takes time and resources to
complete with respect to the broad range of clients that trade in this
market.\10\ Similarly, the additional trade association stated that
time is needed to develop done-away capabilities, including regarding
payment and margin flows, operational connections, lack of middleware
solutions and platforms, accounting treatment, and development of
documentation, among others.\11\ This association specified that
further customization will be needed with respect to documentation to
address registered fund issues, including the need for potential
additional documents, consideration of any Investment Company Act of
1940 (``1940 Act'') issues to be negotiated between the parties, and
the development of legal opinions on bankruptcy and enforceability.\12\
This association stated that it can take a registered fund several
months, and potentially longer, to negotiate the bespoke sponsoring
member documentation necessary to participate in the FICC ``sponsored
service.'' \13\
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\9\ See Associations' Letter, supra note 8, at 2.
\10\ See Associations' Letter, supra note 8, at 2.
\11\ See ICI Letter, supra note 8, at 6.
\12\ See ICI Letter, supra note 8, at 6-7.
\13\ See id.
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The Associations also stated that members of U.S. Treasury
securities CCAs will need to upgrade systems, operations, and legal
relationships with the U.S. Treasury securities CCAs and with their
customers to allow access to central clearing consistent with the Trade
Submission Requirement.\14\ The Associations stated that the current
timeline will not allow adequate time for all market participants to
transition into cleared U.S. Treasury markets.\15\
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\14\ See Associations' Letter, supra note 8, at 3. See also ICI
Letter, supra note 8, at 7-8 (discussing need for additional time to
allow registered funds and other buy-side participants to develop
the operational systems to comply with the Trade Submission
requirement for cash transactions).
\15\ See Associations' Letter, supra note 8, at 3. See also ICI
Letter, supra note 8, at 2 (stating that it has become clear that
additional time for compliance with the Trade Submission Requirement
is needed).
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The Associations further stated that additional time is needed to
consider how to resolve critical issues both for further development of
the market and so that market participants (including covered clearing
agencies, clearing members, and participants) may successfully
implement the Trade Submission Requirement in an efficient manner for
the industry.\16\ The Associations stated that these issues need to be
resolved so that market participants understand what is meant to be
included within the clearing requirements and what activities may be
impacted.\17\ The Associations also stated that the resolution of these
issues will require more time than the February 26, 2025 statutory
deadline for final Commission action on FICC's proposed eligible
secondary market trade submission rules allows.\18\
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\16\ See Associations' Letter, supra note 8, at 1 and 4. The
industry participants identified what they viewed as these critical
issues as follows: (1) SEC rule clarifications with respect to the
treatment of mixed CUSIP tri-party transactions; (2) SEC rule
clarifications as to the scope of the inter-affiliate exemption;
including, in particular, expanding the exemption to allow for
internal liquidity and collateral management; (3) SEC-registered
fund rules that effectively require double margining for cleared
repos; (4) SEC rule clarifications with respect to the ability of
firms to pre-fund customer segregated margin with USD (and not only
UST); (5) SEC rule clarifications with respect to the ability of
firms to take debit in the formula even if client does not pay
margin back within 24 hours; (6) SEC rule clarifications as to the
overall extraterritorial scope of the rule, and necessary SEC
engagement with overseas regulators to ensure the ability for global
participants to clear cash and repo transactions; (7) SEC to seek
public comment and fully consider the clearing application of the
CME Group, as well as ICE and other clearing houses, and the
availability of the cross-margining model to facilitate cross-
product netting between repos and futures; (8) standard
documentation and supporting legal opinions are finalized for the
efficient customer on-boarding and development of robust liquidity
in cleared Treasury markets; and (9) bank capital issues under the
existing capital framework need to be resolved for the development
of the ``done-away'' market structure to confirm similar treatment
currently applicable to the ``done-with'' market structure. Id. at
2.
\17\ See Associations' Letter, supra note 8, at 4. The
Associations stated that the implementation timeline for the Trade
Submission Requirement is significantly shorter than that proposed
for similarly sized industry reforms, including the LIBOR transition
and the uncleared margin rules. Id. at 2.
