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Statement at Open Meeting Regarding Standards for Covered Clearing Agencies

Commissioner Michael S. Piwowar

March 12, 2014

Thank you, Chair White.

I typically do not mention individual staff by name at open meetings, because by the time I get a turn to speak everyone has usually been acknowledged multiple times, and also I may inadvertently fail to include someone who deserves recognition.

But I would like to take this opportunity to single out John Ramsay for his distinguished service to the Commission.  I have worked with John both in my prior role at the United States Senate and now at the Commission, and I have always found him to be an incredibly knowledgeable and thoughtful lawyer, a dedicated public servant, and someone who follows the old adage “It’s nice to be important, but it’s more important to be nice.”

I would also like to thank the rulemaking staff, as a group, for the numerous hours and late nights they put into this project, particularly during these past few days.

The proposal before us today would establish new requirements for risk management, operations, and governance of certain registered clearing agencies.  These clearing agencies are already subject to minimum standards for risk management procedures and controls that were adopted by the Commission in 2012.[1]  Thus, in my view, the primary issue raised by today’s proposal is what additional requirements should be placed upon these clearing agencies, given the vital role that they play in the securities markets.

While I am pleased that we are proactively reviewing our oversight of these entities, I am not convinced that the proposal sufficiently justifies the imposition of the entire package of new requirements.  Many of these requirements would strengthen the regulatory regime governing clearing agencies that fall within the scope of the proposal.  However, we cannot ignore the significant costs and other economic effects that would result from these new proposed rules.

It is no secret that these proposed requirements generally align, where appropriate, with the standards set forth in the Committee on Payment and Settlement Systems and International Organization of Securities Commissions’s Principles for Financial Market Infrastructures (“PFMI”) report.[2]  That report, while providing valuable insights into evolving international standards in this area, is not binding on the Commission.  Thus, today’s proposal should not be viewed as an effort by the Commission to merely codify the PFMI report.  Rather, the goal of the Commission’s action today is to determine, based on our own supervisory experience and analysis of other relevant standards, whether new requirements are necessary to effectively regulate clearing agencies operating in the U.S. securities markets.

I therefore look forward to a robust comment process concerning the merits of each individual requirement in this proposal.  In particular, I ask commenters to provide their thoughts on whether the marginal benefits of each new requirement are likely to justify its costs, given the existing regulatory regime for registered clearing agencies.

Thank you.  I have no questions.

[1] See Clearing Agency Standards, Exchange Act Release No. 68080 (Oct. 22, 2012), 77 FR 66219 (Nov. 2, 2012).

[2] See Committee on Payment and Settlement Systems and International Organization of Securities Commissions, Principles for Financial Market Infrastructures (Apr. 2012), available at .

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