Credit Suisse First Boston
Deutsche Bank AG, New York Branch
Goldman Sachs & Co.
J.P. Morgan Chase & Co.
Merrill Lynch & Co., Inc.
October 21, 2002
Jennifer J. Johnson
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551
Re: Docket No. R-1128
Office of the Comptroller of the Currency
250 E Street, SW
Public Information Room
Mail Stop 1-5
Washington, D.C. 20219
Attention: Docket No. 02-13
Jonathan G. Katz
Securities and Exchange Commission
450 5th Street NW
Washington, D.C. 20549-0609
Re: File No. S7-32-02
New York State Banking Board
2 Rector Street
New York, New York 10006
Re: Draft Interagency White Paper
On Sound Practices to Strengthen
the Resilience of the U.S. Financial System
Ladies and Gentlemen:
Citigroup Inc.; Credit Suisse First Boston; Deutsche Bank AG, New York Branch, Goldman Sachs & Co., J.P. Morgan Chase & Co.; Lehman Brothers; and Merrill Lynch & Co., Inc. (collectively the "Firms") submit the following joint response to the "Draft Interagency White Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System" (the "Draft White Paper"), published in the Federal Register by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission (collectively the "Agencies").
In addition to submitting this joint response, some of the Firms are members of industry groups and associations such as BITS (the Financial Services Roundtable), the New York Clearing House Association, L.L.C., and the Securities Industry Association and The Bond Market Association that are also submitting responses on behalf of their member firms. Some of the Firms are also submitting individual responses to express concerns particular to their businesses.
With publication of the Draft White Paper, the Agencies have assumed an important role in helping to direct the attention of the institutions that comprise the U.S. financial markets to the critical issues of recovery and resumption following a wide-scale, regional disruption. Together with industry associations and individual firms, the Agencies have highlighted the importance of business continuity issues, established expectations for the U.S. financial markets, helped individual firms identify whether disruption of their business could present significant systemic risk, and proposed practices to minimize that risk. The Firms expect that the Agencies will continue the collaborative process as the Draft White Paper is revised.
Even before the September 11, 2001, attacks most financial institutions had disaster recovery and continuity of business plans in place. The firms learned important lessons from the September 11 attacks; they recognized the vulnerabilities in their existing plans and have been working diligently to prepare for regional disruptions that affect more than one firm and extend to its utilities and vendors. Most firms already have spent substantial sums developing and implementing these plans.
The market forces for increased preparedness continue to be relentless; counterparties and customers routinely demand information about the continuity of business planning of the firms with which they do business. The Firms believe that the Agencies should give more consideration to these market forces and the self-enforcing nature of business continuity planning.
The premise of the Draft White Paper is an event that the Agencies characterize as a "wide scale, regional disruption". The Firms concur with the Agencies that the effects of a regional disruption are, at least initially, more important than the causes. Nevertheless, as will become clear, the types of threats are important considerations because they are central to the risk-based analysis that the Firms believe should be the foundation of any Agency guidance.
The proposed definition of a "wide scale, regional disruption", however, is inadequate to provide guidance for continuity of business planning, encompassing as it does (i) failures of the external infrastructure - e.g., power and telecommunications, public transportation, roads, and postal service disruptions -- on which the financial markets are ultimately dependent and over which they have no control, (ii) terrorist attacks on structures or people, and (iii) natural disasters. It seems to encompass both disruptions with sufficient lead-time to organize a response and disasters that strike without warning.
Unfortunately, for purposes of the cost-benefit analysis that the Firms believe must be an important consideration of any action that the Agencies are contemplating, the possible disruption scenarios that seem most likely tend to require the least extensive and costly alterations to the existing infrastructure. The disruption scenarios that tend to be less likely (and potentially more destructive) would require the most expensive and extensive alterations to existing business models.
Ultimately, the question posed by the Draft White Paper is whether the financial system must change the current business efficiency and operations model to prepare for the least likely but most disruptive scenario -- the scenario that results in the highest costs and most extensive dislocations. It is not practical to require the financial markets to make costly changes to meet remote possibilities.
The Agencies should take into account, when considering appropriate business continuity guidance, the economic impact both to the individual firms that would bear the costs and to the metropolitan regions that would be affected by the loss of jobs. In addition, if the Agencies require processing centers to be relocated, issues relating to training personnel, ensuring the security of multiple locations, and management inefficiencies (which are inevitable in multiple locations) that are not addressed in the Draft White Paper could become significant.
