Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Advance Notice, as Modified by Amendment No. 1, To Institute Supplemental Liquidity Deposits to Its Clearing Fund Designed To Increase Liquidity Resources To Meet Its Liquidity Needs, 25496-25500 [2013-10239]

Download as PDF 25496 Federal Register / Vol. 78, No. 84 / Wednesday, May 1, 2013 / Notices SECURITIES AND EXCHANGE COMMISSION II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Advance Notice In its filing with the Commission, NSCC included statements concerning the purpose of and basis for the advance notice and discussed any comments it received on the advance notice. The text of these statements may be examined at the places specified in Item IV below. NSCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.4 [Release No. 34–69451; File No. SR–NSCC– 2013–802] (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Advance Notice added, deleted or postponed, please contact: The Office of the Secretary at (202) 551–5400. Dated: April 26, 2013. Elizabeth M. Murphy, Secretary. [FR Doc. 2013–10355 Filed 4–29–13; 11:15 am] BILLING CODE 8011–01–P Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Advance Notice, as Modified by Amendment No. 1, To Institute Supplemental Liquidity Deposits to Its Clearing Fund Designed To Increase Liquidity Resources To Meet Its Liquidity Needs April 25, 2013. Pursuant to Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision Act of 2010 (‘‘Clearing Supervision Act’’) 1 and Rule 19b– 4(n)(1)(i) 2 thereunder, notice is hereby given that on March 21, 2013, the National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) an advance notice described in Items I, II and III below, which Items have been prepared primarily by NSCC. On April 19, 2013, NSCC filed with the Commission Amendment No. 1 to the advance notice.3 The Commission is publishing this notice to solicit comments on the advance notice from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Advance Notice wreier-aviles on DSK5TPTVN1PROD with NOTICES To enhance its ability to meet its liquidity requirements, NSCC is proposing to amend its Rules & Procedures (‘‘Rules’’) to provide for a supplemental liquidity funding obligation, as described below. 1 12 U.S.C. 5465(e)(1). Defined terms that are not defined in this notice are defined in Exhibit 5 of the advance notice filing, available at https:// www.sec.gov/rules/sro/nscc.shtml under File No. SR–NSCC–2013–802, Additional Materials. 2 17 CFR 240.19b-4(n)(i). 3 Amendment No. 1 revised NSCC’s original advance notice filing to include as Exhibit 2 a written comment received by NSCC relating to the advance notice proposal, as described in Item II(B) below. VerDate Mar<15>2010 14:21 Apr 30, 2013 Jkt 229001 Proposal Overview According to NSCC, as a central counterparty (‘‘CCP’’), NSCC occupies an important role in the securities settlement system by interposing itself between counterparties to financial transactions, thereby reducing the risk faced by its Members and contributing to global financial stability. Further, pursuant to the Clearing Supervision Act, NSCC has been designated a systemically important financial market utility (‘‘SFMU’’) by the Financial Stability Oversight Council, obliging NSCC to meet certain risk management regulatory standards related to, among other things, maintaining adequate financial resources to meet its obligations to its Members in the event of the default of the Member or family of affiliated Members (‘‘Affiliated Family’’) that would generate the largest aggregate payment obligation to NSCC in stressed conditions. In this regard and to enhance its ability to meet its liquidity requirements, NSCC is proposing to amend its Rules to provide for a supplemental liquidity funding obligation. A substantial proportion of the liquidity needed by NSCC is attributable to the exposure presented by those unaffiliated Members and Affiliated Families that regularly incur the largest gross settlement debits over a settlement cycle during trading activity on business days other than periods coinciding with quarterly triple options expiration dates (‘‘Regular Activity Periods’’), as well as during times of increased trading activity that arise around quarterly triple options expiration dates (‘‘Options Expiration Activity Periods’’). With the goal of ensuring that NSCC has sufficient liquidity to meet its obligations during Regular Activity Periods, as well as during Options 4 The Commission has modified the text of the summaries prepared by NSCC. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 Expiration Activity Periods, it is appropriate that those unaffiliated Members and Affiliated Families provide additional liquidity to NSCC. Under proposed Rule 4(A), this will take the form of supplemental liquidity deposits to the Clearing Fund (i) in an amount based on the largest liquidity need NSCC would have in the event of the default of an unaffiliated Member or Affiliated Family during a Regular Activity Period (‘‘Regular Activity Supplemental Deposit’’), and (ii) an additional amount to cover the largest liquidity need NSCC would have in the event of the default of an unaffiliated Member or Affiliated Family during an Options Expiration Activity Period (‘‘Special Activity Supplemental Deposit’’) (collectively with Regular Activity Supplemental Deposit, ‘‘Supplemental Deposit’’). The obligation of an unaffiliated Member or the Members of an Affiliated Family to make a Regular Activity Supplemental Deposit (‘‘Regular Activity Liquidity Obligation’’) or a Special Activity Supplemental Deposit (‘‘Special Activity Liquidity Obligation’’) would be imposed on the thirty (30) unaffiliated Members and/or Affiliated Families who generate the largest aggregate liquidity needs over a settlement cycle that would apply in the event of a closeout (i.e., over a period from date of default through the following three (3) settlement days), based upon a lookback period. The Regular Activity Liquidity Obligation of an unaffiliated Member or the Members of an Affiliated Family to make a Regular Activity Supplemental Deposit will be reduced by any liquidity such Members or their affiliates may provide in the form of commitments under NSCC’s committed liquidity facility (‘‘Credit Facility’’). The calculations for both the Regular Activity Liquidity Obligation and the Special Activity Liquidity Obligation are designed so that NSCC has adequate liquidity resources to enable it to settle transactions, notwithstanding the default of an unaffiliated Member and/ or Affiliated Family during Regular Activity Periods, as well as during Options Expiration Activity Periods. The Liquidity Obligations imposed on Affiliated Families would be allocated among the Family Members in proportion to the liquidity risk (or peak exposure) they present to NSCC. Regulatory Background As both a CCP and a designated SFMU, NSCC adheres to strict risk management processes that are regularly reviewed against applicable regulatory and industry standards. This includes E:\FR\FM\01MYN1.SGM 01MYN1 Federal Register / Vol. 78, No. 84 / Wednesday, May 1, 2013 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES the securities laws and rulemaking promulgated by the Commission, such as Rule 17Ad–22(b)(3), which requires registered clearing agencies that perform CCP services to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain sufficient financial resources to withstand, at a minimum, a default by the participant (defined in Rule 17Ad–22(a)(3) to include a participant family) to which it has the largest exposure. NSCC is also mindful of the standards set forth in the Principles for Financial Market Infrastructures (‘‘PFMI’’) of the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions. Key Consideration 4 of PFMI Principle 7, addressing liquidity risk, provides that a CCP should maintain sufficient liquidity resources to meet its payment obligations under a wide range of stress scenarios including the default of the participant and its affiliates that would generate the largest aggregate payment obligation to the CCP. NSCC believes the proposed rule change should assist NSCC in securing adequate liquidity resources to meet its settlement obligations during both Regular Activity Periods and Options Expiration Activity Periods, notwithstanding the default of one of its unaffiliated Members and/or Affiliated Families that pose the largest aggregate liquidity need over the four day settlement cycle. (iii) leading up to or after the default, there is no increased volatility in the market that would result in a significant increase in Clearing Fund requirements, mark-to-market collections, or other risk-based premiums that would have the result of increasing NSCC’s liquidity resources. NSCC believes that these conditions simulate the impact of significant credit risk and market risk stresses on NSCC’s liquidity need across both Regular Activity Periods and Options Expiration Activity Periods. NSCC then identifies the largest Member liquidity need on each day and determines if the