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SEC approves capital requirement rules for clearinghouses

The SEC has approved a proposal to shorten the settlementcycle for most broker/dealer transactions to two business days after the tradedate from three business days.

Shortening the settlement cycle will reduce clearing capitalrequirements for broker/dealers and pro-cyclical margin and liquidity demandson market participants, and increase global harmonization of settlement cycles,said Steve Luparello, director of the SEC's trading and markets division.

The SEC also approved new rules requiring clearinghouses tomaintain a capital buffer that would enable them to meet financial obligationsin case of a failure, The Wall StreetJournal reported Sept. 28.

The rules would require clearinghouses to develop recoveryplans for maintaining operations in case of market turmoil and craft plans forterminating or transferring services in case of a wind-down. Clearinghousesalso would be required to have enough capital in place to fund operatingexpenses for six months and to have plans in place for raising additionalequity if capital falls below the required level, according to the report.

In addition, clearinghouses would be required to maintainenough funding to meet obligations in case of a particularly large default of amember bank or brokerage firm, the Journalreported.

The SEC also proposed that the rules should be extended tocover Intercontinental Exchange Inc.'s ICE Clear Credit. ICE did notimmediately respond to a request for comment, the news outlet said.