Notice2025-23932
Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Modify the DTC Settlement Service Guide and DTC Rules as They Relate to the DTC Net Debit Cap
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
December 30, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 246 (Tuesday, December 30, 2025)</title>
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[Federal Register Volume 90, Number 246 (Tuesday, December 30, 2025)]
[Notices]
[Pages 61205-61209]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23932]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104484; File No. SR-DTC-2025-019]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change To Modify the DTC Settlement
Service Guide and DTC Rules as They Relate to the DTC Net Debit Cap
December 22, 2025.
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 December 18, 2025, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change \3\ as described in Items I, II and III below, which Items
have been prepared by the clearing agency. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Each capitalized term not otherwise defined herein has its
respective meaning as set forth in the Rules, By-Laws and
Organization Certificate of DTC (``Rules''), available at
<a href="http://www.dtcc.com/-/media/Files/Downloads/legal/rules/dtc_rules.pdf">www.dtcc.com/-/media/Files/Downloads/legal/rules/dtc_rules.pdf</a> or
the DTC Settlement Service Guide, available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf">www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf</a>.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change would (i) modify the DTC Settlement
Service Guide (``Settlement Guide'') \4\ to (a) change how DTC sets its
maximum debit caps for Participants, including Unaffiliated
Participants,\5\ and Affiliated Families,\6\ (b) incorporate
Unaffiliated Participants into the calculation and allocation of DTC's
Liquidity Fund, a component of the Required Participants Fund Deposit,
and (c) make related definitional, technical and clarifying changes to
the Settlement Guide; and (ii) modify the Rules to account for the
Aggregate Affiliated Family Net Debit of an Affiliated Family,\7\ as
applicable, all of which is described below.
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\4\ The Settlement Guide is a Procedure of DTC. Pursuant to the
Rules, the term ``Procedures'' means the Procedures, service guides,
and regulations of DTC adopted pursuant to Rule 27, as amended from
time to time. Rule 1, Section 1, supra note 3. Procedures are
binding on DTC and each Participant in the same manner that they are
bound by the Rules. Rule 27, supra note 3.
\5\ ``Unaffiliated Participant'' would be defined by this
proposed rule change to mean ``a Participant that is not included in
an Affiliated Family.''
\6\ ``Affiliated Family'' means each Participant that controls
or is controlled by another Participant and each Participant that is
under the common control of any Person. For purposes of this
definition, ``control'' means the direct or indirect ownership of
more than 50 percent of the voting securities or other voting
interests of any Person. Rule 1, supra note 3.
\7\ ``Aggregate Affiliated Family Net Debit'' would be defined
by this proposed rule change to mean ``the amount by which the
algebraic sum of all money debits and charges to the Accounts of an
Affiliated Family exceeds the sum of all money credits thereto.''
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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 (i) modify the Settlement Guide to
(a) change how DTC sets its maximum debit caps for Participants,
including Unaffiliated Participants, and Affiliated Families, (b)
incorporate Unaffiliated Participants into the calculation and
allocation of DTC's Liquidity Fund, a component of the Required
Participants Fund Deposit, and (c) make related definitional, technical
and clarifying changes to the Settlement Guide; and (ii) modify the
Rules to account for the Aggregate Affiliated Family Net Debit of an
Affiliated Family, as applicable, all of which is described below.
Background
Through its settlement services, DTC provides book-entry transfer
and pledge of interests in Eligible Securities and end-of-day net funds
settlement. DTC maintains a liquidity structure designed to facilitate
its maintenance of sufficient financial resources to complete
settlement each Business Day notwithstanding the failure to settle of a
defaulting Participant, or Affiliated Family of Participants, with the
largest settlement obligation. In this effort, the Collateral Monitor
\8\ and Net Debit Cap \9\ risk controls are employed by DTC to help
ensure that each Delivery Versus Payment (``DVP'') \10\ obligation of a
Participant that is the Receiver \11\ can satisfy its end-of-day net
settlement obligation, if any.
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\8\ ``Collateral Monitor'' of a Participant, as used with
respect to its obligations to DTC, means, on any Business Day, the
record maintained by DTC for the Participant which records, in the
manner specified in Procedures, the algebraic sum of (i) the Net
Credit or Debit Balance of the Participant and (ii) the aggregate
Collateral Value of the Collateral of the Participant. Rule 1, supra
note 3.