available liquidity resources, consisting of the aggregate Required Deposits, any Supplemental Deposits, and any Prefund Deposits in the Clearing Fund on the day the liquidity need was observed, are adequate to cover that liquidity need, or if there is a calculated liquidity shortfall under the assumed stressed market conditions described above. The Regular Activity Supplemental Deposits will be calculated to address those daily liquidity shortfalls that fall on any business day included in a Regular Activity Period (‘‘Regular Activity Supplemental Liquidity Need’’), and the Special Activity Supplemental Deposits will be calculated to address those additional daily liquidity shortfalls that fall on any business day included in an Options Expiration Activity Period (‘‘Special Activity Supplemental Liquidity Need’’). Supplemental Liquidity Providers Every business day NSCC measures the liquidity obligations of its unaffiliated Members and Affiliated Families by taking the sum of their purchase obligations on that day in securities that are eligible for processing in NSCC’s Continuous Net Settlement (‘‘CNS’’) system and for the following three (3) settlement days (which equates to the period from the date of default through the remaining settlement cycle). NSCC then takes into account certain adjustments, assumptions and offsets, and assumes the occurrence of certain stressed conditions. The stressed market conditions NSCC assumes in this calculation include, but are not limited to, (i) The simultaneous default, without prior warning, of all Members of the Affiliated Family with the largest aggregate four (4) day settlement obligations; (ii) that on the day of such default, the Members of such Affiliated Family are trading at peak historical trading levels and no market participants curtail their activity with any Members of the Family; and Regular Activity Supplemental Deposits VerDate Mar<15>2010 14:21 Apr 30, 2013 Jkt 229001 Under this proposal, every six (6) months, NSCC will determine (i) its largest Regular Activity Supplemental Liquidity Need (‘‘Regular Activity Peak Liquidity Need’’) over the preceding twelve (12) month period and (ii) those unaffiliated Members and Affiliated Families that presented the largest aggregate liquidity exposures to NSCC over the preceding six-month period. NSCC will then rank the aggregate liquidity exposures presented by the unaffiliated Members and/or Affiliated Families (‘‘Regular Activity Peak Liquidity Exposures’’) during the lookback period to determine which thirty (30) such unaffiliated Members and Affiliated Families presented the largest respective Regular Activity Peak Liquidity Exposures within the lookback period. NSCC’s Regular Activity Peak Liquidity Need will then be allocated to these thirty (30) unaffiliated Members and Affiliated Families (‘‘Regular Activity Liquidity Providers’’), in proportion to the Regular Activity Peak Liquidity Exposures they PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 25497 presented to NSCC during the lookback period. The first of these semi-annual calculations of the Regular Activity Liquidity Obligations will be made to coincide with NSCC’s annual renewal of the Credit Facility each year (‘‘Regular Activity First Tranche Liquidity Obligations’’) and the second calculation each year will be made six (6) months thereafter (‘‘Regular Activity Second Tranche Liquidity Obligations’’). Special Activity Supplemental Deposits Special Activity Supplemental Deposits are deposits made in addition to Regular Activity Supplemental Deposits, designed to cover the additional liquidity exposure that occurs over an Options Expiration Activity Period. Each calendar quarter, on a day that is no later than the fifth business day preceding any Options Expiration Activity Period, NSCC will also determine (i) its largest Special Activity Supplemental Liquidity Need (‘‘Special Activity Peak Liquidity Need’’) over the preceding twenty-four (24) months (i.e., the eight prior Options Expiration Activity Periods, or a longer lookback period as determined by NSCC) and (ii) those unaffiliated Members and Affiliated Families that presented the largest aggregate Special Activity liquidity exposures to NSCC over the same period. NSCC will then rank the aggregate Special Activity liquidity exposures presented by such unaffiliated Members and/or Affiliated Families (referred to as their respective ‘‘Special Activity Peak Liquidity Exposures’’) during the lookback period to determine which thirty (30) such unaffiliated Members and Affiliated Families presented the largest respective Special Activity Peak Liquidity Exposures within the lookback period. NSCC’s Special Activity Supplemental Peak Need will then be allocated to these thirty (30) Members and Affiliated Families (‘‘Special Activity Liquidity Providers’’), in proportion to the Special Activity Peak Liquidity Exposures they presented to NSCC during the lookback period. Interim Adjustments and Calls With the goal of ensuring that NSCC’s liquidity resources remain adequate between the specified calculation dates, if either current liquidity needs increase significantly over those liquidity needs used for the regular calculations (or Special Activity Calculations), or the amount of liquidity resources is significantly reduced, the proposal permits NSCC to make interim recalibrations and liquidity calls: If E:\FR\FM\01MYN1.SGM 01MYN1 25498 Federal Register / Vol. 78, No. 84 / Wednesday, May 1, 2013 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES between the semi-annual calculations of the Regular Activity Liquidity Obligations, the aggregate amount of Regular Activity Supplemental Deposits decreases by an amount that exceeds a threshold as determined by NSCC (whether as a result of the retirement of Members, a cease to act, or otherwise), then NSCC will recalculate its Regular Activity Peak Liquidity Need and allocate it among the unaffiliated Members and Affiliated Families that then comprise the applicable thirty (30) largest Regular Activity Liquidity Providers, in the same manner such calculations and allocations would be made at each semi-annual calculation of Regular Activity Liquidity Obligations.5 Conversely, if on any business day between regular semi-annual calculation dates NSCC observes an increase in its Regular Activity Liquidity Needs that exceeds a predetermined threshold amount, or between the dates on which it calculates Special Activity Liquidity Obligations it observes an increase in its Special Activity Liquidity Needs that exceeds a predetermined threshold amount, NSCC shall be entitled to call for an additional deposit from the Member whose increase in activity levels caused (or was the primary cause of) such increased liquidity need (‘‘Liquidity Call’’). Liquidity Call amounts will be treated as a part of that Member’s Regular Activity Supplemental Deposit or Special Activity Supplemental Deposit, as applicable. Operation of the Funding Obligation Each Regular Activity Liquidity Provider will be obligated to contribute to the Clearing Fund, no later than five (5) business days following the effective date of the renewal of the Credit Facility, the amount of its Regular Activity Liquidity Obligation, reduced (i) dollar for dollar by amounts committed to the Credit Facility by that Regular Activity Liquidity Provider or its affiliates, and (ii) ratably (among all Regular Activity Liquidity Providers) by amounts committed to the Credit Facility by the lenders party thereto which are not Members or their affiliates. If the amount of the Regular Activity Second Tranche Liquidity Obligation of an unaffiliated Member or Affiliated Family exceeds its Regular Activity First Tranche Liquidity Obligation (including because the unaffiliated Member or Affiliated Family had no Regular 5 NSCC plans to use an interim date calculation as the first calculation under the proposed rule, should it become effective on a date after the effective date of the 2013 renewal of its Credit Facility. VerDate Mar<15>2010 14:21 Apr 30, 2013 Jkt 229001 Activity First Tranche Liquidity Obligation), such Regular Activity Liquidity Provider will be obligated to contribute its calculated amount within three (3) business days following the final notice of such amount. If the Regular Activity Second Tranche Liquidity Obligation of an unaffiliated Member or Affiliated Family is less than its Regular Activity First Tranche Liquidity Obligation, then it shall be entitled to a refund of the amount of the difference, provided, that nothing shall reduce or in any way affect any commitment or other obligation of any Member or its affiliate under the Credit Facility. Promptly after calculation of the Special Activity Liquidity Obligations, NSCC will inform Special Activity Liquidity Providers of their Special Activity Liquidity Obligations, and those Special Activity Liquidity Providers must make their Special Activity Supplemental Deposits to the Clearing Fund in cash no later than the close of business on the second business day preceding the applicable Options Expiration Activity Period (i.e., generally the Wednesday before the options expiration date). However, if a Special Activity Liquidity Provider anticipates that its Special Activity Peak Liquidity Exposure at any time during an Options Expiration Activity Period will be greater than the amount calculated by NSCC, it may, no later than the first business day of that Options Expiration Activity Period, make an additional cash deposit to the Clearing Fund that is in excess of its Required Deposit and is designated as a ‘‘Special Activity Prefund Deposit.’’ Members may also, at their discretion, deposit to the Clearing Fund amounts in excess of their Required Deposit that are designated ‘‘Regular Activity Prefund Deposits.’’ Because Prefund Deposits are included in calculating available liquidity resources, they thus reduce NSCC’s Supplemental Liquidity Needs, as well as the depositing Member’s Regular Activity (or Special Activity) Peak Liquidity Exposure. As noted above under ‘‘Interim Adjustments and Calls,’’ to the extent that NSCC observes a peak shortfall that breaches predetermined thresholds at any time throughout the year, the amount of the shortfall will be allocated solely to the Member responsible for the activity that caused the shortfall. The liquidity called as a result of that shortfall will be held until the next applicable reset period. This is intended to incentivize Members to make Prefund Deposits to avoid Liquidity Calls, since Prefund Deposits are refunded after the PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 period of activity for which they were made, while Liquidity Calls are retained until the next regular calculation of the applicable supplemental deposit. Treatment and Use of the Supplemental Deposits All Regular Activity Supplemental Deposits (other than Regular Activity Prefund Deposits), as adjusted semiannually, shall remain on deposit in the Clearing Fund, and may not be withdrawn by the applicable Member until five (5) business days after the next following maturity date of the Credit Facility (generally, for a period of 364 days). Regular Activity Prefund Deposits shall remain on deposit in the Clearing Fund and may not be withdrawn by the applicable Member until seven (7) days after they are deposited. All Special Activity Supplemental Deposits (including Special Activity Prefund Deposits) may be refunded to the Special Activity Liquidity Providers seven (7) business days after the end of the applicable Options Expiration Activity Period. Any amounts deposited in response to a Liquidity Call for an additional Regular Activity Supplemental Deposit must remain in the Clearing Fund until the next semi-annual calculations of the Regular Activity Liquidity Obligations, and any amounts deposited in response to a Liquidity Call for an additional Special Activity Supplemental Deposit must remain in the Clearing Fund until two (2) business days preceding the next Options Expiration Activity Period. A Member’s Supplemental Deposit will be made in addition to its Required Deposit to the Clearing Fund, and any other deposit of any such Member to the Clearing Fund. A Member’s Supplemental Deposit will be considered part of that Member’s actual deposit to the Clearing Fund, and, as such, may be used to satisfy obligations of that Member to NSCC, in the same manner as provided in Section 3 of Rule 4. Therefore, if the Member who contributed the Supplemental Deposit defaults, NSCC will be permitted to use its entire actual deposit, which will include the amount of its Supplemental Deposit, to satisfy any loss resulting from closing out that Member’s open positions. A Member’s Supplemental Deposit will not, however, constitute part of its Required Deposit under NSCC’s Rule 4, and, as such, will not be used, pursuant to Section 4 of Rule 4, to satisfy the obligations of any other Member of NSCC that has defaulted in the performance of its obligations to NSCC. A Member’s Supplemental Deposit, therefore, will not be used in calculating E:\FR\FM\01MYN1.SGM 01MYN1 Federal Register / Vol. 78, No. 84 / Wednesday, May 1, 2013 / Notices any pro rata charge (i.e., loss assessment) due from that Member in the event of the default of another Member under Rule 4. Supplemental Deposits will also not be subject to the provisions of Section 6 of Rule 4 when a Member ceases to be a participant. Pending any permitted use described in NSCC’s Rules, the aggregate of all Supplemental Deposits on deposit at NSCC may be invested by NSCC as permitted pursuant to the investment policy adopted by NSCC and as in effect from time to time, and in the same manner the Clearing Fund is invested pursuant to such investment policy. Any interest earned on investment of a Supplemental Deposit, as a part of a Member’s actual deposit, will be payable at the rate that NSCC earns on the investment of such funds, credited monthly and paid on demand. wreier-aviles on DSK5TPTVN1PROD with NOTICES Implementation Timeframe Pending Commission approval, Members will be advised of the implementation date of this proposal through issuance of an NSCC Important Notice. Members will be provided not less than ten (10) days’ notice of the first date on which Supplemental Deposits will be payable. Proposed Rule Changes NSCC proposes to amend its Rules to create a new Rule 4A to reflect the changes as described above. For both the Regular Activity Supplemental Deposits and the Special Activity Supplemental Deposits, the new Rule 4A will provide: (i) A general description of the relevant Supplemental Deposit, (ii) a provision describing the calculation and operation of the funding obligation, and (iii) a description of the treatment and permitted uses of the Supplemental Deposit by NSCC. NSCC believes that this proposed rule change contributes to NSCC’s goal of assuring that NSCC has adequate liquidity resources to meet its settlement obligations during both Regular Activity Periods and Options Expiration Activity Periods, notwithstanding the default of its unaffiliated Members and/or Affiliated Families that pose the largest aggregate liquidity exposure over the relevant settlement cycle. As such, NSCC believes that the proposal is consistent with Rule 17Ad–22(b)(3), as well as with Principle 7 of the PMFI. (B) Clearing Agency’s Statement on Comments on the Advance Notice Received From Members, Participants, or Others On March 19, 2013, National Financial Services, LLC submitted VerDate Mar<15>2010 14:21 Apr 30, 2013 Jkt 229001 written comments relating to the proposed rule change. NSCC will respond to this comment and all future comments received at a later date, as appropriate. (C) Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing and Settlement Supervision Act Description of Change NSCC is proposing to amend its Rules in order to provide for supplemental liquidity deposits to NSCC’s Clearing Fund designed to ensure that NSCC has adequate liquidity resources to meet its liquidity needs. The proposed change is described in detail above. Anticipated Effect on and Management of Risk As described above, NSCC believes that the proposed change to add a Supplemental Deposit, which NSCC believes is calculated so that NSCC has adequate liquidity resources to enable it to settle transactions during Regular Activity Periods and Options Expiration Activity Periods when NSCC’s liquidity need may increase, notwithstanding the default of the unaffiliated Member or Affiliated Family that would generate the largest aggregate liquidity need for NSCC over a four day settlement cycle in stressed market conditions, will enhance NSCC’s ability to meet certain risk management standards, such as Rule 17Ad–22(b)(3) and Principle 7 of the PMFI, described above. By calculating unaffiliated Member’s or Affiliated Family’s Supplemental Deposit funding obligation in proportion to the liquidity needs that such entities present to NSCC, NSCC believes that the proposed rule change will ensure that NSCC’s Members fairly and equitably contribute to NSCC’s liquidity resources for settlement, and also contribute to the goal of financial stability in the event of Member default. III. Date of Effectiveness of the Advance Notice and Timing for Commission Action The clearing agency may implement the proposed change pursuant to Section 806(e)(1)(G) of the Clearing Supervision Act 6 if it has not received an objection to the proposed change within 60 days of the later of (i) the date that the Commission received the advance notice or (ii) the date the Commission receives any further information it requested for consideration of the notice. The clearing agency shall not implement the 6 12 PO 00000 U.S.C. 5465(e)(1)(G). Frm 00086 Fmt 4703 Sfmt 4703 25499 proposed change if the Commission has any objection to the proposed change. The Commission may extend the period for review by an additional 60 days if the proposed change raises novel or complex issues, subject to the Commission providing the clearing agency with prompt written notice of the extension. A proposed change may be implemented in less than 60 days from the date of receipt of the advance notice, or the date the Commission receives any further information it requested, if the Commission notifies the clearing agency in writing that it does not object to the proposed change and authorizes the clearing agency to implement the proposed change on an earlier date, subject to any conditions imposed by the Commission. The clearing agency shall post notice on its Web site of proposed changes that are implemented. The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.7 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the advance notice is consistent with the Clearing Supervision Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File No. SR–NSCC–2013–802 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File No. SR–NSCC–2013–802. This file number 7 NSCC also filed the proposals contained in this advance notice as a proposed rule change under Section 19(b)(1) of the Exchange Act and Rule 19b– 4 thereunder. 