diff --git a/Resources/Documents/DTCC/2021-03-16-DTC-2021-003-Passed.md b/Resources/Documents/DTCC/2021-03-16-DTC-2021-003-Passed.md deleted file mode 100644 index ac470f2..0000000 --- a/Resources/Documents/DTCC/2021-03-16-DTC-2021-003-Passed.md +++ /dev/null @@ -1,50 +0,0 @@ -New DTCC rule just passed, in effect immediatly. Explained in Detail, as simple as possible. -============================================================================================ - -**Author: [u/HeyItsPixeL](https://www.reddit.com/user/HeyItsPixeL/)** - -[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1) - -Edit: Typo in the title. It should be "immediately" - -I. The DTCC just published a "new" SEC Regulatory Rule Filing - -[![r/GME - New DTCC rule just passed, in effect immediatly. Explained in Detail, as simple as possible.](https://preview.redd.it/ww85de4x6nn61.png?width=967&format=png&auto=webp&s=752d216af1904a9a4f389249a1aa063d3af1fb1b)](https://preview.redd.it/ww85de4x6nn61.png?width=967&format=png&auto=webp&s=752d216af1904a9a4f389249a1aa063d3af1fb1b) - -https://www.dtcc.com/legal/sec-rule-filings - -II. The Subject of the filing is to (IN SHORT) "Remove the Requirement for Participants to Submit Monthly Position Confirmations and Clarify Participant Obligation to Reconcile Activity on a Regular Basis" - -[![r/GME - New DTCC rule just passed, in effect immediatly. Explained in Detail, as simple as possible.](https://preview.redd.it/61p47v167nn61.png?width=605&format=png&auto=webp&s=b353b240ab59d849834e6d3ef2b2ccab698bd010)](https://preview.redd.it/61p47v167nn61.png?width=605&format=png&auto=webp&s=b353b240ab59d849834e6d3ef2b2ccab698bd010) - -III. This rule change has been on the table for some time and took effect today, because it was filed today. Thus I said it's "new". - -[![r/GME - New DTCC rule just passed, in effect immediatly. Explained in Detail, as simple as possible.](https://preview.redd.it/tzzudzan7nn61.png?width=506&format=png&auto=webp&s=38d1b8c522ec21388089e76c04fe0f01889eea67)](https://preview.redd.it/tzzudzan7nn61.png?width=506&format=png&auto=webp&s=38d1b8c522ec21388089e76c04fe0f01889eea67) - -[![r/GME - New DTCC rule just passed, in effect immediatly. Explained in Detail, as simple as possible.](https://preview.redd.it/l1hyr2s7mnn61.png?width=629&format=png&auto=webp&s=77b51cd06a1018eb72057f019e96552ccd36c4bb)](https://preview.redd.it/l1hyr2s7mnn61.png?width=629&format=png&auto=webp&s=77b51cd06a1018eb72057f019e96552ccd36c4bb) - -IV. What effect does this rule have? Especially in the current situation. In plain English: Hedgies had to report their positions on a monthly basis to the DTCC prior to the rule change. - -In addition to that (by [u/bull_moose_man](https://www.reddit.com/u/bull_moose_man/)) there was a contradictory rule that stated daily reports had to be submitted; as Hedgies were able to cite this contradiction as a reason to ignore the rules, now that it's gone they have no choice but to comply. That means submitting daily reports and opening up their accounts to the Govt if the balance "threatens" other NCSS members. - -V. So what happens now? Well, now that there is no rule stating when they have to report/confirm (previously once a month!), the DTCC can now ask them at any given time to report/confirm their positions. They are tying the rope around the snakes neck to keep them under control. This is nothing major, but wait for point VI. It already shows, DTCC is actually trying to stop these out of control Hedgefunds, because they are endangering other Institutions with their behaviour at the moment. - -VI. Why this rule change is bigger than you think: This rule in addition to the (yet to be passed) SR-NSCC-2021-801, stating that the DTCC can liquidate their members positions at any time, just shows, the DTCC wants to keep everything under their control. So if they see Citadel doing illegal shit (remember, they can ask for a report on a daily basis now) and their new rule comes into effect, they would notice and could force Citadel to liquidate on close their positions. This is the most important thing about this rule! - -TL;DR: New rule is in effect now. What does it do? Hedgies had to report their positions on a monthly basis to the DTCC. The subject of this rule change is "Remove the Requirement for Participants to Submit Monthly Position Confirmations and Clarify Participant Obligation to Reconcile Activity on a Regular Basis" - -How is that any good? Well, now that there is no rule stating when they have to report/confirm (previously once a month!), the DTCC can now ask them at any given time to report/confirm their positions. They are tying the rope around the snakes neck to keep them under control. This is nothing major, but wait for point VI. It already shows, DTCC is actually trying to stop these out of control Hedgefunds, because they are endangering other Institutions with their behaviour at the moment. (Also read point VI. Quote: "This rule in addition to the (yet to be passed) SR-NSCC-2021-801, stating that the DTCC can liquidate their members positions at any time, just shows, the DTCC wants to keep everything under their control. So if they see Citadel doing illegal shit (remember, they can ask for a report on a daily basis now) and their new rule comes into effect, they would notice and could force Citadel to liquidate on close their positions. - -Short DD, but I hope it helps. If there are any mistakes or I messed up something, call me out! - -Very important remark by [u/yosaso](https://www.reddit.com/u/yosaso/): - -[![r/GME - New DTCC rule just passed, in effect immediatly. Explained in Detail, as simple as possible.](https://preview.redd.it/xg6wh9hicnn61.png?width=582&format=png&auto=webp&s=1b479d9f74a4039023689ec26170d4f9fa2ddb4b)](https://preview.redd.it/xg6wh9hicnn61.png?width=582&format=png&auto=webp&s=1b479d9f74a4039023689ec26170d4f9fa2ddb4b) - -Page 10 - -Conclusion: The DTCC sounds like they're making sure to cover themselves because it's going to spill over!!! - -Link to the whole document: - - diff --git a/Resources/Documents/DTCC/2021-04-20-DTC-2021-007-Rule-File.md b/Resources/Documents/DTCC/2021-04-20-DTC-2021-007-Rule-File.md deleted file mode 100644 index 7b613b3..0000000 --- a/Resources/Documents/DTCC/2021-04-20-DTC-2021-007-Rule-File.md +++ /dev/null @@ -1,28 +0,0 @@ -New DTC RULE came out DTC-2021-007 -================================== - -**Author: [u/Goodluck_77](https://www.reddit.com/user/Goodluck_77/)** - -[News 📰 | Media 📱](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22News%20%F0%9F%93%B0%20%7C%20Media%20%F0%9F%93%B1%22&restrict_sr=1) - -[bduy](https://www.reddit.com/user/bduy/)[7 minutes ago](https://www.reddit.com/r/Superstonk/comments/muzbp3/new_dtc_rule_came_out_dtc2021007/gv8vcid/?utm_source=reddit&utm_medium=web2x&context=3) - -When settling debts between parties, the current system allows an - -"agreement between the parties provides for an adjustment unknown to DTC. The parties can settle the adjustment away from DTC or one of the parties can submit a manual adjustment via the APO service. Unfortunately, manual processing of adjustments via the APO service is subject to a number of shortcomings. For example, the adjustments are not subject to DTC's risk controls" - -They are trying to make the debt claim process more transparent and streamlined, especially with their own risk parameters. - -TLDR: DTCC wants everyone to be like the Lannisters. - ----------- - -New DTC came out DTC-2021-007 Don`t know what this is Anyone have an idea? - -[DTC-2021-007](https://www.dtcc.com/-/media/Files/Downloads/legal/rule-filings/2021/DTC/SR-DTC-2021-007.pdf) - -DTC - -Update the DTC Corporate Actions Distributions Service Guide - - diff --git a/Resources/Documents/DTCC/SR-DTC-2021-004-Defaults-and-Bankruptcies.md b/Resources/Documents/DTCC/SR-DTC-2021-004-Defaults-and-Bankruptcies.md deleted file mode 100644 index 466ab08..0000000 --- a/Resources/Documents/DTCC/SR-DTC-2021-004-Defaults-and-Bankruptcies.md +++ /dev/null @@ -1,146 +0,0 @@ -SR-DTC-2021-004, The DTCC and J.P Morgan. They're getting ready for defaults and bankruptcies, they've just opened THREE additional netting accounts. -===================================================================================================================================================== - -**Author: [u/](https://www.reddit.com/user/JustBeingPunny/)** - -[DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1) - -Edits at the bottom - -I know what you're thinking. What the hell is a netting account and why does this matter? - -WELL. - -My wonderful apes let me feed you with some information. As always, I know nothing and may be putting 2+2 together to make banana. Please critique and help me fill in the gaps, my knowledge on this started approximately 10 minutes ago. - -The background - -[![r/Superstonk - SR-DTC-2021-004, The DTCC and J.P Morgan. They're getting ready for defaults and bankruptcies, they've just opened THREE additional netting accounts.](https://preview.redd.it/9jbqiv21ybu61.png?width=818&format=png&auto=webp&s=bfb10ccc8c15acef2db91dcb37da4aee8761a26a)](https://preview.redd.it/9jbqiv21ybu61.png?width=818&format=png&auto=webp&s=bfb10ccc8c15acef2db91dcb37da4aee8761a26a) - -So yesterday JP Morgan was approved for three more netting services accounts. You might be wondering, *why is this important?* - -Well lets explain the purpose of Netting. - -___________________________________________________________________________________________________________ - -Netting - -*Netting is a method of reducing risks in financial contracts by combining or aggregating multiple financial obligations to arrive at a net obligation amount. Netting is used to reduce settlement, credit, and other financial risks between two or more parties.* - -As I will explain, netting has various purposes depending upon its' use. In trading it's described as offsetting losses in one position with gains in another. For example; - -- I'm short 60 bananas - -- I'm long 100 bananas - -- My net position is long 40 bananas - -Easy right? - -___________________________________________________________________________________________________ - -Netting some failing whales - -Well it also has other purposes. - -Netting is also used when a company files for bankruptcy, whereby the parties tend to net the balances owed to each other. This is also called a set-off clause or set-off law. In other words, a company doing business with a defaulting company may offset any money they owe the defaulting company with money that's owed them. The remainder represents the total amount owed by them or to them, which can be used in bankruptcy proceedings. - -[Netting Definition (investopedia.com)](https://www.investopedia.com/terms/n/netting.asp) - -There are various types of netting are available; - -- Close out - -- Settlement - -- Netting by novation - -- Multilateral - -The one that is the most interesting? Multilateral. - -Multilateral netting is netting that involves more than two parties. In this case, a clearinghouse or central exchange is often used. Multilateral netting can also occur within one company with multiple subsidiaries. If the subs owe payments to each other for various amounts, they can each send their payments to a central corporate entity or netting center. The main office would net the invoices and the various currencies from the subsidiaries and make the net payment to the parties that are owed. Multilateral netting involves pooling the funds from two or more parties so that a more simplified invoicing and payment process can be achieved. - -Now I know what you're thinking, '*one company with multiple subsidiaries'.* I may be wrong but there would be no requirement to register with an account with the DTCC in such a way if it was all internal. - -_______________________________________________________________________________________________ - -What does this mean!? - -Well remember this lovely rule? SR-DTC-2021-004 and this wonderful DD? - -[Why We're STILL Trading Sideways and Why We Haven't Launched](https://www.reddit.com/r/Superstonk/comments/mu9xed/why_were_still_trading_sideways_and_why_we_havent/) - -I quote - - -"DTC may, in extreme circumstances, borrow net credits from Participants secured by collateral of the defaulting Participant" - -Again I quote [u/c-digs/](https://www.reddit.com/user/c-digs/) - -What if: - -1. You are a non-defaulting member - -2. And You know that there are going to be member defaults - -3. And you know that that there will be an auction for their assets at a market discount - -How would you prepare for this? Perhaps you'd want to have cash on hand to meet liquidity requirements and emerge from any collapse flush with assets? How might you go about this? - -Well I think opening 3 new netting accounts would be perfect to prepare for this situation. - -However, these don't come into effect until 05/03/2021. So make of that what you will. - -___________________________________________________________________________________________________ - -TL;DR - J.P Morgan opened three additional netting accounts with the DTCC on 04/19/2021. These generally have many different purposes although it I don't believe its' coincidental regarding the rule changes, increase in liquidity and ever impending doom of other DTCC members. This looks to be the groundwork to have means to profit off of the defaulting, over exposed members. - -_____________________________________________________________________________________________ - -Edits start with the newest at the top - -Edit 4 - - -What a wonderful comment by [u/Themeloncalling](https://www.reddit.com/u/Themeloncalling/) - -I feel that there is need for some counter-DD here. The Netting account is addressed to the Mortgage Backed Securities department. You know, the good folks responsible for the financial collapse, who like another MBS, are good at chopping things up and bringing them elsewhere. I believe the shitstorm here with netting accounts and the weekend meetings has to do with commercial mortgage backed securities (CMBS) having their books cooked. This article detailing overstating of CMBS income is a widespread problem: - - - -The graph shown by the university researchers shows that the incomes of the leaseholders are 25% to 50% overstated, and delinquency rates are spiking at the same rate or worse compared to 2008 among CMBS - can you spot the banks that just issued record amounts of bonds this week in the first chart? A netting account would be necessary because the delinquencies are skyrocketing with covid support and SLR ending on March 31, 2021. I believe there is rampant shorting of the Treasury Bonds, and since the SLR now requires disclosure of Bonds again (which are heavily shorted), the banks now need to issue bonds to cover their bad bets and the overstated income of their mortgage owners - the netting account is where you settle your bad bets and pick up the pieces. - -To further reinforce this point, the Infinity Q hedge fund was liquidated because they overstated their NAV value by at least 30%: - - - -The emergency appointment and meetings on the weekend would make sense given that there will be a lot of bagholders from the CMBS fallout that will begin to rear its head in May. The firewalls will be put in place to ensure one firm's toxic pile of CMBS does not become a systemic problem. - -Since we do need to tie GME into this somewhere, I believe the biggest impact will be ~~reduced~~ increased margin requirements for hedgies. As liquidity dries up, banks will reduce the amount they lend out on margin, forcing hedgies to close short positions. If they are already upside down on a short, let's say one where an $8 short position now owes over $145 a share, there's no way out except liquidation - a margin call that sets off all the dominoes. The catalyst for a margin call may not be anything to do with GME at all, it may be another cancer like CMBS that reduces the amount of margin available for hedgies. In any case, buy and hodl. - -_____________________________________________________ - -EDIT 3 - Oh I'm sorry. I've been corrected. IT'S NOW SEVENTEEN. [u/patthetuck](https://www.reddit.com/u/patthetuck/) - -[![r/Superstonk - SR-DTC-2021-004, The DTCC and J.P Morgan. They're getting ready for defaults and bankruptcies, they've just opened THREE additional netting accounts.](https://preview.redd.it/31yr8yywjcu61.png?width=814&format=png&auto=webp&s=f2e5be82960621386f594d828713201ef9e79460)](https://preview.redd.it/31yr8yywjcu61.png?width=814&format=png&auto=webp&s=f2e5be82960621386f594d828713201ef9e79460) - -Edit 2 - What a wonderful comment. [u/Longjumping_College](https://www.reddit.com/u/Longjumping_College/) - -[Here's DTCC's page](https://www.dtcc.com/clearing-services/ficc-mbsd/msbd-netting) on *netting and settlement services.* - -[~~This kinda freaked me out~~](https://www.dtcc.com/charts/previous-12-months-volume-for-mbs) ~~when I saw it on that page as a essentials document to check....~~ - -~~*$103 trillion*~~ ~~in mortgage backed securities..~~. - -The page? - -[![r/Superstonk - SR-DTC-2021-004, The DTCC and J.P Morgan. They're getting ready for defaults and bankruptcies, they've just opened THREE additional netting accounts.](https://preview.redd.it/kvnjndf3ecu61.png?width=884&format=png&auto=webp&s=897fdea90adcd04bde204fd93f22051c0f74622e)](https://preview.redd.it/kvnjndf3ecu61.png?width=884&format=png&auto=webp&s=897fdea90adcd04bde204fd93f22051c0f74622e) - -Crayon go brr - -____________________________________________________________________________________________________ - -Edit - Oh yeah, BOFA added one too. Also CitiBank. Wonder what these accounts are used for... - -[![r/Superstonk - SR-DTC-2021-004, The DTCC and J.P Morgan. They're getting ready for defaults and bankruptcies, they've just opened THREE additional netting accounts.](https://preview.redd.it/kgtgknbhacu61.png?width=813&format=png&auto=webp&s=917b354a4476b27e3e6294fa2fe99e0fcb2b6946)](https://preview.redd.it/kgtgknbhacu61.png?width=813&format=png&auto=webp&s=917b354a4476b27e3e6294fa2fe99e0fcb2b6946) - -[![r/Superstonk - SR-DTC-2021-004, The DTCC and J.P Morgan. They're getting ready for defaults and bankruptcies, they've just opened THREE additional netting accounts.](https://preview.redd.it/cv0u1ynracu61.png?width=810&format=png&auto=webp&s=69894769014fd39bc81538700206c151949f5af3)](https://preview.redd.it/cv0u1ynracu61.png?width=810&format=png&auto=webp&s=69894769014fd39bc81538700206c151949f5af3) diff --git a/Resources/Documents/Federal-Register/2021-04-14-NYSE-Amends-Rule-737.md b/Resources/Documents/Federal-Register/2021-04-14-NYSE-Amends-Rule-737.md deleted file mode 100644 index c261e9d..0000000 --- a/Resources/Documents/Federal-Register/2021-04-14-NYSE-Amends-Rule-737.md +++ /dev/null @@ -1,120 +0,0 @@ -WTF Does the most recent NYSE SEC filing mean? | NYSE is giving the HFTs a swift kick in the ass -================================================================================================ - -**Author: [u/jsmar18](https://www.reddit.com/user/jsmar18/)** - -**Source: [Federal Regsiter Proposed Rule Change to Amend Rule 7.37](https://www.federalregister.gov/documents/2021/04/14/2021-07592/self-regulatory-organizations-nyse-chicago-inc-notice-of-filing-and-immediate-effectiveness-of)** - -[DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1) - -Well, won't we looky here. Looks like the NYSE may be trying to capitalise on the recent market scrutiny to take another potshot at every market manipulator's fav friend. - -ALOs (Add Liquidity Orders) and ISOs (Intermarket Sweep Orders)!!!! - -So if you don't know by now, I tend to write about order types and HFT. Of particular focus to me is the NYSE Chicago due to: - -1. Particularly low volume, which makes it easy to pick up changes in order type behaviour - -2. A probable stomping ground for our friends Shitadel - -3. NYSE trying to amend ALO and ISO orders, multiple times - -For reference, the NYSE is made up of multiple exchanges, such as Arca, National, American and my personal fav Chicago. - -Anywho, so what is up with the most recent [news](https://www.reddit.com/r/Superstonk/comments/mqisex/well_look_what_gets_published_tomorrow_this/?utm_medium=android_app&utm_source=share) posted by [u/Phonemonkey2500](https://www.reddit.com/u/Phonemonkey2500/)? - -This [bad boy](https://www.federalregister.gov/documents/2021/04/14/2021-07592/self-regulatory-organizations-nyse-chicago-inc-notice-of-filing-and-immediate-effectiveness-of). A filing from the NYSE Chicago with the SEC proposing to amend some rules. It's a pretty fucking dry read. As such, I am at your service to translate it into monke speak, but first off, let's get some background from my [previous post](https://www.reddit.com/r/GME/comments/mf1f6n/i_was_missing_a_key_piece_of_the_puzzel_this_is/) that explains the two orders of interest. - -🐍 IOC ISO (Immediate or Cancel Intermarket Sweep Order) - -For those who have not read my previous post find an excerpt below. - -[Intermarket sweep order](https://ibkr.info/article/1734)'s are generally a large quantity order that is sent to multiple exchanges.This is how it functions: - -- An order is submitted in the pre market to sell at a price of 40.80 and is sent to exchange A. - -- The best offer price on exchange A is 40.63. - -- Exchange B receives an intermarket sweep order to buy 800 shares of the stock at a limit price of 40.88. - -- The best offer price on exchange B is 40.88 - -The trader that enters the intermarket sweep order would be required to fulfill their Regulation NMS requirement by executing the maximum available quantity on exchange A at 40.63 and then may execute the balance of the order on exchange B at 40.88 even though it is at a price that is inferior to the 40.80 order resting in the book on exchange A. The 40.80 price is not the inside quote and is therefore not "protected" in terms of the balance of the sweep order executing at exchange B at a price of 40.88. - -So in monke speak, it fills the lowest alternate exchange price before filling the order at the higher price. - -To make it more complicated this is an order with a modifier (ISO is the modifier), so let's understand an IOC. - -These are orders which attempt to execute immediately and cancel any unfilled portion. E.g. place a buy for 10 @ $180.01 , it's only able to be filled to a portion of 5 @ $180.01 and then canceled straight away. - -A key part to these types of orders is derived from the following. - -> *"The intermarket sweep exception enables trading centers that receive sweep orders to execute those orders immediately, without waiting for better priced quotations in other markets to be updated."* - -This is [derived from a response](https://www.sec.gov/comments/sr-nyse-2014-32/nyse201432-2.pdf) to change how ALOs work by the NYSE, as they've been a thorn in their side since 2014. A prelude to what we'll go into later in the more recent attempt to fix shady shit that HFTs love abusing. - -🐍 Add Liquidity Only (ALO) - -First of all, major thanks to [u/SmithEchoes](https://www.reddit.com/u/SmithEchoes/) on this bad boy as it's a complicated beast. - -Now this order type is a doozy, and is currently being used for nefarious purposes. - -ALO follows a strict "If,then" rule set based on if it locks [(7.31(e)(2)(b)iii-iv)](https://nyseguide.srorules.com/rules/document?treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-37) OR crosses [(7.31(e)(2)(b)ii)](https://nyseguide.srorules.com/rules/document?treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-37). This rule set forces the ALO to perform these trades until it is fully consumed, or the order is canceled. Rule [7.31(e)(2)(C)](https://nyseguide.srorules.com/rules/document?treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-37), once ALO is resting on the exchange AND it was forced to change its price in accordance with [7.31(e)(2)(b)i-iv](https://nyseguide.srorules.com/rules/document?treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-37) THEN it now gets to be priced in accordance with [7.31(e)(1)(A)iii and iv](https://nyseguide.srorules.com/rules/document?treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-37). This is the equivalent of HFT when ALO "activates" BUT it comes with a built in safety feature that IF the price goes UP(Sell ALO) or DOWN (buy ALO) the ALO limit price is no longer locking or crossing at the values it was getting moved to, it REVERTS back to its original limit order price. - -Monke speak translator: These orders create sell/buy walls that have a nifty function that essentially "flips the safety switch" back to the original limit order price if too much buy/sell pressure is applied. - -🐒 Back to the SEC Filing - -Rewind to 2014 - -Funnily enough, the NYSE has tried to [amend how ALO orders work](https://www.federalregister.gov/documents/2014/10/16/2014-24547/self-regulatory-organizations-new-york-stock-exchange-llc-nyse-mkt-inc-order-approving-proposed-rule), because of how they can be used for nefarious purposes.... *cough* Shitadel *cough* The amendment would force to cancel the ALO once it crosses or locked, and not perform how it currently does in accordance with [7.31(e)(2)(b)i-v](https://nyseguide.srorules.com/rules/document?treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-37). Which means no buy/sell wall capability for them to use and abuse. - -Fast Forward to Today - -Smart fucks at the NYSE have done them HFs a dirty. - -There is no fundamental change to how specific order types work, but a rather elegant smack to the HFTs asses through changing how the PBBO is calculated (read this for wtf a [PBBO](https://www.investopedia.com/terms/o/order-protection-rule.asp) is *"Best Protected Bid and the Best Protected Offer"*). - -Going back to our ISO order we discussed (and how it can be used in conjunction with an ALO) is where this starts to come together. I was going to force you to read a paragraph, but i decided to be nice and just translate it into monke speak. - -Change how PBBO is calculated, fuck with how the ALO orders "safety switch" as described above. This makes it less enticing in my eyes at least for HFTs as it increases the risk associated with it (risk being eating away their profits due to no safety switch triggering from buy/sell pressure). - -This is overly simplifying the implications, which to be honest are not that large as they are following suit of NASDAQ and some other exchanges here. It just has particular ramifications for HFTs two fav order types that make them "riskier" to use i.e. less appealing. - -As for when this is going through? ~~I don't do legal things. From what~~ ~~I~~ ~~interpret it as, it's active when it is filed, which I believe is today. Thanks to how it does not "significantly change shit" (my words, not the NYSE's)~~ - -Thanks to [u/Suspicious-Oil-7096](https://www.reddit.com/u/Suspicious-Oil-7096/) for linking the below. The amendment is effective as of 26th April. - - - -~~Wait for~~ [u/leaglese](https://www.reddit.com/u/leaglese/) ~~backup on this one though.