The Firms believe that the Draft White Paper raises the following nine issues:
- What are the critical markets and products?
- Which firms are critical?
- How much time do firms need to recover their business operations and to begin to clear and settle pending transactions?
- Should the Agencies mandate a specific distance between backup facilities and primary processing centers?
- Should the Agency mandate that firms have access to separate labor pools at their backup facilities and primary processing centers?
- What is a reasonable timetable for preparing and implementing continuity of business planning to meet a wide scale, regional disaster?
- How should the costs of implementation be shared?
- What role can the Agencies play in facilitating recovery?
- Should the Agencies adopt regulations or publish guidance?
The Firms believe that addressing these issues also answers the approximately twenty-nine questions posed in the Draft White Paper by the Agencies. The issues will be addressed within the four topic headings suggested by the Draft White Paper for comments.
Scope of Application.
The Draft White Paper identifies critical markets by product, although it discusses markets by function. The functions described are those associated with the infrastructure to settle cash and security transactions. The goal seems to be assisting firms in managing liquidity, market, and other risks -- to the institutions themselves and to the financial markets. The Firms believe that the key components in defining a critical function should be cash settlement, securities clearing, including outstanding settlements of "in flight transactions", and other payment and settlement transactions. (As we discuss below in more detail, the Agencies should recognize that is not possible, even with the best intentions, to isolate Critical Markets and Firms; the financial system is an integrated, interdependent collection of firms that depend on an external infrastructure beyond their control.)
Based on our understanding, the following markets identified in the Draft White Paper would be included in any guidance: federal funds, U.S. dollar-based foreign exchange, commercial paper, government securities, and corporate and mortgage-backed securities. Before any guidelines are published, the Firms urge the Agencies to engage in further consultation on the definition of critical markets. Ultimately, the Agencies should publish a list of critical markets and products.
Although the Firms believe that the Draft White Paper's definition of "core clearing and settlement organizations" -- which included market utilities that provide critical clearing and settlement services, such as large value payment systems operators and firms -- was clear, they also believe that the Agencies should establish well defined and easily applicable criteria so that individual firms could determine for themselves whether they are a critical firm. The Agencies should make clear, however, that a firm would not be considered a core clearing organization for a particular market unless its activities were deemed integral to that market.
The definition of critical markets should also include critical public sector functions and should apply equally to the government agencies on which the markets depend for guidance in the event of a regional disruption.
The Firms believe that more attention has to be placed on the numerous critical interdependencies, such as the telecommunications networks. As the Agencies are well aware, many of the firms and functions on which the markets are ultimately dependent are not regulated by the Agencies. Consequently, the Firms urge the Agencies to work with other government departments and agencies to ensure the ultimate success of continuity of business planning by U.S. financial institutions. The most careful planning will be ultimately fruitless if the financial market dependencies fail, or if local governments (both city and state) take action in the event of a regional disruption that would impede implementation of the firms' recovery plans.
The guidance in the Draft White Paper for firms to determine whether they play "significant roles in critical financial markets" is unclear and needs to be revised. As noted above, in the discussion of Critical Markets and Products, the Firms believe that the Agencies should, in any guidance published by the Agencies, establish a well-defined and easily applicable set of objective criteria for determining whether a firm should be considered critical. The Firms believe that the goal should be a set of guidelines, rather than a rule, so that each financial institution could determine for itself whether it should align its continuity of business planning with the Agencies guidance. (As noted below at some length, the Firms believe that strong competitive pressures will force firms to adopt continuity of business planning consistent with the Agency guidance.)
In particular, each of the products listed by the Agencies should have its own threshold for determining whether a firm is critical in that market. Furthermore, firms should be defined as critical only for those products and markets for which they meet the criteria. A firm that offers a range of products and services but is material in only one market should not be examined against the Agencies' guidance for any other market in which its presence is not material. For example, a firm that meets the definition of critical only in the market for mortgage-backed securities should not be examined against the Agency guidance for markets for U.S. dollar based foreign exchange, or any other product that it may offer for which it fails to meet the threshold.