\18\ Specifically, the Associations stated that ``[a]ny
extension should allow for FICC to withdraw its current trade
submission filings [(FICC-2024-009)] so that it and any other
interested [U.S. Treasury securities CCAs] have the necessary time
and ability to consult further with market participants and the SEC
on resolving these fundamental scoping questions before developing
and submitting [self-regulatory organization] rulebook changes for
eligible secondary market transaction CCA submission.'' See
Associations' Letter, supra note 8, at 4. See also supra note 6
(discussing FICC-2024-009).
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In addition, one association specifically raised several issues
related to registered funds. First, the association stated additional
time is necessary to address margin issues associated with registered
funds' repo transactions. The association identified several such
issues, including the interaction of the 2% overcollateralization
requirement with margin requirements that apply to cleared transactions
but do not exist for uncleared repo transactions; \19\ and the
development and adoption of contractual terms to ensure that a
registered fund maintains compliance with the 1940 Act when using
certain segregated margin accounts at FICC.\20\ Second, the association
stated that time is needed for review of potential new FICC access
models that may provide an additional means to manage the risks posed
by registered funds that participate in cleared repo transactions at
FICC.\21\ The association stated that FICC has not yet submitted any
proposed rule changes to its rulebook regarding such a model to the
Commission for approval.\22\
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\19\ See ICI Letter, supra note 8, at 3-4; see also supra note
16 (identifying this issue as item 3 in the Associations' Letter).
The association stated that additional time is necessary for
registered funds and their counterparties to assess the relative
benefits and tradeoffs of the FICC (and potentially, other CCA)
access models for Treasury repo clearing, and for sponsoring members
to negotiate the contractual terms required to enable a registered
fund to deliver its assets as margin to FICC or another CCA while
still ensuring its repo transactions are ``collateralized fully''
under Rule 5b-3 under the 1940 Act. This association further stated
that, currently for voluntarily cleared repo transactions, a
registered fund's counterparty, in its capacity as the registered
fund's sponsoring member, typically satisfies both its own margin
obligations as well as those of the registered fund in connection
with such transactions, but that, once the Trade Submission
Requirement applies, the economics for sponsoring members may no
longer support this arrangement and the margin obligations may
outweigh any benefits that clearing provides to the sponsoring
member.
\20\ See ICI Letter, supra note 8, at 4-5.
\21\ See ICI Letter, supra note 8, at 5-6.
\22\ See id.
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After considering these requests, the Commission is extending the
compliance dates for the Trade Submission Requirement. The Commission
agrees that an extension would allow for further engagement on
compliance, operational, and interpretive questions, including those
highlighted by the Associations related to, among other things, the
further development of done-away clearing, standard documentation,
onboarding processes, and systems and operations upgrades. In addition,
an extension should improve market participants' ability to plan for
compliance with the Trade Submission Requirement, including the
development and
[[Page 11137]]
implementation of appropriate means to access clearance and settlement
services for U.S. Treasury securities and to facilitate orderly
implementation of the Trade Submission Requirement, which should, in
turn, help avoid the potential for any disruptions in cash and repo
markets in U.S. Treasury securities. Although one commenter stated that
the compliance dates should be extended to allow other clearing houses
the opportunity to apply to register as a U.S. Treasury securities
CCA,\23\ the compliance dates do not prohibit the filing or
consideration of such applications after that time.
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\23\ See ICI Letter, supra note 8, at 8 (discussing the March
31, 2025 compliance date for Rule 17ad-22(e)(6)(i) and Rule 15c3-3),
and at 7 (discussing the need for additional time for the Trade
Submission Requirement as it pertains to repo transactions).
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As discussed further below,\24\ in determining an appropriate
length of time for the extension, the Commission has considered a
number of factors, including the costs and benefits of a longer
extension. A one year extension results in a compliance date for repo
transactions that is approximately 27 months away from the date of this
release and for cash transactions that is approximately 22 months away
from the date of this release. This extension should allow ample time
for Commission consideration of clearing agency applications,\25\
proposed rule changes from new or existing clearing agencies,\26\ and
the execution of new contractual arrangements for market
participants.\27\
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\24\ See Section II infra.
\25\ See 15 U.S.C. 78s(a)(1) (establishing the statutory review
period for clearing agency applications under the Exchange Act
which, generally, can take up to 270 days).
\26\ See 15 U.S.C. 78s(b)(2) (establishing the statutory review
period for clearing agency proposed rule changes under the Exchange
Act which can take up to 240 days).
