Notice2025-15837
Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Remove the Other Transactions Charge From the NSCC Rules
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
August 20, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 159 (Wednesday, August 20, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 159 (Wednesday, August 20, 2025)]
[Notices]
[Pages 40677-40680]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-15837]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103723; File No. SR-NSCC-2025-012]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Remove the Other Transactions Charge From the NSCC Rules
August 15, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on August 7, 2025, 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. NSCC filed the proposed rule change pursuant to
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4) thereunder.\4\
The Commission is publishing this notice to solicit
[[Page 40678]]
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change would remove a margin charge from the
Rules \5\ that is charged to Members for certain settlement
transactions other than CNS, Balance Order, Mutual Fund Services and
Envelope Settlement Service transactions (``Other Transactions
Charge'').\6\
---------------------------------------------------------------------------
\5\ Terms not defined herein are defined in the NSCC Rules &
Procedures (``Rules'' or ``NSCC Rules''), available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
\6\ The Other Transactions Charge is currently imposed by NSCC
pursuant to Procedure XV (Clearing Fund Formula and Other Matters),
Section I.(A)(3), id. ``CNS'' transactions are transactions in
NSCC's CNS System described in NSCC Rule 11 (CNS System) and
Procedure VII (CNS Accounting Operation); ``Balance Order''
transactions are transactions in NSCC's Balance Order Accounting
Operation described in Procedure V (Balance Order Accounting
Operation); ``Mutual Fund Services'' transactions are transactions
in Mutual Fund Services described in NSCC Rule 52 (Mutual Fund
Services); and ``Envelope Settlement Service'' transactions are
transactions in the Envelope Settlement Service described in NSCC
Rule 9 (Envelope Settlement Service), id.
---------------------------------------------------------------------------
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
The proposed rule change would remove a margin charge from the
Rules that is charged to Members for certain settlement transactions
other than CNS, Balance Order, Mutual Fund Services and Envelope
Settlement Service transactions (``Other Transactions Charge'').\7\
---------------------------------------------------------------------------
\7\ The Other Transactions Charge is currently imposed by NSCC
pursuant to Procedure XV (Clearing Fund Formula and Other Matters),
Section I.(A)(3), id. ``CNS'' transactions are transactions in
NSCC's CNS System described in NSCC Rule 11 (CNS System) and
Procedure VII (CNS Accounting Operation); ``Balance Order''
transactions are transactions in NSCC's Balance Order Accounting
Operation described in Procedure V (Balance Order Accounting
Operation); ``Mutual Fund Services'' transactions are transactions
in Mutual Fund Services described in NSCC Rule 52 (Mutual Fund
Services); and ``Envelope Settlement Service'' transactions are
transactions in the Envelope Settlement Service described in NSCC
Rule 9 (Envelope Settlement Service), id.
---------------------------------------------------------------------------
(i) Overview of the Required Fund Deposit and the Other Transactions
Charge
As part of its market risk management strategy, NSCC manages its
credit exposure to Members by calculating the appropriate Required Fund
Deposits to the Clearing Fund and monitoring the Clearing Fund's
sufficiency, as provided for in the Rules.\8\ The Required Fund Deposit
serves as each Member's margin.
---------------------------------------------------------------------------
\8\ See NSCC Rule 4 (Clearing Fund) and Procedure XV (Clearing
Fund Formula and Other Matters), supra note 5. NSCC's market risk
management strategy is designed to comply with Rule 17ad-22(e)(4)
under the Act, where these risks are referred to as ``credit
risks.'' 17 CFR 240.17ad-22(e)(4).
---------------------------------------------------------------------------
The objective of an NSCC Member's deposit is to mitigate potential
losses to NSCC associated with a default by an NSCC Member. Each NSCC
Member's Required Fund Deposit is comprised of a number of risk-based
component charges, including the Other Transactions Charge, which are
calculated and assessed daily. The aggregate of all Members' Required
Fund Deposits constitutes the Clearing Fund of NSCC. NSCC would access
its Clearing Fund should a defaulting Member's own Required Fund
Deposit be insufficient to satisfy losses to NSCC caused by the
liquidation of that Member's portfolio. The Clearing Fund reduces the
risk that NSCC would need to mutualize any losses among non-defaulting
members during the liquidation process.