As noted above, the Agencies have not provided sufficient guidance for firms to determine whether they play a significant role in a critical financial market. Some set of objective criteria should be used to determine whether a firm plays a significant role in a particular market. The definition should vary by market. For certain markets a possible test could define as critical those firms that account for a significant percentage of the market volume (for example: an aggregate of 80% of the market share). For government securities, the test could be whether the firm is a Primary Dealer, which could then be narrowed by market share. The Firms believe that after the Agencies have determined which markets are critical they should work with the firms in each of those markets to determine criteria appropriate for that market.
Recognizing that it is possible for a firm to meet the threshold some time after publication of the guidance, any firm that exceeds the threshold after the guidance has been published should have a commercially reasonable period of time to meet the demands of the Agencies' guidance. Furthermore, it is possible, even in a stable market, for a firm to meet a particular market threshold for a brief period of time and then to fall below the threshold. To account for those anomalies, the thresholds should apply only to an average of some extended period of time.
The Agencies should have the discretion to determine on a case-by-case basis whether individual institutions would be examined against the guidance applicable to Critical Firms. Realistically, however, every firm (even those that do not meet whatever inclusion criteria the Agencies adopt) would be subject to significant market pressure to adjust their business practices to conform to the Agencies' guidance.
Firms that fail to conform, or exclude themselves from selection as critical, would almost certainly suffer a loss of confidence and ultimately customers. The danger of a significant negative impact on an individual firm's reputation will force firms, regardless of the test for inclusion as critical, to conform to the Agencies guidance. Discussions among financial institutions, both informally and as part of industry associations, of the Draft White Paper reflect a profound concern on the part of some firms that any Agency guidance would create a two-tiered market. Customers and counterparties would be hard pressed to justify to their management that they are not dealing with financial institutions that meet government standards for business continuity planning.
Recovery and Resumption of Critical Activities.
The Firms believe that there should be a clear distinction in any guidance issued by the Agencies between the concepts of recovery and resumption. Recovery consists of core clearing and settlement of cash positions and in-flight transactions by the end of the business day, however defined. (As noted below, this understanding of recovery would give critical markets and firms the opportunity to recover within the business day as defined by the Agencies in response to a regional disruption.) The key goal is to ensure that critical firms wind up transactions and manage financial risk.
Indeed, the concept of business day should not be tied to the clock or calendar. For example, after the attacks on September 11, 2001, securities trading was suspended, settlement periods were extended, and the Securities and Exchange Commission and the New York Stock Exchange granted interim relief authorizing firms not to count as "business days" certain calendar days after the attacks. Similar relief should be part of any announcement by the Agencies that a regional disruption has taken place.
Although it is not addressed in the Draft White Paper with much specificity, the time of day that a disruption occurs is critical in considering the issue of recovery. The Firms believe that any guidance should address the time that business operations can be re-started, not the time that recovery will be complete.
As the Draft White Paper seems to contemplate, recovery and resumption is a two-step process. Core clearing and settlement organizations, including value transfer networks, must be able to start business before critical markets begin the process of recovery. If the financial utilities are not able to recover, the other participants in the financial markets will not be able to recover in an orderly way.
The core clearing and settlement organizations must also be able to communicate that they are ready to begin processing prior to the running of the clock for recovery by the critical markets. The Firms believe that the financial utilities should be in a position to process transactions prior to the "end of day". Although hard targets should be avoided, a sufficient window for the Firms to begin the recovery process, after the core clearance and settlement and value transfer networks have resumed business operations, would be four hours.
Resumption is the ability to initiate new transactions and, in effect, to create new risk. In the kind of disruptions apparently contemplated by the Agencies, the Firms believe that recovery is more important than resumption. The central concern should be the time to recover the critical financial markets, i.e., the time to clear and settle transactions. The Firms believe that the Agencies in the Draft White Paper have identified with sufficient specificity the business processes and functions important to the recovery of critical activities by the end of the business day.
Resumption and restoration must of necessity follow recovery, and the time necessary to restore and recover the financial markets is somewhat dependent on the nature of the disruption and the time of day that a disruption occurs. Depending on the time of day and the nature of the disruption, it may not be possible to resume critical activities within the same calendar day. Markets should be given the flexibility to resume as soon as it is commercially reasonable. (We believe that this is a concept that the Agencies themselves accept in the Draft White Paper.)