~~ - -As always, feedback, opinions and questions are more than welcome, in fact wanted! - -TL;DR - -NYSE tried to fix order types abused by HFTs in 2014, failed. Tried again today, and on face value have succeeded in giving them a swift kick up the ass. It's now riskier to use ISO/ALO orders due to a "safety" switch of sorts being removed due to how the amendment proposes to calculate the PBBO of ISOs. This means it's less attractive for HFTs to abuse the order type. - -Edit: Bad at words, fixed ape speak. - -🚀 Edit: Speculation Room - -Thought i'd add in a speculation room to put out my thoughts on how this affects GME price action. - -Speculation #1 - -IF it comes into effect from today (again waiting on confirmation from legal wrinkle brain), it means they'll have a harder time controlling the price. No longer being able to reliably create buy/sell walls, which *could* pose a significant risk to them if they choose to artificially increase buy pressure. On the flip side, it could also hurt any friendly HFT whales who use these order types on the buy-side (think max pain theory). I personally believe most price action is being manipulated by the shorts, so it's more of a detriment to them than anything else. - -It'll be interesting to observe price action moving forward, that's for sure. - -Speculation #2 - -IF this does have an effect on how NYSE Chicago uses ALO/IOC ISO orders I'd have the expectation that either the rate of increase decreases dramatically in % share of these order types (shown below) ~~OR they decrease and switch entirely back to another order type due to the risk posed by the new filings changes.~~ - -[![r/Superstonk - WTF Does the most recent NYSE SEC filing mean? | NYSE is giving the HFTs a swift kick in the ass](https://preview.redd.it/id5d5vosb5t61.png?width=613&format=png&auto=webp&s=ff59bf80e04a38b39c79850fe56aeffab21d965d)](https://preview.redd.it/id5d5vosb5t61.png?width=613&format=png&auto=webp&s=ff59bf80e04a38b39c79850fe56aeffab21d965d) - -https://www.nyse.com/markets/nyse/trading-info#equities-order-types - -Speculation #3 - -The amendment becomes effective as of 26th April, expect to see the order types abused until this time. This means speculation #2 will likely see a slow down in the % increase, but it's hard to tell given it has already slowed down in the rate of increase over the past few months. We'll sadly need to wait until midish June-2021 to see the effect of this amendment on order type behaviour for NYSE Chicago. diff --git a/Resources/Documents/GameStop/2021-05-Prospectus-Supplement.md b/Resources/Documents/GameStop/2021-05-Prospectus-Supplement.md deleted file mode 100644 index d23e026..0000000 --- a/Resources/Documents/GameStop/2021-05-Prospectus-Supplement.md +++ /dev/null @@ -1 +0,0 @@ -[2021-05-GameStop-Prospectus-Supplement.pdf](https://github.com/verymeticulous/i-like-the-stonk/files/6272347/2021-05-GameStop-Prospectus-Supplement.pdf) diff --git a/Resources/Documents/NSCC/2021-03-30-NSCC-2021-004-Filed.md b/Resources/Documents/NSCC/2021-03-30-NSCC-2021-004-Filed.md deleted file mode 100644 index bfec307..0000000 --- a/Resources/Documents/NSCC/2021-03-30-NSCC-2021-004-Filed.md +++ /dev/null @@ -1,55 +0,0 @@ -NSCC Filing Today. THIS. IS. ACTUALLY. INSANE. -============================================== - -**Author; [u/Sar7814](https://www.reddit.com/user/Sar7814/)** - -[News](https://www.reddit.com/r/GME/search?q=flair_name%3A%22News%22&restrict_sr=1) - -NSCC-2021-004 ----> Filed [THIS](https://www.sec.gov/rules/sro/nscc/2021/34-91428.pdf), TODAY. - -APES PLEASE, I know these legal documents look like some squiggly letters and number headings that no one wants to fuck with, but apes, APES, this is actually, to date, the single most convincing piece of evidence I have seen, the most comprehensive, the most powerful, the craziest fucking shit so far (IMO) - -[u/Shooting4daMoon](https://www.reddit.com/u/Shooting4daMoon/) posted the link to the actual govt filing earlier, and I read it. I read this 30 fucking 4 page government document PDF. Why? You all know why. We all crave a wrinkle or two in this ape brain now and then. Also my life is GME. Moving on. - -All you need, is to read these quotes from the filing. That's it. That's all you need to know how I am feeling rn: - -"The R&W Plan sets forth the plan to be used by the Board and NSCC management in the event NSCC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan is structured as a roadmap that defines the strategy and identifies the tools available to NSCC to either (i) recover, in the event it experiences losses that exceed its prefunded resources (such strategies and tools referred to herein as the "Recovery Plan") or (ii) wind-down its business in a manner designed to permit the continuation of NSCC's critical services in the event that such recovery efforts are not successful (such strategies and tools referred to herein as the "Wind-down Plan"). The recovery tools available to NSCC are intended to address the risks of (a) uncovered losses or liquidity shortfalls resulting from the default of one or more of its Members, and (b) losses arising from non-default events, such as damage to NSCC's physical assets, a cyber-attack, or custody and investment losses, and the strategy for implementation of such tools... - -The proposed rule change is designed to update and enhance the clarity of the Plan to ensure it is current in the event it is ever necessary to be implemented. " - -"Section 5.3 (Liquidity Shortfalls) of the Plan identifies tools that may be used to address foreseeable shortfalls of NSCC's liquidity resources following a Member default. The goal in managing NSCC's qualified liquidity resources is to maximize resource availability *in an evolving stress situation*, to maintain flexibility in the order and use of sources of liquidity, and to repay any third-party lenders of liquidity in a timely manner... - -First, the proposed rule change would revise the entries for "3. Obligation Warehouse" and "10. CNS/Prime Broker Interface" to delete the check mark denoting the lack of alternative providers and products as one of the determinants for its classification as a critical service." *(DAYUM DAT WAS A BURN DOE)* - -"Also, the proposed rule change would update Table 3-B (NSCC Critical Services) to add "Account Information Transmission" ("AIT"). This new entry would include in the description of AIT18 that it is being enhanced in support of the bulk transfer initiative, which is an industry effort designed to prepare carrying broker-dealers for an emergency mass transfer of large quantities of customer accounts and assets from a distressed broker to a financially secure broker. - -2\. Member Default Losses through the Crisis Continuum Section 5 (Member Default Losses through the Crisis Continuum) of the Plan is comprised of multiple subsections that identify the risk management surveillance, tools, and governance that NSCC may employ across an increasing stress environment, referred to as the "Crisis Continuum." This section currently identifies, among other things, the tools that can be employed by NSCC to mitigate losses, and mitigate or minimize liquidity needs, as the market environment becomes increasingly stressed. As more fully described below, the proposed rule change would clarify certain language. Section 5.2.1 (Stable Market Phase) describes NSCC's risk management activities in the normal course of business. These activities include (i) the routine monitoring of margin adequacy through daily evaluation of backtesting and stress testing results that review the adequacy of NSCC's margin calculations, and escalation of those results to internal and Board committees and (ii) routine monitoring of liquidity adequacy through review of daily liquidity studies that measure sufficiency of available liquidity resources to meet cash settlement obligations of the Member that would generate the largest aggregate payment obligation." - -GUYS, THIS IS ONLY UP TO PAGE 13. I COULD GO ON BUT HERE I WILL LINK THE PDF WITH JOY: - - - -APE TL;DR The NSCC (National Securities Clearing Corporation) (a subsidiary of DTCC), has filed this document TODAY. The NSCC and DTCC are Clearing corporations, so basically, they are the ones who are stuck with the bag of dogshit when the HFs come to them and say "ummmmm we fuked". So they filed this document today. Many parts to this document, but one part for example was, to clarify "the plan" of what would happen if shit hits the fan basically. - -In their words: - -1. The plan "is intended to address the risks of (a) uncovered losses or liquidity shortfalls resulting from the default of one or more of its Members," - -2. The Plan "identifies tools that may be used to address foreseeable shortfalls of NSCC's liquidity resources following a Member default" - -3. The plans goal "is to maximize resource availability *in an evolving stress situation*, to maintain flexibility in the order and use of sources of liquidity, and to repay any third-party lenders of liquidity in a timely manner..." - -4. The plan supports "an industry effort designed to prepare carrying broker-dealers for an emergency mass transfer of large quantities of customer accounts and assets from a distressed broker to a financially secure broker. - -5. Next section is on "the tools that can be employed by NSCC to mitigate losses, and mitigate or minimize liquidity needs, as the market environment becomes increasingly stressed. " - -I could go on but then it wouldn't be a TLDR, but I will just say there is NO way I can cover this entire doc in a TLDR, if you want the full perspective its worth the read tomorrow maybe when you guys are less high and have more caffeine pumping through your blood. - -Edit: Does this legal document specifically mention GME? No. Do I know if this document is in reference to GME? No. Should we check ourselves, and say hm this COULD be totally unrelated? Yes. We should consider that possibility. But we should also take ALL of our data into account, all of the context. I am only posting information, so I encourage everyone to interpret this how they please. - -## ELI5 of Rules by [u/Criand](https://www.reddit.com/user/Criand/) -003 = give us daily reports on your positions so we can see how stupid you are - -004 = haha we're not going to take the fall for one of you idiots defaulting and getting liquidated. We hope everyone else takes the hit before us - -801 = you know what? I looked at your dumbass positions from 003. Fuck it. You're done for, bitch. Margin is calling. diff --git a/Resources/Documents/NSCC/SR-NSCC-2021-002.md b/Resources/Documents/NSCC/SR-NSCC-2021-002.md deleted file mode 100644 index 7812156..0000000 --- a/Resources/Documents/NSCC/SR-NSCC-2021-002.md +++ /dev/null @@ -1,2291 +0,0 @@ -**[Source](https://www.dtcc.com/-/media/Files/Downloads/legal/rule-filings/2021/NSCC/SR-NSCC-2021-002.pdf)** - -Notice of proposed change pursuant to the Payment, Clearing, and Settlement Act of 2010 -Section 806(e)(1) * Section 806(e)(2) * -Security-Based Swap Submission pursuant -to the Securities Exchange Act of 1934 -Section 3C(b)(2) * -Exhibit 2 Sent As Paper Document Exhibit 3 Sent As Paper Document -has duly caused this filing to be signed on its behalf by the undersigned thereunto duly authorized. -19b-4(f)(6) -19b-4(f)(5) -Provide a brief description of the action (limit 250 characters, required when Initial is checked *). -(Name *) -NOTE: Clicking the button at right will digitally sign and lock -this form. A digital signature is as legally binding as a physical -signature, and once signed, this form cannot be changed. -Managing Director and Deputy General Counsel -(Title *) -Date 03/05/2021 -Provide the name, telephone number, and e-mail address of the person on the staff of the self-regulatory organization -prepared to respond to questions and comments on the action. -Title * Executive Director and Associate General Counsel -Contact Information -19b-4(f)(4) -19b-4(f)(2) -19b-4(f)(3) -Extension of Time Period -for Commission Action * -SECURITIES AND EXCHANGE COMMISSION -WASHINGTON, D.C. 20549 -Form 19b-4 -Withdrawal -Fax -Jacqueline Last Name * -Filing by -Pilot -National Securities Clearing Corporation -2021 - * 002 -Amendment No. (req. for Amendments *) -File No.* SR - -Chezar -jfarinella@dtcc.com -Telephone * (212) 855-3216 -E-mail * -First Name * -Signature -Pursuant to the requirements of the Securities Exchange Act of 1934, -Initial * Amendment * Section 19(b)(3)(A) * Section 19(b)(3)(B) * -Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 -Description -Amend the Supplemental Liquidity Deposit Requirements -npoulos@dtcc.com -By Nikki Poulos -Section 19(b)(2) * -19b-4(f)(1) -Required fields are shown with yellow backgrounds and asterisks. -Page 1 of * 79 - OMB APPROVAL -OMB Number: 3235-0045 -Estimated average burden -hours per response............38 -Rule -Date Expires * -If the self-regulatory organization is amending only part of the text of a lengthy -proposed rule change, it may, with the Commission's permission, file only those -portions of the text of the proposed rule change in which changes are being made if -the filing (i.e. partial amendment) is clearly understandable on its face. Such partial -amendment shall be clearly identified and marked to show deletions and additions. -Partial Amendment -Add Remove View -The self-regulatory organization may choose to attach as Exhibit 5 proposed changes -to rule text in place of providing it in Item I and which may otherwise be more easily -readable if provided separately from Form 19b-4. Exhibit 5 shall be considered part -of the proposed rule change. -Exhibit 5 - Proposed Rule Text -SECURITIES AND EXCHANGE COMMISSION -WASHINGTON, D.C. 20549 -For complete Form 19b-4 instructions please refer to the EFFS website. -Copies of any form, report, or questionnaire that the self-regulatory organization -proposes to use to help implement or operate the proposed rule change, or that is -referred to by the proposed rule change. -Exhibit Sent As Paper Document -Exhibit 4 - Marked Copies -Add Remove View -Exhibit 3 - Form, Report, or Questionnaire -Add Remove -View -Exhibit 2 - Notices, Written Comments, -Transcripts, Other Communications -Add Remove -View -Exhibit 1 - Notice of Proposed Rule Change * -Add -Form 19b-4 Information * -Exhibit 1A- Notice of Proposed Rule -Change, Security-Based Swap Submission, -or Advance Notice by Clearing Agencies * -Add Remove View -Remove -Add Remove -The full text shall be marked, in any convenient manner, to indicate additions to and -deletions from the immediately preceding filing. The purpose of Exhibit 4 is to permit -the staff to identify immediately the changes made from the text of the rule with which -it has been working. -View -The self-regulatory organization must provide all required information, presented in a -clear and comprehensible manner, to enable the public to provide meaningful -comment on the proposal and for the Commission to determine whether the proposal -is consistent with the Act and applicable rules and regulations under the Act. -View -Exhibit Sent As Paper Document -The Notice section of this Form 19b-4 must comply with the guidelines for publication -in the Federal Register as well as any requirements for electronic filing as published -by the Commission (if applicable). The Office of the Federal Register (OFR) offers -guidance on Federal Register publication requirements in the Federal Register -Document Drafting Handbook, October 1998 Revision. For example, all references to -the federal securities laws must include the corresponding cite to the United States -Code in a footnote. All references to SEC rules must include the corresponding cite -to the Code of Federal Regulations in a footnote. All references to Securities -Exchange Act Releases must include the release number, release date, Federal -Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO] --xx-xx). A material failure to comply with these guidelines will result in the proposed -rule change being deemed not properly filed. See also Rule 0-3 under the Act (17 -CFR 240.0-3) -The Notice section of this Form 19b-4 must comply with the guidelines for publication -in the Federal Register as well as any requirements for electronic filing as published -by the Commission (if applicable). The Office of the Federal Register (OFR) offers -guidance on Federal Register publication requirements in the Federal Register -Document Drafting Handbook, October 1998 Revision. For example, all references to -the federal securities laws must include the corresponding cite to the United States -Code in a footnote. All references to SEC rules must include the corresponding cite -to the Code of Federal Regulations in a footnote. All references to Securities -Exchange Act Releases must include the release number, release date, Federal -Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO] --xx-xx). A material failure to comply with these guidelines will result in the proposed -rule change, security-based swap submission, or advance notice being deemed not -properly filed. See also Rule 0-3 under the Act (17 CFR 240.0-3) -Copies of notices, written comments, transcripts, other communications. If such -documents cannot be filed electronically in accordance with Instruction F, they shall be -filed in accordance with Instruction G. -Add Remove View -Required fields are shown with yellow backgrounds and asterisks. -Page 3 of 79 -1. Text of the Proposed Rule Change -(a) The proposed rule change of National Securities Clearing Corporation (“NSCC”) -is annexed hereto as Exhibit 5 and consists of modifications to Rule 4(A) (Supplemental -Liquidity Deposits) of the NSCC’s Rules & Procedures (“Rules”) to (1) calculate and collect, -when applicable, supplemental liquidity deposits to NSCC’s Clearing Fund (“Supplemental -Liquidity Deposits,” or “SLD”) on a daily basis rather than only in advance of the monthly -expiration of stock options (defined in Rule 4(A) as “Options Expiration Activity Period”); -(2) establish an intraday SLD obligation that would apply in advance of Options Expiration -Activity Periods and may also be applied on other days, as needed; (3) implement an alternative -pro rata calculation of Members’ SLD obligations that may apply in certain circumstances; and -(4) simplify and improve the transparency of the description of the calculation, collection and -treatment of SLD in Rule 4(A) of the Rules, as described in greater detail below.1 -(b) Not applicable. -(c) Not applicable. -2. Procedures of the Self-Regulatory Organization -The proposal was approved by the Risk Committee of the Board of Directors of NSCC -on May 21, 2020. -3. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis -for, the Proposed Rule Change -(a) Purpose -NSCC is proposing to enhance its management of the liquidity risks that arise in or are -borne by it by calculating and collecting, when applicable, SLD on each Business Day rather -than only in advance of Options Expiration Activity Periods. The proposed changes would -establish an intraday SLD obligation that would apply in advance of Options Expiration Activity -Periods and may be applicable on any Business Day, as needed. The proposal would also -implement an alternative pro rata calculation of Members’ SLD obligations that may apply in -certain circumstances. Finally, in connection with these proposed changes, NSCC would -simplify and improve the description of the calculation, collection and treatment of SLD in Rule -4(A). These proposed rule changes are described in greater detail below. -(i) Overview of the NSCC Liquidity Risk Management -NSCC, along with its affiliates, The Depository Trust Company and Fixed Income -Clearing Corporation, maintains a Clearing Agency Liquidity Risk Management Framework -(“Framework”) that sets forth the manner in which NSCC measures, monitors and manages the -1 - Capitalized terms not defined herein are defined in the Rules, available at -http://dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf. -Page 4 of 79 -liquidity risks that arise in or are borne by it.2 - As a central counterparty, NSCC’s liquidity needs -are driven by the requirement to complete end-of-day money settlement, on an ongoing basis, in -the event NSCC ceases to act for a Member (hereinafter referred to as a “default”).3 - If a Member -defaults, NSCC needs to complete settlement of guaranteed transactions on the defaulted -Member’s behalf from the date of default through the remainder of the settlement cycle. As -such, and as provided for in the Framework, NSCC measures the sufficiency of its qualifying -liquid resources through daily liquidity studies across a range of scenarios, including amounts -NSCC would need in the event the Member or Member family with the largest aggregate -liquidity exposure defaults.4 - -As described in the Framework, NSCC seeks to maintain qualifying liquid resources in -an amount sufficient to cover this risk. These resources currently include (1) cash deposits to the -NSCC Clearing Fund;5 - (2) the proceeds of the issuance and private placement of (a) short-term, -unsecured notes in the form of commercial paper and extendable notes (“Commercial Paper -Program”),6 - and (b) term debt (“Term Debt Issuance”);7 - (3) cash that would be obtained by -drawing on NSCC’s committed 364-day credit facility with a consortium of banks (“Line of -Credit”);8 - and (4) Supplemental Liquidity Deposits, collected pursuant to Rule 4(A), which are -currently designed to cover the heightened liquidity exposure arising around Options Expiration -2 - See Securities Exchange Act Release No. 82377 (December 21, 2017), 82 FR 61617 -(December 28, 2017) (File Nos. SR-DTC-2017-004; SR-FICC-2017-008; SR-NSCC2017-005). -3 - The Rules identify when NSCC may cease to act for a Member and the types of actions -NSCC may take. For example, NSCC may suspend a firm’s membership with NSCC or -prohibit or limit a Member’s access to NSCC’s services in the event that Member -defaults on a financial or other obligation to NSCC. See Rule 46 (Restrictions on Access -to Services) of the Rules, supra note 1. -4 - “Qualifying liquid resources” are defined in Rule 17Ad-22(a)(14) under the Securities -Exchange Act of 1934 (“Act”). 17 CFR 240.17Ad-22(a)(14). The Framework also -includes a definition of qualifying liquid resources that incorporates by reference Rule -17Ad-22(a)(14). See supra note 2. -5 - See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund Formula and Other -Matters) of the Rules, supra note 1. -6 - See Securities Exchange Act Release Nos. 75730 (August 19, 2015), 80 FR 51638 -(August 25, 2015) (File No. SR-NSCC-2015-802); 82676 (February 9, 2018), 83 FR -6912 (February 15, 2018) (File No. SR-NSCC-2017-807). -7 - See Securities Exchange Act Release No. 88146 (February 7, 2020), 85 FR 8046 -(February 12, 2020) (File No. SR-NSCC-2019-802). -8 - See Securities Exchange Act Release No. 80605 (May 5, 2017), 82 FR 21850 (May 10, -2017) (File Nos. SR-DTC-2017-802; SR-NSCC-2017-802). -Page 5 of 79 -Activity Periods, required from those Members whose activity would pose the largest liquidity -exposure to NSCC.9 - -NSCC’s liquidity risk management has evolved in order to adhere to regulatory -requirements that were adopted after Rule 4(A) was implemented.10 As part of its efforts to -maintain compliance with these requirements, NSCC has continued to strengthen its liquidity -risk management strategy, including through growing and diversifying its qualifying liquid -resources. In connection with these ongoing efforts, NSCC is proposing to calculate and collect, -when applicable, SLD every Business Day rather than only in connection with Options -Expiration Activity Periods. This proposed change would improve NSCC’s ability to measure -and monitor its daily liquidity exposures and allow it to collect additional qualifying liquid -resources from Members whose activity poses the largest liquidity exposure to NSCC in -connection with their daily settlement activity, and not only during Options Expiration Activity -Periods. By measuring SLD against Members’ actual daily settlement activity and NSCC’s -available qualifying liquid resources, the proposal would also help mitigate risks to NSCC that it -is unable to secure adequate default liquidity from other sources in an amount necessary to meet -its liquidity needs. For example, the proposal would help mitigate the risks that could arise if -investor demand for the short-term notes issued under the Commercial Paper Program weakens, -there is limited investor demand for term debt issued pursuant to a Term Debt Issuance, or -NSCC is unable to renew its Line of Credit at the targeted amount. -NSCC is also proposing to establish an intraday SLD obligation that would apply on the -first Business Day of the Options Expiration Activity Period to allow NSCC to continue to -mitigate the additional liquidity exposures presented by options activity. The proposal would -also permit NSCC to calculate and collect an intraday SLD on any Business Day when, for -example, NSCC believes that it is necessary to collect an additional SLD from a Member whose -activity presents relatively greater risks to the NSCC on an overnight basis. -NSCC is also proposing to implement an alternative calculation of Members’ SLD -requirements that would be their pro rata allocation of the largest SLD obligation calculated for -that Business Day. This proposed change would provide NSCC with the discretion, in certain -circumstances, to allocate its largest liquidity need on a Business Day among those Members that -are required to pay SLD on that day rather than collect separate SLD from those Members, as -described in greater detail below. -In connection with these proposed changes, NSCC would also simplify the description of -the calculation of SLD in Rule 4(A) in order to improve the transparency of this Rule, as -described in greater detail below. -9 - See Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, supra note 1. See also -Securities Exchange Act Release Nos. 70999 (December 5, 2013), 78 FR 75413 -(December 11, 2013) (File No. SR-NSCC-2013-02); 71000 (December 5, 2013), 78 FR -75400 (December 11, 2013) (File No. SR-NSCC-2013-802). -10 See 17 CFR 240.17Ad-22(e)(7). See also supra note 2. -Page 6 of 79 -(ii) Current Rule 4(A) and Supplemental Liquidity Deposits -Under the current Rule 4(A), NSCC collects SLD from the unaffiliated Members and -families of affiliated Members (each defined as an “Affiliated Family”) that incur the largest -gross settlement debits over the settlement cycle during times of increased trading activity that -arise around Options Expiration Activity Periods.11 -Under the current Rule 4(A), NSCC performs calculations on a monthly basis, no later -than the fifth day prior to an Options Expiration Activity Period, using activity observed over a -24-month lookback period (defined in the current Rule 4(A) as the “Special Activity Lookback -Period”).12 These calculations determine (1) NSCC’s largest liquidity need that exceeded its -liquidity resources (defined in Rule 4(A) as “Special Activity Peak Liquidity Need”); and (2) the -30 (or fewer) unaffiliated Members or Affiliated Families (defined in Rule 4(A) as “Special -Activity Liquidity Providers”) that presented the largest liquidity exposures to NSCC (defined in -Rule 4(A) as “Special Activity Peak Liquidity Exposures”).13 To determine the SLD obligations -of each Special Activity Liquidity Provider, the calculated Special Activity Peak Liquidity Need -of NSCC is allocated to these Special Activity Liquidity Providers in proportion to the Special -Activity Peak Liquidity Exposures they presented to NSCC during the Special Activity -Lookback Period. Special Activity Liquidity Providers are required to fund their SLD -obligations by the close of business on the second day prior to the applicable Options Expiration -Activity Period.14 SLD may be returned to Special Activity Liquidity Providers seven Business -Days after the end of the applicable Options Expiration Activity Period.15 -On any Business Day between calculation dates, if NSCC observes an increase in its -liquidity needs