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lotter on DSK11XQN23PROD with NOTICES3

Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices well as any SFT Positions established in the SFT Members Agent Clearing Member Customer Omnibus Account by x buying in or selling out, as applicable, some or all of the SFT
Securities that are the subject of each SFT of the SFT Member that has been novated to NSCC but for which the Final Settlement has not occurred, y deeming NSCC to have bought in or sold out some or all such SFT Securities at the bid or ask price therefor, respectively, from a generally recognized source or at such price or prices as NSCC is able to purchase or sell, respectively, some such SFT
Securities, or z otherwise liquidating such SFT Members SFT Positions;
provided, however, if in the opinion of NSCC, the close-out of such SFT
Members SFT Position would create a disorderly market in the relevant SFT
Security, then the timing of the completion of such close-out shall be in the discretion of NSCC.
iv Any Sponsored Member Transactions for which a Defaulting SFT
Member is the Sponsoring Member and which have been novated to NSCC shall continue to be processed by NSCC.
NSCC, in its sole discretion, would determine whether to close-out the SFT
Positions established in a Defaulting SFT Members Sponsored Member SubAccounts if any, which close out shall be effected in accordance with the provisions of Section 14biii, as described above, or instead permit the relevant Sponsored Members to complete settlement of the relevant Sponsored Member Transactions.
v If, in the aggregate, the close-out of a Defaulting SFT Members proprietary SFT Positions results in a profit to NSCC, such profit shall be applied to any loss to NSCC arising from the closing out of such Defaulting SFT
Member including losses arising from closing out the SFT Positions established in any of the Defaulting SFT
Members Agent Clearing Member Customer Omnibus Accounts or Sponsored Member Sub-Accounts or losses arising from closing out any Net Close Out Positions of the Defaulting SFT Member. If, in the aggregate, the close-out of a Defaulting SFT Members proprietary SFT Positions results in a loss to NSCC, such loss shall be netted against, or otherwise applied to, any amounts owed by NSCC to such SFT
Member in its proprietary capacity and thereafter debited from such Defaulting SFT Members Clearing Fund deposit at NSCC.
vi If, in the aggregate, the close-out of the SFT Positions established in the Agent Clearing Member Customer Omnibus Accounts of a Defaulting SFT

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Member results in a profit to NSCC, such profit shall be credited to the Agent Clearing Member Customer Omnibus Accounts. If, in the aggregate, the close-out of the SFT Positions established in the Agent Clearing Member Customer Omnibus Accounts of a Defaulting SFT Member results in a loss to NSCC, such loss shall be netted against, or otherwise applied to, any amounts owed by the NSCC to such SFT
Member in its proprietary capacity, and thereafter debited from the Defaulting SFT Members Clearing Fund deposit at NSCC.
vii If, in the aggregate, the close-out of the SFT Positions established in a Defaulting SFT Members Sponsored Member Sub-Accounts results in a profit to NSCC, such profit shall be credited to the Sponsored Member Sub-Accounts.
If, in the aggregate, the closing out of the SFT Positions established in a Defaulting SFT Members Sponsored Member Sub-Accounts results in a loss to NSCC, such loss shall be netted against, or otherwise applied to, any amounts owed by NSCC to such SFT
Member in its proprietary capacity and thereafter debited from such Defaulting SFT Members Clearing Fund deposit at NSCC.
viii The Final Settlement of each SFT that has been novated to NSCC and that, prior to novation, was with a Defaulting SFT Member each, a Default-Related SFT shall occur in accordance with the normal settlement cycle for the purchase or sale of securities, as applicable; provided that NSCC may in its discretion accelerate Final Settlement of a Default-Related SFT to a Business Day no earlier than the scheduled Final Settlement Date of the Default-Related SFT; and provided further that, if NSCC delays the closeout of any or all of a Defaulting SFT
Members SFT Positions on the basis that such a close-out would create a disorderly market in the relevant SFT
Securities, then NSCC may elect to correspondingly delay Final Settlement of any Default-Related SFTs that have the same SFT Securities as their subject.
As proposed, if doing an immediate buy-in or sell-out as applicable of a defaulters novated SFT Positions would create a disorderly market, then NSCC
may delay in executing such buy-in or sell-out. This is because, as a systemically important financial market utility, NSCC has regulatory obligations not to create disorderly markets or fire sale risk in the course of its liquidation of a defaulted Member. If NSCC were to delay in executing any buy-in or sellout, NSCC may correspondingly delay physical settlement of the SFTs with the
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Defaulting Members pre-novation counterparties.
ix Until Final Settlement, each Default-Related SFT shall be treated as a Non-Returned SFT, and NSCC would pay and collect the Price Differential amounts described in Section 9a of proposed Rule 56, as described above.
NSCC shall have all of the rights of a Transferor in relation to any DefaultRelated SFT in respect of which the Defaulting SFT Member was the Transferor, including the ability to deliver a Recall Notice in relation to such Default-Related SFT and to effect a Buy-In. However, no additional SFT
Deposit required for Non-Returned SFTs under Section 12c of proposed Rule 56, as described above, shall apply to any Default-Related SFT, and no Rate Payments shall accrue on DefaultRelated SFTs after the date on which NSCC ceases to act for the Defaulting SFT Member.
Accordingly, as proposed, during the pendency of any delay in executing any buy-in or sell-out, NSCC would continue to satisfy any Price Differential i.e., the mark-to-market of the SFT
Securities owing to the non-defaulting party.
Proposed Rule 56, Section 15
Sponsored Member SFT Clearing Section 15 of proposed Rule 56 would govern the requirements for Sponsored Member participation in the proposed SFT Clearing Service.
Section 15a of proposed Rule 56
would provide that a Sponsoring Member shall be permitted to submit, either directly as an Approved SFT
Submitter or via another Approved SFT
Submitter, to NSCC Sponsored Member Transactions between itself and its Sponsored Member in accordance with the provisions of proposed Rule 56 and proposed Rule 2C.
Section 15b of proposed Rule 56
would provide that NSCC shall maintain for the Sponsoring Member one or more Sponsored Member SubAccounts. Section 15b would further provide that the SFT Deposits for each Sponsored Member Sub-Account shall be calculated separately based on the SFT Positions in such Sponsored Member Sub-Account, and the Sponsoring Member, as principal, shall be required to satisfy the SFT Deposits for each of the Sponsoring Members Sponsored Member Sub-Accounts.
Section 15c of proposed Rule 56
would provide that settlement of the Final Settlement, Rate Payment, Price Differential, Distribution Payment and other obligations of a Sponsored Member Transaction that have been novated to NSCC shall be effected by the
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