\9\ ``Net Debit Cap'' of a Participant means an amount
determined by DTC in the manner specified in the Procedures;
provided, however, that the maximum Net Debit Cap of the Participant
shall be the least of (i) a maximum amount applicable to all
Participants based on the liquidity resources of DTC, (ii) the
Settling Bank Net Debit Cap applicable to such Participant, or (iii)
any other amount determined by DTC, in its sole discretion. Rule 1,
Section 1, supra note 3. The aggregate Net Debit Cap of an
Affiliated Family is referred to as the ``Aggregate Affiliated
Family Net Debit Cap.'' Rule 1, supra note 3.
\10\ ``Delivery Versus Payment'' means a Delivery against a
settlement debit to the Account of the Receiver, as provided in Rule
9(A) and Rule 9(B) and as specified in the Procedures. Rule 1, supra
note 3.
\11\ ``Receiver,'' as used with respect to a Delivery of a
Security, means the Person which receives the Security. Rule 1,
supra note 3.
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Collateral Monitor. The Collateral Monitor is a calculation by
which DTC measures the sufficiency of the Collateral in a Participant's
account to cover the Participant's net settlement obligation.\12\ The
Collateral Monitor prevents the completion of transactions that would
cause a Participant's Net Debit Balance \13\ to exceed the value of
[[Page 61206]]
Collateral in its account.\14\ In other words, the settlement
obligation of each Participant must be fully collateralized, based on
the Collateral Monitor. This is designed so that if a Participant fails
to pay for its settlement obligation, DTC will have sufficient
Collateral to obtain funding for settlement.
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\12\ Settlement Guide, supra note 3, at 5 and 61.
\13\ ``Net Debit Balance'' of a Participant means the amount by
which the Gross Debit Balance of the Participant exceeds its Gross
Credit Balance. Rule 1, supra note 3. ``Gross Credit Balance'' of a
Participant on any Business Day means the aggregate amount of money
DTC credits to all the Accounts in all the Account Families of the
Participant without accounting for any amount of money DTC debits or
charges thereto. Id. ``Gross Debit Balance'' of a Participant on any
Business Day means the aggregate amount of money DTC debits or
charges to all the Accounts in all the Account Families of the
Participant without accounting for any amount of money DTC credits
thereto. Id.
\14\ ``Collateral'' of a Participant, as used with respect to
its obligations to DTC, means, on any Business Day, the sum of (i)
the Actual Participants Fund Deposit of the Participant, (ii) the
Actual Preferred Stock Investment of a Participant, (iii) all Net
Additions of the Participant, and (iv) any settlement progress
payments (``SPPs'') wired by the Participant to the account of DTC
at the Federal Reserve Bank of New York in the manner specified in
the Procedures. Rule 1, supra note 3. SPPs are funds that may be
wired to DTC to increase a Participant's Collateral Value for its
Collateral Monitor and reduce a Participant's Net Debit Balance.
Settlement Guide, supra note 3, at 62.
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Net Debit Caps. The Net Debit Cap of an individual Participant and
the Aggregate Affiliated Family Net Debit Cap of an Affiliated Family
(collectively, ``Debit Caps'') limit the Net Debit Balance that
Participants and Affiliated Families can incur, irrespective of
available Collateral. Each Participant's and Affiliated Family's
respective Debit Cap is based on their specific activity level \15\ and
in consideration of DTC's qualifying liquid resources (i.e., Debit Caps
are set below DTC's total available liquidity).\16\ Together, the Debit
Caps control the total settlement obligation that any Participant or
Affiliated Family may incur. Any transaction that would cause a
Participant or an Affiliated Family to exceed its respective Debit Cap
will not be processed.\17\ Instead, the transaction will remain in a
pending status until the Net Debit Balance is reduced sufficiently to
allow processing.\18\ Setting the Debit Caps at amounts below DTC's
total qualifying liquid resources helps ensure that DTC will have
sufficient liquidity to complete settlement should any single
Participant or Affiliated Family fail to settle.
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\15\ To determine a Participant's Net Debit Cap, DTC records the
Participant's three highest intraday net debit peaks over a rolling
70-Business Day period. Settlement Guide, supra note 3, at 62. The
Participant's average of these net debit peaks is calculated and
multiplied by a factor to determine the Participant's Net Debit Cap
but currently not to exceed $2.15 BN. Id.
\16\ Governance of DTC's qualifying liquid resources are in
accordance with the Clearing Agency Liquidity Risk Management
Framework and related procedures.
