Notice2025-10527
Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, Concerning the Collection of Intraday Margin
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 11, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 111 (Wednesday, June 11, 2025)</title>
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[Federal Register Volume 90, Number 111 (Wednesday, June 11, 2025)]
[Notices]
[Pages 24675-24680]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-10527]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103199; File No. SR-NSCC-2025-005]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Amendment
No. 1, Concerning the Collection of Intraday Margin
June 5, 2025.
I. Introduction
On April 15, 2025, National Securities Clearing Corporation
(``NSCC,'' a subsidiary of The Depository Trust & Clearing Corporation
(``DTCC'') and a ``Clearing Agency''), filed with the Securities and
Exchange Commission (``Commission'') proposed rule change SR-NSCC-2025-
005, pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed rule
change was published for comment in the Federal Register on April 25,
2025.\3\ The Commission has received no comments on the changes
proposed.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 102893 (Apr. 21,
2025), 90 FR 17491 (Apr. 25, 2025) (File No. SR-NSCC-2025-005)
(``Notice of Filing'').
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On May 9, 2025, NSCC filed a partial amendment to the proposed rule
changes (``Amendment No. 1'') to provide supplemental information to
assist the Commission in its analysis of the proposed rule changes.\4\
Partial Amendment No. 1 does not substantively change the proposed rule
changes. The proposed rule changes, as modified by Partial Amendment
No. 1, are hereinafter referred to as the ``Proposed Rule Change.'' The
Commission is publishing this notice to solicit comments on Amendment
No. 1 from interested persons, and for the reasons discussed below, the
Commission is approving the proposed rule change, as modified by
Amendment No. 1, on an accelerated basis.
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\4\ Partial Amendment No. 1 consists of NSCC's Market Risk
Management Procedures, filed as a confidential Exhibit 3 to the
proposed rule changes (``Confidential Exhibit 3''), describing in
greater detail how NSCC would implement the proposed rule changes.
NSCC has requested confidential treatment of Exhibit 3, pursuant to
17 CFR 240.24b-2.
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II. Background
A. Recent Amendments to Covered Clearing Agency Margin Requirements
On October 25, 2024, the Commission adopted amendments to 17 CFR
240.17ad-22(e)(6)(ii) (``Rule 17Ad-22(e)(6)(ii)'') in the Covered
Clearing Agency Standards (``CCA Standards'') under the Act to add new
requirements related to the monitoring and collection of intraday
margin by a covered clearing agency (``CCA'').\5\ Specifically, the
Commission amended Rule 17ad-22(e)(6)(ii) to establish new requirements
with respect to a CCA's policies and procedures regarding the
collection of intraday margin to: (i) include a new requirement to
monitor intraday exposures on an ongoing basis; (ii) modify the
preexisting reference to making intraday calls ``in defined
circumstances'' to making intraday calls ``as frequently as
circumstances warrant'' and identifying two examples of such
circumstances; and (iii) require that a CCA document when it
[[Page 24676]]
determines not to make an intraday margin call pursuant to its written
policies and procedures. NSCC represents that its Proposed Rule Change
is primarily designed to ensure compliance with these new requirements.
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\5\ See Covered Clearing Agency Resilience and Recovery and
Orderly Wind-Down Plans, Exchange Act Release No. 101446 (Oct. 25,
2024), 89 FR 91000 (Nov. 18, 2024) (hereinafter, ``CCAS Margin
Rules'').
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As part of the CCAS Margin Rules, the Commission also adopted
amendments to 17 CFR 240.17ad-22(e)(6)(iv) (``Rule 17Ad-22(e)(6)(iv)'')
to strengthen its requirements that a CCA have policies and procedures
reasonably designed to cover its credit exposures to its participants
by establishing a risk-based margin system that, among other things,
uses reliable sources for its price data and uses procedures for
addressing circumstances in which price data are not readily available
or reliable.\6\ NSCC represents that its Proposed Rule Change is
primarily designed to ensure compliance with these new requirements.
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\6\ See id.
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B. Overview of NSCC's Margin Methodology
NSCC provides central counterparty (``CCP'') services, including
clearing, settlement, risk management, and a guarantee of completion
for virtually all broker-to-broker trades involving equity securities,
corporate and municipal debt, exchange traded funds (``ETFs''), and
unit investment trusts. As a CCP, NSCC interposes itself as the buyer
to every seller and seller to every buyer for the transactions it
clears. In doing so, NSCC is exposed to the risk that one or more of
its members may fail to make a payment or deliver securities.