15 U.S.C. 78s(b)(1); 17 CFR 240.19b– 4. Pursuant to Section 19(b)(2) of the Exchange Act, within 45 days of the date of publication of the proposed rule change in the Federal Register or within such longer period up to 90 days if the Commission designates or the self-regulatory organization consents the Commission will either: (i) by order approve or disapprove the proposed rule change or (ii) institute proceedings to determine whether the proposed rule change should be disapproved. 17 U.S.C. 78s(b)(2)(A). See Release No. 34–69313 (Apr. 4, 2013), 78 FR 21487 (Apr. 10, 2013). E:\FR\FM\01MYN1.SGM 01MYN1 25500 Federal Register / Vol. 78, No. 84 / Wednesday, May 1, 2013 / Notices 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 Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the advance notice that are filed with the Commission, and all written communications relating to the advance notice 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings also will be available for inspection and copying at the principal office of NSCC and on NSCC’s Web site at https://dtcc.com/downloads/legal/ rule_filings/2013/nscc/SR-NSCC-2013802.pdf. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NSCC–2013–802 and should be submitted on or before May 22, 2013. By the Commission. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–10239 Filed 4–30–13; 8:45 am] Securities and Exchange Commission (‘‘Commission’’) an amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information (‘‘OPRA Plan’’).3 The proposed amendment revises its Usage-based Vendor Fees. The Commission is publishing this notice to solicit comments from interested persons on the proposed OPRA Plan amendment. I. Description and Purpose of the Plan Amendment The purpose of the amendment is to make changes in OPRA’s Usage-based Vendor Fees. Usage-based Vendor Fees are fees that are payable by each OPRA Vendor on the basis of access to current OPRA data by OPRA ‘‘Subscribers’’ (end users of current OPRA data) that have entered into Subscriber Agreements with the Vendor. OPRA permits Vendors to pay Usage-based Vendor Fees on either a ‘‘quote packet’’ basis or an ‘‘options chain’’ basis.4 OPRA is proposing to increase the Usage-based Vendor Fee based on counting quote packets from $0.005 per quote packet to $0.0075 per quote packet, and to increase the Usage-based Vendor Fee based on counting options chains from $0.02 per options chain to $0.03 per options chain. In essence, an OPRA Subscriber may obtain access to OPRA data in one of two ways: Either by signing a Professional Subscriber Agreement directly with OPRA, in which case the Subscriber pays Professional Subscriber Device-Based Fees directly to OPRA; or by entering into a Subscriber Agreement with an OPRA Vendor, in which case BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69448; File No. SR–OPRA– 2013–01] Options Price Reporting Authority; Notice of Filing and Immediate Effectiveness of Proposed Amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information To Revise Usage-Based Vendor Fees wreier-aviles on DSK5TPTVN1PROD with NOTICES April 25, 2013. Pursuant to Section 11A of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 608 thereunder,2 notice is hereby given that on April 11, 2013, the Options Price Reporting Authority (‘‘OPRA’’) submitted to the 1 15 2 17 U.S.C. 78k–1. CFR 242.608. VerDate Mar<15>2010 14:21 Apr 30, 2013 Jkt 229001 3 The OPRA Plan is a national market system plan approved by the Commission pursuant to Section 11A of the Act and Rule 608 thereunder (formerly Rule 11Aa3–2). See Securities Exchange Act Release No. 17638 (March 18, 1981), 22 S.E.C. Docket 484 (March 31, 1981). The full text of the OPRA Plan is available at https:// www.opradata.com. The OPRA Plan provides for the collection and dissemination of last sale and quotation information on options that are traded on the participant exchanges. The eleven participants to the OPRA Plan are BATS Exchange, Inc., BOX Options Exchange, LLC, Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, International Securities Exchange, LLC, Miami International Securities Exchange, LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, NASDAQ Stock Market LLC, NYSE MKT LLC, and NYSE Arca, Inc. 4 The term ‘‘quote packet’’ is defined in footnote 6 to OPRA’s Fee Schedule as consisting of any one or more of the following values for a single series of options or a related index: last sale, bid/ask and related market data. The term ‘‘options chain’’ is also defined in footnote 6 to OPRA’s Fee Schedule; an ‘‘options chain’’ consists of up to all series of put and call options on the same underlying security or index. (OPRA’s Fee Schedule is available on OPRA’s Web site, www.opradata.com.) PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 the Vendor pays Usage-based Vendor Fees to OPRA for the Subscriber’s access to current OPRA data. OPRA’s Usage-based Vendor Fees were established at their current levels effective on January 1, 2000.5 In the thirteen years since then OPRA’s Professional Subscriber Device-Based Fee has, on a weighted average basis, more than doubled.6 Moreover, over the period from the year 2000 through the year 2012, the average number of series in each class of options for which OPRA disseminates data has almost doubled.7 OPRA’s Usage-based Vendor Fees for receipt of OPRA data by Nonprofessional Subscribers and by Professional Subscribers are each subject to monthly caps. For Nonprofessional Subscribers the cap is $1.25 per Nonprofessional Subscriber per month. For Professional Subscribers the cap is the per-device fee applicable to the Professional Subscriber (currently $26.00 per month) times the number of the Professional Subscriber’s User IDs. 5 See File No. SR–OPRA–99–02; Release No. 34– 42152 (November 17, 1999). In File No. SR–OPRA– 99–02, OPRA reduced the quote packet Usage-based Vendor Fee from a range of $0.01–$0.02 (with the actual amount determined on the basis of total usage) to the current $0.005 per quote packet, and implemented the alternative options chain Usagebased Vendor Fee at the current $0.02 per options chain. 6 In the year 2000, OPRA’s weighted average Professional Subscriber Fee was approximately $12.55 per device; it is now $26.00 per device. (In the year 2000, OPRA had a sliding scale for its Professional Subscriber Fees, with different rates based on whether a Professional Subscriber was a Member of one or more of the Exchanges that were parties to the OPRA Plan and on the Professional Subscriber’s number of devices. OPRA’s Professional Subscriber Fees in the year 2000 ranged from $10.50/device for an Exchange Member with 750 or more devices to $27.00/device for a non-Member with nine or fewer devices. Over the course of several years, OPRA made incremental changes in its Professional Subscriber Fees to eliminate all distinctions in these fees based on a Professional Subscriber’s status as a member or nonmember of an exchange that is a party to the OPRA Plan or on the Subscriber’s total number of OPRA-enabled devices. See File No. SR–OPRA– 2004–01; Release No. 34–49382 (February 25, 2004)). 7 The term ‘‘class’’ refers to all options based on the same underlying interest (e.g., the same security or same index). The term ‘‘series’’ refers to all options in the same class that have otherwise identical terms (including put or call, expiration month and exercise price). As of December 31, 2000, there was an average of 67.7 series per class for which OPRA disseminated data; as of December 31, 2012 there was an average of 132.7 series per class. This increase in the number of series per class means that a Subscriber today receives approximately ninety-five percent more data in an options chain than the Subscriber did twelve years ago. It does not mean that a Subscriber receives more data in a quote packet, but OPRA believes that the current ratio of the options chain fee to the quote packet fee (four to one) is appropriate, and that an appropriate adjustment to these fees is to increase each of them by fifty percent. E:\FR\FM\01MYN1.SGM 01MYN1