that exceeds a predetermined threshold amount, it may call for an additional -deposit from the Member whose increase in activity levels caused (or was the primary cause of) -such increased liquidity need (defined in Rule 4(A) as “Special Activity Liquidity Call”).16 -NSCC may hold deposits made pursuant to a Special Activity Liquidity Call for up to 90 days -after the deposit is made.17 Members are also permitted to submit a cash deposit to the Clearing -Fund as a “Special Activity Prefund Deposit” no later than the first Business Day of an Options -11 See Section 2 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, supra note 1. -12 See id. -13 See Section 3 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -14 See Section 4 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -15 See Section 9 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -16 See Section 7 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -17 See Section 10 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -Page 7 of 79 -Expiration Activity Period.18 NSCC understands that a Member would generally make a Special -Activity Prefund Deposit when it anticipates that its Special Activity Peak Liquidity Exposure -during that period may be greater than the amount calculated by NSCC pursuant to Rule 4(A) -based on activity in the Special Activity Lookback Period.19 -The current Rule 4(A) also addresses how SLD are treated generally.20 Specifically, -while SLD are part of a Member’s actual deposit to the Clearing Fund, they are made in addition -to a Member’s Required Fund Deposit and any other deposit of any such Member to the Clearing -Fund.21 Rule 4(A) also provides that SLD may be invested and may be used to satisfy a loss or -liability as provided for in Sections 3 or 13 of Rule 4, and addresses NSCC’s obligation to -provide Members with certain information that would help them anticipate their potential SLD -requirements.22 -(iii) Amended Rule 4(A) and Proposed Daily Calculation of Supplemental -Liquidity Deposits -In order to better address the liquidity risks presented by Members’ daily activity, NSCC -is proposing to amend Rule 4(A) to calculate and collect, when applicable, SLD every Business -Day rather than only in connection with the monthly expiration of stock options. While the -monthly expiration of stock options does present larger liquidity exposures to NSCC, NSCC may -also face large liquidity exposures from Members’ daily activity, particularly during volatile -market conditions. By allowing NSCC to calculate and collect SLD daily, NSCC would be able -to identify these exposures based on Members’ daily activity rather than estimate its upcoming -liquidity exposures based on activity observed over a lookback period. The proposal would help -NSCC mitigate its liquidity risks through the daily collection of SLD from those Members’ -whose daily activity would, in the event of the Member’s default, create a potential liquidity -need that is in excess of NSCC’s available qualifying liquid resources. The proposal would also -permit NSCC to return SLD to Members on the Business Day following the day those deposits -are collected and would remove the current requirement that SLD be held for up to 90 days. -In order to implement this proposed change to the timing of the SLD, NSCC would make -a number of changes to Rule 4(A), described below. The proposed changes to Rule 4(A) would -implement a daily calculation and collection of SLD, simplify and clarify the calculations done -in connection with the SLD requirements, and enhance the disclosures of the SLD requirements. -18 See definition of “Special Activity Prefund Deposit” in Section 2 of Rule 4(A) -(Supplemental Liquidity Deposits) of the Rules, id. -19 See id. -20 See Section 13 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -21 See Section 13(b) of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -22 See Section 13(c) and Section 14 of Rule 4(A) (Supplemental Liquidity Deposits) of the -Rules, id. -Page 8 of 79 -Despite these proposed changes, the structure of Rule 4(A) and the fundamental mechanics of -the SLD requirements would be unchanged. -Proposed Daily Calculation of Supplemental Liquidity Deposits -Supplemental Liquidity Providers. Under the proposed Rule 4(A), each Business Day -NSCC would determine the 30 (or fewer) Members (each such Member a “Supplemental -Liquidity Provider”) that had the “Peak Liquidity Need,” which would be defined as the largest -Daily Liquidity Need that NSCC would have for that Member or Affiliated Family in a -“Lookback Period.” 23 For purposes of this calculation, Daily Liquidity Need would be defined -as the amount of liquid resources needed to effect the settlement of NSCC’s payment obligations -as a central counterparty over a three day settlement cycle, assuming the default of that Member -on that day. -As described above, Supplemental Liquidity Providers are currently identified by -reviewing Members’ Special Activity Peak Liquidity Exposures over the Lookback Period. -Under the proposed approach, NSCC would base this determination on Members’ Peak Liquidity -Need, which would continue to identify those Members whose activity posed the largest liquidity -risks to NSCC during the Lookback Period. The proposed approach would no longer require a -calculation using NSCC’s available liquid resources on each day in the Lookback Period but -would use a simpler approach by looking only at liquidity need. The proposed approach to use a -simpler calculation would reduce the risk of error and would clarify the description of how -NSCC would identify Supplemental Liquidity Providers in the proposed Rule 4(A), making it -more predictable to Members. -Supplemental Liquidity Obligation. After NSCC determines the Supplemental Liquidity -Providers, NSCC would then determine if any of the Supplemental Liquidity Providers would be -required to pay an SLD on that Business Day. The proposed Rule 4(A) would use a simplified -calculation by determining if the Daily Liquidity Need for each Supplemental Liquidity Provider -on that Business Day exceeds the sum of NSCC’s qualifying liquid resources available to NSCC -on that day, assuming stressed market conditions (described below) (defined in the proposed -Rule 4(A) as “Qualifying Liquid Resources”). The result of that calculation would be a -Supplemental Liquidity Provider’s SLD requirement (defined in the proposed Rule 4(A) as a -“Supplemental Liquidity Obligation”) for that day. If the Daily Liquidity Need of a -Supplemental Liquidity Provider does not exceed NSCC’s Qualifying Liquid Resources on that -day, then it would not have a Supplemental Liquidity Obligation. -Because this calculation would be done at the start of each Business Day (as discussed -further below), it would be based on the Qualifying Liquid Resources, including Required Fund -Deposits to the Clearing Fund, available to NSCC as of the end of the prior Business Day. -23 The “Lookback Period” would continue to be defined as 24 months, or a longer period as -determined by NSCC in its discretion. NSCC may adjust the Lookback Period if, for -example, unusual activity observed in the Lookback Period is not an appropriate indicator -of future settlement activity and causes a Member to be a Supplemental Liquidity -Provider. See Section 2 (Defined Terms) of Rule 4(A), id. -Page 9 of 79 -Additionally, in order to anticipate market conditions that could cause Qualifying Liquid -Resources to be unavailable on that day, NSCC would apply stress scenarios in determining its -total Qualifying Liquid Resources for purposes of Rule 4(A). Currently, NSCC applies stress -scenarios in determining the Special Activity Daily Liquidity Need and, in practice, they are -currently applied to the Other Qualifying Liquid Resources in this calculation under the current -Rule 4(A).24 The proposed change would allow NSCC to continue to assume stressed markets in -its SLD calculations, which protects it against unexpected market events.25 The proposed -changes to Rule 4(A) would make it clearer how these stress scenarios are applied. -Under this proposed calculation, NSCC would no longer need to estimate the potential -liquidity need a Member’s activity could pose to NSCC based on activity that settled in the -Lookback Period. Instead, the Supplemental Liquidity Obligation of a Member would be -calculated based on the actual liquidity exposure that its daily activity would pose to NSCC on -that particular day in the event of that Member’s default. The proposed change provides both -NSCC and Members with a more reliable measure of the liquidity risks posed to NSCC by its -Members’ daily settlement activity in calculating SLD requirements. -Each Supplemental Liquidity Provider that has a Supplemental Liquidity Obligation on a -Business Day would receive a notice from NSCC of the amount of its Supplemental Liquidity -Obligation and would be required to make a deposit in that amount to the Clearing Fund within -one hour of such notice. The proposed timing of funding a Supplemental Liquidity Obligation -would mirror the current requirement that is applied to Members’ Required Fund Deposits, -which is also calculated and collected daily, and must be funded within one hour of demand.26 -Specifically, NSCC expects to deliver notification of Supplemental Liquidity Obligations to -Supplemental Liquidity Providers by around 8:30 AM ET each Business Day, with deposits -required by no later than 9:30 AM ET. -Proposed Pro Rata Calculation of Supplemental Liquidity Obligations. As an alternative -to the calculation of Supplemental Liquidity Obligations described above, proposed Rule 4(A) -would also state that, in the event two or more Supplemental Liquidity Providers have a -Supplemental Liquidity Obligation of more than $2 billion on a Business Day, calculated -pursuant to the calculation described above, NSCC may determine the Supplemental Liquidity -24 Current Rule 4(A) uses the defined term “Other Qualifying Liquid Resources” to refer to -NSCC’s qualifying liquid resources other than the Clearing Fund and the Line of Credit. -See Section 2 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -25 NSCC would apply the same stress scenarios that it currently applies, which include the -market shocks of 1987, and removing the largest commitment to the Line of Credit, -excess deposits to the Clearing Fund on deposit and proceeds from issued commercial -paper that is maturing within five Business Days from NSCC’s Qualifying Liquid -Resource. Any changes to these stress scenarios would be announced by an Important -Notice posted to NSCC’s website. -26 See Section II(B) of Procedure XV (Clearing Fund Formula and Other Matters) of the -Rules, supra note 1. -Page 10 of 79 -Obligation of all Supplemental Liquidity Providers on that day would be their pro rata share of -the largest Supplemental Liquidity Obligation calculated on that Business Day.27 -This proposed alternative calculation of the Supplemental Liquidity Obligations would -provide NSCC with the option of collecting only the largest SLD calculated on a Business Day, -allocated among each of the Supplemental Liquidity Providers. The purpose of this proposed -provision is to provide NSCC with the option of collecting enough funds to meet its regulatory -requirements in circumstances when the aggregate Supplemental Liquidity Obligations on a -particular day would significantly exceed that amount. Therefore, NSCC has structured this -provision to be available only if two or more Supplemental Liquidity Providers owe SLD of -more than $2 billion. NSCC has never had two more Supplemental Liquidity Providers owe -more than $2 billion in SLD on a calculation date since Rule 4(A) was adopted. Therefore, -NSCC believes this alternative calculation would only be available in very limited -circumstances. Furthermore, NSCC believes the threshold of $2 billion is appropriate as it -would only permit this alternative calculation in circumstances when it would have a material -impact on the allocation of Supplemental Liquidity Obligations among the Supplemental -Liquidity Providers. -In such circumstances, when multiple Members have relatively large Supplemental -Liquidity Obligations of more than $2 billion, NSCC would have the option to determine if it is -appropriate to collect the largest SLD calculated for that Business Day, divided pro rata among -the Supplemental Liquidity Providers rather than collect the each of the Supplemental Liquidity -Obligations of those firms. NSCC may determine, for example, that, in certain market -conditions, this approach would be appropriate to alleviate liquidity pressures on Supplemental -Liquidity Providers. This alternative calculation would allow NSCC to collect sufficient -qualifying liquid resources to meet its regulatory obligations with respect to liquidity risk -management without requiring all of the Supplemental Liquidity Providers to fund the total -amount of their calculated Supplemental Liquidity Obligation on that Business Day.28 -27 As an example, the Supplemental Liquidity Obligations for three Supplemental Liquidity -Providers on a Business Day are – Member A: $6 billion, Member B: $2 billion and -Member C: $1 billion. If NSCC determines, in its sole discretion, to calculate their -Supplemental Liquidity Obligations on a pro-rata basis, then their Supplemental -Liquidity Obligations would be – Member A: $4 billion (or 6/9 of the largest -Supplemental Liquidity Obligation of $6 billion), Member B: $1.3 billion (or 2/9 of the -$6 billion) and Member C: $700 million (or 1/9 of the $6 billion). The notice provided to -each Supplemental Liquidity Provider on that Business Day would inform those -Members that this pro-rata calculation was applied. -28 Rule 17Ad-22(e)(7)(i) under the Act requires, in part, that NSCC maintain sufficient -liquid resources at the minimum to effect same-day settlement of payment obligations -with a high degree of confidence under a wide range of foreseeable stress scenarios, -including the default of the participant family that would generate the largest aggregate -payment obligation for the covered clearing agency in extreme but plausible market -conditions. 17 CFR 240.17Ad-22(e)(7)(i). -Page 11 of 79 -Intraday Supplemental Liquidity Calls. The proposed Rule 4(A) would also establish -Intraday Supplemental Liquidity Calls that would replace the current Special Activity Liquidity -Calls. The existing Special Activity Liquidity Calls are designed to address increases in NSCC’s -liquidity need between calculation dates. The proposed Intraday Supplemental Liquidity Calls -would serve a similar function, allowing NSCC to calculate and collect additional SLD on an -intraday basis if a Supplemental Liquidity Provider’s increased activity levels or projected -settlement activity causes NSCC’s Daily Liquidity Need to exceed NSCC’s Qualifying Liquid -Resources. This proposed provision would assist NSCC in mitigating increased liquidity -exposures in specified circumstances. -First, proposed Rule 4(A) would establish a monthly Intraday Supplemental Liquidity -Call that is calculated and collected, when applicable, on the first Business Day of an Options -Expiration Activity Period, which is typically a Friday.29 This Intraday Supplemental Liquidity -Call would be calculated as the difference between (1) NSCC’s Daily Liquidity Need, -recalculated to account for both actual settlement activity submitted to NSCC over the course of -Business Day and projected activity in stock options that is expected to be submitted to NSCC30 -and (2) NSCC’s Qualifying Liquid Resources. Settlement activity may net with (and offset) the -activity that NSCC uses in re-calculating the Daily Liquidity Need. In order to account for any -potential offsetting settling activity, NSCC would adjust the re-calculated Daily Liquidity Need -using an estimated netting percentage that is based on each Supplemental Liquidity Provider’s -average percentage of netting observed over the prior 24 months. Under this proposed provision, -NSCC would adjust the amount of SLD it collects in order to mitigate the increased liquidity -exposures related to the monthly expiration of stock options. -Second, proposed Rule 4(A) would allow NSCC to call for additional SLD on an intraday -basis on any Business Day if a Supplemental Liquidity Provider’s increased activity levels -causes NSCC’s Daily Liquidity Need to exceed NSCC’s Qualifying Liquid Resources and -NSCC determines, in its sole discretion, that it is appropriate to require an additional intraday -SLD from that Supplemental Liquidity Provider in order to mitigate those additional liquidity -exposures. Under this proposed change, NSCC would have the ability to make an Intraday -Supplemental Liquidity Call on any Business Day. The amount of an Intraday Supplemental -Liquidity Call would be the difference between NSCC’s Daily Liquidity Need, recalculated for -that Business Day taking into account any increase in settlement activity, and NSCC’s -Qualifying Liquid Resources. This proposed provision would allow NSCC to adjust the amount -of SLD it collects for a Business Day in circumstances when NSCC believes it is necessary to -29 The proposed Rule 4(A) will retain the existing definition of an Options Expiration -Activity Period for purposes of this monthly Intraday Supplemental Liquidity Call. -30 Each Business Day, NSCC receives information regarding projected settlement activity -from The Options Clearing Corporation pursuant to a Stock and Futures Settlement -Agreement (“OCC Accord”). The OCC Accord provides for the clearance and settlement -of exercises and assignments of options on eligible securities or the maturity of eligible -stock futures contracts through NSCC. See Securities Exchange Act Release No. 81260 -(July 31, 2017), 82 FR 36484 (August 4, 2017) (File Nos. SR-NSCC-2017-803; -SR-OCC-2017-804). -Page 12 of 79 -accelerate the collection of additional SLD from Supplemental Liquidity Providers whose -activity may present relatively greater risks to the NSCC on an overnight basis. NSCC would -determine if an Intraday Supplemental Liquidity Call is appropriate based on a variety of factors -and circumstances, including, but not limited to, an assessment of a Supplemental Liquidity -Provider’s ability to meet its projected settlement or Supplemental Liquidity Obligations and -estimates of settlement activity that could offset settlement exposures and are not reflected in -NSCC’s liquidity estimates. -Returns of SLD and Miscellaneous Matters. Proposed Rule 4(A) would provide that -NSCC would return SLD, including any SLD funded pursuant to an Intraday Supplemental -Liquidity Call, on the next Business Day unless such amounts are held longer by NSCC pursuant -to proposed Section 12a of Rule 4(A), as described below. Under the current Rule 4(A), NSCC -may hold SLD for up to seven Business Days after the end of the applicable Options Expiration -Activity Period and may hold SLD funded pursuant to a Special Activity Liquidity Call for up to -90 days after such deposit is made. Under the proposed change, because NSCC would -recalculate the Supplemental Liquidity Obligations each Business Day, NSCC would no longer -need to hold SLD for these extended periods. -NSCC would amend proposed Section 12a (currently Section 13a) of Rule 4(A) to clarify -that SLD, as part of Members’ actual deposit to the Clearing Fund, would be subject to the -provision of Section 9 of Rule 4. Section 9 of Rule 4 addresses NSCC’s right to withhold all or -any part of any excess deposit of a Member if such Member has been placed on the Watch List -pursuant to the Rules or if NSCC determines that the Member’s anticipated activities in NSCC in -the near future may reasonably be expected to be materially different than its activities of the -recent past.31 Current Section 13a of Rule 4(A) addresses how SLD are treated pursuant to other -Rules, particularly Rule 4, which addresses Members’ deposits to the Clearing Fund. While this -proposal would not change NSCC’s rights with respect to these funds, it would provide Members -with greater transparency into how SLD are treated under Rule 4. -NSCC would also amend the provision in Rule 4(A) that addresses when SLD would be -returned to a Member that ceases to be a participant. Currently, Rule 4(A) states that SLD are -not subject to Section 7 of Rule 4 (which addresses how Required Fund Deposits are returned to -retired Members) and, as such, are returned to retired Members as otherwise provided for in Rule -4(A).32 Under the proposed Rule 4(A), because NSCC would be able to calculate SLD each -Business Day, it would return SLD on the Business Day following the calculation date. -However, while a firm may still have unsettled activity on the day it retires, NSCC would not be -able to collect SLD on the days following a Member’s retirement. Therefore, NSCC is -proposing to amend Rule 4(A) to require that SLD of a retired Member be treated similarly to -other cash Required Fund Deposits to the Clearing Fund and be held by NSCC for 30 calendar -31 For example, this may occur when an index rebalancing occurs shortly after a month-end -options expiration period, which could cause an increase in NSCC’s liquidity exposures. -32 Section 7 of Rule 4 provides that Required Fund Deposits to the Clearing Fund in the -form of cash and securities are returned to retired Members within 30 calendar days after -all of its transactions have settled and obligations have been satisfied. See supra note 1. -Page 13 of 79 -days after any of its open transactions have settled and obligations have been satisfied. This -proposed change would protect NSCC from liquidity risks presented by open transactions in the -days following a firm’s retirement and would align the treatment of these funds with the -treatment of Required Fund Deposits of retired Members. -The proposed Rule 4(A) would also simplify the additional miscellaneous provisions -applicable to SLD, which address, for example, NSCC’s right to debit Members’ accounts at -NSCC if a Supplemental Liquidity Provider fails to meet its Supplemental Liquidity Obligation, -and the information NSCC makes available to Supplemental Liquidity Providers each Business -Day regarding SLD calculations. While the proposed changes would update and simplify these -provisions, they would not significantly alter the structure of these provisions, as described -below. -Proposed Changes to Rule 4(A) -The proposal described above would be implemented into the Rules by amending the -current Rule 4(A). The specific changes to implement the proposal are described below. -Section 1 (Overview). NSCC is proposing changes to Section 1 of Rule 4(A) to simplify -the descriptions by removing outdated and unnecessary language. Section 1 of Rule 4(A) would -continue to provide the rationale for the SLD requirement, by describing NSCC’s liquidity needs -and how the SLD requirements are designed to contribute to meeting those needs. However, the -proposed changes would simplify this section by removing a statement that specifically identifies -two of NSCC’s principal sources of liquidity and would instead more generally refer to NSCC’s -sources of liquidity. The proposed changes to Section 1 of Rule 4(A) would also remove -references to options expiration activity periods, which would no longer be applicable to the -SLD requirement under this proposal. -Section 2 (Defined Terms). NSCC is proposing several changes to Section 2 of Rule 4(A) -in order to implement this proposal. As described below, the proposed changes to the defined -terms address the change in timing of the SLD requirement to occur each Business Day and -would improve the transparency of Rule 4(A) through simplified and clearer defined terms. -First, Section 2 of proposed Rule 4(A) would remove the definition of “Special Activity -Calculation Date,” which is tied to the monthly Options Expiration Activity Period, and instead -would use the term “Business Day” throughout proposed Rule 4(A), where appropriate. -Business Day is currently defined in Rule 1 as any day on which NSCC is open for business. -Therefore, this proposed change would provide for the calculation of SLD requirements on each -day that NSCC is open for business. -Second, Section 2 of the proposed Rule 4(A) revise other defined terms that use the -phrase “Special Activity” to either remove that phrase or, when appropriate, to replace this -phrase with the term “Supplemental.” For example, NSCC would revise the defined term -“Special Activity Daily Liquidity Need” to “Daily Liquidity Need,” and would revise the defined -term “Special Activity Liquidity Provider” to “Supplemental Liquidity Provider.” The phrase -“Special Activity” was used in the current Rule 4(A) to refer to the Options Expiration Activity -Period, which would only be applicable to the monthly intraday SLD in the proposed Rule 4(A). -Page 14 of 79 -NSCC would also update the definition of Daily Liquidity Need to change a reference -from a four-day settlement cycle to a three-day settlement cycle, to reflect the amendment to -Rule 15c6-1(a) under the Act to shorten the standard settlement cycle for most broker-dealer -transactions.33 Additionally, NSCC would move the defined term for “Options Expiration -Activity Period” within Section 2 of the proposed Rule 4(A) so it continues to appear -alphabetically, but is not proposing to change the definition of this term. -Third, the proposed changes to Section 2 of Rule 4(A) would include one defined term -for “Qualifying Liquid Resources” to refer to all default liquidity resources available to NSCC to -settle its payment obligations as a central counterparty. As discussed in greater detail above, the -defined term would provide that NSCC may apply stressed market assumptions to its Qualifying -Liquid Resources when applying these resources in the calculations made under Rule 4(A). In -connection with this proposed change, NSCC would remove the defined terms “Commitment” -and “Credit Facility,” which were used in the current Rule 4(A) to refer to NSCC’s Line of -Credit, and would remove “Other Qualifying Liquid Resources,” which was used to refer to -NSCC’s liquid resources other than the Clearing Fund and the Line of Credit. This proposed -change would simplify Rule 4(A) and would account for NSCC’s continuing efforts to expand -and diversify its default liquidity resources. The proposed change would also clarify that -Qualifying Liquid Resources would not include SLD for purposes of the calculations in Rule -4(A). -Fourth, the proposed changes would move certain calculations out of the defined terms in -Section 2 and include them in the relevant later sections of Rule 4(A). This proposed change -would simplify and clarify Rule 4(A), which currently requires a reader to refer back to the -defined terms in Section 2 when reading the calculations and requirements set forth in later -sections of Rule 4(A). For example, Section 2 of Rule 4(A) currently includes the calculation of -“Special Activity Peak Liquidity Exposure” and “Special Activity Peak Liquidity Need.” In the -proposed Rule 4(A), NSCC would no longer use the calculation of Special Activity Peak -Liquidity Exposure in determining the Supplemental Liquidity Providers or in calculating those -requirements. The calculation of Peak Liquidity Need, which would replace Special Activity -Peak Liquidity Need, would be moved out of Section 2 and into Section 3, where that calculation -would be described as being used to identify Supplemental Liquidity Providers. -Finally, the proposed changes to Section 