The Other Transactions Charge is a flat charge based on a
percentage of each Member's average settlement debits and credits of
certain settlement transactions (``Other Transactions'') not including
CNS, Balance Order, Mutual Fund Services and the Envelope Settlement
Service settlement transactions. The charge is intended to cover
potential risks related to NSCC settlement activity in Other
Transactions.
The charge currently varies based on each Member's Credit Risk
Rating Matrix (``CRRM'') \9\ rating. For Members that have a CRRM
rating of 1 through 6, the Other Transactions Charge is the greater of
the following, based on a 20-day rolling average of activity: (i) 2.5%
of the absolute value of debits plus the absolute value of credits or
(ii) 5.0% of the absolute value of debits.
---------------------------------------------------------------------------
\9\ The CRRM is a credit risk rating model NSCC utilizes to
evaluate and rate the credit risk of NSCC's U.S. bank, foreign bank,
and U.S. broker-dealer Members, and rate such Members based upon
qualitative and quantitative information. See definition of Credit
Risk Rating Matrix in NSCC Rule 1 (Definitions and Descriptions),
supra note 5.
---------------------------------------------------------------------------
For Members with a CRRM rating of 7, the Other Transactions Charge
is 10% of the 20-day rolling average of activity of the absolute value
of debits plus the absolute value of credits.\10\
---------------------------------------------------------------------------
\10\ Members that have a credit rating of 6 or 7 are placed on
the ``Watch List.'' See definition of Watch List in NSCC Rule 1,
supra note 5. Although the Other Transactions Charge formula in
Procedure XV does not contemplate a 10% charge, NSCC may require
Members on the Watch List to make deposits to the Clearing Fund over
and above the amount determined in accordance with Procedure XV. See
NSCC Rule 2B (Ongoing Membership Requirements and Monitoring),
Section 4(e) and Procedure XV. Section I.(B)(1).
---------------------------------------------------------------------------
(ii) Proposed Changes to the Other Transactions Charge
NSCC regularly assesses its margining methodologies to evaluate
whether margin levels are commensurate with the particular risk
attributes of each relevant product, portfolio, and market. In
connection with such reviews, NSCC has determined that the Other
Transactions Charge is not necessary to address the risks relating to
Other Transactions. NSCC is proposing to discontinue the application of
the Other Transactions Charge and remove it from the Rules.
NSCC established the Other Transactions Charge initially to cover
risk relating to the Envelope Settlement Service (``ESS'') which, at
the time, was a guaranteed activity.\11\ All Clearing Fund activity at
the time was a flat charge of 2.5% of all settlement debits and
credits. This charge was added to address the risk raised when the
debit balances for participants using ESS exceeded their credit
balances and exceeded their excess net capitalization.\12\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 18852 (June 18,
1982), 47 FR 29426 (June 28, 1982) (SR-NSCC-82-10).
\12\ Id.
---------------------------------------------------------------------------
Over time, in addition to CNS and Balance Order activity, certain
non-guaranteed activity was excluded from the charge. In particular,
Mutual Fund Services (``MFS''), which is a non-guaranteed activity, was
excluded from the Other Transactions Charge when separate Clearing Fund
requirements were added for MFS,\13\ and ESS was excluded from the
Other Transactions Charge when it became non-guaranteed
[[Page 40679]]
activity.\14\ Currently, the activity that is subject to the charge is
a mix of guaranteed and non-guaranteed activity. NSCC has reviewed all
the settlement codes included in the Other Transactions Charge, which
is comprised of 43 NSCC settlement codes, of which 6 represent
guaranteed transactions and 37 represent non-guaranteed transactions.
The Other Transactions Charge calculation does not distinguish
guaranteed from non-guaranteed settlement activities, even though NSCC
has different obligations and faces different risks for each.
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 26377 (Dec. 20,
1988), 53 FR 52546 (Dec. 28, 1988) (SR-NSCC-87-12). The Clearing
Fund requirements relating to MFS have since been removed as MFS is
non-guaranteed activity and there is currently no Clearing Fund
requirement for MFS activity. See Securities Exchange Act Release
No. 93722 (Dec. 6, 2021), 86 FR 70548 (Dec. 10, 2021) (SR-NSCC-2021-
015).