Agencies

[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25496-25500]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10239]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69451; File No. SR-NSCC-2013-802]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Advance Notice, as Modified by 
Amendment No. 1, To Institute Supplemental Liquidity Deposits to Its 
Clearing Fund Designed To Increase Liquidity Resources To Meet Its 
Liquidity Needs

April 25, 2013.
    Pursuant to Section 806(e)(1) of the Payment, Clearing, and 
Settlement Supervision Act of 2010 (``Clearing Supervision Act'') \1\ 
and Rule 19b-4(n)(1)(i) \2\ thereunder, notice is hereby given that on 
March 21, 2013, the National Securities Clearing Corporation (``NSCC'') 
filed with the Securities and Exchange Commission (``Commission'') an 
advance notice described in Items I, II and III below, which Items have 
been prepared primarily by NSCC. On April 19, 2013, NSCC filed with the 
Commission Amendment No. 1 to the advance notice.\3\ The Commission is 
publishing this notice to solicit comments on the advance notice from 
interested persons.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 5465(e)(1). Defined terms that are not defined in 
this notice are defined in Exhibit 5 of the advance notice filing, 
available at https://www.sec.gov/rules/sro/nscc.shtml under File No. 
SR-NSCC-2013-802, Additional Materials.
    \2\ 17 CFR 240.19b-4(n)(i).
    \3\ Amendment No. 1 revised NSCC's original advance notice 
filing to include as Exhibit 2 a written comment received by NSCC 
relating to the advance notice proposal, as described in Item II(B) 
below.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    To enhance its ability to meet its liquidity requirements, NSCC is 
proposing to amend its Rules & Procedures (``Rules'') to provide for a 
supplemental liquidity funding obligation, as described below.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Advance Notice

    In its filing with the Commission, NSCC included statements 
concerning the purpose of and basis for the advance notice and 
discussed any comments it received on the advance notice. The text of 
these statements may be examined at the places specified in Item IV 
below. NSCC has prepared summaries, set forth in sections (A), (B), and 
(C) below, of the most significant aspects of these statements.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified the text of the summaries 
prepared by NSCC.
---------------------------------------------------------------------------

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Advance Notice

Proposal Overview
    According to NSCC, as a central counterparty (``CCP''), NSCC 
occupies an important role in the securities settlement system by 
interposing itself between counterparties to financial transactions, 
thereby reducing the risk faced by its Members and contributing to 
global financial stability. Further, pursuant to the Clearing 
Supervision Act, NSCC has been designated a systemically important 
financial market utility (``SFMU'') by the Financial Stability 
Oversight Council, obliging NSCC to meet certain risk management 
regulatory standards related to, among other things, maintaining 
adequate financial resources to meet its obligations to its Members in 
the event of the default of the Member or family of affiliated Members 
(``Affiliated Family'') that would generate the largest aggregate 
payment obligation to NSCC in stressed conditions. In this regard and 
to enhance its ability to meet its liquidity requirements, NSCC is 
proposing to amend its Rules to provide for a supplemental liquidity 
funding obligation.
    A substantial proportion of the liquidity needed by NSCC is 
attributable to the exposure presented by those unaffiliated Members 
and Affiliated Families that regularly incur the largest gross 
settlement debits over a settlement cycle during trading activity on 
business days other than periods coinciding with quarterly triple 
options expiration dates (``Regular Activity Periods''), as well as 
during times of increased trading activity that arise around quarterly 
triple options expiration dates (``Options Expiration Activity 
Periods'').
    With the goal of ensuring that NSCC has sufficient liquidity to 
meet its obligations during Regular Activity Periods, as well as during 
Options Expiration Activity Periods, it is appropriate that those 
unaffiliated Members and Affiliated Families provide additional 
liquidity to NSCC. Under proposed Rule 4(A), this will take the form of 
supplemental liquidity deposits to the Clearing Fund (i) in an amount 
based on the largest liquidity need NSCC would have in the event of the 
default of an unaffiliated Member or Affiliated Family during a Regular 
Activity Period (``Regular Activity Supplemental Deposit''), and (ii) 
an additional amount to cover the largest liquidity need NSCC would 
have in the event of the default of an unaffiliated Member or 
Affiliated Family during an Options Expiration Activity Period 
(``Special Activity Supplemental Deposit'') (collectively with Regular 
Activity Supplemental Deposit, ``Supplemental Deposit'').
    The obligation of an unaffiliated Member or the Members of an 
Affiliated Family to make a Regular Activity Supplemental Deposit 
(``Regular Activity Liquidity Obligation'') or a Special Activity 
Supplemental Deposit (``Special Activity Liquidity Obligation'') would 
be imposed on the thirty (30) unaffiliated Members and/or Affiliated 
Families who generate the largest aggregate liquidity needs over a 
settlement cycle that would apply in the event of a closeout (i.e., 
over a period from date of default through the following three (3) 
settlement days), based upon a lookback period. The Regular Activity 
Liquidity Obligation of an unaffiliated Member or the Members of an 
Affiliated Family to make a Regular Activity Supplemental Deposit will 
be reduced by any liquidity such Members or their affiliates may 
provide in the form of commitments under NSCC's committed liquidity 
facility (``Credit Facility'').
    The calculations for both the Regular Activity Liquidity Obligation 
and the Special Activity Liquidity Obligation are designed so that NSCC 
has adequate liquidity resources to enable it to settle transactions, 
notwithstanding the default of an unaffiliated Member and/or Affiliated 
Family during Regular Activity Periods, as well as during Options 
Expiration Activity Periods. The Liquidity Obligations imposed on 
Affiliated Families would be allocated among the Family Members in 
proportion to the liquidity risk (or peak exposure) they present to 
NSCC.
Regulatory Background
    As both a CCP and a designated SFMU, NSCC adheres to strict risk 
management processes that are regularly reviewed against applicable 
regulatory and industry standards. This includes