\17\ Settlement Guide, supra note 3, at 62.
\18\ Id. at 62. A Participant's Net Debit Balance may be reduced
during the processing day by, among other things, receipt of a DVP
transaction, which generates credits to the Participant's settlement
account, or by SPPs. Id.
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DTC Liquidity. Currently, DTC maintains two key liquidity resources
that are considered ``qualifying liquid resources,'' as defined by Rule
17ad-22(a) \19\ promulgated under the Act: the (i) Required
Participants Fund Deposits (``Participants Fund''), which applies
across all Participants and equals $1.15 BN, and (ii) a committed line
of credit (``LOC'') of $1.9 BN. Taken together, the Participants Fund
and LOC provide DTC with $3.05 BN in total qualifying liquid resources.
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\19\ 17 CFR 240.17ad-22(a).
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DTC recently obtained approval to raise additional qualifying
liquidity resources through the periodic issuance and private placement
of senior notes (``Debt Issuance'').\20\ Up to $3.0 BN in total can be
raised from the Debt Issuance, as DTC deems reasonable or as
necessitated by liquidity needs.\21\ The proceeds from the Debt
Issuance would supplement DTC's existing qualifying liquidity
resources.
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\20\ Securities Exchange Act Release No. 102318 (January 31,
2025), 90 FR 9094 (February 6, 2025) (SR-DTC-2023-801).
\21\ Id.
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Current Net Debit Cap Amounts
The current maximum Net Debit Cap for an individual Participant is
$2.15 BN,\22\ while the current maximum Aggregate Affiliated Family Net
Debit Cap for an Affiliated Family is $2.85 BN,\23\ both of which are
below the current total available qualifying liquid resources for DTC
of $3.05 BN.\24\
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\22\ Settlement Guide, supra note 3, at 62.
\23\ Id. at 63.
\24\ Id.
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The Net Debit Cap of $2.15 BN for an individual Participant was a
recent change. In 2024, to reduce transaction blockage and the need to
make SPPs, DTC increased the individual Participant Net Debit Cap from
$1.8 BN to $2.15 BN.\25\ Since the implementation of this increase,
Participants have urged DTC to reassess the current maximum Debit Cap
levels, for both individual Participants and Affiliated Families, given
increasing transaction volumes. Increased transaction volumes can
result in Participants incurring higher intraday net debit peaks, which
then increase the likelihood that the Participants will reach DTC's
maximum Net Debit Cap. If, though, DTC had a greater maximum Debit Cap,
then it would reduce the need for Participants to make SPPs to reduce
their net debits.
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\25\ Securities Exchange Act Release No. 99234 (December 22,
2023), 88 FR 89752 (December 28, 2023) (SR-DTC-2023-013). The
increase of $350 MM was supported by available liquidity resources
from the $450 MM Core Fund, to which all Participants contribute,
and the $1.90 BN LOC, which is collectively $2.35 BN. Raising the
maximum Net Debit Cap for an individual Participant to $2.15 BN and
not to $2.35 BN accounts for the possibility that a defaulted
Participant may also be a lender to the LOC (``LOC Assumption'').
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Having reviewed transaction volumes, pending activity, and SPPs, as
discussed below, DTC agrees that there is a need to further increase
the Debit Caps and that there also is an opportunity to do so given the
recent expansion of DTC's qualifying liquid resources to include
proceeds from a Debt Issuance. DTC believes that further increases to
the maximum Debit Caps would further reduce activity blockage and the
need for Participants to submit SPPs, as described below.
Proposed Change to the Net Debit Cap and Aggregate Affiliated Family
Net Debit Cap
DTC proposes to change the maximum Debit Caps for Participants and
Affiliated Families from the current fixed amounts of $2.15 BN and
$2.85 BN, respectively, to a flexible amount not to exceed the amount
of available qualifying liquid resources at DTC.
As explained above, DTC's liquidity resources are a $1.15 BN
Participants Fund, a $1.9 BN LOC,\26\ and the proceeds from any
issuance of senior notes through the Debt Issuance program.\27\ The
Debt Issuance program would provide additional liquidity resources to
allow DTC the flexibility to increase the maximum Debit Caps. DTC would
manage the caps based on its total liquidity resources, related costs,
and the projected benefit to Participants, including reduced
transaction blockage and the need to submit SPPs to reduce a net debit
balance.\28\
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\26\ DTC assumes $1.7 BN of the LOC as available for liquidity
purposes, with $200 MM serving as the LOC Assumption buffer.
