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Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices
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Supplemental Liquidity Obligations on a particular day would significantly exceed that amount. Therefore, NSCC
has structured this provision to be available only if two or more Supplemental Liquidity Providers owe SLD of more than $2 billion. NSCC has never had two more Supplemental Liquidity Providers owe more than $2
billion in SLD on a calculation date since Rule 4A was adopted. Therefore, NSCC believes this alternative calculation would only be available in very limited circumstances.
Furthermore, NSCC believes the threshold of $2 billion is appropriate as it would only permit this alternative calculation in circumstances when it would have a material impact on the allocation of Supplemental Liquidity Obligations among the Supplemental Liquidity Providers.
In such circumstances, when multiple Members have relatively large Supplemental Liquidity Obligations of more than $2 billion, NSCC would have the option to determine if it is appropriate to collect the largest SLD
calculated for that Business Day, divided pro rata among the Supplemental Liquidity Providers rather than collect the each of the Supplemental Liquidity Obligations of those firms. NSCC may determine, for example, that, in certain market conditions, this approach would be appropriate to alleviate liquidity pressures on Supplemental Liquidity Providers. This alternative calculation would allow NSCC to collect sufficient qualifying liquid resources to meet its regulatory obligations with respect to liquidity risk management without requiring all of the Supplemental Liquidity Providers to fund the total amount of their calculated Supplemental Liquidity Obligation on that Business Day.31
Intraday Supplemental Liquidity Calls. The proposed Rule 4A would also establish Intraday Supplemental Liquidity Calls that would replace the current Special Activity Liquidity Calls.
The existing Special Activity Liquidity Calls are designed to address increases in NSCCs liquidity need between calculation dates. The proposed Intraday Supplemental Liquidity Calls would serve a similar function, allowing NSCC to calculate and collect additional 31 Rule 17Ad22e7i under the Act requires, in part, that NSCC maintain sufficient liquid resources at the minimum to effect same-day settlement of payment obligations with a high degree of confidence under a wide range of foreseeable stress scenarios, including the default of the participant family that would generate the largest aggregate payment obligation for the covered clearing agency in extreme but plausible market conditions. 17 CFR 240.17Ad22e7i.

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SLD on an intraday basis if a Supplemental Liquidity Providers increased activity levels or projected settlement activity causes NSCCs Daily Liquidity Need to exceed NSCCs Qualifying Liquid Resources. This proposed provision would assist NSCC
in mitigating increased liquidity exposures in specified circumstances.
First, proposed Rule 4A would establish a monthly Intraday Supplemental Liquidity Call that is calculated and collected, when applicable, on the first Business Day of an Options Expiration Activity Period, which is typically a Friday.32 This Intraday Supplemental Liquidity Call would be calculated as the difference between 1 NSCCs Daily Liquidity Need, recalculated to account for both actual settlement activity submitted to NSCC over the course of Business Day and projected activity in stock options that is expected to be submitted to NSCC 33 and 2 NSCCs Qualifying Liquid Resources. Settlement activity may net with and offset the activity that NSCC uses in re-calculating the Daily Liquidity Need. In order to account for any potential offsetting settling activity, NSCC would adjust the re-calculated Daily Liquidity Need using an estimated netting percentage that is based on each Supplemental Liquidity Providers average percentage of netting observed over the prior 24 months.
Under this proposed provision, NSCC
would adjust the amount of SLD it collects in order to mitigate the increased liquidity exposures related to the monthly expiration of stock options.
Second, proposed Rule 4A would allow NSCC to call for additional SLD
on an intraday basis on any Business Day if a Supplemental Liquidity Providers increased activity levels causes NSCCs Daily Liquidity Need to exceed NSCCs Qualifying Liquid Resources and NSCC determines, in its sole discretion, that it is appropriate to require an additional intraday SLD from that Supplemental Liquidity Provider in order to mitigate those additional liquidity exposures. Under this proposed change, NSCC would have the 32 The proposed Rule 4A will retain the existing definition of an Options Expiration Activity Period for purposes of this monthly Intraday Supplemental Liquidity Call.
33 Each Business Day, NSCC receives information regarding projected settlement activity from The Options Clearing Corporation pursuant to a Stock and Futures Settlement Agreement OCC
Accord. The OCC Accord provides for the clearance and settlement of exercises and assignments of options on eligible securities or the maturity of eligible stock futures contracts through NSCC. See Securities Exchange Act Release No.
81260 July 31, 2017, 82 FR 36484 August 4, 2017
File Nos. SRNSCC2017803; SROCC2017
804.

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ability to make an Intraday Supplemental Liquidity Call on any Business Day. The amount of an Intraday Supplemental Liquidity Call would be the difference between NSCCs Daily Liquidity Need, recalculated for that Business Day taking into account any increase in settlement activity, and NSCCs Qualifying Liquid Resources. This proposed provision would allow NSCC
to adjust the amount of SLD it collects for a Business Day in circumstances when NSCC believes it is necessary to accelerate the collection of additional SLD from Supplemental Liquidity Providers whose activity may present relatively greater risks to the NSCC on an overnight basis. NSCC would determine if an Intraday Supplemental Liquidity Call is appropriate based on a variety of factors and circumstances, including, but not limited to, an assessment of a Supplemental Liquidity Providers ability to meet its projected settlement or Supplemental Liquidity Obligations and estimates of settlement activity that could offset settlement exposures and are not reflected in NSCCs liquidity estimates.
Returns of SLD and Miscellaneous Matters. Proposed Rule 4A would provide that NSCC would return SLD, including any SLD funded pursuant to an Intraday Supplemental Liquidity Call, on the next Business Day unless such amounts are held longer by NSCC
pursuant to proposed Section 12a of Rule 4A, as described below. Under the current Rule 4A, NSCC may hold SLD for up to seven Business Days after the end of the applicable Options Expiration Activity Period and may hold SLD funded pursuant to a Special Activity Liquidity Call for up to 90 days after such deposit is made. Under the proposed change, because NSCC would recalculate the Supplemental Liquidity Obligations each Business Day, NSCC
would no longer need to hold SLD for these extended periods.
NSCC would amend proposed Section 12a currently Section 13a of Rule 4A
to clarify that SLD, as part of Members actual deposit to the Clearing Fund, would be subject to the provision of Section 9 of Rule 4. Section 9 of Rule 4 addresses NSCCs right to withhold all or any part of any excess deposit of a Member if such Member has been placed on the Watch List pursuant to the Rules or if NSCC determines that the Members anticipated activities in NSCC
in the near future may reasonably be expected to be materially different than its activities of the recent past.34 Current 34 For example, this may occur when an index rebalancing occurs shortly after a month-end
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