A key tool NSCC uses to manage this credit exposure to its members
is determining and collecting a Required Fund Deposit \7\ (i.e.,
margin) from each member on at least a daily basis. The objective of a
member's margin is to mitigate potential losses to NSCC associated with
liquidating a member's portfolio in the event NSCC ceases to act for
that member (hereinafter referred to as a ``default'').\8\ The
aggregate amount of all members' margin constitutes NSCC's Clearing
Fund. NSCC would access its Clearing Fund should a defaulting member's
own margin be insufficient to satisfy losses to NSCC caused by the
liquidation of that member's portfolio.\9\ Each member's margin
consists of several components, each of which is calculated to address
specific risks NSCC faces based on that member's trading activity and
unsettled positions.\10\
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\7\ Capitalized terms not defined herein shall have the meaning
assigned to such terms in the NSCC Rules & Procedures (``Rules''),
available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
\8\ 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 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 7.
\9\ See Rule 4 (Clearing Fund), supra note 7.
\10\ See Procedure XV within NSCC's Rules, supra note 7
(describing NSCC's Clearing Fund formula and methodology).
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C. NSCC's Current Intraday Margin Rules
NSCC currently has the authority and operational capacity to
collect intraday margin on two margin components, the mark-to-market
component and the volatility component (collectively, ``intraday
margin''), based on established calculations and thresholds used to
trigger the potential collection of such margin.\11\ First, the
intraday mark-to-market component is designed to measure the change in
market value of unsettled and pending positions of each member since
the last marked-to-market margin collection.\12\ An intraday mark-to-
market charge generally may be imposed if the resulting calculation
meets or exceeds 80 percent of that member's volatility component
amount included in that member's start of day Required Fund
Deposit.\13\ NSCC may reduce this threshold during volatile market
conditions if it determines that a reduction of the threshold is
appropriate to mitigate risks to NSCC.\14\
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\11\ Intraday mark-to-market and volatility exposures are
calculated for CNS (``continuous net settlement'') Positions,
Balance Order positions, and SFT (``securities financing
transactions'') Positions. See Rule 56 and Procedure XV of NSCC's
Rules, supra note 7.
\12\ See Notice of Filing, supra note 3, at 17492.
\13\ See id.
\14\ See id.
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Second, NSCC's intraday volatility component is designed to measure
the change in NSCC's potential future exposure, i.e., market price
risk, of a member's unsettled positions since the last volatility
margin collection with a high degree of confidence.\15\ An intraday
volatility charge generally may be imposed if the resulting calculation
meets or exceeds 100 percent of that member's volatility component
amount included in that member's start of day Required Fund Deposit and
the amount would be greater than $250,000.\16\ NSCC may reduce this
threshold during volatile market conditions if it determines that a
reduction of the threshold is appropriate to mitigate risks to
NSCC.\17\
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\15\ NSCC's potential future exposure is based on the interval
between the last margin collection and the close out of a defaulting
member's positions, assuming a three day liquidation period. See
NSCC Disclosure Framework for Covered Clearing Agencies and
Financial Market Infrastructures, December 2024, available at
<a href="https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC-DISCLOSURE-FRAMEWORK-2024-Q3-Q4.pdf">https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC-DISCLOSURE-FRAMEWORK-2024-Q3-Q4.pdf</a> (``Disclosure
Framework'').
\16\ See Notice of Filing, supra note 3, at 17492.
\17\ See id.
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NSCC currently monitors its intraday mark-to-market and volatility
exposures to each member in 15 minute intervals throughout the day.\18\
NSCC reviews these intraday snapshots of each member's portfolio to
determine whether the member has experienced an adverse risk exposure
that warrants NSCC assessing intraday mark-to-market and/or volatility
charges.\19\
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\18\ See Notice of Filing, supra note 3, at 17493. See also,
Disclosure Framework, supra note 15, at 44.
\19\ See id.