\27\ See ICI Letter, supra note 8, at 5, 6-7 (stating that
negotiation of such documentation can take months or even a year or
longer).
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Therefore, the Commission extends the compliance date for Rule
17ad-22(e)(18)(iv)(A) and (B) by one year to December 31, 2026, for
eligible cash market transactions, and June 30, 2027, for eligible repo
market transactions.
Lastly, the Commission is not extending the compliance dates for
Rule 17ad-22(e)(18)(iv)(C) (regarding access) and Rule 15c3-3
(regarding the broker-dealer customer protection rule). Although these
rules have a March 31, 2025, compliance date, no market participant is
obligated to use a particular access model or to segregate its
margin.\28\ If a direct participant of a U.S. Treasury securities CCA
determines to offer certain access models or segregated margin
accounts, the CCA would be obligated to enforce those rules regarding
such models or accounts against the relevant participant, and the
direct participant must comply with those rules.\29\
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\28\ The Commission is issuing an order granting temporary
exemptive relief regarding Rule 17ad-22(e)(6)(i) (17 CFR 240.17ad-
22(e)(6)(i)), which also has a compliance date of March 31, 2025.
See Order Granting Temporary Exemptive Relief, Pursuant to Sections
17A and 36(a) of the Securities Exchange Act of 1934, from Certain
Aspects of Rule 17ad-22(e)(6)(i), Exchange Act Release No. 34-102486
(Feb. 25, 2025).
\29\ For example, the rule amendments in the Adopting Release
permit broker-dealers to include a debit in the customer reserve
formula equal to the amount of margin required and on deposit at a
U.S. Treasury securities CCA, subject to the conditions in Note H to
Rule 15c3-3a. Each of the conditions in Note H must be met for a
broker-dealer to include the debit in the formula. These conditions
include the requirement that the U.S. Treasury securities CCA adopts
rules designed to protect and segregate the margin, and the U.S.
Treasury securities CCA and broker-dealer are in compliance with
those rules. See 17 CFR 240.15c3-3a, Note H and Adopting Release,
supra note 3, 89 FR at 2760-68.
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II. Economic Analysis
The Commission is mindful of the economic effects, including the
costs and benefits, of the compliance date extension. Exchange Act
section 3(f) requires the Commission, when it is engaged in rulemaking
pursuant to the Exchange Act and is required to consider or determine
whether an action is necessary or appropriate in the public interest,
to consider, in addition to the protection of investors, whether the
action will promote efficiency, competition, and capital formation.\30\
In addition, Exchange Act section 23(a)(2) requires the Commission,
when making rules pursuant to the Exchange Act, to consider among other
matters the impact that any such rule would have on competition and not
to adopt any rule that would impose a burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\31\
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\30\ See 15 U.S.C. 78c(f).
\31\ See 15 U.S.C. 78w(a)(2).
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The baseline against which the costs, benefits, and the effects on
efficiency, competition, and capital formation of the compliance date
extension are measured consists of the current state of the market for
U.S. Treasury securities, including the repo market, current practice
as it relates to the purchase and sale of U.S. Treasury securities, and
the current regulatory framework, including recently adopted rules. As
discussed above, pursuant to the Adopting Release, the compliance date
for the Trade Submission Requirement was December 31, 2025, for
eligible cash market transactions, and June 30, 2026, for eligible repo
market transactions.\32\
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\32\ See supra Section I.
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The Trade Submission Requirement will apply to all covered clearing
agencies for U.S. Treasury securities, and, in turn, will have an
impact on direct participants in such covered clearing agencies and
other market participants transacting with such direct participants.
Such market participants include, among others: broker-dealers that are
not direct participants of such covered clearing agencies, hedge funds,
family offices, separately managed accounts, registered investment
companies (including money market funds, certain exchange-traded funds,
and other types of mutual funds), principal trading firms, private
pension funds, triparty agents, custodian banks, and the Fedwire
Settlement Service.\33\
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\33\ See Adopting Release, supra note 3, at part IV.B.7.
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The Commission is extending the compliance date for the Trade
Submission Requirement to December 31, 2026, for eligible cash market
transactions, and June 30, 2027, for eligible repo market transactions.