\27\ Prefunded liquidity from the Debt Issuance that is
outstanding but maturing within 0-3 Business Days (``Maturity
Assumption'') would be assumed to be unavailable for liquidity
purposes on the Date of Insolvency.
\28\ The Clearing Agency Liquidity Risk Management Framework
will be amended pursuant to a separate proposed rule change to
identify the proceeds from the Debt Issuance program as qualifying
liquidity resources, in addition to the Participants Fund and LOC.
Governance of DTC's qualifying liquid resources will continue to be
managed in accordance with the Clearing Agency Liquidity Risk
Management Framework and related procedures.
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By allowing for a flexible maximum Debit Cap, the proposed rule
change would provide for transaction processing efficiencies that would
lower the likelihood of transactions pending under a cap limit or a
Receiving Participant needing to submit SPPs to reduce its intraday Net
Debit Balance to allow a transaction to process. Moreover, any
Participant that is a Deliverer in a DVP transaction may realize
processing efficiencies when the
[[Page 61207]]
Receiver maintains a higher Debit Cap, as the transaction would not
pend.
Maintaining a flexible maximum Debit Cap would benefit
Participants. A Net Debit increase impact study (``Impact Study'')
conducted by DTC for the period June 2, 2024, through January 31, 2025,
showed that out of 179 Participant families, 17 (across 44 Accounts)
would likely realize an immediate benefit from a Debit Cap increase.
The liquidity needs across legal entities were determined by looking at
families reaching 90 percent of the current $2.85 BN cap limit, and by
identifying the transactions pending under cap limits and any incoming
SPPs. An increase in the maximum cap by $0.75 BN to $1 BN would lead to
a reduction of $3.62 BN to $4.43 BN in daily SPPs sent across the 17
families benefiting from the proposed change.
In the event DTC determined to adjust the Debit Caps downward, due
to anticipation of a reduction in available liquidity resources or
otherwise, DTC would provide Participants with a minimum of 10 Business
Days' notice via Important Notice, in order to allow Participants to
adjust their own liquidity management strategies, as needed.\29\
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\29\ DTC will continue to maintain and does not propose to
change its current authority to lower an individual Participant's
maximum Net Debit Cap. See Rule 1, supra note 3.
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Expansion of Participants Eligible for Liquidity Fund
As noted above, the Liquidity Fund component (set at $700 MM) of
the Participants Fund applies to Participants whose Affiliated Families
have Debit Caps that exceed $2.15 BN. Because an Unaffiliated
Participant cannot currently have a Debit Cap that exceeds $2.15 BN,
such Participants are not subject to a Liquidity Fund allocation.
Given that the maximum Debit Cap for an Unaffiliated Participant
could exceed $2.15 BN under this proposal, thus relying in part on the
Liquidity Fund to support the increase cap amount, DTC proposes to
expand the allocation of the Liquidity Fund contribution to
Unaffiliated Participants that have Debit Caps that exceed $2.15 BN.
The Impact Study conducted by DTC showed that with this proposed
change, two Unaffiliated Participants now would be subject to the
Liquidity Fund. The number of Affiliated Families, and Unaffiliated
Participants paying into the Liquidity Fund (those whose Debit Caps
would exceed $2.15 BN) is estimated to increase from 18 to 21, with an
average daily contribution of $33.3 MM per family, ranging between
$39.1 MM to $1.6 MM. However, given the increase in the number of
Participants contributing to the Liquidity Fund overall, the highest
amount paid by a single family is estimated to go down to $39.1 MM from
$50.5 MM.
Proposed Rule Changes
Settlement Guide Changes. To effectuate the proposed changes,
several updates would be made to the Settlement Guide. First, the
Important Terms section of the guide would be updated to include
definitions for Affiliated Family and Unaffiliated Participant. The
proposed definition for Affiliated Family would match the definition
already used in the Rules.\30\ Specifically, the definition would read,
``[a]n Affiliated Family means each Participant that controls or is
controlled by another Participant and each Participant that is under
the common control of any Person. For purposes of this definition,
``control'' means the direct or indirect ownership of more than 50
percent of the voting securities or other voting interests of any
Person.'' Meanwhile, Unaffiliated Participant would be defined to mean,
``[a] Participant that is not included in an Affiliated Family.'' A
technical change also would be made in the Important Terms section to
refer to the Collateral Monitor as a ``calculation'' rather than a
``process'' for consistency with the Rules, which set forth a
methodology for calculation of the Collateral Monitor.
