Notice Permitting Broker-Dealer Reserve Computation Debits for U.S. Treasury CCA Margin

Content

ACTION:

Notice.

SUMMARY:

The Securities and Exchange Commission (“Commission”) is publishing notice that broker-dealers may include a debit in the
customer protection rule reserve computations when depositing cash, U.S. Treasury securities, and/or qualified customer securities
to meet a margin requirement of the CME Securities Clearing Inc. (“CMESC”) resulting from positions in U.S. Treasury securities
of the customers of the broker-dealer.

FOR FURTHER INFORMATION CONTACT:

Raymond Lombardo, Assistant Director; Sheila Dombal Swartz, Senior Special Counsel, or Abraham Jacob, Special Counsel, at
(202) 551-5500, Office of Broker-Dealer Finances, Division of Trading and Markets; Securities and Exchange Commission, 100
F Street NE, Washington, DC 20549-7010.

SUPPLEMENTARY INFORMATION:

I. Background

On December 13, 2023, the Commission adopted rules under the Securities Exchange Act of 1934 (“Exchange Act”) to amend the
standards applicable to covered clearing agencies for U.S. Treasury securities (“U.S. Treasury securities CCAs”) to enhance
risk management practices for central counterparties in the U.S. Treasury market and facilitate additional clearing of U.S.
Treasury securities transactions. (1) The Commission also amended the formula for computing reserve account requirements under the broker-dealer customer protection
rule. (2) The amendments to the formula—which are set forth in Rule 15c3-3a—permit margin required and on deposit with a U.S. Treasury
securities CCA to be included as a debit when computing reserve requirements with respect to customers and proprietary accounts
of broker-dealers (“PAB”), subject to certain conditions. (3) In particular, the amendments added Item 15 to the customer and PAB reserve computations on which to record the value of the
debit and prescribed conditions—set forth in Note H to Item 15—for including the debit in the formulas. (4) Each of the conditions in Note H needs to be met for a broker-dealer to include a debit equal to the amount of customer or
PAB account holder margin required and on deposit at the U.S. Treasury securities CCA. (5)

Certain of the conditions in Note H require the broker-dealer to take a number of steps with respect to the customer and PAB
account holder margin in its custody. (6) Other conditions provide that the U.S. Treasury securities CCA that will receive the customer or PAB account holder margin
from the broker-dealer must have adopted rules—approved by the Commission—that require it to take certain steps with respect
to calculating margin requirements and handling customer and PAB account holder margin received from the broker-dealer. (7) The requirements of Note H are designed to permit the inclusion of the debit in the customer and PAB reserve computations
under conditions that “provide maximum protection” to the broker-dealer's customers and PAB account holders and that do not
diminish the

  customer protection objectives of Rules 15c3-3 and 15c3-3a. [(8)]()

Paragraph (b)(3) to Note H sets forth the final condition: that the Commission has approved rules of the U.S. Treasury securities
CCA that meet the conditions of Note H and has published (and not subsequently withdrawn) a notice that broker-dealers may
include a debit in the customer and/or PAB reserve computations when depositing cash, U.S. Treasury securities, and/or qualified
customer securities to meet a margin requirement of the U.S. Treasury securities CCA resulting from positions in U.S. Treasury
securities of the customers or PAB account holders of the broker-dealer. (9) The Commission stated that its staff would analyze the U.S. Treasury securities CCA's approved rules and practices regarding
the treatment of customer position margin and make a recommendation as to whether they adequately implement the customer protection
objectives of the conditions set forth in Note H. (10) If satisfied with the staff's recommendation, the Commission stated it will publish a positive notice.