[[Page 25497]]

the securities laws and rulemaking promulgated by the Commission, such 
as Rule 17Ad-22(b)(3), which requires registered clearing agencies that 
perform CCP services to establish, implement, maintain and enforce 
written policies and procedures reasonably designed to maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the participant (defined in Rule 17Ad-22(a)(3) to include a participant 
family) to which it has the largest exposure.
    NSCC is also mindful of the standards set forth in the Principles 
for Financial Market Infrastructures (``PFMI'') of the Committee on 
Payment and Settlement Systems and the Technical Committee of the 
International Organization of Securities Commissions. Key Consideration 
4 of PFMI Principle 7, addressing liquidity risk, provides that a CCP 
should maintain sufficient liquidity resources to meet its payment 
obligations under a wide range of stress scenarios including the 
default of the participant and its affiliates that would generate the 
largest aggregate payment obligation to the CCP.
    NSCC believes the proposed rule change should assist NSCC in 
securing adequate liquidity resources to meet its settlement 
obligations during both Regular Activity Periods and Options Expiration 
Activity Periods, notwithstanding the default of one of its 
unaffiliated Members and/or Affiliated Families that pose the largest 
aggregate liquidity need over the four day settlement cycle.
Supplemental Liquidity Providers
    Every business day NSCC measures the liquidity obligations of its 
unaffiliated Members and Affiliated Families by taking the sum of their 
purchase obligations on that day in securities that are eligible for 
processing in NSCC's Continuous Net Settlement (``CNS'') system and for 
the following three (3) settlement days (which equates to the period 
from the date of default through the remaining settlement cycle). NSCC 
then takes into account certain adjustments, assumptions and offsets, 
and assumes the occurrence of certain stressed conditions.
    The stressed market conditions NSCC assumes in this calculation 
include, but are not limited to, (i) The simultaneous default, without 
prior warning, of all Members of the Affiliated Family with the largest 
aggregate four (4) day settlement obligations; (ii) that on the day of 
such default, the Members of such Affiliated Family are trading at peak 
historical trading levels and no market participants curtail their 
activity with any Members of the Family; and (iii) leading up to or 
after the default, there is no increased volatility in the market that 
would result in a significant increase in Clearing Fund requirements, 
mark-to-market collections, or other risk-based premiums that would 
have the result of increasing NSCC's liquidity resources. NSCC believes 
that these conditions simulate the impact of significant credit risk 
and market risk stresses on NSCC's liquidity need across both Regular 
Activity Periods and Options Expiration Activity Periods.
    NSCC then identifies the largest Member liquidity need on each day 
and determines if the available liquidity resources, consisting of the 
aggregate Required Deposits, any Supplemental Deposits, and any Prefund 
Deposits in the Clearing Fund on the day the liquidity need was 
observed, are adequate to cover that liquidity need, or if there is a 
calculated liquidity shortfall under the assumed stressed market 
conditions described above.
    The Regular Activity Supplemental Deposits will be calculated to 
address those daily liquidity shortfalls that fall on any business day 
included in a Regular Activity Period (``Regular Activity Supplemental 
Liquidity Need''), and the Special Activity Supplemental Deposits will 
be calculated to address those additional daily liquidity shortfalls 
that fall on any business day included in an Options Expiration 
Activity Period (``Special Activity Supplemental Liquidity Need'').
Regular Activity Supplemental Deposits
    Under this proposal, every six (6) months, NSCC will determine (i) 
its largest Regular Activity Supplemental Liquidity Need (``Regular 
Activity Peak Liquidity Need'') over the preceding twelve (12) month 
period and (ii) those unaffiliated Members and Affiliated Families that 
presented the largest aggregate liquidity exposures to NSCC over the 
preceding six-month period. NSCC will then rank the aggregate liquidity 
exposures presented by the unaffiliated Members and/or Affiliated 
Families (``Regular Activity Peak Liquidity Exposures'') during the 
lookback period to determine which thirty (30) such unaffiliated 
Members and Affiliated Families presented the largest respective 
Regular Activity Peak Liquidity Exposures within the lookback period. 
NSCC's Regular Activity Peak Liquidity Need will then be allocated to 
these thirty (30) unaffiliated Members and Affiliated Families 
(``Regular Activity Liquidity Providers''), in proportion to the 
Regular Activity Peak Liquidity Exposures they presented to NSCC during 
the lookback period.
    The first of these semi-annual calculations of the Regular Activity 
Liquidity Obligations will be made to coincide with NSCC's annual 
renewal of the Credit Facility each year (``Regular Activity First 
Tranche Liquidity Obligations'') and the second calculation each year 
will be made six (6) months thereafter (``Regular Activity Second 
Tranche Liquidity Obligations'').
Special Activity Supplemental Deposits
    Special Activity Supplemental Deposits are deposits made in 
addition to Regular Activity Supplemental Deposits, designed to cover 
the additional liquidity exposure that occurs over an Options 
Expiration Activity Period. Each calendar quarter, on a day that is no 
later than the fifth business day preceding any Options Expiration 
Activity Period, NSCC will also determine (i) its largest Special 
Activity Supplemental Liquidity Need (``Special Activity Peak Liquidity 
Need'') over the preceding twenty-four (24) months (i.e., the eight 
prior Options Expiration Activity Periods, or a longer lookback period 
as determined by NSCC) and (ii) those unaffiliated Members and 
Affiliated Families that presented the largest aggregate Special 
Activity liquidity exposures to NSCC over the same period. NSCC will 
then rank the aggregate Special Activity liquidity exposures presented 
by such unaffiliated Members and/or Affiliated Families (referred to as 
their respective ``Special Activity Peak Liquidity Exposures'') during 
the lookback period to determine which thirty (30) such unaffiliated 
Members and Affiliated Families presented the largest respective 
Special Activity Peak Liquidity Exposures within the lookback period. 
NSCC's Special Activity Supplemental Peak Need will then be allocated 
to these thirty (30) Members and Affiliated Families (``Special 
Activity Liquidity Providers''), in proportion to the Special Activity 
Peak Liquidity Exposures they presented to NSCC during the lookback 
period.
Interim Adjustments and Calls
    With the goal of ensuring that NSCC's liquidity resources remain 
adequate between the specified calculation dates, if either current 
liquidity needs increase significantly over those liquidity needs used 
for the regular calculations (or Special Activity Calculations), or the 
amount of liquidity resources is significantly reduced, the proposal 
permits NSCC to make interim recalibrations and liquidity calls: If