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\30\ Rule 1, supra note 3.
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Second, the Amounts subsection of the Participants Fund and
Preferred Stock Investment section of the Settlement Guide would be
updated to more clearly describe the components of the Participants
Fund. Although the Settlement Guide accurately describes the aggregate
Participants Fund as including four components (i.e., the Core Fund,
Base Fund, Incremental Fund, and Liquidity Fund), two of these are
considered the main component amounts: the Core Fund and the Liquidity
Fund.\31\ This proposal would update the Settlement Guide to describe
the aggregate Participants Fund more simply as the Core Fund and the
Liquidity Fund, where the Core Fund is made up of the Base Fund and the
Incremental Fund. More importantly, the Amounts subsection would be
revised to no longer consider the Liquidity Fund as applicable only to
Affiliated Families that have Net Debit Caps that exceed $2.15 BN.
Instead, the subsection would read that the Liquidity Fund applies to
certain Unaffiliated Participants and Affiliated Families, as would be
described in the updated Liquidity Fund subsection.
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\31\ Settlement Guide, supra note 3, at 45-47. The Core Fund is
set by DTC at an aggregate amount of $450 MM and is comprised of the
Base Fund and the Incremental Fund. The Base Fund is the sum of all
minimum deposits by all Participants (i.e., $7,500 times the number
of Participants at any time). Id. The Incremental Fund is the
balance of the Core Fund up to $450 MM, which is ratably allocated
among Participants that are required to pay more than a minimum
deposit. Id. The second main component is the Liquidity Fund, which
is set at $700 MM and applies to Participants whose Affiliated
Families have Affiliated Family Net Debit Caps that exceed $2.15 BN.
Id.
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Third, the steps explaining the Liquidity Fund allocation formula
in the Liquidity Fund subsection of the How the Required Deposit to the
Participants Fund and the Required Preferred Stock Investment are
Calculated for a Participant section of the Settlement Guide would be
simplified, clarified, and adjusted to account for the proposed changes
described above, in particular, the inclusion of Unaffiliated
Participants in the calculation.
The subsection would begin by explaining that the Liquidity Fund
would be proportionally shared among both Unaffiliated Participants and
Participants of Affiliated Families that have Net Debit Caps that
exceed $2.15 BN, thus removing language that limited the Liquidity Fund
to only Affiliated Families. The steps for calculating that allocation
would then be updated to reflect that change, so that Unaffiliated
Participants would be part of the calculation. More specifically,
Unaffiliated Participants would be added to the ``Overage''
calculation, which is the amount that an Affiliated Family's and now an
Unaffiliated Participant's Net Debit Cap exceeds $2.15 BN up to $2.85
BN. Next, the calculation of the allocation percentage would be updated
to include Unaffiliated Participants and then that percentage would be
used to calculate the allocation amounts of Unaffiliated Participants
too.
In addition to several clarification, grammatical, and
organizational updates to the entire Liquidity Fund subsection for
readability and simplicity, the subsection would conclude by stating
that Unaffiliated Participants would not be part of calculation that
determines the proportion of the Liquidity Fund allocation amount among
Participants of Affiliated Families since Unaffiliated Participants are
not part of an Affiliated Family. Rather, their proportion is simply
their allocation amount.
Fourth, to maintain alignment of the Net Debit Cap with qualifying
liquid resources, as described above, the Settlement Guide would
further provide in the Net Debit Cap section that the
[[Page 61208]]
Debit Caps would always be set lower than DTC's total available
liquidity resources, may never exceed DTC's maximum Net Debit Cap, and
would be determined based on benefits to Participants, DTC's total
available liquidity resources and related costs. It also would be noted
that governance of DTC's liquidity and liquidity resources would
continue to be in accordance with the Clearing Agency Liquidity Risk
Management Framework and related procedures. Finally, the section would
make clear that the Aggregate Affiliated Family Net Debit Cap of an
Affiliated Family may be shared among the Participants of the
Affiliated Family according to either (i) the proportional liquidity
usage of the Participants as calculated by DTC's system or (ii) as DTC
is instructed, in writing, by the Affiliated Family.