\14\ See Securities Exchange Act Release No. 61415 (Jan. 25,
2010), 75 FR 4896 (Jan. 29, 2010) (SR-NSCC-2010-01).
---------------------------------------------------------------------------
NSCC proposes to retire the Other Transactions Charge because the
charge has become misaligned with the risk of the activity subject to
the charge and the amounts raised by the charge are immaterial to the
overall Clearing Fund. Any risks relating to the guaranteed activity
subject to the charge are adequately addressed by the current Clearing
Fund methodology and risk management framework through other charges.
Of the 6 guaranteed transactions covered by the Other Transactions
Charge, the settlement exposure stemming from 3 of the transaction
codes is captured in the mark-to-market charge \15\ at NSCC and in
NSCC's liquidity needs sufficiency calculation. Settlement activity
stemming from 2 of the transaction codes relates to a process that is
being removed by NSCC.\16\ The guaranteed transactions represented by
the remaining settlement code present no settlement exposure due to
only being used for internal tracking purposes with no impact to NSCC
positions.\17\
---------------------------------------------------------------------------
\15\ See Procedure XV, Section I.(A)(1)(b), supra note 5.
\16\ These two transaction codes are used to track credits and
debits relating to positions processed through NSCC's Fully-Paid-
For-Account. See Addendum G (Fully-Paid-For Account) of the Rules,
supra note 5. The positions placed in the Fully-Paid-For-Accounts
are also subject to the normal margining process and subject to
separate margin charges. NSCC is in the process of removing the
Fully-Paid-For Account. See Securities Exchange Act Release No.
103390 (July 3, 2025), 90 FR 30538 (July 9, 2025) (SR-NSCC-2025-10).
\17\ The remaining transaction code is used by NSCC for internal
accounting of dividend payments and does not affect any individual
Member positions.
---------------------------------------------------------------------------
The non-guaranteed activity subject to the charge poses no market
risk to NSCC. In the event of a Member default relating to non-
guaranteed activity, NSCC can reverse any unpaid settlement debits and
corresponding credits owed to counterparties relating to that activity
thus making the Other Transactions Charge unnecessary to cover any
risks of such activity. This proposal better aligns the Clearing Fund
formula with the Clearing Fund methodology and risk management
framework at NSCC.
(iii) Detailed Description of Proposed Rule Change
NSCC is proposing to delete Section I.(A)(3) of Procedure XV which
contains the Other Transactions Charge.
(iv) Impact of Proposed Changes
The collection of the Other Transactions Charge provided an
additional deposit of $27.2 million or 0.24% of the daily average total
Clearing Fund of $11.24 billion in 2024.
NSCC conducted an impact study of the proposed changes based on
data from July 29, 2024 through November 21, 2024 (``Impact Study'').
The Impact Study indicated that during the Impact Study period, the
guaranteed Other Transactions covered by the Other Transactions Charge
accounted for approximately 1.4% of the average daily credit amount of
$205.7 million and 0.6% of the average daily debit amount of $210.4
million.
Implementation Timeframe
NSCC would implement the proposed rule change by no later than 60
Business Days after the approval of the proposed rule change by the
Commission. NSCC would announce the effective date of the proposed
changes by an Important Notice posted to its website.
2. Statutory Basis
NSCC believes that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a registered clearing agency. Specifically, NSCC believes
that the proposed rule change is consistent with Section 17A(b)(3)(F)
of the Act \18\ and Rule 17ad22(e)(6)(i),\19\ each as promulgated under
the Act, for the reasons described below.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17ad-22(e)(6)(i).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be designed to, among other things, remove impediments to and perfect
the mechanism of a national system for the prompt and accurate
clearance and settlement of securities transactions.\20\ The proposed
revisions are consistent with this provision because the proposed
revisions would remove a requirement to pay the Other Transactions
Charge that NSCC has determined is not necessary to mitigate potential
losses to NSCC associated with Other Transactions. In a review of its
margining methodologies, NSCC has determined that the Other
Transactions Charge has become misaligned with the risk of the activity
subject to the charge and the amounts raised by the charge are
immaterial to the overall Clearing Fund. The non-guaranteed activity
subject to the Other Transactions Charge poses no risk to NSCC. In the
event of a Member default relating to non-guaranteed activity, NSCC can
reverse any unpaid settlement debits and corresponding credits owed to
counterparties relating to that activity thus making the Other
Transactions Charge unnecessary to cover any risks of such activity.