[[Page 25498]]

between the semi-annual calculations of the Regular Activity Liquidity 
Obligations, the aggregate amount of Regular Activity Supplemental 
Deposits decreases by an amount that exceeds a threshold as determined 
by NSCC (whether as a result of the retirement of Members, a cease to 
act, or otherwise), then NSCC will recalculate its Regular Activity 
Peak Liquidity Need and allocate it among the unaffiliated Members and 
Affiliated Families that then comprise the applicable thirty (30) 
largest Regular Activity Liquidity Providers, in the same manner such 
calculations and allocations would be made at each semi-annual 
calculation of Regular Activity Liquidity Obligations.\5\
---------------------------------------------------------------------------

    \5\ NSCC plans to use an interim date calculation as the first 
calculation under the proposed rule, should it become effective on a 
date after the effective date of the 2013 renewal of its Credit 
Facility.
---------------------------------------------------------------------------

    Conversely, if on any business day between regular semi-annual 
calculation dates NSCC observes an increase in its Regular Activity 
Liquidity Needs that exceeds a predetermined threshold amount, or 
between the dates on which it calculates Special Activity Liquidity 
Obligations it observes an increase in its Special Activity Liquidity 
Needs that exceeds a predetermined threshold amount, NSCC shall be 
entitled to call for an additional deposit from the Member whose 
increase in activity levels caused (or was the primary cause of) such 
increased liquidity need (``Liquidity Call''). Liquidity Call amounts 
will be treated as a part of that Member's Regular Activity 
Supplemental Deposit or Special Activity Supplemental Deposit, as 
applicable.
Operation of the Funding Obligation
    Each Regular Activity Liquidity Provider will be obligated to 
contribute to the Clearing Fund, no later than five (5) business days 
following the effective date of the renewal of the Credit Facility, the 
amount of its Regular Activity Liquidity Obligation, reduced (i) dollar 
for dollar by amounts committed to the Credit Facility by that Regular 
Activity Liquidity Provider or its affiliates, and (ii) ratably (among 
all Regular Activity Liquidity Providers) by amounts committed to the 
Credit Facility by the lenders party thereto which are not Members or 
their affiliates.
    If the amount of the Regular Activity Second Tranche Liquidity 
Obligation of an unaffiliated Member or Affiliated Family exceeds its 
Regular Activity First Tranche Liquidity Obligation (including because 
the unaffiliated Member or Affiliated Family had no Regular Activity 
First Tranche Liquidity Obligation), such Regular Activity Liquidity 
Provider will be obligated to contribute its calculated amount within 
three (3) business days following the final notice of such amount. If 
the Regular Activity Second Tranche Liquidity Obligation of an 
unaffiliated Member or Affiliated Family is less than its Regular 
Activity First Tranche Liquidity Obligation, then it shall be entitled 
to a refund of the amount of the difference, provided, that nothing 
shall reduce or in any way affect any commitment or other obligation of 
any Member or its affiliate under the Credit Facility.
    Promptly after calculation of the Special Activity Liquidity 
Obligations, NSCC will inform Special Activity Liquidity Providers of 
their Special Activity Liquidity Obligations, and those Special 
Activity Liquidity Providers must make their Special Activity 
Supplemental Deposits to the Clearing Fund in cash no later than the 
close of business on the second business day preceding the applicable 
Options Expiration Activity Period (i.e., generally the Wednesday 
before the options expiration date).
    However, if a Special Activity Liquidity Provider anticipates that 
its Special Activity Peak Liquidity Exposure at any time during an 
Options Expiration Activity Period will be greater than the amount 
calculated by NSCC, it may, no later than the first business day of 
that Options Expiration Activity Period, make an additional cash 
deposit to the Clearing Fund that is in excess of its Required Deposit 
and is designated as a ``Special Activity Prefund Deposit.'' Members 
may also, at their discretion, deposit to the Clearing Fund amounts in 
excess of their Required Deposit that are designated ``Regular Activity 
Prefund Deposits.'' Because Prefund Deposits are included in 
calculating available liquidity resources, they thus reduce NSCC's 
Supplemental Liquidity Needs, as well as the depositing Member's 
Regular Activity (or Special Activity) Peak Liquidity Exposure.
    As noted above under ``Interim Adjustments and Calls,'' to the 
extent that NSCC observes a peak shortfall that breaches predetermined 
thresholds at any time throughout the year, the amount of the shortfall 
will be allocated solely to the Member responsible for the activity 
that caused the shortfall. The liquidity called as a result of that 
shortfall will be held until the next applicable reset period. This is 
intended to incentivize Members to make Prefund Deposits to avoid 
Liquidity Calls, since Prefund Deposits are refunded after the period 
of activity for which they were made, while Liquidity Calls are 
retained until the next regular calculation of the applicable 
supplemental deposit.
Treatment and Use of the Supplemental Deposits
    All Regular Activity Supplemental Deposits (other than Regular 
Activity Prefund Deposits), as adjusted semi-annually, shall remain on 
deposit in the Clearing Fund, and may not be withdrawn by the 
applicable Member until five (5) business days after the next following 
maturity date of the Credit Facility (generally, for a period of 364 
days). Regular Activity Prefund Deposits shall remain on deposit in the 
Clearing Fund and may not be withdrawn by the applicable Member until 
seven (7) days after they are deposited. All Special Activity 
Supplemental Deposits (including Special Activity Prefund Deposits) may 
be refunded to the Special Activity Liquidity Providers seven (7) 
business days after the end of the applicable Options Expiration 
Activity Period.
    Any amounts deposited in response to a Liquidity Call for an 
additional Regular Activity Supplemental Deposit must remain in the 
Clearing Fund until the next semi-annual calculations of the Regular 
Activity Liquidity Obligations, and any amounts deposited in response 
to a Liquidity Call for an additional Special Activity Supplemental 
Deposit must remain in the Clearing Fund until two (2) business days 
preceding the next Options Expiration Activity Period.
    A Member's Supplemental Deposit will be made in addition to its 
Required Deposit to the Clearing Fund, and any other deposit of any 
such Member to the Clearing Fund.
    A Member's Supplemental Deposit will be considered part of that 
Member's actual deposit to the Clearing Fund, and, as such, may be used 
to satisfy obligations of that Member to NSCC, in the same manner as 
provided in Section 3 of Rule 4. Therefore, if the Member who 
contributed the Supplemental Deposit defaults, NSCC will be permitted 
to use its entire actual deposit, which will include the amount of its 
Supplemental Deposit, to satisfy any loss resulting from closing out 
that Member's open positions.
    A Member's Supplemental Deposit will not, however, constitute part 
of its Required Deposit under NSCC's Rule 4, and, as such, will not be 
used, pursuant to Section 4 of Rule 4, to satisfy the obligations of 
any other Member of NSCC that has defaulted in the performance of its 
obligations to NSCC. A Member's Supplemental Deposit, therefore, will 
not be used in calculating