Lastly, the Calculation of Participant Net Debit Caps section of
the Settlement Guide would be updated to (i) replace a reference to
$2.15 BN being the maximum Participant Net Debit Cap with a general
reference to the Net Debit Cap, since it would no longer be a fixed
number, and (ii) provide for the minimum 10 Business Day notice that
DTC would issue by Important Notice to Participants for any decrease in
the maximum Debit Cap, including outreach to affected Participants.
Rules Changes. DTC would make technical and clarifying changes to
the Rules for consistency with the description of the function of the
Aggregate Affiliated Family Net Debit Cap in the Settlement Guide.
Specifically, Rule 9(B) (Transactions in Eligible Securities), which
includes a description of the operation of the Collateral Monitor and
Net Debit Cap would be updated to reflect that a transaction would not
be processed if it would cause a Participant that is a member of an
Affiliated Family to exceed the Aggregate Affiliated Family Net Debit
Cap of the Affiliated Family, regardless of whether the Participant is
the Instructor \32\ or a Contra Party.\33\ Relatedly, to describe the
sum of the Net Debit Balances of an Affiliated Family of Participants
for use in the proposed description in Rule 9(B) of the function of
Aggregate Affiliated Family Net Debit Cap, a new term, ``Aggregate
Affiliated Family Net Debit,'' would be added to Rule 1 (Definitions;
Governing Law) and defined as ``the amount by which the algebraic sum
of all money debits and charges to the Accounts of an Affiliated Family
exceeds the sum of all money credits thereto.''
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\32\ ``Instructor'' means a Participant or Pledgee which gives
DTC an instruction with respect to (i) a Delivery, Pledge, Release
or Withdrawal of Securities, (ii) a payment in connection with a
transaction in Securities or (iii) any other instruction pursuant to
these Rules and the Procedures. Rule 1, supra note 3.
\33\ ``Contra Party'' means an Account in the Account Family of
another Participant or Pledgee (other than the Instructor) or an
Account in the same or another Account Family of the Instructor.
Rule 9(B), supra note 3. For clarity, the term ``Account Family''
refers to an Account or group of Accounts designated as such by a
Participant, using a common set of risk management controls. Rule 1,
supra note 3. It does not mean accounts of an Affiliated Family.
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Implementation Timeline
DTC would implement the proposed rule changes upon approval by the
Commission; however, the actual maximum Debit Cap amount for DTC would
not increase until DTC secured additional qualifying liquid resources,
such as with the Debit Issuance described above.
2. Statutory Basis
Section 17A(b)(3)(F) \34\ of the Act requires that the rules of the
clearing agency be designed, inter alia, to promote the prompt and
accurate clearance and settlement of securities transactions. DTC
believes the proposed rule change is consistent with the Section
17A(b)(3)(F) of the Act and the rules promulgated thereunder,
particularly Rule 17ad-22(e)(7)(i).\35\
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\34\ 15 U.S.C. 78q-1(b)(3)(F).
\35\ 17 CFR 240.17ad-22(e)(7)(i).
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The Impact Study indicates that by allowing for a flexible maximum
Debit Cap that can be increased, as described above, the proposed rule
change would help improve transaction processing by enabling more
transactions to process without the need for a Receiving Participant to
wait for DVP-related credits or submit SPPs to reduce its intraday Net
Debit Balance. Moreover, any Participant that is a Deliverer of a DVP
may see less of its deliveries pend because the Receiver may maintain a
higher Debit Cap. Meanwhile, the proposed adjustable Debit Cap would
continue to be supported by adequate DTC liquidity resources available
to complete system-wide settlement in the event of a failure to settle
by the largest Participant or Affiliated Family. By improving
transaction processing within DTC's liquidity resources, as well as the
readability and clarity of the Settlement Guide and Rules related to
the proposed changes, DTC believes the proposed rule change is
consistent with Section 17A(b)(3)(F) of the Act, cited above, by
helping to promote the prompt and accurate clearance and settlement of
securities transactions.
Rule 17ad-22(e)(7)(i) promulgated under the Act requires, inter
alia, that DTC, a covered clearing agency, establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable, effectively measure, monitor, and manage
the liquidity risk that arises in or is borne by the covered clearing
agency, including measuring, monitoring, and managing its settlement
and funding flows on an ongoing and timely basis, and its use of
intraday liquidity by, at a minimum, maintaining sufficient liquid
resources to effect same-day 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 the covered clearing agency in extreme but plausible
market conditions \36\ (i.e., the ``Cover One standard'').