Finally, the financial markets are themselves dependent on the ability of the Agencies to react quickly in the event of a disruption.
As the Agencies seem to acknowledge, the concept of "out of region resources" should not be based merely on geography. The Firms take an even stronger position, one that is firmly based on current technology: mileage from the critical firms and markets should not be the determinative consideration in business continuity planning.
There are good reasons why distance and recovery are not compatible. Synchronous processing is necessary for the fastest possible recovery because asynchronous processing would require significant manual effort and risks data loss. As the Agencies acknowledge in the Draft White Paper, synchronous processing is not available beyond a distance of approximately 25 miles.
The Draft White Paper suggests that some existing technology limitations may be overcome in the future. Although that may be true, financial institutions cannot make long-term plans around technology that has yet to prove itself. Individual firms are in the best position of balancing the benefits of existing technology against the risks of employing untested systems.
As this joint response makes clear, the most important consideration is the risk analysis to be performed by individual firms. Each firm should be able to determine, based on its own risk profile and the availability of resources, where its processing centers should be located. The important consideration is whether sufficient resources are maintained at locations with separate labor pools, water supply, transportation networks, and telecommunications and power infrastructure.
More importantly, the Firms believe that the Agencies should not provide inflexible rules, including minimum distances or a detailed profile of the out-of-region locations contemplated. Furthermore, the Firms do not believe that the Agencies should mandate a particular business model such as active-active. Alternative models can be as efficient without the associated costs. For example, it is possible to maintain processing sites in different locations for different functions and to cross-train personnel for multiple responsibilities. The Agencies, however, should recognize that hiring staff and managers and training them across several disciplines would take time.
Consistent with the risk-based approach urged in this joint response, each financial institution should have the flexibility to manage its own labor pool. Although the Draft White Paper does not expressly recognize this as a problem, labor is one of the more expensive and difficult issues in any continuity of business plan. A sufficient pool of well-educated and motivated workers is difficult to locate and maintain outside of major metropolitan areas. Costs to train a new pool of labor could be significant.
As the Draft White Paper suggests, alternative arrangements do exist within some regions that would provide sufficient resilience in a wide scale, regional disaster. At certain distances from major urban centers, including the northeast corridor, the labor pools, transportation networks, and power grids may, at this time, be sufficiently distinct to accommodate major relocations of the data processing centers necessary to support the financial markets. As noted above, firms should have the flexibility under any Agency guidance to cross-train personnel for different processing tasks.
Timetable for Implementation.
The timetable proposed by the Agencies of no more than six months after the Agencies issue their final views is unrealistic. The issues raised in the Draft White Paper are complex. They involve examining hardware and software solutions to the problems inherent in duplicative processing. Considerations also have to be given to staffing multiple locations and training personnel. There is also the question of establishing and developing plans for multiple locations. (Many financial institutions may have signed long-term real estate contracts that may require substantial payments to terminate.) Institutions deemed to be critical should have at least one year from the date of publication to demonstrate how they intend to implement the Agency guidance.
The Firms believe that specific time frames for implementation should not be mandated by the Agencies. At this preliminary stage in the comment process, it is not even possible to determine how long it would take to implement the changes necessary to meet the terms of the guidance. (One cannot estimate how long it would take to conform to a process that has not even been adopted.)
Because the number of critical firms is limited, the Agencies should meet and confer with each firm covered by the guidance to determine a schedule for implementation. Such consultation would allow for the diverse circumstances and uncertainties presented by each institution. (As noted above, firms that become critical after publication of the guidance should have time periods comparable to those outlined here to demonstrate how they intend to conform to the guidance and to prepare a schedule for implementation.)
Many of the internal infrastructure changes that would be required by any Agency guidance could not proceed without specific, detailed plans and budgets. In all likelihood, any significant changes would require senior management and even board approval. The changes suggested in the Draft White Paper are costly and would require site planning, real estate planning, personnel planning, and technology and software considerations. Many firms are in the last stages of the 2003 budget and planning process and would not be able, without significant dislocation, to develop plans this year or within six months of the publication of any guidance. Because of the numerous dependencies outlined above, it would not be prudent for a financial institution to complete its business plan (much less to begin implementation) until the value transfer networks and market utilities have disclosed their continuity of business plans.