2 of Rule 4(A) would remove defined terms that -are no longer needed when NSCC calculates SLD requirements daily. For example, NSCC -would remove defined terms that are related to the Options Expiration Activity Period, including -“Special Activity Business Day,” which is currently defined as a Business Day included in an -Options Expiration Activity Period. NSCC would also remove the defined term for “Special -Activity Prefund Deposit” because it would no longer be necessary for Members to prefund their -potential SLD requirement in advance of NSCC’s calculations when they are done on a daily -basis. -Section 3 (Supplemental Liquidity Providers). NSCC is proposing to amend Section 3 to -describe how NSCC would identify the Supplemental Liquidity Providers for each Business -33 See 17 CFR 240.15c6-1. -Page 15 of 79 -Day. Section 3 of the proposed Rule 4(A) would state that, each Business Day, NSCC would -determine the Peak Liquidity Need of each Member during the Lookback Period, and would -identify the Supplemental Liquidity Providers for that Business Day as the 30 (or fewer) -Members with the largest Peak Liquidity Need in that time period. These changes would -implement the proposal described in greater detail above to make this calculation daily and to -simplify the calculation used to identify Supplemental Liquidity Providers by using Peak -Liquidity Need rather than using the largest exposures of all providers in the Lookback Period. -Section 4 (Supplemental Liquidity Obligations); Section 5 (Satisfaction of Supplemental -Liquidity Obligations); and Section 6 (Notice of Supplemental Liquidity Obligations and -Payment of Supplemental Liquidity Deposits). NSCC would amend Sections 4, 5 and 6 of Rule -4(A) to describe the simplified calculation of Supplemental Liquidity Obligations, and the -process by which Supplemental Liquidity Providers would pay their Supplemental Liquidity -Obligations after being notified by NSCC. Proposed changes to Section 4 would implement the -revised calculation of Supplemental Liquidity Obligations, described in greater detail above, as -the difference between a Supplemental Liquidity Provider’s Daily Liquidity Need for that -Business Day and the Qualifying Liquid Resources available to NSCC on that day. The -proposed changes would also create a subsection b. of Section 4 to describe the optional, -alternative pro rata calculation of Supplemental Liquidity Obligations, as described in greater -detail above. -Proposed changes to Sections 5 and 6 of Rule 4(A) would update the defined terms and -the timing by when Supplemental Liquidity Providers must fund their Supplemental Liquidity -Obligations to reflect the change of these obligations to daily. Proposed changes to Section 6 of -Rule 4(A) would state that the notice provided to Supplemental Liquidity Providers regarding -their Supplemental Liquidity Obligations would state if that amount was calculated pursuant to -Section 4b as a pro rata share of the largest Supplemental Liquidity Obligation of that Business -Day. -Section 7 (Determination of Intraday Supplemental Liquidity Calls) and Section 8 -(Satisfaction of Intraday Supplemental Liquidity Calls). NSCC would amend Sections 7 and 8 of -Rule 4(A) to reflect the removal of the Special Activity Liquidity Calls and the adoption of the -two Intraday Supplemental Liquidity Calls, as described in greater detail above. The proposed -changes to these sections would also update defined terms, as appropriate. -Returns of Supplemental Liquidity Deposits – Section 9 (Deposits Made in Satisfaction of -a Supplemental Liquidity Obligation) and Section 10 (Ceasing to be a Participant). NSCC is -proposing to consolidate the current Sections 9 and 10 of Rule 4(A) into a new Section 9 of Rule -4(A), which would address the return of SLD that are made in satisfaction of both Supplemental -Liquidity Obligations and Intraday Supplemental Liquidity Calls. The proposed changes would -provide that SLD made pursuant to either Supplemental Liquidity Obligations and Intraday -Supplemental Liquidity Calls would be returned to Supplemental Liquidity Providers on the next -Business Day after the calculation date, unless otherwise notified by NSCC. -NSCC would amend Section 10 (currently Section 11) to align the treatment of SLD of a -retired Member with the treatment of such firm’s Required Fund Deposits, as described in -greater detail above. -Page 16 of 79 -Miscellaneous Matters – Section 11 (Obligations of Affiliated Families and Supplemental -Liquidity Providers), Section 12 (Application of Supplemental Liquidity Deposits) and Section 13 -(Information). NSCC would amend Sections 11, 12 and 13 (currently Sections 12, 13 and 14) of -Rule 4(A) to update and simplify these provisions. The proposed amendments would not -substantially amend the purpose or application of these sections. -Section 11 (currently Section 12) of Rule 4(A) provides that the Supplemental Liquidity -Obligations of Affiliated Families are the several obligations of all of the Members of the -Affiliated Family ratably in proportion to their applicable Special Activity Peak Liquidity -Exposure. NSCC would not change this provision but would update it to use revised defined -terms. NSCC would also amend Section 11 by consolidating two parallel paragraphs into -subsection b., which address NSCC’s right to collect SLD from Supplemental Liquidity -Providers. This proposed change would simplify the provision but would not make substantive -changes to NSCC’s rights or Members’ obligations. -Section 12 (currently Section 13), which addresses how SLD are treated under Rule 4, -would be amended to update defined terms and to clarify that SLD may be held by NSCC as part -of Members’ actual deposits to the Clearing Fund, pursuant to Section 9 of Rule 4. No -substantive changes are proposed to this Section. -Section 13 (currently Section 14) describes NSCC’s obligation to provide Members with -certain information regarding its SLD calculation. NSCC is proposing to amend this section to -include updated defined terms and to reflect the daily calculation of SLD. -(iv) Impact Study Results -NSCC has provided the Securities and Exchange Commission (“Commission”) with the -results of an impact study that reviewed the proposal against the observed regulatory liquidity -needs and NSCC’s Qualifying Liquid Resources available during the period from 2016 through -2020 to assess both pro-forma and hypothetical impacts of the proposal under various liquidity -scenarios. -Pro-Forma Impact Study. The pro-forma impact study compared NSCC’s regulatory -liquidity needs against the Qualifying Liquid Resources that were available between 2016 and -2020. The pro-forma analysis indicated that NSCC would expect between 1 and 3 Supplemental -Liquidity Obligations per year, ranging in size between $1.0 billion to $5.4 billion in 2016 -through 2019. In calendar year 2020, the impact study shows that available Qualifying Liquid -Resources for each date would have eliminated potential Supplement Liquidity Obligations. -Additionally, this impact study showed between 4 and 27 actual Supplemental Liquidity -Obligations were received by NSCC per year, typically averaging $3.6 billion during this same -period, including 9 actual Supplemental Liquidity Obligations received by NSCC in 2020. -Hypothetical Impact Study. NSCC also developed several hypothetical liquidity -scenarios to assess the proposal’s impact. When hypothetical Qualifying Liquid Resources -available to NSCC are between $17 billion and $22 billion, NSCC would expect between 7 and -36 Supplemental Liquidity Obligations per year, ranging in size between $2.1 billion to $4.6 -billion each; and (2) when the hypothetical Qualifying Liquid Resources available to NSCC are -Page 17 of 79 -$22 billion or above, NSCC would expect between 1 and 5 Supplemental Liquidity Obligations -per year, ranging in size between $2.1 billion to $6.8 billion each. -NSCC has also provided the Commission with details of potential impacts of the proposal -on the largest 50 Affiliated Families, a list of the 30 Affiliated Families with the largest liquidity -exposures as of December 31, 2020, and the respective Affiliated Families’ maximum and -average NSCC liquidity needs for each calendar year between 2016 and 2020. -(v) Implementation Timeframe -NSCC would implement the proposed changes no later than 10 Business Days after the -later of the approval of the proposed rule change and no objection to the related advance notice34 -by the Commission. NSCC would announce the effective date of the proposed changes by -Important Notice posted to its website. - (b) Statutory Basis -NSCC believes the proposed changes are consistent with the requirements of the Act and -the rules and regulations thereunder applicable to a registered clearing agency. In particular, -NSCC believes the proposed changes are consistent with Section 17A(b)(3)(F) of the Act,35 and -Rules 17Ad-22(e)(7)(i) and (ii), each promulgated under the Act,36 for the reasons described -below. -Section 17A(b)(3)(F) of the Act requires that the rules of NSCC be designed to, among -other things, assure the safeguarding of securities and funds which are in the custody or control -of the clearing agency or for which it is responsible.37 NSCC believes the proposed rule change -is designed to assure the safeguarding of securities and funds which are in its custody or control -or for which it is responsible because the proposal would allow NSCC to better limit its liquidity -exposure to Members in the event of a Member default. -Specifically, under the proposal, each Business Day NSCC would measure the -Supplemental Liquidity Obligation of each Supplemental Liquidity Provider as the difference -between the Daily Liquidity Need of the Supplemental Liquidity Provider calculated for that -Business Day and the Qualifying Liquid Resources available to NSCC on that day assuming -34 NSCC filed this proposed rule change as an advance notice (File No. SR-NSCC2021-801) with the Commission pursuant to Section 806(e)(1) of Title VIII of the DoddFrank Wall Street Reform and Consumer Protection Act entitled the Payment, Clearing, -and Settlement Supervision Act of 2010, 12 U.S.C. 5465(e)(1), and Rule 19b-4(n)(1)(i) -under the Act, 17 CFR 240.19b-4(n)(1)(i). A copy of the advance notice is available at -http://www.dtcc.com/legal/sec-rule-filings.aspx. -35 15 U.S.C. 78q-1(b)(3)(F). -36 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -37 15 U.S.C. 78q-1(b)(3)(F). -Page 18 of 79 -stressed market conditions. By making these calculations daily based on Members’ current -activity and NSCC’s resources currently available to NSCC, the proposed SLD requirement -would provide NSCC with a more accurate measure of its potential liquidity exposures to its -Members in the event of a Member default. The proposal would also establish a monthly -intraday SLD collection in connection with options expiration activity that present heighted -liquidity exposures, and an optional intraday SLD that NSCC may collect when it deems -appropriate to mitigate any increased liquidity exposures or in light of other circumstances. -These proposed intraday SLD would allow NSCC to re-calculate its liquidity exposures and -collect sufficient liquidity to allow it to complete end-of-day settlement in the event of the -default of a Member. -Additionally, by providing an alternative pro rata calculation of Supplemental Liquidity -Obligations in certain circumstances, the proposal would provide NSCC with the flexibility to -determine the total amount collected on a Business Day, while continuing to collect and hold -sufficient liquidity to allow NSCC to complete end-of-day settlement in the event of the default -of the Member with the largest payment obligations. In this way, the proposed change to -calculate and collect, when applicable, SLD on a daily basis based on current information, and -on an intraday basis when NSCC observes an increase in its Daily Liquidity Need, would help -NSCC assure the safeguarding of securities and funds which are in its custody or control or for -which it is responsible, consistent with the requirements of Section 17A(b)(3)(F) of the Act.38 -The proposed changes to simplify and clarify Rule 4(A), which describes the SLD -requirement, would also be consistent with the requirements of Section 17A(b)(3)(F) of the -Act.39 These proposed changes would make the rights and obligations of both NSCC and its -Members under Rule 4(A) more transparent and easier to understand. A clearer rule supports the -ability of Members to meet their obligations to provide NSCC with SLD when required. The -liquidity provided to NSCC through the SLD allows it to complete end-of-day settlement in the -event of the default of a Member. Therefore, by making the provisions of Rule 4(A) clearer, -simpler and more transparent to Members, these proposed changes also support NSCC’s -compliance with the requirements of Section 17A(b)(3)(F) of the Act to assure the safeguarding -of securities and funds which are in NSCC’s custody or control or for which it is responsible.40 -Rule 17Ad-22(e)(7)(i) under the Act requires that NSCC establish, implement, maintain -and enforce written policies and procedures reasonably designed to maintain sufficient liquid -resources at the minimum in all relevant currencies to effect same-day and, where appropriate, -intraday and multiday settlement of payment obligations with a high degree of confidence under -a wide range of foreseeable stress scenarios that includes, but is not limited to, the default of the -participant family that would generate the largest aggregate payment obligation for NSCC in -extreme but plausible market conditions.41 Rule 17Ad-22(e)(7)(ii) under the Act requires that -38 Id. -39 Id. -40 Id. -41 17 CFR 240.17Ad-22(e)(7)(i). -Page 19 of 79 -NSCC establish, implement, maintain and enforce written policies and procedures reasonably -designed to hold qualifying liquid resources sufficient to meet the minimum liquidity resource -requirement under Rule 17Ad-22(e)(7)(i) in each relevant currency for which NSCC has -payment obligations owed to its Members.42 -As described above, the proposal would strengthen NSCC’s ability to maintain sufficient -liquidity to complete end-of-day settlement in the event of the default of a Member. The -proposal would do this by allowing NSCC to calculate and collect, when applicable, SLD every -Business Day from those Members that pose the largest liquidity exposures to NSCC on that day. -The proposal would also include a mechanism to allow NSCC to collect SLD on an intraday -basis, including on the first Business Day of the Options Expiration Activity Period, when -liquidity exposures are historically higher. These resources would be available to NSCC to -complete end-of-day settlement in the event of the default of a Member. Further, SLD are -currently, and would continue to be, held by NSCC at either its cash deposit account at the -Federal Reserve Bank of New York, at a creditworthy commercial bank, or in other investments -pursuant to the Clearing Agency Investment Policy.43 Therefore, SLD would continue to be -considered a qualifying liquid resource, as defined by Rule 17Ad-22(a)(14) under the Act,44 and -would support NSCC’s ability to hold qualifying liquid resources sufficient to meet the -minimum liquidity resource requirement under Rule 17Ad-22(e)(7)(i), as required by Rule -17Ad-22(e)(7)(ii). Additionally, the proposed alternative pro rata calculation of Supplemental -Liquidity Obligations would provide NSCC with the flexibility to determine the total amount -collected on a Business Day, while continuing to collect and hold sufficient liquidity to allow -NSCC to complete end-of-day settlement in the event of the default of the Member with the -largest payment obligations, as required by Rule 17Ad-22(e)(7)(i).45 As such, this proposed -change would support NSCC’s ability to hold sufficient qualifying liquid resources to meet its -minimum liquidity resource requirement under Rules 17Ad-22(e)(7)(i) and (ii).46 -4. Self-Regulatory Organization’s Statement on Burden on Competition -NSCC believes that the proposed rule change could have an impact on competition. -Specifically, NSCC believes the proposed changes could burden competition because they would -require those Members that are identified as Supplemental Liquidity Providers to make an SLD -42 17 CFR 240.17Ad-22(e)(7)(ii). For purposes of Rule 17Ad-22(e)(7)(ii), “qualifying -liquid resources” are defined in Rule 17Ad-22(a)(14) as including, in part, cash held -either at the central bank of issue or at creditworthy commercial banks. Supra note 4. -43 See Securities Exchange Act Release Nos. 79528 (December 12, 2016), 81 FR 91232 -(December 16, 2016) (File Nos. SR-DTC-2016-007, SR-FICC-2016-005, SR-NSCC2016-003); 84949 (December 21, 2018), 83 FR 67779 (December 31, 2018) (File Nos. -SR-DTC-2018-012, SR-FICC-2018-014, SR-NSCC-2018-013). -44 17 CFR 240.17Ad-22(a)(14). -45 17 CFR 240.17Ad-22(e)(7)(i). -46 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -Page 20 of 79 -to the Clearing Fund each Business Day, when applicable, rather than only monthly in -connection with the expiration of stock options. -Members are currently subject to SLD requirements under Rule 4(A), and, while the -proposed rule change could result in a Supplemental Liquidity Obligation on a more frequent -basis, the impact study results, discussed above, show that the proposal would not have a -significant impact on the frequency or amount of those requirements. The Supplemental -Liquidity Obligations of Supplemental Liquidity Providers would be in direct relation to the -specific liquidity exposures presented to NSCC by Members’ daily activity. Therefore, -Members that present the largest liquidity exposures to NSCC, regardless of the type of Member, -currently have, and would continue to have, similar SLD requirements. The proposed alternative -calculation of Supplemental Liquidity Obligations would provide NSCC with the flexibility to -collect and hold sufficient liquidity to meet NSCC’s regulatory obligations while allocating the -Supplemental Liquidity Obligations on a pro rata basis among the Supplemental Liquidity -Providers for that Business Day. This proposed change would treat each Supplemental Liquidity -Provider equally when this alternative calculation is triggered. -Therefore, NSCC believes that any burden on competition imposed by the proposed -changes would not be significant and, further, would be both necessary and appropriate in -furtherance of NSCC’s efforts to mitigate risks and meet the requirements of the Act,47 as -described in this filing and further below. -NSCC believes the above described burden on competition that may be created by the -proposed changes to the SLD requirement would be necessary in furtherance of the purposes of -the Act, specifically Section 17A(b)(3)(F) of the Act.48 As discussed above, the proposed -change would improve NSCC’s ability to estimate its liquidity exposures in the calculation and -collection of SLD by using daily activity rather than estimating potential exposures based on -activity in a look-back period. The proposal would also establish a monthly intraday SLD to -address the additional liquidity exposures that are presented by monthly options expiration -activity, and an optional intraday SLD that may be collected when NSCC deems appropriate. In -aggregate, the total SLD collected would improve NSCC’s liquidity risk management by -supplementing its liquidity resources that are available to it to complete end-of-day settlement in -the event of the default of a Member. The proposed pro rata alternative calculation of SLD -would allow NSCC to opt to collect only the largest Supplemental Liquidity Obligation -calculated for that Business Day, while still meeting NSCC’s applicable regulatory obligations. -The proposed enhancements to its liquidity risk management would help NSCC assure the -safeguarding of securities and funds which are in its custody or control or for which it is -responsible, consistent with the requirements of Section 17A(b)(3)(F) of the Act.49 -NSCC believes the proposed changes would also support its compliance with Rules -17Ad-22(e)(7)(i) and (ii) under the Act, which require NSCC to establish, implement, maintain -47 15 U.S.C. 78q-1(b)(3)(I). -48 15 U.S.C. 78q-1(b)(3)(F). -49 Id. -Page 21 of 79 -and enforce written policies and procedures reasonably designed to (x) maintain sufficient liquid -resources at the minimum in all relevant currencies to effect same-day and, where appropriate, -intraday and multiday settlement of payment obligations with a high degree of confidence under -a wide range of foreseeable stress scenarios that includes, but is not limited to, the default of the -participant family that would generate the largest aggregate payment obligation for NSCC in -extreme but plausible market conditions,50 and (y) hold qualifying liquid resources sufficient to -meet the minimum liquidity resource requirement under Rule 17Ad-22(e)(7)(i) in each relevant -currency for which NSCC has payment obligations owed to its Members.51 -The proposal would strengthen NSCC’s ability to maintain sufficient liquidity to -complete end-of-day settlement in the event of the default of a Member by allowing NSCC to -collect SLD each Business Day from those Members that pose the largest liquidity exposures to -NSCC on that day. Further, SLD are currently, and would continue to be, cash deposits to -NSCC’s Clearing Fund, which meet the criteria to be considered qualifying liquid resources, as -defined by Rule 17Ad-22(a)(14) under the Act.52 The proposed alternative pro rata calculation -would allow NSCC to continue to collect sufficient liquidity to meet the requirements of Rule -17Ad-22(e)(7)(i).53 As such, this proposed change would support NSCC’s ability to hold -sufficient qualifying liquid resources to meet its minimum liquidity resource requirement under -Rules 17Ad-22(e)(7)(i) and (ii).54 -NSCC believes that the above described burden on competition that could be created by -the proposed changes would be appropriate in furtherance of the purposes of the Act because -such changes have been designed to assure the safeguarding of securities and funds which are in -the custody or control of NSCC or for which it is responsible, as described in detail above. -Under both the current Rule 4(A) and the proposed changes to Rule 4(A), the SLD requirements -are designed to require those Members whose settlement activity pose the largest liquidity -exposures to NSCC to provide SLD in the amount of such exposures. The proposed changes to -Rule 4(A) would better support NSCC by allowing it to calculate and collect, when applicable, -SLD to address liquidity exposures that are presented by the activity of Supplemental Liquidity -Providers each Business Day rather than only during monthly options expiration periods. The -proposed rule change would improve NSCC’s ability to measure these liquidity exposures by -using daily activity rather than estimations based on past activity. -Therefore, because the proposed changes are designed to provide NSCC with a more -accurate measure of the liquidity risks presented by Members’ daily activity, NSCC believes the -proposal would meet NSCC’s risk management goals and its regulatory obligations. NSCC -believes that it has designed the proposed rule change in an appropriate way in order to comply -50 17 CFR 240.17Ad-22(e)(7)(i). -51 17 CFR 240.17Ad-22(e)(7)(ii). -52 17 CFR 240.17Ad-22(a)(14). -53 17 CFR 240.17Ad-22(e)(7)(i). -54 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -Page 22 of 79 -with NSCC’s obligations under the Act. Therefore, as described above, NSCC believes the -proposed changes are necessary and appropriate in furtherance of NSCC’s obligations under the -Act,55 specifically Section 17A(b)(3)(F) of the Act56 and Rules 17Ad-22(e)(7)(i) and (ii) under -the Act.57 -5. