On October 10, 2024, the Securities and Exchange Commission (SEC) adopted significant amendments and a new rule aimed at enhancing the resilience, recovery, and wind-down planning of covered clearing agencies. These rule changes address critical areas such as intraday margin collection, reliance on substantive inputs, and new, detailed requirements for recovery and wind-down plans. These adjustments are expected to strengthen the stability of clearing agencies, protect investors, and ensure market continuity during times of heightened volatility.

Key Rule Amendments for Clearing Agencies

1. Intraday Margin Collection: Clearing agencies providing central counterparty services must now implement a risk-based margin system that monitors intraday exposures in real-time. Agencies are empowered to make intraday margin calls whenever risk thresholds are breached or volatility increases. Agencies must also document when they decide not to call for intraday margins, ensuring transparency and consistency.
2. Substantive Inputs: The amendments require that clearing agencies use reliable sources of substantive data for their risk-based margin models and have contingency plans in place for situations where inputs may be unreliable or unavailable. This includes using alternative price data sources or designing a margin system that can function without such inputs to prevent gaps in credit exposure management.
3. Recovery and Wind-Down Plans: The new rule mandates that clearing agencies include nine specific elements in their recovery and wind-down plans, covering aspects such as scenario planning, triggers, available tools, and board approval. The rule also requires regular testing and board endorsement, adding a layer of accountability and robustness to these plans.

Compliance Deadlines

The SEC has set two primary compliance deadlines:

• 150 Days After Federal Register Publication: Agencies must file required rule changes or advance notices.
• 390 Days After Federal Register Publication: Agencies must implement the proposed changes.

These rules reflect the SEC’s commitment to market stability, and SEC Chair Gary Gensler noted, “These amendments will benefit investors, issuers, and markets alike.” The increased rigor is part of a broader effort to ensure that U.S. markets remain resilient and that clearing agencies are prepared for unexpected events.

These amendments, as highlighted in the SEC's press release, aim to bolster intraday margin collection processes and improve reliance on substantive inputs within risk-based margin models.