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D. NSCC's Current MLA Charge for Certain Equity ETFs
The MLA Charge is a margin component of NSCC's daily Required Fund
Deposit and is designed to address the potential increased market
impact costs of liquidating a defaulting member's portfolio that
includes large positions in a particular group of securities with a
similar risk profile.\20\ Such large positions may be more difficult to
liquidate in the market in the event the member defaults because of
concentration in that group of securities could reduce the
marketability of those large positions.\21\ Therefore, such portfolios
create a risk that NSCC may face increased market impact costs to
liquidate that portfolio in the assumed margin period of risk of three
business days at market prices.\22\
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\20\ See Disclosure Framework, supra note 15, at 56.
\21\ See id. at 45.
\22\ See id.
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To determine the MLA Charge for equity ETFs with in-kind
baskets,\23\ NSCC runs two separate calculations to compare and
determine the ``impact cost'' of liquidating the ETF.\24\ NSCC runs (i)
a baseline calculation to simulate all the ETF positions being
liquidated in the secondary market (the ``Baseline Calculation'') with
the impact cost calculation being at the security level (i.e., the ETF
shares), and (ii) an alternative calculation (``Create/Redeem
Calculation'') to simulate the ETF positions being liquidated in the
primary market using the creation/redemption process.\25\ NSCC then
uses the smaller calculated impact costs of either the Baseline
Calculation or the
[[Page 24677]]
Create/Redeem Calculation for purposes of calculating the MLA
Charge.\26\
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\23\ The MLA Charge is applied to CNS Positions, Balance Order
positions, and SFT Positions. See Rule 56 and Procedure XV of NSCC's
Rules, supra note 7.
\24\ See Notice of Filing, supra note 3, at 17495.
\25\ See id.
\26\ See id.
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III. Description of the Proposed Rule Change
A. Proposed Changes to Intraday Margin
NSCC proposes to amend its rules concerning the ongoing monitoring,
calculation, and collection of intraday margin to ensure compliance
with the newly adopted CCAS Margin Rules.\27\ First, NSCC proposes to
explicitly state it will monitor and recalculate its intraday exposures
on an ongoing basis, during such times and at such frequency as set by
NSCC, which NSCC will communicate to its members on NSCC's public
website.
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\27\ See CCAS Margin Rules, supra note 5.
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Second, NSCC proposes to clarify that NSCC may collect intraday
margin ``as frequently as circumstances warrant'' including in the two
circumstances the Commission defined in the CCAS Margin Rules: (1) when
specific risk thresholds are breached, or (2) when the products cleared
or markets served display elevated volatility. While NSCC has already
established its authority to lower the intraday risk thresholds in
volatile market conditions, NSCC proposes to add a non-exhaustive list
of examples \28\ to help clarify when it considers markets to display
elevated volatility that would justify such a reduction. NSCC also
proposes to add new authority to lower intraday risk thresholds for
individual members or groups of members if NSCC determines it to be
necessary to protect itself and its members in response to factors such
as market conditions or financial or operational capabilities affecting
such member or group.
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\28\ For both the intraday mark-to-market and volatility risk
thresholds, NSCC provides for the occurrence of large price changes
in a major benchmark equity index as one example. For the intraday
volatility risk threshold, NSCC provides for ETF index rebalancing
periods as another example.
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Third, NSCC proposes to provide additional detail around NSCC's
process for determining whether to collect intraday margin.
Specifically, NSCC provides it may determine not to collect intraday
margin or may decrease the amount of intraday margin in circumstances
where NSCC determined that the intraday exposure of the member or
breaches of certain thresholds do not accurately reflect its risk
exposure to that member. In addition to the two existing examples of
such circumstances,\29\ NSCC proposes to add two new examples NSCC may
consider with respect to such a determination: (1) market conditions or
portfolio composition result in the defined thresholds not being
breached on a consistent or persistent basis, and (2) the defined
threshold was met due to erroneous data inputs. Additionally, NSCC
proposes to add a waiver provision for the intraday volatility charge
only. NSCC's proposed waiver provision stipulates NSCC may waive the
intraday volatility charge, that it may otherwise ordinarily collect,
in exigent circumstances if NSCC determines that such a waiver is
necessary to protect NSCC, its participants, investors and the public
interest or it can effectively address the risk exposure presented by
the member without the collection of such charge.