Any risks relating to the guaranteed activity subject to the Other
Transactions Charge are adequately addressed by the current Clearing
Fund methodology and risk management framework through other charges.
Removing the requirement of the Other Transactions Charge would allow
Members to engage in Other Transactions without having to incur costs
associated with incurring an Other Transactions Charge. As such, NSCC
believes the proposed rule change would remove impediments to and
perfect the mechanism for the prompt and accurate clearance and
settlement of securities transactions consistent with Section
17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Rule 17ad-22(e)(6)(i) under the Act requires NSCC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to cover its credit exposures to its Members 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.\21\ In a
review of its margining methodologies, NSCC has determined that the
Other Transactions Charge has become misaligned with the risk of the
activity subject to the charge, and the amounts raised by the charge
are immaterial to the overall Clearing Fund. The non-guaranteed
activity subject to the Other Transactions Charge poses no risk to
NSCC. In the event of a Member default relating to non-guaranteed
activity, NSCC can reverse any unpaid settlement debits and
corresponding credits owed to counterparties relating to that activity
thus making the Other Transactions Charge unnecessary to cover any
risks of such activity. Any risks relating to the guaranteed activity
subject to the charge are adequately addressed by the current Clearing
Fund
[[Page 40680]]
methodology and risk management framework through other charges.
Therefore, NSCC believes the coverage of its credit exposures to NSCC
Members engaging in Other Transactions without applying an Other
Transactions Charge is consistent with Rule 17ad-22(e)(6)(i) under the
Act.
---------------------------------------------------------------------------
\21\ 17 CFR 240.17ad-22(e)(6)(i).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \22\ requires that the rules of the
clearing agency do not impose any burden on competition not necessary
or appropriate in furtherance of the Act. NSCC does not believe the
proposed change would have an adverse impact or impose a burden on
competition. The proposed change would remove a requirement to pay the
Other Transactions Charge for Members that engage in Other Transactions
that NSCC believes is not necessary. The proposed change would not be
adding any obligations on Members that are using NSCC's services. As
such, the proposed change would not impede any Members from engaging in
the services or have an adverse impact on any Members. Moreover, the
proposed change may promote competition because the proposed change
could enhance participation in Other Transactions by removing the
obligation to pay an Other Transactions Charge.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------
(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. If any written comments are received by NSCC, they will
be publicly filed as an Exhibit 2 to this filing, as required by Form
19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at <a href="http://www.sec.gov/rules-regulations/how-submit-comment">www.sec.gov/rules-regulations/how-submit-comment</a>. General questions regarding the rule
filing process or logistical questions regarding this filing should be
directed to the Main Office of the Commission's Division of Trading and
Markets at <a href="/cdn-cgi/l/email-protection#e3979182878a8d84828d878e829188869790a3908680cd848c95"><span class="__cf_email__" data-cfemail="cdb9bfaca9a4a3aaaca3a9a0acbfa6a8b9be8dbea8aee3aaa2bb">[email protected]</span></a> or 202-551-5777.
NSCC reserves the right to not respond to any comments received.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \23\ of the Act and paragraph (f) of Rule 19b-4
thereunder.\24\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act. If
the Commission takes such action, the Commission will institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#cdbfb8a1a8e0aea2a0a0a8a3b9be8dbea8aee3aaa2bb"><span class="__cf_email__" data-cfemail="6311160f064e000c0e0e060d1710231006004d040c15">[email protected]</span></a>. Please include
file number SR-NSCC-2025-012 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-2025-012. This 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of NSCC and on DTCC's website
(<a href="http://www.dtcc.com/legal/sec-rule-filings">www.dtcc.com/legal/sec-rule-filings</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-2025-012 and should be submitted on or
before September 10, 2025.
For the Commission, by the Division of Trading and Markets, pursuant
to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-15837 Filed 8-19-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on August 20, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.