Financial institutions are developing continuity of business plans that would be sufficient to respond to most disaster scenarios. Of course, firms have considerable market incentive to implement and phase-in the guidance as soon as possible. Flexibility, however, should be a consideration in the timing.
The concern in the Draft White Paper that distant dates would not communicate a sufficient sense of urgency is unwarranted. The Firms believe that, even without the intervention of the Agencies, there is already a sense of urgency in the industry and agency timelines will not diminish that sense. There are strong market incentives to prepare for regional disruptions, including the demands of customers and counterparties. Realistic dates, subject to adjustment during the phase-in process, will, however, give financial institutions the time and flexibility to develop and implement sound practices in the most cost-effective manner.
Other Important Issues.
The financial impact of the organizational changes required by the kind of guidance suggested by the Draft White Paper will be considerable. Firms would be penalized for industry leadership. A disproportionate burden of adopting organizational changes would be shifted to firms that are identified as critical. The kinds of changes to the business model that are discussed in the Draft White Paper would require significant capital investment. The burdens of that capital investment would fall on businesses that are vulnerable to increased costs, including such high volume, low margin businesses as the value transfer networks and clearing services.
Certain firms in some markets that are on the margins of inclusion in the guidance may conclude that they may want to exclude themselves from the provisions of the guidance. For example, a financial institution that just meets a market volume test might decide to eliminate that product. One of the unintended consequences of regulations with hard and fast rules could be further market concentration and increased liquidity risk.
In addition, some firms might be receiving substantial tax or financial incentives from states or municipalities that would be endangered if an inflexible requirement of "out of region resources" forced them to move facilities and employees away from a particular state or municipality. Many firms already have recovery plans in place and the costs of terminating existing real estate leases can be prohibitive.
Consideration must be given to reducing the impact of the increased costs on the individual firms that would be covered by any Agency guidance. Although more consideration should be given to this question, tax relief or incentives are obvious choices.
A corollary of the concept of the "wide-scale, regional disruption" is the need for the Agencies to declare that such an event has taken place. Such a disruption may be self-evident in some circumstances, but, given the number of possible scenarios and the need for predictability and uniformity across the financial markets -- wherever located, the Agencies should have a process for declaring that such an event has taken place.
In addition, depending on the nature of the disruption, the Agencies should be willing to grant interim relief from certain regulations. In the past the Agencies have demonstrated flexibility by granting such relief. For example after the attacks on September 11, 2001, the securities markets closed for several days, the Fed Wire remained open for extended hours, and some agencies allowed firms not to count as "business days", within the meaning of their regulations, certain days following those attacks. The Firms urge the Agencies to recognize the need for such flexibility in the event of a regional disruption.
A few examples of some regulations or other requirements that could be suspended in the event of a regional disruption are attached to this response. The Firms would welcome an opportunity to work with the Agencies to identify other regulations that could be suspended in the event of a regional disruption.
The Firms strongly believe that the Agencies should not impose requirements in the form of regulations. We believe that the Agencies should define these sound practices as guidelines and recommendations. More flexible guidelines would allow these practices to prove themselves over time and to accommodate the inevitable technological advances.
In addition, the Firms urge the policy-making units of the Agencies to work with examiners to ensure that there is consistency of interpretation of the new guidelines. Moreover, the Agencies should ensure that these new guidelines are tied to existing reporting requirements, such as SP 5 to avoid duplication of effort.
The Firms strongly urge the Agencies to circulate another draft of the Draft White Paper for comment prior to publishing guidance. The Firms believe that adopting potentially massive changes in the current business model should not proceed without more careful consideration of the many issues raised in this joint response and in the responses to be submitted by other firms and industry associations.
As the Agencies concede in the draft, their suggestions are based on interviews and anecdotal accounts of the response of the financial markets to the disruptions caused by the attacks on September 11, 2001. Emotionally compelling as those accounts may be, anecdotal evidence is thin support for mandatory regulations that could have substantial impacts on the geographical regions and financial institutions that would be most affected by the guidance.
The Draft White Paper contains little in the way of data and scientific evidence to support its suggestions and at certain points even recognizes that current technology is inadequate to address such important issues as simultaneous processing. In addition, the Draft White Paper does not appear to acknowledge that many of the software applications on which the clearing systems operate would have to be re-written or re-engineered to accomplish some of the more ambitious goals proposed by the Agencies.