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\36\ Id.
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DTC's liquidity needs are driven by its need to protect against a
Participant failing to pay its settlement obligations. The tools
available to DTC, including the above described Debit Caps, allow it to
regularly test the sufficiency of its liquid resources on an intraday
and end-of-day basis and adjust to stressed circumstances during a
settlement day to protect itself and Participants against liquidity
exposure under normal and stressed market conditions. DTC calculates
its liquidity needs per Participant (at a legal entity level) and
further aggregates these amounts at a family level (that is, including
all affiliated Participants, based on the assumption that all such
affiliates may fail simultaneously). In this regard, DTC monitors
settlement flows and net-debit obligations daily, and its current
available liquidity resources are sufficient to satisfy the Cover One
standard.
As described above, the proposed rule change would only permit an
increase to the maximum Debit Caps to an amount below DTC's total
available liquidity, which is currently made up of the Participants
Fund, LOC, and any Debt Issuance, and it would not otherwise alter the
way DTC monitors settlement flows and net-debit obligations. Also, the
proposed rule change would require Unaffiliated Participants to
contribute to the Liquidity Fund to cover exposures relating to their
use of liquidity above $2.15 BN, ensuring that all Participants
contribute to DTC's liquidity resources in a proportionate manner.
Moreover, DTC would provide all Participants notice at least 10
Business Days prior to
[[Page 61209]]
decreasing Debit Caps, including specific outreach to affected
Participants. Therefore, DTC believes the proposal is consistent with
Rule 17ad-22(e)(7)(i), cited above, because the proposed increase would
remain aligned with DTC's continued maintenance of sufficient liquid
resources to satisfy its Cover One standard and not change DTC's
monitoring of settlement flows and net-debit obligations.
(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe that the proposed rule change would impose a
burden on competition.\37\ The proposed rule change would simply allow
DTC to maintain a flexible maximum Debt Cap, with a ceiling less than
the total amount of DTC's available liquidity resources, as described
above. The flexibility of the Debit Cap would apply to each
Participant, including Unaffiliated Participants and Affiliated
Families equally, as applicable.
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\37\ 15 U.S.C. 78q-1(b)(3)(I).
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Also, the proposed rule change provides that Unaffiliated
Participants that utilize liquidity in an amount above $2.15 BN would
be obligated to contribute to the Liquidity Fund in the same way as an
Affiliated Family does today. That is, the obligation only would apply
to Unaffiliated Participants whose activity results in needing
liquidity in excess of $2.15 BN and would be directly proportional to
the Unaffiliated Participant's activity, as determined by the
algorithms used to calculate allocations under the Liquidity Fund, as
is done for Affiliated Families today. At the same time, it would be
less likely that the Unaffiliated Participant's activity would pend or
that it would need to submit SPPs since it would have a greater Debit
Cap. Nevertheless, if an Unaffiliated Participant did not want to
contribute to the Liquidity Fund, despite the benefits, then it could
simply manage its activity to stay below the $2.15 BN liquidity
threshold. Therefore, DTC does not believe this proposed change would
impose a burden on competition.
DTC believes the proposed rule change may promote competition
because it alleviates the need for some Participants to wait for DVP
credits or submit SPPs for their transactions to process. Moreover, any
Participant that is a Deliverer in a DVP transaction may realize
processing efficiencies when the Receiver maintains a higher Debit Cap,
as the transaction may not pend due to the higher maximum.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
DTC has not received or solicited any written comments relating to
this proposal. If any written comments are received, they would 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#2155534045484f46404f454c40534a445552615244420f464e57"><span class="__cf_email__" data-cfemail="66121407020f08010708020b07140d0312152615030548010910">[email protected]</span></a> or 202-551-5777.
DTC reserves the right to not respond to any comments received.
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 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.
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#6e1c1b020b430d0103030b001a1d2e1d0b0d40090118"><span class="__cf_email__" data-cfemail="4331362f266e202c2e2e262d3730033026206d242c35">[email protected]</span></a>. Please include
File Number SR-DTC-2025-019 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-DTC-2025-019. 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 DTC and on DTCC's website (<a href="https://dtcc.com/legal/sec-rule-filings.aspx">https://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-DTC-2025-019 and should be submitted on or
before January 20, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23932 Filed 12-29-25; 8:45 am]
BILLING CODE 8011-01-P
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