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule -Change Received from Members, Participants, or Others -NSCC has not received or solicited any written comments relating to this proposal. -NSCC will notify the Commission of any written comments received by NSCC. -6. Extension of Time Period for Commission Action -NSCC does not consent to an extension of the time period specified in Section 19(b)(2) -of the Act58 for Commission action. -7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for Accelerated -Effectiveness Pursuant to Section 19(b)(2) -(a) Not applicable. -(b) Not applicable. -(c) Not applicable. -(d) Not applicable. -8. Proposed Rule Change Based on Rules of Another Self-Regulatory Organization or -of the Commission -Not applicable. -9. Security-Based Swap Submissions Filed Pursuant to Section 3C of the Act -Not applicable. -55 15 U.S.C. 78q-1(b)(3)(I). -56 15 U.S.C. 78q-1(b)(3)(F). -57 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -58 15 U.S.C. 78s(b)(2). -Page 23 of 79 -10. Advance Notice Filed Pursuant to Section 806(e) of the Payment, Clearing, and -Settlement Supervision Act of 2010 -Not applicable. -11. Exhibits -Exhibit 1 – Not applicable. -Exhibit 1A – Notice of proposed rule change for publication in the Federal Register. -Exhibit 2 – Not applicable. -Exhibit 3 – Impact Study Data – January 2016 to December 2020. Omitted and filed -separately with the Commission. Confidential treatment of this Exhibit 3 pursuant to 17 CFR -240.24b-2 being requested. -Exhibit 4 – Not applicable. -Exhibit 5 – Proposed changes to the Rules. -Page 24 of 79 -EXHIBIT 1A -SECURITIES AND EXCHANGE COMMISSION -(Release No. 34-[_________]; File No. SR-NSCC-2021-002) -[DATE] -Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of -Filing of Proposed Rule Change to Amend the Supplemental Liquidity Deposit -Requirements - Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)1 - and -Rule 19b-4 thereunder,2 - notice is hereby given that on March __, 2021, National -Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange -Commission (“Commission”) the proposed rule change as described in Items I, II and III -below, which Items have been prepared by the clearing agency.3 - The Commission is -publishing this notice to solicit comments on the proposed rule change from interested -persons. -I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule -Change -The proposed rule change consists of modifications to Rule 4(A) (Supplemental -Liquidity Deposits) of the NSCC’s Rules & Procedures (“Rules”) to (1) calculate and -collect, when applicable, supplemental liquidity deposits to NSCC’s Clearing Fund -1 - 15 U.S.C. 78s(b)(1). -2 - 17 CFR 240.19b-4. -3 - NSCC filed this proposed rule change as an advance notice (File No. SR-NSCC2021-801) with the Commission pursuant to Section 806(e)(1) of Title VIII of the -Dodd-Frank Wall Street Reform and Consumer Protection Act entitled the -Payment, Clearing, and Settlement Supervision Act of 2010, 12 U.S.C. -5465(e)(1), and Rule 19b-4(n)(1)(i) under the Act, 17 CFR 240.19b-4(n)(1)(i). A -copy of the advance notice is available at http://www.dtcc.com/legal/sec-rulefilings.aspx. -Page 25 of 79 -(“Supplemental Liquidity Deposits,” or “SLD”) on a daily basis rather than only in -advance of the monthly expiration of stock options (defined in Rule 4(A) as “Options -Expiration Activity Period”); (2) establish an intraday SLD obligation that would apply in -advance of Options Expiration Activity Periods and may also be applied on other days, as -needed; (3) implement an alternative pro rata calculation of Members’ SLD obligations -that may apply in certain circumstances; and (4) simplify and improve the transparency -of the description of the calculation, collection and treatment of SLD in Rule 4(A) of the -Rules, as described in greater detail below.4 - -II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the -Proposed Rule Change -In its filing with the Commission, the clearing agency included statements -concerning the purpose of and basis for the proposed rule change and discussed any -comments it received on the proposed rule change. The text of these statements may be -examined at the places specified in Item IV below. The clearing agency has prepared -summaries, set forth in sections A, B, and C below, of the most significant aspects of -such statements. -(A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, -the Proposed Rule Change -1. Purpose -NSCC is proposing to enhance its management of the liquidity risks that arise in -or are borne by it by calculating and collecting, when applicable, SLD on each Business -Day rather than only in advance of Options Expiration Activity Periods. The proposed -4 - Capitalized terms not defined herein are defined in the Rules, available at -http://dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf. -Page 26 of 79 -changes would establish an intraday SLD obligation that would apply in advance of -Options Expiration Activity Periods and may be applicable on any Business Day, as -needed. The proposal would also implement an alternative pro rata calculation of -Members’ SLD obligations that may apply in certain circumstances. Finally, in -connection with these proposed changes, NSCC would simplify and improve the -description of the calculation, collection and treatment of SLD in Rule 4(A). These -proposed rule changes are described in greater detail below. -(i) Overview of the NSCC Liquidity Risk Management -NSCC, along with its affiliates, The Depository Trust Company and Fixed -Income Clearing Corporation, maintains a Clearing Agency Liquidity Risk Management -Framework (“Framework”) that sets forth the manner in which NSCC measures, -monitors and manages the liquidity risks that arise in or are borne by it.5 - As a central -counterparty, NSCC’s liquidity needs are driven by the requirement to complete end-ofday money settlement, on an ongoing basis, in the event NSCC ceases to act for a -Member (hereinafter referred to as a “default”).6 - If a Member defaults, NSCC needs to -complete settlement of guaranteed transactions on the defaulted Member’s behalf from -the date of default through the remainder of the settlement cycle. As such, and as -provided for in the Framework, NSCC measures the sufficiency of its qualifying liquid -5 - See Securities Exchange Act Release No. 82377 (December 21, 2017), 82 FR -61617 (December 28, 2017) (File Nos. SR-DTC-2017-004; SR-FICC-2017-008; -SR-NSCC-2017-005). -6 - The Rules identify when NSCC may cease to act for a Member and the types of -actions NSCC may take. For example, NSCC may suspend a firm’s membership -with NSCC or prohibit or limit a Member’s access to NSCC’s services in the -event that Member defaults on a financial or other obligation to NSCC. See Rule -46 (Restrictions on Access to Services) of the Rules, supra note 4. -Page 27 of 79 -resources through daily liquidity studies across a range of scenarios, including amounts -NSCC would need in the event the Member or Member family with the largest aggregate -liquidity exposure defaults.7 - -As described in the Framework, NSCC seeks to maintain qualifying liquid -resources in an amount sufficient to cover this risk. These resources currently include -(1) cash deposits to the NSCC Clearing Fund;8 - (2) the proceeds of the issuance and -private placement of (a) short-term, unsecured notes in the form of commercial paper and -extendable notes (“Commercial Paper Program”),9 - and (b) term debt (“Term Debt -Issuance”);10 (3) cash that would be obtained by drawing on NSCC’s committed 364-day -credit facility with a consortium of banks (“Line of Credit”);11 and (4) Supplemental -Liquidity Deposits, collected pursuant to Rule 4(A), which are currently designed to -cover the heightened liquidity exposure arising around Options Expiration Activity -7 - “Qualifying liquid resources” are defined in Rule 17Ad-22(a)(14) under the Act. -17 CFR 240.17Ad-22(a)(14). The Framework also includes a definition of -qualifying liquid resources that incorporates by reference Rule 17Ad-22(a)(14). -See supra note 5. -8 - See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund Formula and Other -Matters) of the Rules, supra note 4. -9 - See Securities Exchange Act Release Nos. 75730 (August 19, 2015), 80 FR -51638 (August 25, 2015) (File No. SR-NSCC-2015-802); 82676 (February 9, -2018), 83 FR 6912 (February 15, 2018) (File No. SR-NSCC-2017-807). -10 See Securities Exchange Act Release No. 88146 (February 7, 2020), 85 FR 8046 -(February 12, 2020) (File No. SR-NSCC-2019-802). -11 See Securities Exchange Act Release No. 80605 (May 5, 2017), 82 FR 21850 -(May 10, 2017) (File Nos. SR-DTC-2017-802; SR-NSCC-2017-802). -Page 28 of 79 -Periods, required from those Members whose activity would pose the largest liquidity -exposure to NSCC.12 -NSCC’s liquidity risk management has evolved in order to adhere to regulatory -requirements that were adopted after Rule 4(A) was implemented.13 As part of its efforts -to maintain compliance with these requirements, NSCC has continued to strengthen its -liquidity risk management strategy, including through growing and diversifying its -qualifying liquid resources. In connection with these ongoing efforts, NSCC is proposing -to calculate and collect, when applicable, SLD every Business Day rather than only in -connection with Options Expiration Activity Periods. This proposed change would -improve NSCC’s ability to measure and monitor its daily liquidity exposures and allow it -to collect additional qualifying liquid resources from Members whose activity poses the -largest liquidity exposure to NSCC in connection with their daily settlement activity, and -not only during Options Expiration Activity Periods. By measuring SLD against -Members’ actual daily settlement activity and NSCC’s available qualifying liquid -resources, the proposal would also help mitigate risks to NSCC that it is unable to secure -adequate default liquidity from other sources in an amount necessary to meet its liquidity -needs. For example, the proposal would help mitigate the risks that could arise if -investor demand for the short-term notes issued under the Commercial Paper Program -12 See Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, supra note 4. See -also Securities Exchange Act Release Nos. 70999 (December 5, 2013), 78 FR -75413 (December 11, 2013) (File No. SR-NSCC-2013-02); 71000 (December 5, -2013), 78 FR 75400 (December 11, 2013) (File No. SR-NSCC-2013-802). -13 See 17 CFR 240.17Ad-22(e)(7). See also supra note 5. -Page 29 of 79 -weakens, there is limited investor demand for term debt issued pursuant to a Term Debt -Issuance, or NSCC is unable to renew its Line of Credit at the targeted amount. -NSCC is also proposing to establish an intraday SLD obligation that would apply -on the first Business Day of the Options Expiration Activity Period to allow NSCC to -continue to mitigate the additional liquidity exposures presented by options activity. The -proposal would also permit NSCC to calculate and collect an intraday SLD on any -Business Day when, for example, NSCC believes that it is necessary to collect an -additional SLD from a Member whose activity presents relatively greater risks to the -NSCC on an overnight basis. -NSCC is also proposing to implement an alternative calculation of Members’ -SLD requirements that would be their pro rata allocation of the largest SLD obligation -calculated for that Business Day. This proposed change would provide NSCC with the -discretion, in certain circumstances, to allocate its largest liquidity need on a Business -Day among those Members that are required to pay SLD on that day rather than collect -separate SLD from those Members, as described in greater detail below. -In connection with these proposed changes, NSCC would also simplify the -description of the calculation of SLD in Rule 4(A) in order to improve the transparency -of this Rule, as described in greater detail below. -(ii) Current Rule 4(A) and Supplemental Liquidity Deposits -Under the current Rule 4(A), NSCC collects SLD from the unaffiliated Members -and families of affiliated Members (each defined as an “Affiliated Family”) that incur the -Page 30 of 79 -largest gross settlement debits over the settlement cycle during times of increased trading -activity that arise around Options Expiration Activity Periods.14 -Under the current Rule 4(A), NSCC performs calculations on a monthly basis, no -later than the fifth day prior to an Options Expiration Activity Period, using activity -observed over a 24-month lookback period (defined in the current Rule 4(A) as the -“Special Activity Lookback Period”).15 These calculations determine (1) NSCC’s largest -liquidity need that exceeded its liquidity resources (defined in Rule 4(A) as “Special -Activity Peak Liquidity Need”); and (2) the 30 (or fewer) unaffiliated Members or -Affiliated Families (defined in Rule 4(A) as “Special Activity Liquidity Providers”) that -presented the largest liquidity exposures to NSCC (defined in Rule 4(A) as “Special -Activity Peak Liquidity Exposures”).16 To determine the SLD obligations of each -Special Activity Liquidity Provider, the calculated Special Activity Peak Liquidity Need -of NSCC is allocated to these Special Activity Liquidity Providers in proportion to the -Special Activity Peak Liquidity Exposures they presented to NSCC during the Special -Activity Lookback Period. Special Activity Liquidity Providers are required to fund their -SLD obligations by the close of business on the second day prior to the applicable -Options Expiration Activity Period.17 SLD may be returned to Special Activity Liquidity -14 See Section 2 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, supra -note 4. -15 See id. -16 See Section 3 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -17 See Section 4 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -Page 31 of 79 -Providers seven Business Days after the end of the applicable Options Expiration -Activity Period.18 -On any Business Day between calculation dates, if NSCC observes an increase in -its liquidity needs that exceeds a predetermined threshold amount, it may call for an -additional deposit from the Member whose increase in activity levels caused (or was the -primary cause of) such increased liquidity need (defined in Rule 4(A) as “Special -Activity Liquidity Call”).19 NSCC may hold deposits made pursuant to a Special -Activity Liquidity Call for up to 90 days after the deposit is made.20 Members are also -permitted to submit a cash deposit to the Clearing Fund as a “Special Activity Prefund -Deposit” no later than the first Business Day of an Options Expiration Activity Period.21 -NSCC understands that a Member would generally make a Special Activity Prefund -Deposit when it anticipates that its Special Activity Peak Liquidity Exposure during that -period may be greater than the amount calculated by NSCC pursuant to Rule 4(A) based -on activity in the Special Activity Lookback Period.22 -The current Rule 4(A) also addresses how SLD are treated generally.23 -Specifically, while SLD are part of a Member’s actual deposit to the Clearing Fund, they -18 See Section 9 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -19 See Section 7 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -20 See Section 10 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -21 See definition of “Special Activity Prefund Deposit” in Section 2 of Rule 4(A) -(Supplemental Liquidity Deposits) of the Rules, id. -22 See id. -23 See Section 13 of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, id. -Page 32 of 79 -are made in addition to a Member’s Required Fund Deposit and any other deposit of any -such Member to the Clearing Fund.24 Rule 4(A) also provides that SLD may be invested -and may be used to satisfy a loss or liability as provided for in Sections 3 or 13 of Rule 4, -and addresses NSCC’s obligation to provide Members with certain information that -would help them anticipate their potential SLD requirements.25 -(iii) Amended Rule 4(A) and Proposed Daily Calculation of -Supplemental Liquidity Deposits -In order to better address the liquidity risks presented by Members’ daily activity, -NSCC is proposing to amend Rule 4(A) to calculate and collect, when applicable, SLD -every Business Day rather than only in connection with the monthly expiration of stock -options. While the monthly expiration of stock options does present larger liquidity -exposures to NSCC, NSCC may also face large liquidity exposures from Members’ daily -activity, particularly during volatile market conditions. By allowing NSCC to calculate -and collect SLD daily, NSCC would be able to identify these exposures based on -Members’ daily activity rather than estimate its upcoming liquidity exposures based on -activity observed over a lookback period. The proposal would help NSCC mitigate its -liquidity risks through the daily collection of SLD from those Members’ whose daily -activity would, in the event of the Member’s default, create a potential liquidity need that -is in excess of NSCC’s available qualifying liquid resources. The proposal would also -permit NSCC to return SLD to Members on the Business Day following the day those -24 See Section 13(b) of Rule 4(A) (Supplemental Liquidity Deposits) of the Rules, -id. -25 See Section 13(c) and Section 14 of Rule 4(A) (Supplemental Liquidity Deposits) -of the Rules, id. -Page 33 of 79 -deposits are collected and would remove the current requirement that SLD be held for up -to 90 days. -In order to implement this proposed change to the timing of the SLD, NSCC -would make a number of changes to Rule 4(A), described below. The proposed changes -to Rule 4(A) would implement a daily calculation and collection of SLD, simplify and -clarify the calculations done in connection with the SLD requirements, and enhance the -disclosures of the SLD requirements. Despite these proposed changes, the structure of -Rule 4(A) and the fundamental mechanics of the SLD requirements would be unchanged. -Proposed Daily Calculation of Supplemental Liquidity Deposits -Supplemental Liquidity Providers. Under the proposed Rule 4(A), each Business -Day NSCC would determine the 30 (or fewer) Members (each such Member a -“Supplemental Liquidity Provider”) that had the “Peak Liquidity Need,” which would be -defined as the largest Daily Liquidity Need that NSCC would have for that Member or -Affiliated Family in a “Lookback Period.” 26 For purposes of this calculation, Daily -Liquidity Need would be defined as the amount of liquid resources needed to effect the -settlement of NSCC’s payment obligations as a central counterparty over a three day -settlement cycle, assuming the default of that Member on that day. -As described above, Supplemental Liquidity Providers are currently identified by -reviewing Members’ Special Activity Peak Liquidity Exposures over the Lookback -26 The “Lookback Period” would continue to be defined as 24 months, or a longer -period as determined by NSCC in its discretion. NSCC may adjust the Lookback -Period if, for example, unusual activity observed in the Lookback Period is not an -appropriate indicator of future settlement activity and causes a Member to be a -Supplemental Liquidity Provider. See Section 2 (Defined Terms) of Rule 4(A), -id. -Page 34 of 79 -Period. Under the proposed approach, NSCC would base this determination on -Members’ Peak Liquidity Need, which would continue to identify those Members whose -activity posed the largest liquidity risks to NSCC during the Lookback Period. The -proposed approach would no longer require a calculation using NSCC’s available liquid -resources on each day in the Lookback Period but would use a simpler approach by -looking only at liquidity need. The proposed approach to use a simpler calculation would -reduce the risk of error and would clarify the description of how NSCC would identify -Supplemental Liquidity Providers in the proposed Rule 4(A), making it more predictable -to Members. -Supplemental Liquidity Obligation. After NSCC determines the Supplemental -Liquidity Providers, NSCC would then determine if any of the Supplemental Liquidity -Providers would be required to pay an SLD on that Business Day. The proposed Rule -4(A) would use a simplified calculation by determining if the Daily Liquidity Need for -each Supplemental Liquidity Provider on that Business Day exceeds the sum of NSCC’s -qualifying liquid resources available to NSCC on that day, assuming stressed market -conditions (described below) (defined in the proposed Rule 4(A) as “Qualifying Liquid -Resources”). The result of that calculation would be a Supplemental Liquidity Provider’s -SLD requirement (defined in the proposed Rule 4(A) as a “Supplemental Liquidity -Obligation”) for that day. If the Daily Liquidity Need of a Supplemental Liquidity -Provider does not exceed NSCC’s Qualifying Liquid Resources on that day, then it would -not have a Supplemental Liquidity Obligation. -Because this calculation would be done at the start of each Business Day (as -discussed further below), it would be based on the Qualifying Liquid Resources, -Page 35 of 79 -including Required Fund Deposits to the Clearing Fund, available to NSCC as of the end -of the prior Business Day. Additionally, in order to anticipate market conditions that -could cause Qualifying Liquid Resources to be unavailable on that day, NSCC would -apply stress scenarios in determining its total Qualifying Liquid Resources for purposes -of Rule 4(A). Currently, NSCC applies stress scenarios in determining the Special -Activity Daily Liquidity Need and, in practice, they are currently applied to the Other -Qualifying Liquid Resources in this calculation under the current Rule 4(A).27 The -proposed change would allow NSCC to continue to assume stressed markets in its SLD -calculations, which protects it against unexpected market events.28 The proposed -changes to Rule 4(A) would make it clearer how these stress scenarios are applied. -Under this proposed calculation, NSCC would no longer need to estimate the -potential liquidity need a Member’s activity could pose to NSCC based on activity that -settled in the Lookback Period. Instead, the Supplemental Liquidity Obligation of a -Member would be calculated based on the actual liquidity exposure that its daily activity -would pose to NSCC on that particular day in the event of that Member’s default. The -proposed change provides both NSCC and Members with a more reliable measure of the -27 Current Rule 4(A) uses the defined term “Other Qualifying Liquid Resources” to -refer to NSCC’s qualifying liquid resources other than the Clearing Fund and the -Line of Credit. See Section 2 of Rule 4(A) (Supplemental Liquidity Deposits) of -the Rules, id. -28 NSCC would apply the same stress scenarios that it currently applies, which -include the market shocks of 1987, and removing the largest commitment to the -Line of Credit, excess deposits to the Clearing Fund on deposit and proceeds from -issued commercial paper that is maturing within five Business Days from NSCC’s -Qualifying Liquid Resource. Any changes to these stress scenarios would be -announced by an Important Notice posted to NSCC’s website. -Page 36 of 79 -liquidity risks posed to NSCC by its Members’ daily settlement activity in calculating -SLD requirements. -Each Supplemental Liquidity Provider that has a Supplemental Liquidity -Obligation on a Business Day would receive a notice from NSCC of the amount of its -Supplemental Liquidity Obligation and would be required to make a deposit in that -amount to the Clearing Fund within one hour of such notice. The proposed timing of -funding a Supplemental Liquidity Obligation would mirror the current requirement that is -applied to Members’ Required Fund Deposits, which is also calculated and collected -daily, and must be funded within one hour of demand.29 Specifically, NSCC expects to -deliver notification of Supplemental Liquidity Obligations to Supplemental Liquidity -Providers by around 8:30 AM ET each Business Day, with deposits required by no later -than 9:30 AM ET. -Proposed Pro Rata Calculation of Supplemental Liquidity Obligations. As an -alternative to the calculation of Supplemental Liquidity Obligations described above, -proposed Rule 4(A) would also state that, in the event two or more Supplemental -Liquidity Providers have a Supplemental Liquidity Obligation of more than $2 billion on -a Business Day, calculated pursuant to the calculation described above, NSCC may -determine the Supplemental Liquidity Obligation of all Supplemental Liquidity Providers -on that day would be their pro rata share of the largest Supplemental Liquidity Obligation -calculated on that Business Day.30 -29 See Section II(B) of Procedure XV (Clearing Fund Formula and Other Matters) of -the Rules, supra note 4. -30 As an example, the Supplemental Liquidity Obligations for three Supplemental -Liquidity Providers on a Business Day are – Member A: $6 billion, Member B: -$2 billion and Member C: $1 billion. If NSCC determines, in its sole discretion, -Page 37 of 79 -This proposed alternative calculation of the Supplemental Liquidity Obligations -would provide NSCC with the option of collecting only the largest SLD calculated on a -Business Day, allocated among each of the Supplemental Liquidity Providers. The -purpose of this proposed provision is to provide NSCC with the option of collecting -enough funds to meet its regulatory requirements in circumstances when the aggregate -Supplemental Liquidity Obligations on a particular day would significantly exceed that -amount. Therefore, NSCC has structured this provision to be available only if two or -more Supplemental Liquidity Providers owe SLD of more than $2 billion. NSCC has -never had two more Supplemental Liquidity Providers owe more than $2 billion in SLD -on a calculation date since Rule 4(A) was adopted. Therefore, NSCC believes this -alternative calculation would only be available in very limited circumstances. -Furthermore, NSCC believes the threshold of $2 billion is appropriate as it would only -permit this alternative calculation in circumstances when it would have a material impact -on the allocation of Supplemental Liquidity Obligations among the Supplemental -Liquidity Providers. -In such circumstances, when multiple Members have relatively large -Supplemental Liquidity Obligations of more than $2 billion, NSCC would have the -option to determine if it is appropriate to collect the largest SLD calculated for that -Business Day, divided pro rata among the Supplemental Liquidity Providers rather than -to calculate their Supplemental Liquidity Obligations on a pro-rata basis, then -their Supplemental Liquidity Obligations would be – Member A: $4 billion (or -6/9 of the largest Supplemental Liquidity Obligation of $6 billion), Member B: -$1.3 billion (or 2/9 of the $6 billion) and Member C: $700 million (or 1/9 of the -$6 billion). The notice provided to each Supplemental Liquidity Provider on that -Business Day would inform those Members that this pro-rata calculation was -applied. -Page 38 of 79 -collect the each of the Supplemental Liquidity Obligations of those firms. NSCC may -determine, for example, that, in certain market conditions, this approach would be -appropriate to alleviate liquidity pressures on Supplemental Liquidity Providers. This -alternative calculation would allow NSCC to collect sufficient qualifying liquid resources -to meet its regulatory obligations with respect to liquidity risk management without -requiring all of the Supplemental Liquidity Providers to fund the total amount of their -calculated Supplemental Liquidity Obligation on that Business Day.31 -Intraday Supplemental Liquidity Calls. The proposed Rule 4(A) would also -establish Intraday Supplemental Liquidity Calls that would replace the current Special -Activity Liquidity Calls. The existing Special Activity Liquidity Calls are designed to -address increases in NSCC’s liquidity need between calculation dates. The proposed -Intraday Supplemental Liquidity Calls would serve a similar function, allowing NSCC to -calculate and collect additional SLD on an intraday basis if a Supplemental Liquidity -Provider’s increased activity levels or projected settlement activity causes NSCC’s Daily -Liquidity Need to exceed NSCC’s Qualifying Liquid Resources. This proposed -provision would assist NSCC in mitigating increased liquidity exposures in specified -circumstances. -First, proposed Rule 4(A) would establish a monthly Intraday Supplemental -Liquidity Call that is calculated and collected, when applicable, on the first Business Day -31 Rule 17Ad-22(e)(7)(i) under the Act requires, in part, that NSCC maintain -sufficient liquid resources at the minimum to effect same-day settlement of -payment obligations with a high degree of confidence under a wide range of -foreseeable stress scenarios, including the default of the participant family that -would generate the largest aggregate payment obligation for the covered clearing -agency in extreme but plausible market conditions. 17 CFR 240.17Ad22(e)(7)(i). -Page 39 of 79 -of an Options Expiration Activity Period, which is typically a Friday. 