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\29\ The two existing examples include: (1) trades will be
offset by trades submitted later in the day, and (2) the defined
threshold was met due to the submission of erroneous trades that are
being corrected. NSCC's list of examples are non-exhaustive.
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Last, NSCC proposes to add a requirement that any reduction or
determination not to collect intraday margin, or any waiver of the
intraday volatility charge, shall be approved, documented, and reviewed
on a regular basis.\30\ Pursuant to NSCC's Market Risk Management
Procedures, NSCC's market risk management team monitors members' open
positions and exposures and identifies accounts that exceed certain
pre-established thresholds.\31\ These threshold breaches trigger
research, review, and escalation actions, including recommendations for
making an intraday margin call.\32\ If a recommendation to collect
intraday margin is made, this recommendation is escalated to more
senior members of the market risk management team in accordance with
specified escalation procedures.\33\ Alternatively, if a recommendation
not to collect or to reduce intraday margin or to waive an intraday
volatility charge is made, this recommendation similarly must be
approved, and a member of the market risk management team documents
this determination in accordance with NSCC's Market Risk Management
Procedures.\34\ As mentioned above, these determinations also are
reviewed on a regular basis pursuant to NSCC's Market Risk Management
Procedures.\35\
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\30\ NSCC also proposes to make a conforming change to Section
12(c) of NSCC Rule 56 to clarify that NSCC's underlying procedures
also apply to intraday mark-to-market and intraday volatility
charges on a member's SFT Positions.
\31\ See Notice of Filing, supra note 3, at 17493.
\32\ See id.
\33\ See id. Confidential Exhibit 3 provides more detail on the
process for intraday margin collection. See Confidential Exhibit 3,
supra note 4.
\34\ See id. Confidential Exhibit 3 provides more detail on the
process for waiver and documentation. See Confidential Exhibit 3,
supra note 4.
\35\ See id. Confidential Exhibit 3 provides more detail on the
process for the regular review of waiver determinations. See
Confidential Exhibit 3, supra note 4.
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B. Proposed Changes to MLA Charge for Certain Equity ETFs
NSCC proposes to clarify that, if certain data inputs needed to
determine the ETF decomposition for the Create/Redeem Calculation are
unavailable or unreliable, NSCC may use the Baseline Calculation for
purposes of calculating the MLA Charge for ETFs. NSCC states this
proposed change is intended to address limited scenarios where NSCC may
be unable to perform both calculations for comparison.
C. Other Proposed Changes
NSCC proposes to add language applicable to NSCC Procedure XV \36\
noting that all times may be extended as needed by NSCC as it relates
to Clearing Fund calculations and collections. NSCC specifies the
circumstances in which it may need to extend times including to (1)
address operational or other delays that would reasonably prevent
members or NSCC from meeting the deadline or timeframe, as applicable,
or (2) allow NSCC time to operationally exercise its existing rights
under its Rules. NSCC also proposes to add language that all times
applicable to NSCC are standards and not deadlines, and actual
processing times may vary slightly, as necessary.
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\36\ NSCC also proposes to renamed Procedure XV to ``Clearing
Fund Formula and Methodology.''
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IV. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \37\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to such organization. After carefully considering
the Proposed Rule Change, the Commission finds that the proposal is
consistent with the requirements of the Exchange Act and the rules and
regulations thereunder applicable to NSCC. More specifically, the
Commission finds that the proposal is consistent with Section
17A(b)(3)(F) of the Exchange Act,\38\ and Rules 17Ad-22(e)(6)(i), 17Ad-
22(e)(6)(ii), 17Ad-
[[Page 24678]]
22(e)(6)(iv), and 17Ad-22(e)(23) \39\ under the Act.
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\37\ 15 U.S.C. 78s(b)(2)(C).
\38\ 15 U.S.C. 78q-1(b)(3)(F).
\39\ 17 CFR 240.17ad-22(e)(4)(i), 17 CFR 240.17ad-22(e)(6)(i),
17 CFR 240.17ad-22(e)(6)(ii), 17Ad-22(e)(6)(iv), 17 CFR 240.17ad-
22(e)(19), 17 CFR 240.17ad-22(e)(23).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a registered clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions, to assure
the safeguarding of securities and funds which are in its custody or
control or for which it is responsible, and, in general, to protect
investors and the public interest.\40\ The Proposed Rule Change is
consistent with Section 17A(b)(3)(F) of the Act \41\ for the reasons
discussed below.