[[Page 25499]]

any pro rata charge (i.e., loss assessment) due from that Member in the 
event of the default of another Member under Rule 4. Supplemental 
Deposits will also not be subject to the provisions of Section 6 of 
Rule 4 when a Member ceases to be a participant.
    Pending any permitted use described in NSCC's Rules, the aggregate 
of all Supplemental Deposits on deposit at NSCC may be invested by NSCC 
as permitted pursuant to the investment policy adopted by NSCC and as 
in effect from time to time, and in the same manner the Clearing Fund 
is invested pursuant to such investment policy. Any interest earned on 
investment of a Supplemental Deposit, as a part of a Member's actual 
deposit, will be payable at the rate that NSCC earns on the investment 
of such funds, credited monthly and paid on demand.
Implementation Timeframe
    Pending Commission approval, Members will be advised of the 
implementation date of this proposal through issuance of an NSCC 
Important Notice. Members will be provided not less than ten (10) days' 
notice of the first date on which Supplemental Deposits will be 
payable.
Proposed Rule Changes
    NSCC proposes to amend its Rules to create a new Rule 4A to reflect 
the changes as described above. For both the Regular Activity 
Supplemental Deposits and the Special Activity Supplemental Deposits, 
the new Rule 4A will provide: (i) A general description of the relevant 
Supplemental Deposit, (ii) a provision describing the calculation and 
operation of the funding obligation, and (iii) a description of the 
treatment and permitted uses of the Supplemental Deposit by NSCC. NSCC 
believes that this proposed rule change contributes to NSCC's goal of 
assuring that NSCC has adequate liquidity resources to meet its 
settlement obligations during both Regular Activity Periods and Options 
Expiration Activity Periods, notwithstanding the default of its 
unaffiliated Members and/or Affiliated Families that pose the largest 
aggregate liquidity exposure over the relevant settlement cycle. As 
such, NSCC believes that the proposal is consistent with Rule 17Ad-
22(b)(3), as well as with Principle 7 of the PMFI.

(B) Clearing Agency's Statement on Comments on the Advance Notice 
Received From Members, Participants, or Others

    On March 19, 2013, National Financial Services, LLC submitted 
written comments relating to the proposed rule change. NSCC will 
respond to this comment and all future comments received at a later 
date, as appropriate.

(C) Advance Notices Filed Pursuant to Section 806(e) of the Payment, 
Clearing and Settlement Supervision Act

Description of Change
    NSCC is proposing to amend its Rules in order to provide for 
supplemental liquidity deposits to NSCC's Clearing Fund designed to 
ensure that NSCC has adequate liquidity resources to meet its liquidity 
needs. The proposed change is described in detail above.
Anticipated Effect on and Management of Risk
    As described above, NSCC believes that the proposed change to add a 
Supplemental Deposit, which NSCC believes is calculated so that NSCC 
has adequate liquidity resources to enable it to settle transactions 
during Regular Activity Periods and Options Expiration Activity Periods 
when NSCC's liquidity need may increase, notwithstanding the default of 
the unaffiliated Member or Affiliated Family that would generate the 
largest aggregate liquidity need for NSCC over a four day settlement 
cycle in stressed market conditions, will enhance NSCC's ability to 
meet certain risk management standards, such as Rule 17Ad-22(b)(3) and 
Principle 7 of the PMFI, described above.
    By calculating unaffiliated Member's or Affiliated Family's 
Supplemental Deposit funding obligation in proportion to the liquidity 
needs that such entities present to NSCC, NSCC believes that the 
proposed rule change will ensure that NSCC's Members fairly and 
equitably contribute to NSCC's liquidity resources for settlement, and 
also contribute to the goal of financial stability in the event of 
Member default.

III. Date of Effectiveness of the Advance Notice and Timing for 
Commission Action

    The clearing agency may implement the proposed change pursuant to 
Section 806(e)(1)(G) of the Clearing Supervision Act \6\ if it has not 
received an objection to the proposed change within 60 days of the 
later of (i) the date that the Commission received the advance notice 
or (ii) the date the Commission receives any further information it 
requested for consideration of the notice. The clearing agency shall 
not implement the proposed change if the Commission has any objection 
to the proposed change.
---------------------------------------------------------------------------

    \6\ 12 U.S.C. 5465(e)(1)(G).
---------------------------------------------------------------------------

    The Commission may extend the period for review by an additional 60 
days if the proposed change raises novel or complex issues, subject to 
the Commission providing the clearing agency with prompt written notice 
of the extension. A proposed change may be implemented in less than 60 
days from the date of receipt of the advance notice, or the date the 
Commission receives any further information it requested, if the 
Commission notifies the clearing agency in writing that it does not 
object to the proposed change and authorizes the clearing agency to 
implement the proposed change on an earlier date, subject to any 
conditions imposed by the Commission. The clearing agency shall post 
notice on its Web site of proposed changes that are implemented.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.\7\
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    \7\ NSCC also filed the proposals contained in this advance 
notice as a proposed rule change under Section 19(b)(1) of the 
Exchange Act and Rule 19b-4 thereunder. 15 U.S.C. 78s(b)(1); 17 CFR 
240.19b-4. Pursuant to Section 19(b)(2) of the Exchange Act, within 
45 days of the date of publication of the proposed rule change in 
the Federal Register or within such longer period up to 90 days if 
the Commission designates or the self-regulatory organization 
consents the Commission will either: (i) by order approve or 
disapprove the proposed rule change or (ii) institute proceedings to 
determine whether the proposed rule change should be disapproved. 17 
U.S.C. 78s(b)(2)(A). See Release No. 34-69313 (Apr. 4, 2013), 78 FR 
21487 (Apr. 10, 2013).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the advance 
notice is consistent with the Clearing Supervision Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-NSCC-2013-802 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NSCC-2013-802. This file 
number

[[Page 25500]]

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 Web site (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the advance notice that are filed with the 
Commission, and all written communications relating to the advance 
notice 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 Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filings also will be available for inspection 
and copying at the principal office of NSCC and on NSCC's Web site at 
https://dtcc.com/downloads/legal/rule_filings/2013/nscc/SR-NSCC-2013-802.pdf. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File No. SR-NSCC-
2013-802 and should be submitted on or before May 22, 2013.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10239 Filed 4-30-13; 8:45 am]
BILLING CODE 8011-01-P
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