The geographical dispersion implied by the Draft White Paper, with multiple active processing sites, recognizes that there are many "important business and internal control reasons for having processing sites near financial markets and firms' headquarters". Multiple processing sites at substantial distances from an institution's headquarters could increase the vulnerability of the clearing and settlement system to hacking and fraud. More consideration needs to be given to a cost-benefit analysis.
The banking and securities industry is concentrated in the tri-state area and is, perhaps, the region's most important employer. The industry has already lost tens of thousands of jobs since last August. Each job in the banking and securities industry supports slightly more than two jobs in the economy of the metropolitan area and has an impact on municipal and state revenues. Adopting regulations that could cause the banking and securities industry to shift jobs outside of the tri-state region would have a significant impact on the local economy.
We think that the Agencies should consider forming an advisory group of the firms that are most directly impacted by the Draft White Paper. Finally, the Firms appreciate the opportunity to provide this joint response to the Agencies, and we look forward to meeting with the Agencies to develop guidelines that improve the resilience of the U.S. financial markets.
Very truly yours,
/s/ Steven A. Bernstein
Head, Business Continuity Planning
Credit Suisse First Boston
/s/ Gerard Leahy
Business Continuity Group
Deutsche Bank AG, New York Branch
/s/ Roseann McSorley
Head, Americas Business Continuity Management
Goldman Sachs & Co.
/s/ Barry L. Zubrow
Chief Administrative Officer
J. P. Morgan Chase & Co.
/s/ Paula J. Larkin
/s/ Bridget E. O'Connor
CTO and Global Head of Business Continuity Planning
Merrill Lynch & Co., Inc.
/s/ John W. Cummings
Senior Vice President & Chief Operating Officer
Global Technology & Services
Potential Regulatory Constraints to Liquidity in Emergencies
Issue: Under Rule 15c3-1(c)(2)(viii), firms must take capital charges for any failed trades that are outstanding for five business days or longer. Institutions would have incurred an extraordinarily high level of capital charges resulting from aged fails during the weeks following September 11.
September 11 Relief: SEC granted interim relief allowing firms to not count as "business days" certain days following September 11 when determining capital charges.
Issue 1: Rule 15c3-3(b)(3) requires that in borrowing securities from customers firms must pledge collateral consisting solely of Treasury bills and notes and letters of credit. Restrictions on types of eligible collateral for use in stock borrow transactions limited firms' options in what securities they could pledge to satisfy their obligations, including obligations to deliver securities to other counterparties.
Issue 2: Rule 15c3-3(e) requires that firms maintain amounts equal to customer credit balances in reserve accounts consisting solely of U.S. government securities. Restrictions on types of eligible collateral that could be deposited in reserve accounts restricted ability of institutions to utilize such liquid collateral for other purposes, such as meeting their funding needs.
Issue 3: Currently, in order to receive non-customer status for affiliates for Rule 15c3-3 purposes, SRO affirmative approval is required, and receiving required approval may be time consuming.
Rules 23A and 23B:
Issue: Restrictions on inter-affiliate transfers of funds and extensions of credit restricts the ability of institutions to satisfy their funding needs in situations in which liquidity needs to be transferred on a temporary basis to support operations.
Issue: Restrictions on borrowing from non-U.S. entities restricts ability of U.S. institutions to obtain inter-affiliate transfers of funds from their overseas affiliates to satisfy their funding needs.
Issue: Firms are required to collect margin equal to specified amounts and freeze accounts or take other specified actions when margin is not received on a timely basis.
Sept. 11 Relief: The NYSE issued an emergency order stating that for purposes of taking required actions Sept. 11-14 would not be considered calendar or business days.
Federal Reserve Risk-Based Capital Guidelines:
Issue: Require daily positive margin of collateral in secured financing transactions in order to receive a zero percent risk weight - a requirement that is impossible to meet when clearance and settlement problems prevent the transfer of additional margin.
September 11 Relief: The Federal Reserve Board issued interim relief stating that transactions between September 10 and September 28 whose settlement was affected by such disruptions may risk weight the portion of the exposure covered by collateral at zero percent.
Trading Locations Generally
Issue: Various restrictions, including Regulation X, Section 23A, and Rule 15a-6, limits the ability of firms to "pass the book" on a temporary basis to allow functions to be assumed by a foreign affiliate.