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Cadwalader Cabinet: December 30, 2021

Securities Clearing Organizations Propose Enhanced Capital Requirements

Three securities clearing organizations filed proposals for rule changes with the SEC to raise capital requirements for their members.

In separate filings, the Fixed Income Clearing Corporation, the Depository Trust Company and the National Securities Clearing Corporation proposed changes to their respective rules, bylaws and procedures to raise the capital requirements of their members. The organizations highlighted the need for adjustments in light of (i) changes in financial markets and regulations, (ii) exposure to market volatility, and (iii) the designation of these firms as systematically important financial market utilities (or "SIFMUs"). Clearing organizations are permitted to condition member participation on meeting net capital requirements under Exchange Act Section 17A(b)(4)(B). The organizations all noted that the capital requirements have not been updated in more than 20 years.

The organizations also proposed changes to their watch list procedures.

NCUA Offers Diversity Self-Assessment for Credit Unions

The National Credit Union Administration ("NCUA") issued an Annual Voluntary Credit Union Diversity Self-Assessment to provide guidance to credit unions "for advancing workforce and supplier diversity."

The NCUA stated that the self-assessment online tool can help credit unions "create a baseline for action, such as making the commitment to develop new products and services aimed at addressing the needs of communities of color, increasing investment in underserved areas, and improving community marketing and outreach." The self-assessment follows from an Interagency Policy Statement Establishing Joint Standards for Assessing Diversity Policies and Practices. The NCUA noted that (i) the self-assessment is voluntary, (ii) the self-assessment is not included as a part of the examination process, (iii) individual credit unions will not be named in assessment data reports, and (iv) the NCUA does not expect all credit unions to implement every best practice identified.

CME Amends Swaps Rule to Facilitate Transition to SOFR

The Chicago Mercantile Exchange ("CME") amended a rule on swap elections in connection with the transition from LIBOR to SOFR.

Amended Rule 58101.B ("Swap Elections") under CBOT ("Board of Trade of the City of Chicago, Inc.") Chapter 58 ("Treasury Invoice Swaps") changes the floating rate option from USD LIBOR to SOFR. The amended rule will affect all Treasury invoice swap spreads traded on CME.

The rule will become effective on January 23, 2022, for the trade date of January 24, 2022.

Primary Sources

  1. Federal Register: Self-Regulatory Organizations; the Depository Trust Company; Notice of Filing of Proposed Rule Change to Enhance Capital Requirements and Make Other Changes

  2. Federal Register: Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change to Enhance Capital Requirements and Make Other Changes

  3. Federal Register: Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change to Enhance Capital Requirements and Make Other Changes

  4. NCUA Letter: Voluntary Credit Union Diversity Self-Assessment

  5. NCUA: Voluntary Credit Union Diversity Self-Assessment

  6. CME: Amendments to Convert Floating Rate from LIBOR to SOFR for All Treasury Invoice Swap Spreads

  7. Board of Trade of the City of Chicago: Chapter 58 ("Treasury Invoice Swaps")

© Copyright 2022 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XI, Number 364
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