Extending the compliance date will mitigate the costs that industry
participants (including covered clearing agencies) will face relative
to the baseline of the Initial Compliance Date.\34\ As discussed above,
a number of
[[Page 11138]]
issues, including but not limited to issues related to the scope of the
rule and inter-dependencies of many items required for successful
completion, have been raised and there are concerns expressed by
commenters that absent an extension, the transition to central clearing
could be compromised which in turn could produce expensive disruptions
in the cash and repo Treasury markets. The commenters state that
multiple issues exist requiring cooperation and collaboration among
various regulators and that need to be clarified and implemented.\35\
In addition, fundamental market structure changes necessary to allow
for done-away trading have not yet been designed and implemented by
industry participants. The compliance date extension will reduce the
possibility of such costly disruptions.
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\34\ Id. Extending the compliance date will also mitigate the
potential costs associated with overlap of the compliance date of
the Trade Submission Requirement and rules that were adopted prior
to the Trade Submission Requirement, to the extent the compliance
dates of those prior final rules have not already passed. See
Adopting Release, supra note 3, at section IV.C.2.e. As explained in
the Adopting Release, where overlap in compliance periods exists,
the Commission acknowledges that there may be additional costs on
those entities subject to one or more other rules, but spreading the
compliance dates out over an extended period limits the number of
implementation activities occurring simultaneously. Id. For the same
reason, extending the compliance date will likely mitigate the
potential costs associated with overlap of the compliance date and
the compliance dates of rules that have been adopted since the Trade
Submission Requirement. Specifically, the Commission has adopted
five rules since the Trade Submission Requirement in which it
considered the overlap of compliance dates with those established in
the Adopting Release, including for the Trade Submission
Requirement. See Form PF; Reporting Requirements for All Filers and
Large Hedge Fund Advisers, Release No. IA-6546 (Feb. 8, 2024), 89 FR
17984 (March 12, 2024) (compliance date extended by Form PF;
Reporting Requirements for All Filers and Large Hedge Fund Advisers;
Extension of Compliance Date, Release No. IA-6838 (Jan. 29, 2025),
90 FR 9007 (Feb. 5, 2025); Covered Clearing Agency Resilience and
Recovery and Orderly Wind-Down Plans, Release No. 34-101446 (Oct.
25, 2024), 89 FR 91000 (Nov. 18, 2024); Regulation NMS: Minimum
Pricing Increments, Access Fees, and Transparency of Better Priced
Orders, Release No. 34-101070 (Sept. 18, 2024), 89 FR 81620 (Oct. 8,
2024); Electronic Submission of Certain Materials Under the
Securities Exchange Act of 1934; Amendments Regarding the FOCUS
Report, Release Nos. 33-11342; 34-101925; IC-35420 (Dec. 16, 2024),
90 FR 7250 (Jan. 21, 2025); Daily Computation of Customer and
Broker-Dealer Reserve Requirements Under the Broker-Dealer Customer
Protection Rule, Release No. 34-102022 (Dec. 20, 2024), 90 FR 2790
(Jan. 13, 2025).
\35\ See Associations' Letter, supra note 8, at 1 (listing the
critical issues identified by the Associations). See also ICI
Letter, supra note 8, at 4-8 (discussing issues identified by ICI).
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In aggregate, the extension of the compliance dates for the Trade
Submission Requirement to December 31, 2026, for eligible cash market
transactions, and June 30, 2027, for eligible repo market transactions
will also delay the realization of the economic benefits associated
with the final rules. In particular, the benefits of central clearing
including the reduction of contagion risk to U.S. Treasury securities
CCAs and the resulting lowering of systemic risk would be delayed.
The Commission has also previously acknowledged that ``the
centralization of clearance and settlement activities at covered
clearing agencies allows market participants to reduce costs, increase
operational efficiency, and manage risks more effectively.'' \36\ The
extension of the compliance date will postpone the realization of such
benefits.
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\36\ Covered Clearing Agency Standards Proposing Release,
Exchange Act Release No. 71699 (Mar. 12, 2014), 79 FR 29507, 29587
(May 27, 2014).
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The effect of the extension of the compliance dates on efficiency,
competition, or capital formation will be a delay in the impact on
efficiency, competition, and capital formation described in the final
rule.
The Commission considered reasonable alternatives to the new
compliance dates, namely a longer extension. As discussed above, one
commenter requested that the Commission extend the compliance dates
established in the Adopting Release by 24 months stating that the
additional time was needed to develop done-away capabilities, to
further address necessary customization needed with respect to
documentation to address registered fund issues, to address margin
issues associated with registered funds' repo transactions, and to
review potential new FICC access models.\37\
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\37\ See ICI Letter, supra note 8.