32 This Intraday -Supplemental Liquidity Call would be calculated as the difference between (1) NSCC’s -Daily Liquidity Need, recalculated to account for both actual settlement activity -submitted to NSCC over the course of Business Day and projected activity in stock -options that is expected to be submitted to NSCC33 and (2) NSCC’s Qualifying Liquid -Resources. Settlement activity may net with (and offset) the activity that NSCC uses in -re-calculating the Daily Liquidity Need. In order to account for any potential offsetting -settling activity, NSCC would adjust the re-calculated Daily Liquidity Need using an -estimated netting percentage that is based on each Supplemental Liquidity Provider’s -average percentage of netting observed over the prior 24 months. Under this proposed -provision, NSCC would adjust the amount of SLD it collects in order to mitigate the -increased liquidity exposures related to the monthly expiration of stock options. -Second, proposed Rule 4(A) would allow NSCC to call for additional SLD on an -intraday basis on any Business Day if a Supplemental Liquidity Provider’s increased -activity levels causes NSCC’s Daily Liquidity Need to exceed NSCC’s Qualifying Liquid -Resources and NSCC determines, in its sole discretion, that it is appropriate to require an -additional intraday SLD from that Supplemental Liquidity Provider in order to mitigate -32 The proposed Rule 4(A) will retain the existing definition of an Options -Expiration Activity Period for purposes of this monthly Intraday Supplemental -Liquidity Call. -33 Each Business Day, NSCC receives information regarding projected settlement -activity from The Options Clearing Corporation pursuant to a Stock and Futures -Settlement Agreement (“OCC Accord”). The OCC Accord provides for the -clearance and settlement of exercises and assignments of options on eligible -securities or the maturity of eligible stock futures contracts through NSCC. See -Securities Exchange Act Release No. 81260 (July 31, 2017), 82 FR 36484 -(August 4, 2017) (File Nos. SR-NSCC-2017-803; SR-OCC-2017-804). -Page 40 of 79 -those additional liquidity exposures. Under this proposed change, NSCC would have the -ability to make an Intraday Supplemental Liquidity Call on any Business Day. The -amount of an Intraday Supplemental Liquidity Call would be the difference between -NSCC’s Daily Liquidity Need, recalculated for that Business Day taking into account any -increase in settlement activity, and NSCC’s Qualifying Liquid Resources. This proposed -provision would allow NSCC to adjust the amount of SLD it collects for a Business Day -in circumstances when NSCC believes it is necessary to accelerate the collection of -additional SLD from Supplemental Liquidity Providers whose activity may present -relatively greater risks to the NSCC on an overnight basis. NSCC would determine if an -Intraday Supplemental Liquidity Call is appropriate based on a variety of factors and -circumstances, including, but not limited to, an assessment of a Supplemental Liquidity -Provider’s ability to meet its projected settlement or Supplemental Liquidity Obligations -and estimates of settlement activity that could offset settlement exposures and are not -reflected in NSCC’s liquidity estimates. -Returns of SLD and Miscellaneous Matters. Proposed Rule 4(A) would provide -that NSCC would return SLD, including any SLD funded pursuant to an Intraday -Supplemental Liquidity Call, on the next Business Day unless such amounts are held -longer by NSCC pursuant to proposed Section 12a of Rule 4(A), as described below. -Under the current Rule 4(A), NSCC may hold SLD for up to seven Business Days after -the end of the applicable Options Expiration Activity Period and may hold SLD funded -pursuant to a Special Activity Liquidity Call for up to 90 days after such deposit is made. -Under the proposed change, because NSCC would recalculate the Supplemental -Page 41 of 79 -Liquidity Obligations each Business Day, NSCC would no longer need to hold SLD for -these extended periods. -NSCC would amend proposed Section 12a (currently Section 13a) of Rule 4(A) to -clarify that SLD, as part of Members’ actual deposit to the Clearing Fund, would be -subject to the provision of Section 9 of Rule 4. Section 9 of Rule 4 addresses NSCC’s -right to withhold all or any part of any excess deposit of a Member if such Member has -been placed on the Watch List pursuant to the Rules or if NSCC determines that the -Member’s anticipated activities in NSCC in the near future may reasonably be expected -to be materially different than its activities of the recent past.34 Current Section 13a of -Rule 4(A) addresses how SLD are treated pursuant to other Rules, particularly Rule 4, -which addresses Members’ deposits to the Clearing Fund. While this proposal would not -change NSCC’s rights with respect to these funds, it would provide Members with -greater transparency into how SLD are treated under Rule 4. -NSCC would also amend the provision in Rule 4(A) that addresses when SLD -would be returned to a Member that ceases to be a participant. Currently, Rule 4(A) -states that SLD are not subject to Section 7 of Rule 4 (which addresses how Required -Fund Deposits are returned to retired Members) and, as such, are returned to retired -Members as otherwise provided for in Rule 4(A).35 Under the proposed Rule 4(A), -34 For example, this may occur when an index rebalancing occurs shortly after a -month-end options expiration period, which could cause an increase in NSCC’s -liquidity exposures. -35 Section 7 of Rule 4 provides that Required Fund Deposits to the Clearing Fund in -the form of cash and securities are returned to retired Members within 30 calendar -days after all of its transactions have settled and obligations have been satisfied. -See supra note 4. -Page 42 of 79 -because NSCC would be able to calculate SLD each Business Day, it would return SLD -on the Business Day following the calculation date. However, while a firm may still -have unsettled activity on the day it retires, NSCC would not be able to collect SLD on -the days following a Member’s retirement. Therefore, NSCC is proposing to amend Rule -4(A) to require that SLD of a retired Member be treated similarly to other cash Required -Fund Deposits to the Clearing Fund and be held by NSCC for 30 calendar days after any -of its open transactions have settled and obligations have been satisfied. This proposed -change would protect NSCC from liquidity risks presented by open transactions in the -days following a firm’s retirement and would align the treatment of these funds with the -treatment of Required Fund Deposits of retired Members. -The proposed Rule 4(A) would also simplify the additional miscellaneous -provisions applicable to SLD, which address, for example, NSCC’s right to debit -Members’ accounts at NSCC if a Supplemental Liquidity Provider fails to meet its -Supplemental Liquidity Obligation, and the information NSCC makes available to -Supplemental Liquidity Providers each Business Day regarding SLD calculations. While -the proposed changes would update and simplify these provisions, they would not -significantly alter the structure of these provisions, as described below. -Proposed Changes to Rule 4(A) -The proposal described above would be implemented into the Rules by amending -the current Rule 4(A). The specific changes to implement the proposal are described -below. -Section 1 (Overview). NSCC is proposing changes to Section 1 of Rule 4(A) to -simplify the descriptions by removing outdated and unnecessary language. Section 1 of -Page 43 of 79 -Rule 4(A) would continue to provide the rationale for the SLD requirement, by -describing NSCC’s liquidity needs and how the SLD requirements are designed to -contribute to meeting those needs. However, the proposed changes would simplify this -section by removing a statement that specifically identifies two of NSCC’s principal -sources of liquidity and would instead more generally refer to NSCC’s sources of -liquidity. The proposed changes to Section 1 of Rule 4(A) would also remove references -to options expiration activity periods, which would no longer be applicable to the SLD -requirement under this proposal. -Section 2 (Defined Terms). NSCC is proposing several changes to Section 2 of -Rule 4(A) in order to implement this proposal. As described below, the proposed -changes to the defined terms address the change in timing of the SLD requirement to -occur each Business Day and would improve the transparency of Rule 4(A) through -simplified and clearer defined terms. -First, Section 2 of proposed Rule 4(A) would remove the definition of “Special -Activity Calculation Date,” which is tied to the monthly Options Expiration Activity -Period, and instead would use the term “Business Day” throughout proposed Rule 4(A), -where appropriate. Business Day is currently defined in Rule 1 as any day on which -NSCC is open for business. Therefore, this proposed change would provide for the -calculation of SLD requirements on each day that NSCC is open for business. -Second, Section 2 of the proposed Rule 4(A) revise other defined terms that use -the phrase “Special Activity” to either remove that phrase or, when appropriate, to -replace this phrase with the term “Supplemental.” For example, NSCC would revise the -defined term “Special Activity Daily Liquidity Need” to “Daily Liquidity Need,” and -Page 44 of 79 -would revise the defined term “Special Activity Liquidity Provider” to “Supplemental -Liquidity Provider.” The phrase “Special Activity” was used in the current Rule 4(A) to -refer to the Options Expiration Activity Period, which would only be applicable to the -monthly intraday SLD in the proposed Rule 4(A). -NSCC would also update the definition of Daily Liquidity Need to change a -reference from a four-day settlement cycle to a three-day settlement cycle, to reflect the -amendment to Rule 15c6-1(a) under the Act to shorten the standard settlement cycle for -most broker-dealer transactions.36 Additionally, NSCC would move the defined term for -“Options Expiration Activity Period” within Section 2 of the proposed Rule 4(A) so it -continues to appear alphabetically, but is not proposing to change the definition of this -term. -Third, the proposed changes to Section 2 of Rule 4(A) would include one defined -term for “Qualifying Liquid Resources” to refer to all default liquidity resources available -to NSCC to settle its payment obligations as a central counterparty. As discussed in -greater detail above, the defined term would provide that NSCC may apply stressed -market assumptions to its Qualifying Liquid Resources when applying these resources in -the calculations made under Rule 4(A). In connection with this proposed change, NSCC -would remove the defined terms “Commitment” and “Credit Facility,” which were used -in the current Rule 4(A) to refer to NSCC’s Line of Credit, and would remove “Other -Qualifying Liquid Resources,” which was used to refer to NSCC’s liquid resources other -than the Clearing Fund and the Line of Credit. This proposed change would simplify -Rule 4(A) and would account for NSCC’s continuing efforts to expand and diversify its -36 See 17 CFR 240.15c6-1. -Page 45 of 79 -default liquidity resources. The proposed change would also clarify that Qualifying -Liquid Resources would not include SLD for purposes of the calculations in Rule 4(A). -Fourth, the proposed changes would move certain calculations out of the defined -terms in Section 2 and include them in the relevant later sections of Rule 4(A). This -proposed change would simplify and clarify Rule 4(A), which currently requires a reader -to refer back to the defined terms in Section 2 when reading the calculations and -requirements set forth in later sections of Rule 4(A). For example, Section 2 of Rule -4(A) currently includes the calculation of “Special Activity Peak Liquidity Exposure” -and “Special Activity Peak Liquidity Need.” In the proposed Rule 4(A), NSCC would no -longer use the calculation of Special Activity Peak Liquidity Exposure in determining the -Supplemental Liquidity Providers or in calculating those requirements. The calculation -of Peak Liquidity Need, which would replace Special Activity Peak Liquidity Need, -would be moved out of Section 2 and into Section 3, where that calculation would be -described as being used to identify Supplemental Liquidity Providers. -Finally, the proposed changes to Section 2 of Rule 4(A) would remove defined -terms that are no longer needed when NSCC calculates SLD requirements daily. For -example, NSCC would remove defined terms that are related to the Options Expiration -Activity Period, including “Special Activity Business Day,” which is currently defined as -a Business Day included in an Options Expiration Activity Period. NSCC would also -remove the defined term for “Special Activity Prefund Deposit” because it would no -longer be necessary for Members to prefund their potential SLD requirement in advance -of NSCC’s calculations when they are done on a daily basis. -Page 46 of 79 -Section 3 (Supplemental Liquidity Providers). NSCC is proposing to amend -Section 3 to describe how NSCC would identify the Supplemental Liquidity Providers for -each Business Day. Section 3 of the proposed Rule 4(A) would state that, each Business -Day, NSCC would determine the Peak Liquidity Need of each Member during the -Lookback Period, and would identify the Supplemental Liquidity Providers for that -Business Day as the 30 (or fewer) Members with the largest Peak Liquidity Need in that -time period. These changes would implement the proposal described in greater detail -above to make this calculation daily and to simplify the calculation used to identify -Supplemental Liquidity Providers by using Peak Liquidity Need rather than using the -largest exposures of all providers in the Lookback Period. -Section 4 (Supplemental Liquidity Obligations); Section 5 (Satisfaction of -Supplemental Liquidity Obligations); and Section 6 (Notice of Supplemental Liquidity -Obligations and Payment of Supplemental Liquidity Deposits). NSCC would amend -Sections 4, 5 and 6 of Rule 4(A) to describe the simplified calculation of Supplemental -Liquidity Obligations, and the process by which Supplemental Liquidity Providers would -pay their Supplemental Liquidity Obligations after being notified by NSCC. Proposed -changes to Section 4 would implement the revised calculation of Supplemental Liquidity -Obligations, described in greater detail above, as the difference between a Supplemental -Liquidity Provider’s Daily Liquidity Need for that Business Day and the Qualifying -Liquid Resources available to NSCC on that day. The proposed changes would also -create a subsection b. of Section 4 to describe the optional, alternative pro rata calculation -of Supplemental Liquidity Obligations, as described in greater detail above. -Page 47 of 79 -Proposed changes to Sections 5 and 6 of Rule 4(A) would update the defined -terms and the timing by when Supplemental Liquidity Providers must fund their -Supplemental Liquidity Obligations to reflect the change of these obligations to daily. -Proposed changes to Section 6 of Rule 4(A) would state that the notice provided to -Supplemental Liquidity Providers regarding their Supplemental Liquidity Obligations -would state if that amount was calculated pursuant to Section 4b as a pro rata share of the -largest Supplemental Liquidity Obligation of that Business Day. -Section 7 (Determination of Intraday Supplemental Liquidity Calls) and Section 8 -(Satisfaction of Intraday Supplemental Liquidity Calls). NSCC would amend Sections 7 -and 8 of Rule 4(A) to reflect the removal of the Special Activity Liquidity Calls and the -adoption of the two Intraday Supplemental Liquidity Calls, as described in greater detail -above. The proposed changes to these sections would also update defined terms, as -appropriate. -Returns of Supplemental Liquidity Deposits – Section 9 (Deposits Made in -Satisfaction of a Supplemental Liquidity Obligation) and Section 10 (Ceasing to be a -Participant). NSCC is proposing to consolidate the current Sections 9 and 10 of Rule -4(A) into a new Section 9 of Rule 4(A), which would address the return of SLD that are -made in satisfaction of both Supplemental Liquidity Obligations and Intraday -Supplemental Liquidity Calls. The proposed changes would provide that SLD made -pursuant to either Supplemental Liquidity Obligations and Intraday Supplemental -Liquidity Calls would be returned to Supplemental Liquidity Providers on the next -Business Day after the calculation date, unless otherwise notified by NSCC. -Page 48 of 79 -NSCC would amend Section 10 (currently Section 11) to align the treatment of -SLD of a retired Member with the treatment of such firm’s Required Fund Deposits, as -described in greater detail above. -Miscellaneous Matters – Section 11 (Obligations of Affiliated Families and -Supplemental Liquidity Providers), Section 12 (Application of Supplemental Liquidity -Deposits) and Section 13 (Information). NSCC would amend Sections 11, 12 and 13 -(currently Sections 12, 13 and 14) of Rule 4(A) to update and simplify these provisions. -The proposed amendments would not substantially amend the purpose or application of -these sections. -Section 11 (currently Section 12) of Rule 4(A) provides that the Supplemental -Liquidity Obligations of Affiliated Families are the several obligations of all of the -Members of the Affiliated Family ratably in proportion to their applicable Special -Activity Peak Liquidity Exposure. NSCC would not change this provision but would -update it to use revised defined terms. NSCC would also amend Section 11 by -consolidating two parallel paragraphs into subsection b., which address NSCC’s right to -collect SLD from Supplemental Liquidity Providers. This proposed change would -simplify the provision but would not make substantive changes to NSCC’s rights or -Members’ obligations. -Section 12 (currently Section 13), which addresses how SLD are treated under -Rule 4, would be amended to update defined terms and to clarify that SLD may be held -by NSCC as part of Members’ actual deposits to the Clearing Fund, pursuant to Section 9 -of Rule 4. No substantive changes are proposed to this Section. -Page 49 of 79 -Section 13 (currently Section 14) describes NSCC’s obligation to provide -Members with certain information regarding its SLD calculation. NSCC is proposing to -amend this section to include updated defined terms and to reflect the daily calculation of -SLD. -(iv) Impact Study Results -NSCC has provided the Commission with the results of an impact study that -reviewed the proposal against the observed regulatory liquidity needs and NSCC’s -Qualifying Liquid Resources available during the period from 2016 through 2020 to -assess both pro-forma and hypothetical impacts of the proposal under various liquidity -scenarios. -Pro-Forma Impact Study. The pro-forma impact study compared NSCC’s -regulatory liquidity needs against the Qualifying Liquid Resources that were available -between 2016 and 2020. The pro-forma analysis indicated that NSCC would expect -between 1 and 3 Supplemental Liquidity Obligations per year, ranging in size between -$1.0 billion to $5.4 billion in 2016 through 2019. In calendar year 2020, the impact study -shows that available Qualifying Liquid Resources for each date would have eliminated -potential Supplement Liquidity Obligations. -Additionally, this impact study showed between 4 and 27 actual Supplemental -Liquidity Obligations were received by NSCC per year, typically averaging $3.6 billion -during this same period, including 9 actual Supplemental Liquidity Obligations received -by NSCC in 2020. -Hypothetical Impact Study. NSCC also developed several hypothetical liquidity -scenarios to assess the proposal’s impact. When hypothetical Qualifying Liquid -Page 50 of 79 -Resources available to NSCC are between $17 billion and $22 billion, NSCC would -expect between 7 and 36 Supplemental Liquidity Obligations per year, ranging in size -between $2.1 billion to $4.6 billion each; and (2) when the hypothetical Qualifying -Liquid Resources available to NSCC are $22 billion or above, NSCC would expect -between 1 and 5 Supplemental Liquidity Obligations per year, ranging in size between -$2.1 billion to $6.8 billion each. -NSCC has also provided the Commission with details of potential impacts of the -proposal on the largest 50 Affiliated Families, a list of the 30 Affiliated Families with the -largest liquidity exposures as of December 31, 2020, and the respective Affiliated -Families’ maximum and average NSCC liquidity needs for each calendar year between -2016 and 2020. -(v) Implementation Timeframe -NSCC would implement the proposed changes no later than 10 Business Days -after the later of the approval of the proposed rule change and no objection to the related -advance notice37 by the Commission. NSCC would announce the effective date of the -proposed changes by Important Notice posted to its website. -2. Statutory Basis -NSCC believes the proposed changes are consistent with the requirements of the -Act and the rules and regulations thereunder applicable to a registered clearing agency. -In particular, NSCC believes the proposed changes are consistent with Section -37 Supra note 3. -Page 51 of 79 -17A(b)(3)(F) of the Act,38 and Rules 17Ad-22(e)(7)(i) and (ii), each promulgated under -the Act,39 for the reasons described below. -Section 17A(b)(3)(F) of the Act requires that the rules of NSCC be designed to, -among other things, assure the safeguarding of securities and funds which are in the -custody or control of the clearing agency or for which it is responsible.40 NSCC believes -the proposed rule change is designed to assure the safeguarding of securities and funds -which are in its custody or control or for which it is responsible because the proposal -would allow NSCC to better limit its liquidity exposure to Members in the event of a -Member default. -Specifically, under the proposal, each Business Day NSCC would measure the -Supplemental Liquidity Obligation of each Supplemental Liquidity Provider as the -difference between the Daily Liquidity Need of the Supplemental Liquidity Provider -calculated for that Business Day and the Qualifying Liquid Resources available to NSCC -on that day assuming stressed market conditions. By making these calculations daily -based on Members’ current activity and NSCC’s resources currently available to NSCC, -the proposed SLD requirement would provide NSCC with a more accurate measure of its -potential liquidity exposures to its Members in the event of a Member default. The -proposal would also establish a monthly intraday SLD collection in connection with -options expiration activity that present heighted liquidity exposures, and an optional -intraday SLD that NSCC may collect when it deems appropriate to mitigate any -38 15 U.S.C. 78q-1(b)(3)(F). -39 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -40 15 U.S.C. 78q-1(b)(3)(F). -Page 52 of 79 -increased liquidity exposures or in light of other circumstances. These proposed intraday -SLD would allow NSCC to re-calculate its liquidity exposures and collect sufficient -liquidity to allow it to complete end-of-day settlement in the event of the default of a -Member. -Additionally, by providing an alternative pro rata calculation of Supplemental -Liquidity Obligations in certain circumstances, the proposal would provide NSCC with -the flexibility to determine the total amount collected on a Business Day, while -continuing to collect and hold sufficient liquidity to allow NSCC to complete end-of-day -settlement in the event of the default of the Member with the largest payment obligations. -In this way, the proposed change to calculate and collect, when applicable, SLD on a -daily basis based on current information, and on an intraday basis when NSCC observes -an increase in its Daily Liquidity Need, would help NSCC assure the safeguarding of -securities and funds which are in its custody or control or for which it is responsible, -consistent with the requirements of Section 17A(b)(3)(F) of the Act.41 -The proposed changes to simplify and clarify Rule 4(A), which describes the SLD -requirement, would also be consistent with the requirements of Section 17A(b)(3)(F) of -the Act.42 These proposed changes would make the rights and obligations of both NSCC -and its Members under Rule 4(A) more transparent and easier to understand. A clearer -rule supports the ability of Members to meet their obligations to provide NSCC with SLD -when required. The liquidity provided to NSCC through the SLD allows it to complete -end-of-day settlement in the event of the default of a Member. Therefore, by making the -41 Id. -42 Id. -Page 53 of 79 -provisions of Rule 4(A) clearer, simpler and more transparent to Members, these -proposed changes also support NSCC’s compliance with the requirements of Section -17A(b)(3)(F) of the Act to assure the safeguarding of securities and funds which are in -NSCC’s custody or control or for which it is responsible.43 -Rule 17Ad-22(e)(7)(i) under the Act requires that NSCC establish, implement, -maintain and enforce written policies and procedures reasonably designed to maintain -sufficient liquid resources at the minimum in all relevant currencies to effect same-day -and, where appropriate, intraday and multiday settlement of payment obligations with a -high degree of confidence under a wide range of foreseeable stress scenarios that -includes, but is not limited to, the default of the participant family that would generate the -largest aggregate payment obligation for NSCC in extreme but plausible market -conditions.44 Rule 17Ad-22(e)(7)(ii) under the Act requires that NSCC establish, -implement, maintain and enforce written policies and procedures reasonably designed to -hold qualifying liquid resources sufficient to meet the minimum liquidity resource -requirement under Rule 17Ad-22(e)(7)(i) in each relevant currency for which NSCC has -payment obligations owed to its Members.45 -As described above, the proposal would strengthen NSCC’s ability to maintain -sufficient liquidity to complete end-of-day settlement in the event of the default of a -43 Id. -44 17 CFR 240.17Ad-22(e)(7)(i). -45 17 CFR 240.17Ad-22(e)(7)(ii). For purposes of Rule 17Ad-22(e)(7)(ii), -“qualifying liquid resources” are defined in Rule 17Ad-22(a)(14) as including, in -part, cash held either at the central bank of issue or at creditworthy commercial -banks. Supra note 7. -Page 54 of 79 -Member. The proposal would do this by allowing NSCC to calculate and collect, when -applicable, SLD every Business Day from those Members that pose the largest liquidity -exposures to NSCC on that day. The proposal would also include a mechanism to allow -NSCC to collect SLD on an intraday basis, including on the first Business Day of the -Options Expiration Activity Period, when liquidity exposures are historically higher. -These resources would be available to NSCC to complete end-of-day settlement in the -event of the default of a Member. Further, SLD are currently, and would continue to be, -held by NSCC at either its cash deposit account at the Federal Reserve Bank of New -York, at a creditworthy commercial bank, or in other investments pursuant to the -Clearing Agency Investment Policy.46 Therefore, SLD would continue to be considered a -qualifying liquid resource, as defined by Rule 17Ad-22(a)(14) under the Act,47 and would -support NSCC’s ability to hold qualifying liquid resources sufficient to meet the -minimum liquidity resource requirement under Rule 17Ad-22(e)(7)(i), as required by -Rule 17Ad-22(e)(7)(ii). Additionally, the proposed alternative pro rata calculation of -Supplemental Liquidity Obligations would provide NSCC with the flexibility to -determine the total amount collected on a Business Day, while continuing to collect and -hold sufficient liquidity to allow NSCC to complete end-of-day settlement in the event of -the default of the Member with the largest payment obligations, as required by Rule -46 See Securities Exchange Act Release Nos. 79528 (December 12, 2016), 81 FR -91232 (December 16, 2016) (File Nos. SR-DTC-2016-007, SR-FICC-2016-005, -SR-NSCC-2016-003); 84949 (December 21, 2018), 83 FR 67779 (December 31, -2018) (File Nos. SR-DTC-2018-012, SR-FICC-2018-014, SR-NSCC-2018-013). -47 17 CFR 240.17Ad-22(a)(14). -Page 55 of 79 -17Ad-22(e)(7)(i).48 As such, this proposed change would support NSCC’s ability to hold -sufficient qualifying liquid resources to meet its minimum liquidity resource requirement -under Rules 17Ad-22(e)(7)(i) and (ii).49 -(B) Clearing Agency’s Statement on Burden on Competition -NSCC believes that the proposed rule change could have an impact on -competition. Specifically, NSCC believes the proposed changes could burden -competition because they would require those Members that are identified as -Supplemental Liquidity Providers to make an SLD to the Clearing Fund each Business -Day, when applicable, rather than only monthly in connection with the expiration of -stock options. -Members are currently subject to SLD requirements under Rule 4(A), and, while -the proposed rule change could result in a Supplemental Liquidity Obligation on a more -frequent basis, the impact study results, discussed above, show that the proposal would -not have a significant impact on the frequency or amount of those requirements. The -Supplemental Liquidity Obligations of Supplemental Liquidity Providers would be in -direct relation to the specific liquidity exposures presented to NSCC by Members’ daily -activity. Therefore, Members that