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\40\ 15 U.S.C. 78q-1(b)(3)(F).
\41\ Id.
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As described in Section III.A. above, NSCC proposes to provide
additional detail in its Rules regarding the ongoing monitoring,
calculation, and collection of intraday margin. Specifically, NSCC
proposes to explicitly state it will monitor and recalculate its
intraday exposures on an ongoing basis and to require NSCC to
communicate the times and frequency of intraday exposures to its
members on its public website. NSCC also proposes to specify when it
considers market conditions to be volatile and how it will make a
determination whether to collect intraday margin. The added details
around NSCC's intraday margin processes should help members better
understand their potential intraday margin obligations to NSCC, thereby
enabling them to plan for and meet their obligations to NSCC when due.
Additionally, NSCC proposes new authority to lower risk thresholds
for individual members or groups in certain circumstances and proposes
new NSCC requirements that any reduction or determination not to
collect intraday margin, or any waiver of an intraday volatility charge
must be approved, documented, and reviewed on a regular basis. These
proposed changes should help NSCC collect sufficient margin to cover
its intraday exposures to its members.
Similarly, as described in Section III.B., NSCC proposed
clarification to its MLA calculations for equity ETFs should help
ensure NSCC is still able to calculate and collect sufficient margin to
cover potential market impact costs even when certain data inputs for
the Create/Redeem Calculation are unavailable. And as described in
Section III.C., NSCC proposes to clarify flexibility in the timelines
established by NSCC for monitoring, calculating, and collecting daily
Required Fund Deposits, generally. NSCC's proposed clarifications to
its MLA calculation and the flexibility in its timelines should help
members better understand their potential margin obligations to NSCC
generally, thereby enabling them to plan for and meet their obligations
to NSCC when due.
Given the objective of a member's margin to mitigate potential
losses to NSCC associated with the liquidation of a defaulting member's
portfolio, NSCC's ability to collect sufficient margin should help
ensure NSCC is able to continue to effect the prompt and accurate
clearance and settlement of securities transactions despite a member
default. Furthermore, in the event a defaulting member's margin proved
insufficient, NSCC would mutualize the remaining losses to non-
defaulting members by accessing the Clearing Fund. Therefore, by
increasing the likelihood NSCC collects sufficient margin from each
member, the proposed changes should help assure the safeguarding of
securities and funds which are in the custody or control of NSCC or for
which it is responsible and, in general, to protect investors and the
public interest.
Accordingly, for the reasons discussed above, the Proposed Rule
Change is consistent with the requirements of Section 17A(b)(3)(F) of
Act.\42\
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\42\ Id.
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B. Consistency With Rule 17ad-22(e)(6)(i)
Rule 17Ad-22(e)(6)(i) requires that a CCA that provides CCP
services, such as NSCC, establish, implement, maintain and enforce
written policies and procedures reasonably designed to cover its credit
exposure to its participants by establishing a risk-based margin system
that, at a minimum, considers and produces margin levels commensurate
with the risks and particular attributes of each relevant product,
portfolio, and market.\43\ For the following reasons, the Proposed Rule
Change is consistent with Rule 17ad-22(e)(6)(i).\44\
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\43\ 17 CFR 240.17Ad-22(e)(6)(i).
\44\ Id.
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As described in Section II. above, a key tool NSCC uses to manage
its credit exposure to its members is determining and collecting margin
from each member on at least a daily basis. As described in Section
III.B., NSCC's proposed clarification to its MLA Charge for ETFs should
help NSCC calculate and collect sufficient margin to cover potential
market impact costs even when certain data inputs are unavailable.
Therefore, these changes should help ensure NSCC's margin system
identifies the risks and particular attributes present in the
portfolios of its members, and produces margin levels commensurate to
such risk and are consistent with Rule 17Ad-22(e)(6)(i).\45\
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\45\ Id.