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An extension longer than the one year by which the Commission is
extending the compliance dates for the Trade Submission Requirement
would entail a tradeoff: while it could further reduce some costs
associated with disruptions under a more compressed timeline, as
explained above, it also further delays the benefits from
implementation. As discussed above, a one year extension results in a
compliance date for repo transactions that is approximately 27 months
away from the date of this release and for cash transactions that is
approximately 22 months away from the date of this release. The
Commission believes a one-year extension, which is consistent with the
minimum amount of additional time requested in the Associations'
Letter, is sufficient given that compliance activity has been ongoing
and the incremental cost savings of an extension longer than one year
are uncertain relative to the benefits that would be lost as a result.
III. Procedural and Other Matters
The Administrative Procedure Act (``APA'') generally requires an
agency to publish notice of a rulemaking in the Federal Register and
provide an opportunity for public comment. This requirement does not
apply, however, if the agency ``for good cause finds . . . that notice
and public procedure are impracticable, unnecessary, or contrary to the
public interest.\38\
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\38\ 5 U.S.C. 553(b)(B).
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For the reasons cited above, the Commission, for good cause, finds
that notice and solicitation of comment regarding the extension of the
compliance dates set forth herein is impracticable, unnecessary, or
contrary to the public interest.\39\ The Associations' letter was
submitted recently and given the issues and challenges with
implementation that have been raised, as well as the upcoming March 31,
2025 deadline and the pending proposed rule change from FICC, there is
good cause for not providing notice and comment. This rule does not
impose any new substantive regulatory requirements on any person and
merely reflects the extension of the compliance dates for the Trade
Submission Requirement. For the reasons discussed in Part I above, an
extension of the compliance dates is needed to facilitate orderly
implementation of these rules by allowing additional time for all
industry participants (i.e., U.S. Treasury securities CCAs, their
direct participants, and their counterparties) to comply with the Trade
Submission Requirement. Further, the Commission recognizes the
importance of providing notice of the extended compliance date, and
providing immediate effectiveness upon publication of this release will
allow industry participants to adjust their implementation plans
accordingly.\40\
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\39\ See id. (stating that an agency may dispense with prior
notice and comment when it finds, for good cause, that notice and
comment are ``impracticable, unnecessary, or contrary to the public
interest'').
\40\ The compliance date extensions set forth in this release
are effective upon publication in the Federal Register. Section
553(d)(1) of the Administrative Procedure Act allows effective dates
that are less than 30 days after publication for a ``substantive
rule which grants or recognizes an exemption or relieves a
restriction.'' 5 U.S.C. 553(d)(1).
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For similar reasons, although the APA generally requires
publication of a rule at least 30 days before its effective date, the
requirements of 5 U.S.C. 808(2) are satisfied (notwithstanding the
requirement of 5 U.S.C. 801),\41\ and the Commission finds that there
is good cause for this extension to take effect on March 4, 2025.
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\41\ See 5 U.S.C. 808(2) (if a Federal agency finds that notice
and public comment are impracticable, unnecessary or contrary to the
public interest, a rule shall take effect at such time as the
Federal agency promulgating the rule determines). This rule also
does not require analysis under the Regulatory Flexibility Act. See
5 U.S.C. 604(a) (requiring a final regulatory flexibility analysis
only for rules required by the APA or other law to undergo notice
and comment). Finally, this rule does not contain any collection of
information requirements as defined by the Paperwork Reduction Act
of 1995 (``PRA''). 44 U.S.C. 3501 et seq. Accordingly, the PRA is
not applicable.
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Pursuant to the Congressional Review Act, the Office of Information
and Regulatory Affairs has designated the extension of the compliance
dates not a ``major rule,'' as defined by 5 U.S.C. 804(2).
IV. Conclusion
The Commission extends the compliance date for Rule 17ad-
22(e)(18)(iv)(A) and (B) by one year, to December 31, 2026, for
eligible cash market transactions, and June 30, 2027, for eligible repo
market transactions.
By the Commission.
[[Page 11139]]
Dated: February 25, 2025.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-03351 Filed 3-3-25; 8:45 am]
BILLING CODE 8011-01-P