present the largest liquidity exposures to NSCC, -regardless of the type of Member, currently have, and would continue to have, similar -SLD requirements. The proposed alternative calculation of Supplemental Liquidity -Obligations would provide NSCC with the flexibility to collect and hold sufficient -liquidity to meet NSCC’s regulatory obligations while allocating the Supplemental -48 17 CFR 240.17Ad-22(e)(7)(i). -49 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -Page 56 of 79 -Liquidity Obligations on a pro rata basis among the Supplemental Liquidity Providers for -that Business Day. This proposed change would treat each Supplemental Liquidity -Provider equally when this alternative calculation is triggered. -Therefore, NSCC believes that any burden on competition imposed by the -proposed changes would not be significant and, further, would be both necessary and -appropriate in furtherance of NSCC’s efforts to mitigate risks and meet the requirements -of the Act,50 as described in this filing and further below. -NSCC believes the above described burden on competition that may be created by -the proposed changes to the SLD requirement would be necessary in furtherance of the -purposes of the Act, specifically Section 17A(b)(3)(F) of the Act.51 As discussed above, -the proposed change would improve NSCC’s ability to estimate its liquidity exposures in -the calculation and collection of SLD by using daily activity rather than estimating -potential exposures based on activity in a look-back period. In this way, the proposed -change would improve NSCC’s liquidity risk management by supplementing its liquidity -resources that are available to it to complete end-of-day settlement in the event of the -default of a Member. The proposed pro rata alternative calculation of SLD would allow -NSCC to opt to collect only the largest Supplemental Liquidity Obligation calculated for -that Business Day, while still meeting NSCC’s applicable regulatory obligations. The -proposed enhancements to its liquidity risk management would help NSCC assure the -50 15 U.S.C. 78q-1(b)(3)(I). -51 15 U.S.C. 78q-1(b)(3)(F). -Page 57 of 79 -safeguarding of securities and funds which are in its custody or control or for which it is -responsible, consistent with the requirements of Section 17A(b)(3)(F) of the Act.52 -NSCC believes the above described burden on competition that may be created by -the proposed changes to the SLD requirement would be necessary in furtherance of the -purposes of the Act, specifically Section 17A(b)(3)(F) of the Act.53 As discussed above, -the proposed change would improve NSCC’s ability to estimate its liquidity exposures in -the calculation and collection of SLD by using daily activity rather than estimating -potential exposures based on activity in a look-back period. The proposal would also -establish a monthly intraday SLD to address the additional liquidity exposures that are -presented by monthly options expiration activity, and an optional intraday SLD that may -be collected when NSCC deems appropriate. In aggregate, the total SLD collected would -improve NSCC’s liquidity risk management by supplementing its liquidity resources that -are available to it to complete end-of-day settlement in the event of the default of a -Member. The proposed pro rata alternative calculation of SLD would allow NSCC to opt -to collect only the largest Supplemental Liquidity Obligation calculated for that Business -Day, while still meeting NSCC’s applicable regulatory obligations. The proposed -enhancements to its liquidity risk management would help NSCC assure the safeguarding -of securities and funds which are in its custody or control or for which it is responsible, -consistent with the requirements of Section 17A(b)(3)(F) of the Act.54 -52 Id. -53 15 U.S.C. 78q-1(b)(3)(F). -54 Id. -Page 58 of 79 -The proposal would strengthen NSCC’s ability to maintain sufficient liquidity to -complete end-of-day settlement in the event of the default of a Member by allowing -NSCC to collect SLD each Business Day from those Members that pose the largest -liquidity exposures to NSCC on that day. Further, SLD are currently, and would -continue to be, cash deposits to NSCC’s Clearing Fund, which meet the criteria to be -considered qualifying liquid resources, as defined by Rule 17Ad-22(a)(14) under the -Act.55 The proposed alternative pro rata calculation would allow NSCC to continue to -collect sufficient liquidity to meet the requirements of Rule 17Ad-22(e)(7)(i).56 As such, -this proposed change would support NSCC’s ability to hold sufficient qualifying liquid -resources to meet its minimum liquidity resource requirement under Rules 17Ad22(e)(7)(i) and (ii).57 -NSCC believes that the above described burden on competition that could be -created by the proposed changes would be appropriate in furtherance of the purposes of -the Act because such changes have been designed to assure the safeguarding of securities -and funds which are in the custody or control of NSCC or for which it is responsible, as -described in detail above. Under both the current Rule 4(A) and the proposed changes to -Rule 4(A), the SLD requirements are designed to require those Members whose -settlement activity pose the largest liquidity exposures to NSCC to provide SLD in the -amount of such exposures. The proposed changes to Rule 4(A) would better support -NSCC by allowing it to calculate and collect, when applicable, SLD to address liquidity -55 17 CFR 240.17Ad-22(a)(14). -56 17 CFR 240.17Ad-22(e)(7)(i). -57 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -Page 59 of 79 -exposures that are presented by the activity of Supplemental Liquidity Providers each -Business Day rather than only during monthly options expiration periods. The proposed -rule change would improve NSCC’s ability to measure these liquidity exposures by using -daily activity rather than estimations based on past activity. -Therefore, because the proposed changes are designed to provide NSCC with a -more accurate measure of the liquidity risks presented by Members’ daily activity, NSCC -believes the proposal would meet NSCC’s risk management goals and its regulatory -obligations. NSCC believes that it has designed the proposed rule change in an -appropriate way in order to comply with NSCC’s obligations under the Act. Therefore, -as described above, NSCC believes the proposed changes are necessary and appropriate -in furtherance of NSCC’s obligations under the Act,58 specifically Section 17A(b)(3)(F) -of the Act59 and Rules 17Ad-22(e)(7)(i) and (ii) under the Act.60 -(C) Clearing Agency’s Statement on Comments on the Proposed Rule Change -Received from Members, Participants, or Others -NSCC has not received or solicited any written comments relating to this -proposal. NSCC will notify the Commission of any written comments received by -NSCC. -III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission -Action -Within 45 days of the date of publication of this notice in the Federal Register or -within such longer period up to 90 days (i) as the Commission may designate if it finds -58 15 U.S.C. 78q-1(b)(3)(I). -59 15 U.S.C. 78q-1(b)(3)(F). -60 17 CFR 240.17Ad-22(e)(7)(i) and (ii). -Page 60 of 79 -such longer period to be appropriate and publishes its reasons for so finding or (ii) as to -which the self-regulatory organization consents, the Commission will: -(A) by order approve or disapprove such proposed rule change, or -(B) institute proceedings to determine whether the proposed rule change -should be disapproved. -The proposal shall not take effect until all regulatory actions required with respect -to the proposal are completed. -IV. Solicitation of Comments -Interested persons are invited to submit written data, views and arguments -concerning the foregoing, including whether the proposed rule change is consistent with -the Act. Comments may be submitted by any of the following methods: -Electronic Comments: - Use the Commission’s Internet comment form -(http://www.sec.gov/rules/sro.shtml); or - Send an e-mail to rule-comments@sec.gov. Please include File Number -SR-NSCC-2021-002 on the subject line. -Paper Comments: - Send paper comments in triplicate to Secretary, Securities and Exchange -Commission, 100 F Street, NE, Washington, DC 20549. -All submissions should refer to File Number SR-NSCC-2021-002. This file number -should be included on the subject line if e-mail is used. To help the Commission process -and review your comments more efficiently, please use only one method. The -Commission will post all comments on the Commission’s Internet website -Page 61 of 79 -(http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent -amendments, all written statements with respect to the proposed rule change that are filed -with the Commission, and all written communications relating to the proposed rule -change between the Commission and any person, other than those that may be withheld -from the public in accordance with the provisions of 5 U.S.C. 552, will be available for -website viewing and printing in the Commission’s Public Reference Room, 100 F Street, -NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. -and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the -principal office of NSCC and on DTCC’s website (http://dtcc.com/legal/sec-rulefilings.aspx). All comments received will be posted without change. Persons submitting -comments are cautioned that we do not redact or edit personal identifying information -from comment submissions. You should submit only information that you wish to make -available publicly. All submissions should refer to File Number SR-NSCC-2021-002 and -should be submitted on or before [insert date 21 days from publication in the Federal -Register]. -For the Commission, by the Division of Trading and Markets, pursuant to -delegated authority.61 -Secretary -61 17 CFR 200.30-3(a)(12). -Page 62 of 79 -EXHIBIT 3 -Impact Study Data -January 2016 to December 2020 - -Page 63 of 79 -PAGE REDACTED IN ITS ENTIRETY - -Page 64 of 79 -PAGE REDACTED IN ITS ENTIRETY - -Page 65 of 79 -PAGE REDACTED IN ITS ENTIRETY - -Page 66 of 79 -PAGE REDACTED IN ITS ENTIRETY - -Page 67 of 79 -PAGE REDACTED IN ITS ENTIRETY - -Page 68 of 79 -PAGE REDACTED IN ITS ENTIRETY - -Page 69 of 79 -PAGE REDACTED IN ITS ENTIRETY -Page 70 of 79 -EXHIBIT 5 -NATIONAL -SECURITIES -CLEARING -CORPORATION - RULES & PROCEDURES -TEXT OF PROPOSED RULE CHANGE -Bold and underlined text indicates proposed added language. -Bold and strikethrough text indicates proposed deleted language. - -Page 71 of 79 -RULE 4(A). SUPPLEMENTAL LIQUIDITY DEPOSITS -[Changes to this Rule 4(A), as amended by File Nos. SR-NSCC-2021-002 and -SR-NSCC-2021-801, are available at dtcc.com/~/media/Files/Downloads/legal/rulefilings/2021/NSCC/SR-NSCC-2021-002.pdf and at -dtcc.com/~/media/Files/Downloads/legal/rule-filings/2021/NSCC/SR-NSCC2021-801.pdf, respectively. These changes have been approved by the Securities -and Exchange Commission but have not yet been implemented. By no later than -[insert date no later than 10 Business Days after the later of the approval of -SR-NSCC-2021-002 and no objection to SR-NSCC-2021-801 by the Securities and -Exchange Commission], these changes will be implemented, and this legend will -be automatically removed from this Rule 4(A).] -SEC. 1. Overview. The Corporation requires sufficient liquidity to enable it to -effect the settlement of its payment obligations as a central counterparty. The two -principal sources of liquidity for the Corporation currently are deposits to the -Clearing Fund and a committed line of credit.to meet its regulatory obligations. A -substantial proportion of the liquidity needed by the Corporation for these purposes is -attributable to the exposure presented to the Corporation by its Members who would -generate the largest settlement debits during options expiration activity periods in -stressed market conditions. In order to ensure that the Corporation has sufficient -liquidity to meet its payment and regulatory obligations, it is appropriate that such -Members shall provide additional liquidity to the Corporation in the form of -supplemental liquidity deposits to the Clearing Fund, offset by (i) commitments under -the line of credit and (ii) any to supplement the Corporation’s other qualifying -liquid resources the Corporation may securesources of liquidity pursuant to -settle its payment obligations as a central counterparty.this Rule 4(A). This Rule -4(A) describes how such additional liquidity in the form of supplemental liquidity -deposits to the Clearing Fund shall be calculated and provided. -SEC. 2. Defined Terms. The following terms shall have the meanings specified -below for purposes of this Rule 4(A): -“Affiliate” means a person that controls or is controlled by or is under common -control with another person. Control of a person means the direct or indirect ownership -or power to vote more than 50% of any class of the voting securities or other voting -interests of any person. -“Affiliated Family” means a group of Members, excluding from the group any -Member that is a securities clearinghouse, depository, exchange or other market -infrastructure, in which each Member in the group is an Affiliate of at least one other -Member in the group. -“Commitment” means a commitment to lend to the Corporation under the -Credit Facility. -Page 72 of 79 -“Credit Facility” means the committed line of credit maintained by the -Corporation to enable the Corporation to satisfy losses and liabilities incident to -the operation of its clearance and settlement business. -“Options Expiration Activity Period” means the period (i) beginning at the -opening of business on the Friday preceding the Saturday that is the monthly -expiration date for stock options (or the Business Day before that if such Friday -is not a Business Day) and (ii) ending at the close of business on the second -Settlement Day following such date. If the monthly expiration date for stock -options is changed to a Friday, the “Options Expiration Activity Period” shall -mean the period (i) beginning at the opening of business on such Friday (or the -Business Day before that if such Friday is not a Business Day) and (ii) ending at -the close of business on the second Settlement Day following such date. -“Other Qualifying Liquid Resources” means liquid resources, other than -the Clearing Fund and Credit Facility, available to the Corporation to enable the -Corporation to settle its payment obligations as a central counterparty in -stressed market conditions. -“Special Activity Business Day” means a Business Day that is included in -an Options Expiration Activity Period. -“Special Activity Calculation Date” has the meaning given to such term in -Section 3 below. -“Special Activity Daily Liquidity Need” means, on any Special Activity -Business Day, the amount of liquid resources, as calculated and determined by the -Corporation, needed to effect the settlement of its payment obligations as a central -counterparty over a fourthree day settlement cycle, assuming the default on that -Business Dayday of thean Unaffiliated Member or Affiliated Family that would cause -the largest liquidity exposure to the Corporation over that cycle in stressed -market conditions. -“Special ActivityIntraday Supplemental Liquidity Call” has the meaning given -to such term in Section 7 below. -“Special Activity Liquidity Obligation” has the meaning given to such term -in Section 4 below. -“Special Activity Liquidity Provider” has the meaning given to such term in -Section 4 below. -“Special Activity Lookback Period” means, with respect to the 24 month period -(or longer period as determined by the Corporation in its discretion) ending on the -applicable Special Activity Calculation Date, prior to each Options Expiration -Activity Period that falls within the same calendar month as the calendar month -of the applicable Special Activity Calculation DateBusiness Day. -Page 73 of 79 -“Options Expiration Activity Period” means the period (i) beginning at the -opening of business on the Friday preceding the Saturday that is the monthly -expiration date for stock options (or the Business Day before that if such Friday -is not a Business Day) and (ii) ending at the close of business on the second -Settlement Day following such date. If the monthly expiration date for stock -options is changed to a Friday, the “Options Expiration Activity Period” shall -mean the period (i) beginning at the opening of business on such Friday (or the -Business Day before that if such Friday is not a Business Day) and (ii) ending at -the close of business on the second Settlement Day following such date. -“Special Activity Peak Liquidity Exposure Need” means: has the meaning -given to such term in Section 3 below. -a. with respect to an Unaffiliated Member, the amount by which the -largest Special Activity Supplemental Liquidity Need that the -Corporation would have in the event of the default of such -Unaffiliated Member on any Special Activity Business Day during the -applicable Special Activity Lookback Period exceeds, on the -applicable Special Activity Calculation Date, the sum of (i) all -Commitments under the Credit Facility and (ii) all Other Qualifying -Liquid Resources; -b. with respect to a Member of an Affiliated Family, the amount by -which the largest Special Activity Supplemental Liquidity Need that -the Corporation would have in the event of the default of such -Member on any Special Activity Business Day during the applicable -Special Activity Lookback Period exceeds, on the applicable Special -Activity Calculation Date, the sum of (i) all Commitments under the -Credit Facility and (ii) all Other Qualifying Liquid Resources; and -c. with respect to an Affiliated Family, the amount by which the largest -Special Activity Supplemental Liquidity Need that the Corporation -would have in the event of the simultaneous default of all Members -of that Affiliated Family on any Special Activity Business Day during -the applicable Special Activity Lookback Period exceeds, on the -applicable Special Activity Calculation Date, the sum of (i) all -Commitments under the Credit Facility and (ii) all Other Qualifying -Liquid Resources. -“Special Activity Peak Liquidity Need” means, on any Special Activity -Calculation Date, the amount by which the largest Special Activity Supplemental -Liquidity Need observed at any time during any Options Expiration Activity -Period exceeds, on such Special Activity Calculation Date, the sum of (i) all -Commitments under the Credit Facility and (ii) all Other Qualifying Liquid -Resources. -Page 74 of 79 -“Special Activity Peak Liquidity Need Date” means the date of the -applicable Special Activity Peak Liquidity Need. -“Special Activity Prefund Deposit” means a cash deposit of a Member to -the Clearing Fund made by wire transfer to an account designated by the -Corporation: -a. that is in excess of the Required Fund Deposit of the Member; -b. that the Member deposits to the Clearing Fund, not later than the -time specified by the Corporation on the first Business Day of an -Options Expiration Activity Period, if the Member anticipates that its -Special Activity Peak Liquidity Exposure at any time during such -Options Expiration Activity Period will be greater than the amount -calculated by the Corporation pursuant to this Rule 4(A); -c. that the Member undertakes to keep on deposit in the Clearing Fund -for at least seven Business Days after the end of the applicable -Options Expiration Activity Period; and -d. that the Member designates as a “Special Activity Prefund Deposit” -at the time of the deposit in a manner specified by the Corporation. -“Special Activity Supplemental “Qualifying Liquid Resources” means, as of -each Business Day, the liquid resources available to the Corporation to enable it -to settle its payment obligations as a central counterparty in stressed market -conditions (as described below), which may include (i) a commitment to lend -under a committed line of credit maintained by the Corporation to enable it to -satisfy losses and liabilities incident to the operation of its clearance and -settlement business; (ii) actual deposits to its Clearing Fund, including -Supplemental Liquidity Deposits; and (iii) any other prefunded or committed -liquidity resources that the Corporation may use to settle its payment obligations -as a central counterparty. Qualifying Liquid Resources would not include -Supplemental Liquidity Deposits for purposes of this Rule 4(A). In order to -simulate stressed market conditions, the Corporation would apply assumptions -to the size and availability of its Qualifying Liquid Resources when applying these -resources in the calculations made under this Rule 4(A). -“Supplemental Liquidity Deposit” shall have the meaning given to such term in -Section 5, and shall include any amount deposited to the Clearing Fund in satisfaction -of (i) a Special ActivitySupplemental Liquidity Obligation (pursuant to Section 64 -below) or (ii) a Special Activity an Intraday Supplemental Liquidity Call (pursuant to -Section 87 below). All Special Activity Supplemental Liquidity Deposits shall be -made in cash by wire transfer to an account designated by the Corporation. -“Special Activity Supplemental Liquidity ObligationNeed” means, on any -Special Activity Business Day, the amount by which the Special Activity Daily -Page 75 of 79 -Liquidity Need of the Corporation exceeds the sum of all Required Fund Deposits -has the meaning given to such term in Section 4 below. -“Supplemental Liquidity Provider” has the meaning given to such term in -Section 3 below. -“Unaffiliated Member” means a Member that (i) is not in any Affiliated Family and -(ii) is not a securities clearinghouse, depository, exchange or other market -infrastructure. -Capitalized terms that are used but not defined in this Rule 4(A) shall have the -meanings given to such terms elsewhere in these Rules. -Special ActivitySupplemental Liquidity Obligations -SEC. 3. Special Activity Calculation Date Determinations. Supplemental -Liquidity Providers. On a day that is no later than the fifth each Business Day -preceding any Options Expiration Activity Period (the “Special Activity -Calculation Date”), the Corporation shall determine: the “Peak Liquidity Need” of -each Member, which shall be: -a. the Special Activity For Unaffiliated Members, the largest Daily -Liquidity Need ofthat the Corporation on each Special Activity would -have in the event of the default of such Unaffiliated Member on any -Business Day ofduring the applicable Special Activity Lookback -Period;. -b. the Special Activity Supplemental For Members of an Affiliated -Family, the largest Daily Liquidity Need ofthat the Corporation would -have in the event of the default of such Member on each Special -Activityany Business Day ofduring the applicable Special Activity -Lookback Period; -c. and with respect to an Affiliated Family, the Special Activity -Peaklargest Daily Liquidity Need ofthat the Corporation would have in -the event of on the applicable Special Activity Calculation Date; -d. the Special Activity Peak Liquidity Exposure of each Unaffiliated -Member or Affiliated Family during the applicable Special Activity -Lookback Period; and -e. the 30 (or fewer) Unaffiliatedsimultaneous default of all Members orof -that Affiliated Families with the largest Special Activity Peak Liquidity -ExposuresFamily on any Business Day during the applicable Special -Activity Lookback Period. -SEC. 4. Special Activity Liquidity Obligations and Providers. The 30 (or -fewer) Unaffiliated Members or Affiliated Families with the largest Special Activity -Page 76 of 79 -Peak Liquidity ExposuresNeed during the applicable Special Activity Lookback -Period shall be “Supplemental Liquidity Providers” for that Business Day. -SEC 4. Supplemental Liquidity Obligations. -a. On each Business Day, (each, a “Special Activity Supplemental -Liquidity Provider”) shall have a supplemental liquidity obligation to the -Corporation (a “Special ActivitySupplemental Liquidity Obligation”),”) -determined for each Special Activity Liquidity Provider in accordance -with the following formula: -A = B multiplied by (minus C divided by D), where -- -A is the Special ActivitySupplemental Liquidity Obligation of such -Special Activity Supplemental Liquidity Provider; -B is the Daily Liquidity Need of the Supplemental Liquidity -Provider calculated for that Business Day; and -CB is the Special Activity Peak Liquidity Needsum of all Qualifying -Liquid Resources available to the Corporation on the applicable -Special Activity Calculation Date;that Business Day assuming -stressed market conditions. -C is the Special Activity Peak Liquidity Exposure of such Special -Activity Liquidity Provider during the applicable Special Activity -Lookback Period; and -D is the aggregate amount of the Special Activity Peak Liquidity -Exposures of all Special Activity Liquidity Providers during the -applicable Special Activity Lookback Period. -b. If two or more Supplemental Liquidity Providers have a -Supplemental Liquidity Obligation of more than $2 billion, as -determined pursuant to subsection a. above, the Corporation may, in -its sole discretion, determine the Supplemental Liquidity Obligation -of each Supplemental Liquidity Provider as its pro rata share of the -largest Supplemental Liquidity Obligation calculated for that -Business Day. -SEC. 5. Satisfaction of Special Activity Supplemental Liquidity Obligations. In -satisfaction of its Special ActivitySupplemental Liquidity Obligation to the Corporation, -a Special ActivitySupplemental Liquidity Provider shall make a supplemental liquidity -deposit (a “Special Activity Supplemental Liquidity Deposit”) to the Clearing Fund in -an amount equal to its Supplemental Activity Liquidity Obligation. -SEC. 6. Notice of Special ActivitySupplemental Liquidity Obligations and -Payment of Special Activity Supplemental Liquidity Deposits. Promptly after the -Page 77 of 79 -Special Activity Calculation DateOn each Business Day, the Corporation shall -provide each Special ActivitySupplemental Liquidity Provider with the amount of its -Special ActivitySupplemental Liquidity Obligation for that Options Expiration -Activity Period. Not later thanBusiness Day. Such notice shall state if the -closeSupplemental Liquidity Obligation was calculated pursuant to Section 4b of -business onthis Rule. Within one hour of demand, unless otherwise determined -by the second Business Day preceding the applicable Options Expiration Activity -PeriodCorporation, a Special ActivitySupplemental Liquidity Provider shall make its -Special Activity Supplemental Liquidity Deposit to the Clearing Fund. -Special ActivityIntraday Supplemental Liquidity Calls -SEC. 7. Determination of Special ActivityIntraday Supplemental Liquidity -Calls. -a. If, with respect to any Special Activity on the first Business Day of an -Options Expiration Activity Period between Special Activity Calculation Dates, the -Corporation observes an increase in its Special Activity Supplemental Liquidity -Need in excess of such threshold as may be determined by the Corporation from -time to timeDaily Liquidity Need, the Corporation shall be entitled to call on the -Member Supplemental Liquidity Providers whose increase in activity levels or -projected settlement activity with respect to monthly expiration of stock options -caused (or was the primary cause of) such increase in the Special Activity -SupplementalDaily Liquidity Need of the Corporation to deposit to the Clearing Fund, -as an addition to its Special Activity