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C. Consistency With Rule 17ad-22(e)(6)(ii)
Rule 17Ad-22(e)(6)(ii) \46\ requires a CCA that provides CCP
services, such as NSCC, to establish, implement, maintain, and enforce
written policies and procedures reasonably designed to cover its credit
exposure to its participants by establishing a risk-based margin system
that, at a minimum: (A) marks participant positions to market and
collects margin at least daily; (B) monitors intraday exposure on an
ongoing basis; (C) includes the authority and operational capacity to
make intraday margin calls as frequently as circumstances warrant,
including (1) when risk thresholds specified by the CCA are breached,
and (2) when the products cleared or markets served display elevated
volatility; and (D) documents when the CCA determines not to make an
intraday call pursuant to its written policies and procedures.\47\ For
the following reasons, the Proposed Rule Change is consistent with Rule
17ad-22(e)(6)(ii).\48\
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\46\ 17 CFR 240.17Ad-22(e)(6)(ii).
\47\ 17 CFR 240.17Ad-22(e)(6)(ii).
\48\ Id.
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As described in Sections II and III above, NSCC currently charges
margin at least daily and has the authority and operational capacity to
make intraday margin calls. While NSCC currently monitors its intraday
exposures, NSCC proposes to explicitly state in its Rules its
obligation to monitor its intraday exposures on an ongoing basis, which
NSCC represents it currently does in 15 minute intervals.\49\ Also,
NSCC proposes to clarify in its rules that it has the authority and
operational capacity to collect intraday margin as frequently as
circumstances warrant. Moreover, while NSCC currently has established
risk thresholds which can be lowered in volatile market conditions,
NSCC is providing additional details in its Rules addressing its
process for determining whether to charge intraday margin and when it
considers markets to display elevated volatility.
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\49\ See Notice of Filing, supra note 3, at 17492.
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NSCC also proposes new authority to collect margin from an
individual
[[Page 24679]]
member or group, based on lowered risk thresholds, if NSCC determines
it to be necessary to protect itself and its members in response to
factors such as market conditions or financial or operational
capabilities affecting such member or group. Finally, NSCC proposes new
requirements that any reduction or determination not to collect
intraday margin, or any waiver of an intraday volatility charge must be
approved, documented, and reviewed on a regular basis.
Therefore, the Proposed Rule Change is consistent with the
requirements for Rule 17Ad-22(e)(6)(ii).
D. Consistency With Rule 17ad-22(e)(6)(iv)
Rule 17Ad-22(e)(6)(iv) requires a CCA that provides CCP services,
such as NSCC, to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to cover its credit
exposure to its participants by establishing a risk-based margin system
that, at a minimum: (A) uses reliable sources of timely price data and
other substantive inputs; (B) uses procedures (and, with respect to
price data, sound valuation models) for addressing circumstances in
which price data or other substantive inputs are not readily available
or reliable, to ensure that the covered clearing agency can continue to
meet its obligations under this section; and (C) such procedures under
paragraph (e)(6)(iv)(B) of this section must include either: (1) the
use of price data or substantive inputs from an alternate source; or
(2) if it does not use an alternate source, the use of a risk-based
margin system that does not rely on substantive inputs that are
unavailable or unreliable.\50\
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\50\ 17 CFR 240.17Ad-22(e)(6)(iv).
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As described in Section III.B., NSCC proposes to clarify that, if
certain data inputs needed to determine its ETF decomposition for the
Create/Redeem Calculation are unavailable or unreliable, NSCC may use
the Baseline Calculation for purposes of calculating the MLA Charge for
ETFs. NSCC states this proposed change is intended to address limited
scenarios where NSCC may be unable to perform both calculations for
comparison and represents that it may be appropriate to use the
Baseline Calculation to determine the impact cost and resulting MLA
charge for the ETFs in question.\51\ Therefore, NSCC's proposed changes
clarifying how it calculates the MLA Charge in these limited scenarios
should ensure that NSCC is able to continue to use a risk-based margin
system that does not rely on substantive inputs that are unavailable or
unreliable.
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\51\ See Notice of Filing, supra note 3, at 17495.
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Therefore, the Proposed Rule Change is consistent with the
requirements for Rule 17Ad-22(e)(6)(iv).\52\
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\52\ 17 CFR 240.17Ad-22(e)(6)(iv).
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E. Consistency With Rule 17Ad-22(e)(23)
Rule 17Ad-22(e)(23)(ii) \53\ under the Act requires each CCA to
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to, among other things, provide
sufficient information to enable participants to identify and evaluate
the risks, fees, and other material costs they incur by participating
in the CCA. Based on the reasons described below, the Proposed Rule
Change is consistent with the requirements of Rule 17Ad-
22(e)(23)(ii).\54\
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\53\ 17 CFR 240.17Ad-22(e)(23)(ii).