II. Notice

On December 13, 2024, CMESC filed with the Commission an application on Form CA-1 under Section 17A of the Exchange Act (11) seeking to register as a clearing agency to provide central counterparty clearing services with respect to secondary cash
market transactions and repurchase and reverse repurchase transactions in U.S. Treasury securities. (12) On December 1, 2025, the Commission approved CMESC's application. (13) CMESC's application, among other things, included rules, and policies and procedures to address the conditions of Note H of
the customer and PAB reserve computations set forth in Rule 15c3-3a. Following the approval of its application, CMESC filed
a proposed rule change to make, among other changes, certain clarifying modifications to its rulebook. (14) The staff has analyzed CMESC's rules, as well as the changes made pursuant to the proposed rule change, and made a recommendation
to the Commission that they adequately implement the customer protection objectives of the conditions set forth in Note H.

Accordingly, the Commission is publishing this notice to advise broker-dealers that they may include a debit in their customer
and/or PAB reserve computations when depositing cash, U.S. Treasury securities, and/or qualified customer securities to meet
a margin requirement of CMESC resulting from positions in U.S. Treasury securities of the customers of the broker-dealer. (15) Any changes to the relevant CMESC rules and practices that would undermine these customer protection objectives could result
in the Commission withdrawing this notice, at which point a broker-dealer could no longer include the debit in the customer
and/or PAB reserve computations.

By the Commission.

Dated: April 10, 2026. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2026-07224 Filed 4-13-26; 8:45 am] BILLING CODE 8011-01-P

Footnotes

(1) See 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, Exchange Act Release No. 99149 (Dec. 13, 2023), 89 FR 2714 (Jan. 16, 2024) (“Treasury Clearing Release”).

(2) See Treasury Clearing Release, 89 FR at 2760-68. See also 17 CFR 240.15c3-3a (the formula for computing reserve requirements under the customer protection rule) (“Rule 15c3-3a”); 17
CFR 240.15c3-3 (the customer protection rule) (“Rule 15c3-3”). Rule 15c3-3 requires a broker-dealer to compute the net amount
of cash owed to customers and PAB account holders under a formula in Rule 15c3-3a (“customer and PAB reserve computations”).
Generally, broker-dealers must perform their customer and PAB reserve computations and make any required deposits in a special
reserve account at a bank weekly or daily. See paragraph (e)(3) to Rule 15c3-3.

(3) See Treasury Clearing Release, 89 FR at 2760-68.

(4) See id. The amendments also modified Note B to Item 2 of the customer and PAB reserve computations to provide that this item in the
reserve computations must include as a credit the market value of customers' and PAB account holders' securities on deposit
at a U.S. Treasury CCA. See id. at 2761.

(5) See Treasury Clearing Release, 89 FR at 2760-68.

(6) See Rule 15c3-3a, Note H(a) and (b)(1).

(7) See Rule 15c3-3a, Note H(b)(2).

(8) See Treasury Clearing Release, 89 FR at 2760.

(9) See Rule 15c3-3a, Note H(b)(3).

(10) See Treasury Clearing Release, 89 FR at 2768.

(11) 15 U.S.C. 78q-1.

(12) See Notice of Filing of an Application for Registration as a Clearing Agency Under Section 17A of the Securities Exchange Act
of 1934, Exchange Act Release No. 102200 (Jan. 15, 2025), 90 FR 7713 (Jan. 22, 2025).

(13) Order Granting an Application for Registration as a Clearing Agency under Section 17A of the Securities Exchange Act of 1934,
Exchange Act Release No. 104281 (Dec. 1, 2025), 90 FR 55926 (Dec. 4, 2025).

(14) Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify the CME Securities Clearing Inc. Rules and
Incorporate CME Securities Clearing Inc. Procedures into the Rules, Exchange Act Release No. 104784 (Feb. 9, 2026), 91 FR
6669 (Feb. 12, 2026) [File No. CMESC-2026-001]. The proposed rule change consists of non-substantive modifications to the
CMESC rulebook to incorporate existing provisions in the procedures of CMESC into the rules; clarify CMESC's intentions in
a small number of rules; and make wordsmithing corrections, clarifications, and technical changes to improve clarity and consistency
of the rules. CMESC filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Exchange Act (15 U.S.C. 78s(b)(3)(A)).
As a result, the proposed changes became effective immediately upon filing.

(15) See supra note 5 and accompanying text (discussing Note H conditions).

Download File

Download