Supplemental Liquidity Deposit, an amount equal -to the difference between (i) the Special Activity SupplementalDaily Liquidity Need of -the Corporation on such Special Activity Business DayBusiness Day, adjusted to -account for such increased activity levels and projected settlement activity, and -(ii) the sum, on such Special Activity Business Day, of (w) all Special Activity -Supplemental Deposits, (x) all Commitments under the Credit Facility, (y) all -Other Qualifying Liquid Resources and (z) an amount of Special Activity Prefund -Deposits up to such limit as may be determined by the Corporation from time to -time (a “Special Activity all Qualifying Liquid Resources assuming stressed -market conditions (an “Intraday Supplemental Liquidity Call”). For purposes of -this Section 7a, the Corporation would adjust the re-calculated Daily Liquidity -Need using an estimated netting percentage that is based on that Supplemental -Liquidity Provider’s average percentage of netting observed over the prior 24 -months. -b. If, on any Business Day other than the first Business Day of an -Options Expiration Activity Period, the Corporation observes an increase in its -Daily Liquidity Need, the Corporation shall be entitled to call on the Supplemental -Liquidity Providers whose increase in activity levels caused (or was the primary -cause of) such increase in the Daily Liquidity Need of the Corporation to deposit -an Intraday Supplemental Liquidity Call in an amount equal to the difference -between (i) the Daily Liquidity Need of the Corporation on such Business Day, -adjusted to account for such increased activity levels, and (ii) the sum, on such -Page 78 of 79 -Business Day, of all Qualifying Liquid Resources assuming stressed market -conditions. -SEC. 8. Satisfaction of Special ActivityIntraday Supplemental Liquidity Calls. -On the first Business Day after receipt of a Special Activity Liquidity Call from -Unless otherwise determined by the Corporation, or such later time as the -Corporation may specify but not later than 10 a.m. on the second Business Day -after receipt of a Special Activity within one hour of demand of an Intraday -Supplemental Liquidity Call from the Corporation, a Member shall make a Special -Activityan additional Supplemental Liquidity Deposit to the Clearing Fund in the -amount of the Special ActivityIntraday Supplemental Liquidity Call. -Returns of Special Activity Supplemental Liquidity Deposits -SEC. 9. Deposits Made in Satisfaction of a Supplemental Liquidity Obligation. -A Special ActivitySupplemental Liquidity Provider shall be entitled to a return of the -amount of its Special Activity Supplemental Liquidity Deposit made in satisfaction of a -Supplemental Activity Liquidity Obligation or Intraday Supplemental Liquidity Call, -payable sevenon the Business DaysDay following after the end of the applicable -Options Expiration Activity PeriodBusiness Day on which the Supplemental -Liquidity Deposit was made, unless otherwise notified by the Corporation. -SEC. 10. Deposits Made in Satisfaction of a Liquidity Call. A Special -Activity Liquidity Provider shall be entitled to a return of the amount of its Special -Activity Liquidity Deposit made in satisfaction of a Special Activity Liquidity Call, -payable 90 days after the date of such deposit. -SEC. 11. Ceasing to be a Participant. Special Activity Supplemental Liquidity -Deposits shall not be subject to the provisions of Section 7 of Rule 4 relating to the -thirty (30) calendar day deferral of refundsrefund of deposits to the Clearing Fund -when a Member ceases to be a participant. -Miscellaneous Matters -SEC. 12.11. Obligations of Affiliated Families and Unaffiliated Members -Supplemental Liquidity Providers. -a. The Special ActivitySupplemental Liquidity Obligations of an Affiliated -Family shall be the several obligations of all of the Members of the -Affiliated Family ratably in proportion to their applicable Special Activity -Peak Liquidity ExposuresNeed. -b. In the event of any failure of an Unaffiliated Membera Supplemental -Liquidity Provider to satisfy a Special ActivitySupplemental Liquidity -Obligation in full when due, the Corporation may (i) debit the amount of -any such deficiency to the account of such Unaffiliated Member, -(ii) collect such amount in system wide settlement, and (iii) credit such -amount as a Special Activity Supplemental Liquidity Deposit for the -Page 79 of 79 -account of such Unaffiliated Member. The Corporation may also -exercise any and all of its other default rights under these Rules. -c. In the event of any failure of a Member of an Affiliated Family to -satisfy a Special Activity Liquidity Obligation in full when due, the -Corporation may, (i) debit the amount of any such deficiency to the -account of such Member, (ii) collect such amount in system wide -settlement and (iii) credit such amount as a Special Activity -Supplemental Deposit for the account of such Member. The -Corporation may also exercise any and all of its other default rights -under these Rules. -SEC. 13. 12. Application of Special Activity Supplemental Liquidity Deposits. -a. A Special Activity Supplemental Liquidity Deposit of a Member may not -be withdrawn by the Member unless it is entitled to a return of such deposit -pursuant to Sections 9 or 10 above. Notwithstanding Sections 9 and 10 -of this Rule, the Supplemental Liquidity Deposit of a Member may be -held by the Corporation pursuant to Section 9 of Rule 4. -b. A Special Activity Supplemental Liquidity Deposit of a Member shall form -a part of the Actual Depositactual deposit of the Member to the Clearing -Fund but shall be in addition to, and separate from, (i) the Required Fund -Deposit of the Member and (ii) any other deposit of the Member to the -Clearing Fund. -c. A Special Activity Supplemental Liquidity Deposit of a Member (i) may -be invested, paid, applied and loaned as provided in Section 2 of Rule 4 -and (ii) may be used to satisfy a loss or liability as provided in Sections 3 -or 13 of Rule 4. -d. A Special Activity Supplemental Liquidity Deposit of a Member may not -be used to calculate or be applied to satisfy any pro rata charge pursuant -to Section 4 of Rule 4. -SEC. 14. 13. Information. To enable MembersSupplemental Liquidity -Providers to understand and manage their obligations to the Corporation: -a. , on each Business Day, the Corporation shall make available to each -MemberSupplemental Liquidity Provider the amount of the liquidity -needDaily Liquidity Need that the Corporation would have had in the event -of the default of such Member on the preceding Business Day; and -b. promptly after each Special Activity Calculation Date, the Corporation -shall provide each Special Activity Liquidity Provider with the amount -of its Special Activity Liquidity Obligation for the following Options -Expiration Activity Period. diff --git a/Resources/Documents/SEC/2021-03-25-SEC-Closed-Meeting-Notes.md b/Resources/Documents/SEC/2021-03-25-SEC-Closed-Meeting-Notes.md deleted file mode 100644 index 55b95d2..0000000 --- a/Resources/Documents/SEC/2021-03-25-SEC-Closed-Meeting-Notes.md +++ /dev/null @@ -1,108 +0,0 @@ -Re: SEC Closed Meeting today 3/25/2021 -====================================== - -**Author: [u/Conscious-Sea-5937](https://www.reddit.com/user/Conscious-Sea-5937/)** - -[Discussion](https://www.reddit.com/r/GME/search?q=flair_name%3A%22Discussion%22&restrict_sr=1) - -So this is my first attempt at trying to add value to our beloved ape community. I decided to see what I could find out about this closed meeting the SEC had on deck for today. What I found is mostly above my head but it does sound to me that someone(s) about to get pinched? - - - -SEC Meeting noted here: - - - -From the above page I clicked on the "Sunshine Act Notice" link:  - -In 3rd paragraph under MATTERS TO BE CONSIDERED: - -"The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in *5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10)*, permit consideration of the scheduled matters at the closed meeting." - -So I googled "5 U.S.C. 552b" and found this: - - - -Under (c) - - -**(3)**disclose matters specifically exempted from disclosure by statute (other than [section 552 of this title](https://www.law.cornell.edu/uscode/text/5/552)), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld; - -*(5)involve accusing any* [*person*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-991716523-1277204884&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) *of a crime, or formally censuring any* [*person*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-991716523-1277204884&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)*;* - -**(6)**disclose information of a personal nature where disclosure would constitute a clearly unwarranted invasion of personal privacy; - -*(7)**disclose investigatory records compiled for law enforcement purposes, or information which if written would be contained in such records, but only to the extent that the production of such records or information would (A) interfere with enforcement proceedings, (B) deprive a*[*person*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-991716523-1277204884&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)*of a right to a fair trial or an impartial*[*adjudication*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-231349275-1277204889&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)*,*** (C) constitute an unwarranted invasion of personal privacy, *(D) disclose the identity of a confidential source and, in the case of a record compiled by a criminal law enforcement authority in the course of a criminal investigation, or by an* [*agency*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) *conducting a lawful national security intelligence investigation, confidential information furnished only by the confidential source, (E) disclose investigative techniques and procedures,* or (F) endanger the life or physical safety of law enforcement personnel; - -**(8)**disclose information contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an [agency](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) responsible for the *regulation or supervision of financial institutions;* - -**9(B)**in the case of any [agency](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b), *be likely to significantly frustrate implementation of a proposed* [*agency*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) *action,* - -except that subparagraph (B) shall not apply in any instance where the [agency](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) has already disclosed to the public the content or nature of its proposed action, or where the [agency](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) is required by law to make such disclosure on its own initiative prior to taking final [agency](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) action on such proposal; or - -*(10)specifically concern the* [*agency*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)*'s issuance of a subpena, or the* [*agency*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)*'s participation in a civil action or proceeding, an action in a foreign court or international tribunal, or an arbitration, or the initiation, conduct, or disposition by the* [*agency*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b) *of a particular case of formal* [*agency*](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-1419699195-161327363&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)[ *adjudication* ](https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=5-USC-231349275-1277204889&term_occur=999&term_src=title:5:part:I:chapter:5:subchapter:II:section:552b)*pursuant to the procedures in* [*section 554 of this title*](https://www.law.cornell.edu/uscode/text/5/554) *or otherwise involving a determination on the record after opportunity for a hearing.* - -I then googled "17 CFR 200.402" and found this: - - - -Under (a) - - -(3) Disclose matters specifically exempted from disclosure by statute (other than [5 U.S.C. 552](https://www.law.cornell.edu/uscode/text/5/552)): *Provided,* That such statute requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or establishes particular criteria for withholding or refers to particular types of matters to be withheld. - -*(5) Involve accusing any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *of a crime, or formally censuring any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402)*, including, but not limited to, consideration of whether to:* - -*(i) Institute, continue, or conclude administrative proceedings or any formal or informal investigation or inquiry, whether public or nonpublic, against or involving any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402)*, alleging a violation of any provision of the federal securities laws, or the rules and regulations thereunder, or any other statute or rule a violation of which is punishable as a crime; or* - -*(ii) Commence, participate in, or terminate judicial proceedings alleging a violation of any provision of the federal securities laws, or the rules and regulations thereunder, or any other statute or rule a violation of which is punishable as a crime; or* - -*(iii) Issue a report or statement discussing the conduct of any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *and the relationship of that conduct to possible violations of any provision of the federal securities laws, or the rules and regulations thereunder, or any other statute or rule a violation of which is punishable as a crime; or* - -*(iv) Transmit, or disclose, with or without recommendation, any Commission memorandum, file, document, or record to the Department of Justice, a United States Attorney, any federal, state, local, or foreign governmental authority or foreign securities authority, any professional association, or any securities industry self-regulatory organization, in order that the recipient may consider the institution of proceedings against any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *or the taking of any action that might involve accusing any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *of a crime or formally censuring any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402)*; or* - -*(v) Seek from, act upon, or act jointly with respect to, any information, file, document, or record where such action could lead to accusing any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *of a crime or formally censuring any* [*person*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *by any entity described in* [*paragraph (a)(5)(iv)*](https://www.law.cornell.edu/cfr/text/17/200.402#a_5_iv) *of this section.* - -(6) Disclose information of a personal nature, where disclosure would constitute a clearly unwarranted invasion of personal privacy. - -(7) - -*(i) Disclose investigatory records compiled for law enforcement purposes,* or information which, if written, would be contained in such records, to the extent that the production of such records would: - -*(A) Interfere with enforcement activities undertaken, or* [*likely to*](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=160ae5dee9d5f330ffd2d2a85d3ad75d&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) *be undertaken, by the Commission or the Department of Justice, or any United States Attorney, or any Federal, State, local, or foreign governmental authority or foreign securities authority, any professional association, or any securities industry self-regulatory organization;* - -(B) Deprive a [person](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) of a right to a fair trial or an impartial adjudication; - -(C) Constitute an unwarranted invasion of personal privacy; - -*(D) Disclose the identity of a confidential source and, in the case of a record compiled by a criminal law enforcement authority in the course of a criminal investigation, or by an agency conducting a lawful national security intelligence investigation, confidential information furnished only by the confidential source;* - -*(E) Disclose investigative techniques and procedures; or* - -(F) Endanger the life or physical safety of law enforcement personnel. - -(ii) The term *investigatory records* includes, but is not limited to, all documents, records, transcripts, evidentiary [materials](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=acb6182e29bd7ed2ff96fc4128b95cd9&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) of any nature, correspondence, related memoranda, or work product concerning any examination, any investigation (whether formal or informal), or any related litigation, which pertains to, or may disclose, the possible violation by any [person](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) of any provision of any statute, rule, or regulation administered by the Commission, by any other Federal, State, local, or foreign governmental authority *or foreign securities authority, by any professional association, or by any securities industry self-regulatory organization.* The term *investigatory records* also includes all written communications from, or to, any [person](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=103671350aef8fbd308b6a53dda18f83&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) complaining or otherwise furnishing information respecting such possible violations, as well as all correspondence or memoranda in connection with such complaints or information. - -*(8) Disclose information contained in, or related to, any examination, operating, or condition report prepared by, on behalf of, or for the use of, the Commission, any other federal, state, local, or foreign governmental authority or foreign securities authority, or any securities industry self-regulatory organization, responsible for the regulation or supervision of financial institutions.* - -(9) (ii) Significantly frustrate the implementation, or the proposed implementation, of any action by the Commission, any other federal, state, local or foreign governmental authority, any foreign securities authority, or any securities industry self-regulatory organization: *Provided, however,* That this paragraph (a)(9)(ii) shall not apply in any instance where the Commission has already disclosed to the public the precise content or nature of its proposed action, or where the Commission is expressly required by law to make such disclosure on its own initiative prior to taking final agency action on such proposal. - -(10) Specifically concern the Commission's consideration of, or its actual: *Issuance of a subpoena* (whether by the Commission directly or by any Commission [employee](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=9c4c70a8673e1558c0f949913e9c9aed&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) or member); participation in a civil action or proceeding, an action in a foreign court or international tribunal, or an arbitration; or initiation, conduct, or disposition of a particular case of formal adjudication pursuant to the procedures in [5 U.S.C. 554](https://www.law.cornell.edu/uscode/text/5/554), or otherwise involving a [determination](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=303fcbaed0f05f0084d25708de2b32ca&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) on the record after opportunity for a hearing; including, but not limited to, matters involving - -(i) The institution, prosecution, adjudication, dismissal, settlement, or amendment of any administrative proceeding, whether public or nonpublic; or - -(ii) The commencement, settlement, defense, or prosecution of any judicial proceeding to which the Commission, or any one or more of its members or employees, is or may become a party; or - -(iii) The commencement, conduct, termination, status, or disposition of any inquiry, investigation, or proceedings to which the power to issue subpoenas is, or may become, attendant; or - -(iv) The discharge of the Commission's responsibilities involving litigation under any statute concerning the subject of bankruptcy; or - -(v) The participation by the Commission (or any [employee](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=9c4c70a8673e1558c0f949913e9c9aed&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) or member thereof) in, or involvement with, any civil judicial proceeding or any administrative proceeding, whether as a party, as amicus curiae, or otherwise; or - -(vi) The disposition of any application for a Commission order of any nature where the issuance of such an order would involve a [determination](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=303fcbaed0f05f0084d25708de2b32ca&term_occur=999&term_src=Title:17:Chapter:II:Part:200:Subpart:I:200.402) on the record after opportunity for a hearing. - -TL;DR - -A player in the game may be about to get pinched? - -I'm out of my depth on this but it feels pertinent to marble ape brain. I don't feel right tagging our most wrinkled of ape brains here until more of yall check it out and make sure I'm not wasting folks time. I suppose it's all speculation regardless.Enjoy! - -EDIT: as my ape fam correctly points out this may or MAY NOT have anything to do with GME. Confirmation bias led me to post. Maybe it's our boys and maybe it ain't. diff --git a/Resources/Documents/SEC/2021-04-09-SEC-Proposed-Rule-Change-to-Enhance-IEX.md b/Resources/Documents/SEC/2021-04-09-SEC-Proposed-Rule-Change-to-Enhance-IEX.md deleted file mode 100644 index 3966b1a..0000000 --- a/Resources/Documents/SEC/2021-04-09-SEC-Proposed-Rule-Change-to-Enhance-IEX.md +++ /dev/null @@ -1,24 +0,0 @@ -New SEC filing from IEX seeking to overhaul and improve fairness in executing trades for retail investors. -========================================================================================================== - -**Author: [u/Scalpel_Jockey9965](https://www.reddit.com/user/Scalpel_Jockey9965/)** - -[DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1) - -Unpublished and scheduled to be posted on the federal register tomorrow. This will close several loopholes that market makers and HF have over retail investors for all trades routed to IEX. - - - -The purpose of the proposed rule change is to enhance the Exchange's Retail Price Improvement Program for the benefit of retail investors. Specifically, the Exchange proposes to make the following four changes: (i) revise the definition of Retail order in IEX Rule 11.190(b)(15) to apply only to the trading interest of a natural person that does not place more than 390 equity orders per day on average during a calendar month for its own beneficial account(s);7 (ii) provide Order Book8 priority to Retail Liquidity Provider ("RLP") orders9 at the Midpoint Price10 ahead of other non-displayed orders priced to execute at the Midpoint Price; (iii) disseminate a "Retail Liquidity Identifier" through the Exchange's proprietary market data feeds and the appropriate securities information processor ("SIP") when RLP order interest aggregated to form at least one round lot for a particular security is available in the System,11 provided that the RLP order interest is resting at the Midpoint Price and is priced at least $0.001 better than the NBB12 or NBO13; and (iv) amend the definition of RLP orders so such orders can only be midpoint peg orders,14 cannot be Discretionary Peg orders,15 and cannot include a minimum quantity restriction.16 The proposed changes are designed to further support and enhance the ability of non-professional retail investors to obtain meaningful price improvement by incentivizing market participants to compete to provide such price improvement. - -Retail Liquidity Provider means a broker that routes retail orders through the IEX. You can call your broker and see if they are an RLP for IEX. - -Ape speak: - -*This completely negates the ability for other firms to see retail orders before execution and then act accordingly to manipulate the price. This would give retail orders* *Priority over other non-displayed orders. These orders are routinely used to drop price even when buying pressure is increased.* - -Read some of the DD to learn a bit on how non displayed orders are likely being used by citadel and friends to manipulate the price. - -Overall, it seems like a major step in the right direction to help level the playing field. It looks like it has to go through the traditional comment period before approval. (Not an advance notice). - -Still reading will add more as needed. diff --git a/Resources/Documents/SEC/2021-04-17-Gensler-Sworn-in-to-SEC.md b/Resources/Documents/SEC/2021-04-17-Gensler-Sworn-in-to-SEC.md deleted file mode 100644 index ad4d479..0000000 --- a/Resources/Documents/SEC/2021-04-17-Gensler-Sworn-in-to-SEC.md +++ /dev/null @@ -1,23 +0,0 @@ -Gary Gensler Sworn in as Member of the SEC -========================================== - -**Author: [SEC](https://www.sec.gov/news/press-release/2021-65)** - -FOR IMMEDIATE RELEASE\ -2021-65 - -Washington D.C., April 17, 2021 --- - -Gary Gensler was sworn into office today as a Member of the Securities and Exchange Commission by U.S. Senator Ben Cardin. He was nominated to Chair the SEC by President Joseph R. Biden on February 3, 2021 and confirmed by the U.S. Senate on April 14, 2021. - -"I feel incredibly privileged to join the SEC's team of remarkable public servants," Gensler said. "As Chair, every day I will be animated by our mission: protecting investors, facilitating capital formation, and promoting fair, orderly, and efficient markets. It is that mission that has helped make American capital markets the most robust in the world." - -"I'm honored that President Biden nominated me, and I'm grateful to Vice President Harris and the Senate for their support," Gensler added. "I'd like to thank Acting Chair Allison Herren Lee for her leadership the last few months and all of my fellow Commissioners for being so generous with their time and advice." - -Before joining the SEC, Gensler was most recently Professor of the Practice of Global Economics and Management at the MIT Sloan School of Management, Co-Director of MIT's Fintech@CSAIL, and Senior Advisor to the MIT Media Lab Digital Currency Initiative. From 2017-2019, he served as chair of the Maryland Financial Consumer Protection Commission. - -Gensler was formerly chair of the U.S. Commodity Futures Trading Commission, leading the Obama Administration's reform of the $400 trillion swaps market. He also was Senior Advisor to U.S. Senator Paul Sarbanes in writing the Sarbanes-Oxley Act (2002) and was Under Secretary of the Treasury for Domestic Finance and Assistant Secretary of the Treasury from 1997-2001. In recognition for his service, he was awarded Treasury's highest honor, the Alexander Hamilton Award. He is a recipient of the 2014 Frankel Fiduciary Prize. - -Prior to his public service, Gensler worked at Goldman Sachs, where he became a partner in the Mergers & Acquisition department, headed the firm's Media Group, led fixed income & currency trading in Asia, and was co-head of Finance, responsible for the firm's worldwide Controllers and Treasury efforts. - -A native of Baltimore, Maryland, Gensler earned his undergraduate degree in economics in 1978 and his MBA from The Wharton School, University of Pennsylvania, in 1979. He has three daughters. diff --git a/Resources/Documents/SEC/Federal-Register.md b/Resources/Documents/SEC/Federal-Register.md deleted file mode 100644 index 0a1a347..0000000 --- a/Resources/Documents/SEC/Federal-Register.md +++ /dev/null @@ -1 +0,0 @@ -# [Federal Register](https://www.federalregister.gov/agencies/securities-and-exchange-commission)