\54\ Id.
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As described in Section III.A above, NSCC proposes to clarify its
processes for monitoring, calculating, and determining whether to
collect intraday margin. NSCC proposes to add a requirement that it
will post its intraday risk monitoring times and frequencies on its
public website. Similarly, as described in Section III.B., NSCC
proposed clarification to its MLA calculations for equity ETFs should
ensure NSCC is still able to calculate and collect sufficient margin to
cover potential market impact costs even when certain data inputs for
the Create/Redeem Calculation are unavailable. And as described in
Section III.C., NSCC proposes to clarify the flexibility in the
timelines established by NSCC for monitoring, calculating, and
collecting daily Required Fund Deposits, generally. Therefore, NSCC's
proposed changes should facilitate providing sufficient information to
enable participants to identify and evaluate the risks, fees, and other
materials costs they incur by participating in the CCA.
Thus, the Proposed Rule Change is consistent with the requirements
of Rule 17Ad-22(e)(23)(ii) under the Act.\55\
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\55\ Id.
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V. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning whether Partial Amendment No. 1 is consistent with
the Act. Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c4b6b1a8a1e9a7aba9a9a1aab0b784b7a1a7eaa3abb2"><span class="__cf_email__" data-cfemail="7b090e171e56181416161e150f083b081e18551c140d">[email protected]</span></a>. Please include
file number SR-NSCC-2025-005 on the subject line.
Paper Comments
<bullet> 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-2025-005. The file
number should be included on the subject line if email 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 a.m. and 3 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 (<a href="https://www.dtcc.com/legal/sec-rule-filings.aspx">https://www.dtcc.com/legal/sec-rule-filings.aspx</a>). Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-NSCC-2025-005 and should be submitted on or
before July 2, 2025.
VI. Accelerated Approval of the Proposed Rule Changes, as Modified by
Partial Amendment No. 1
The Commission finds good cause, pursuant to Section
19(b)(2)(C)(iii) of the Act,\56\ to approve the proposed rule changes,
as modified by Partial Amendment No. 1, prior to the thirtieth day
after the date of publication of Partial Amendment No. 1 in the Federal
Register. As noted above, in Partial Amendment No. 1, NSCC filed
Confidential Exhibit 3 to the proposed
[[Page 24680]]
rule changes \57\ to provide NSCC's Market Risk Management Procedures,
which provides supplemental information to assist the Commission in its
analysis of the Proposed Rule Changes. Partial Amendment No. 1 neither
modifies the proposed rule changes as originally published in any
substantive manner, nor does Partial Amendment No. 1 affect any rights
or obligations of the NSCC or its members. Instead, Partial Amendment
No. 1 includes NSCC's Market Risk Management Procedures that NSCC would
follow to implement its margin rules, including those aspects of its
margin rules affected by the proposed rule changes. Additionally, since
NSCC filed Partial Amendment No. 1 on May 9, 2025, the Commission has
had sufficient time to review and consider Partial Amendment No.1 as
part of its analysis of the proposed rule changes. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2)(C)(iii) of
the Act,\58\ to approve the proposed rule changes, as modified by
Partial Amendment No. 1, prior to the thirtieth day after the date of
publication of notice of Partial Amendment No. 1 in the Federal
Register.
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\56\ 15 U.S.C. 78s(b)(2)(C)(iii).
\57\ See Confidential Exhibit 3, supra note 5.
\58\ 15 U.S.C. 78s(b)(2)(C)(iii).
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VII. Conclusion
On the basis of the foregoing, the Commission finds that the
Proposed Rule Change is consistent with the requirements of the Act and
in particular the requirements of Section 17A of the Act \59\ and the
rules and regulations thereunder.
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\59\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\60\ that proposed rule change SR-NSCC-2025-005, as modified by Partial
Amendment No. 1, be, and hereby is, approved.\61\
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\60\ 15 U.S.C. 78s(b)(2).
\61\ In approving the Proposed Rule Change, the Commission
considered its impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\62\
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\62\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-10527 Filed 6-10-25; 8:45 am]
BILLING CODE 8011-01-P
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