The Depository Trust Company filed a proposed rule change with the Securities and Exchange Commission on February 25, 2026, to amend the Clearing Agency Stress Testing Framework shared with its affiliates, Fixed Income Clearing Corporation and National Securities Clearing Corporation. Effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, this filing aims to enhance the framework's role in supporting recovery and wind-down planning by incorporating scenarios required under new SEC Rule 17ad-26. Published in the Federal Register on March 9, 2026, the notice solicits public comments and underscores the importance of robust risk management in maintaining the stability of securities clearance and settlement systems. This development reflects ongoing efforts to comply with evolving regulatory standards, ensuring clearing agencies can address extreme but plausible risks that might threaten their operations.
Background on the Stress Testing Framework
The Clearing Agency Stress Testing Framework, initially adopted in 2017, outlines how DTC and its affiliates identify, measure, monitor, and manage credit and liquidity risks through stress testing. It ensures compliance with SEC Rules 17ad-22(e)(4) and (7), which mandate policies for managing these risks, including maintaining sufficient prefunded resources to cover exposures with high confidence. As described in the filing, the framework involves daily and monthly stress tests to evaluate potential losses from participant defaults or market disruptions.
The proposal builds on this foundation by addressing updates necessitated by SEC Rule 17ad-26, adopted in November 2024. This rule expands requirements for recovery and wind-down plans under Rule 17ad-22(e)(3)(ii), specifically mandating that such plans identify scenarios preventing a clearing agency from providing core services, including uncovered credit losses, liquidity shortfalls, and general business losses. DTC's filing notes that the clearing agencies approved related amendments to their recovery and wind-down plans in June 2025, leveraging existing stress testing methodologies for scenario development.
Key players include DTC as the filing entity, its affiliates under the Depository Trust & Clearing Corporation umbrella, and the SEC as the regulator. The Stress Testing Team, part of DTCC, collaborates with the Office of Recovery & Resolution Planning to refine these scenarios, ensuring they align with real-world risks without introducing new burdens on participants.
Proposed Amendments and Their Purpose
The primary changes focus on integrating recovery and wind-down scenarios into the framework. DTC proposes revising the executive summary to clarify how stress testing supports Rule 17ad-26(a)(3) by identifying scenarios that could lead to uncovered losses. A new section titled 'Recovery and Wind-down' would provide context on the plans' purpose, describing them as roadmaps for addressing events that threaten core services.
Under the renamed 'Stress Testing Requirements' section, the framework would detail how the Stress Testing Team develops assumptions and inputs for credit loss and liquidity shortfall scenarios, using existing methodologies. For general business losses—defined as non-default events like fraud or cyber incidents—the team collaborates with other stakeholders to identify risks. The filing states, 'The Stress Testing Team leverages the Clearing Agencies' existing stress testing methodologies to identify scenario assumptions and inputs to be used in the RWP Scenarios.'
Additional updates include modifications to the 'Stress Testing Methodologies' section to encompass general business losses and classify recovery scenarios as a subset of informational stress scenarios. Governance sections would note that scenario usage in recovery plans is governed by each agency's specific plan. Cleanup changes involve updating glossary terms, such as defining 'General Business Losses' and refining the Enterprise Stress Testing Committee's role, along with citation corrections and drafting clarifications.
These amendments aim to enhance transparency and precision, ensuring the framework accurately reflects regulatory requirements without altering core stress testing processes.
Legal and Regulatory Context
The proposal aligns with Section 17A(b)(3)(F) of the Securities Exchange Act, which requires clearing agency rules to promote prompt and accurate settlement while safeguarding securities and funds. DTC asserts consistency by facilitating continuity of services during potential recovery or wind-down. It also complies with Rule 17ad-26(a)(3), which demands scenario identification for losses that could halt operations.
Relevant precedents include the 2017 adoption of the framework (SEC Release No. 82368) and the 2025 approval of recovery plan amendments (SEC Release No. 103221). No direct judicial precedents are cited, but the filing emphasizes statutory basis under Sections 19(b)(3)(A) and 17A(b)(3)(I), arguing no undue burden on competition since changes support existing plans without disadvantaging participants.
Perspectives vary: Regulators view this as strengthening systemic resilience, while industry participants may appreciate the clarity in risk management. Critics could argue for more aggressive scenario testing, though the filing maintains a balanced, evidence-based approach.
Implications for Clearing Agencies and Market Participants
Short-term implications include improved documentation and internal processes, enabling quicker identification of risks. DTC's filing indicates no immediate operational changes, as scenarios are derived from current methodologies, potentially minimizing implementation costs.
Long-term, these amendments could enhance market stability by better preparing for extreme events, such as those modeled in stress tests. For participants, this means greater assurance of service continuity, though it highlights the need for robust internal risk management. Different viewpoints emerge: Policymakers may see this as advancing financial resilience, while academics might analyze its effectiveness against historical crises like the 2008 financial meltdown.
The filing notes that loss amounts from stress tests will inform recovery actions, with tools detailed in the plans themselves.
In summary, DTC's proposed amendments refine the stress testing framework to support recovery and wind-down planning under new SEC rules. Key takeaways include enhanced scenario integration and regulatory alignment. Potential next steps involve public comment review and possible SEC suspension within 60 days. Ongoing debates may center on scenario comprehensiveness and adaptation to emerging risks like cyberattacks, presenting challenges in balancing rigor with practicality.
