SEC Introduces New Rules to Enhance Risk Management and Resilience of Covered Clearing Agencies

The Securities and Exchange Commission (SEC) has adopted rule amendments and introduced a new rule to enhance the resilience, recovery, and wind-down planning of covered clearing agencies. The amendments establish new standards for intraday margin collection and the use of substantive inputs in risk-based margin models. Additionally, the new rule outlines key requirements for recovery and wind-down plans.

“Recovery and wind-down planning strengthens the resiliency and continuity of our market infrastructure,” said SEC Chair Gary Gensler. “These amendments are designed to benefit investors, issuers, and the markets overall.”

For intraday margin collection, the amendments require that covered clearing agencies offering central counterparty services implement policies for a risk-based margin system. This system must continuously monitor intraday exposures, have the capacity to make intraday margin calls as needed (especially during elevated market volatility or breaches of specified risk thresholds), and document instances where intraday calls are not made in accordance with established policies.

In relation to substantive inputs, the amendments mandate that covered clearing agencies maintain policies ensuring the use of reliable input sources in their risk-based margin systems. In cases where inputs are unavailable or unreliable, alternative sources or systems must be in place to manage ongoing credit exposures to participants.

The new rule also prescribes nine key elements for a recovery and wind-down plan, including detailed planning for scenarios, triggers, tools, staffing, and testing. The rule emphasizes clear timing and implementation measures, along with required board approval.

The SEC has set two compliance dates: (1) 150 days after publication in the Federal Register for covered clearing agencies to file proposed rule changes or advance notices with the SEC, and (2) 390 days after publication for those rule changes and notices to become effective.