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Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices
Sponsoring Member, as settlement agent for the relevant Sponsored Member, crediting and debiting the account the Sponsoring Member maintains for the Sponsored Member on the Sponsoring Members books and records.

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Proposed Rule 56, Section 16 Customer SFT Clearing Section 16 of proposed Rule 56 would govern the requirements for participation by Agent Clearing Members and their Customers in the proposed SFT Clearing Service.
Section 16a of proposed Rule 56
would provide that an Agent Clearing Member shall be permitted to submit, either directly as an Approved SFT
Submitter or via another Approved SFT
Submitter, to NSCC for novation SFTs that are Agent Clearing Member Transactions. Section 16a would further provide that any such submission shall be in accordance with proposed Rule 56 and proposed Rule 2D.
Section 16b of proposed Rule 56
would provide that with respect to an Agent Clearing Member that submits SFTs to NSCC for novation on behalf of its Customers, NSCC shall maintain one or more Agent Clearing Member Customer Omnibus Accounts in the name of the Agent Clearing Member for the benefit of its Customers in which all SFT Positions and SFT Cash carried by the Agent Clearing Member on behalf of its Customers are reflected; provided, that each Agent Clearing Member Customer Omnibus Account may only contain activity where the Agent Clearing Member is acting as Transferor on behalf of its Customers, or as Transferee on behalf of its Customers, but not both.
Section 16c of proposed Rule 56
would provide that with respect to SFTs entered into on behalf of its Customers and maintained in the Agent Clearing Member Customer Omnibus Account, the Agent Clearing Member shall act solely as agent of its Customers in connection with the clearing of such SFTs; provided, that the Agent Clearing Member shall remain fully liable for the performance of all obligations to NSCC
arising in connection with such SFTs;
and provided further, that the liabilities and obligations of NSCC with respect to such SFTs entered into by the Agent Clearing Member on behalf of its Customers shall extend only to the Agent Clearing Member. Without limiting the generality of the foregoing, NSCC shall not have any liability or obligation arising out of or with respect to any SFT to any Customer of an Agent Clearing Member.

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Section 16d of proposed Rule 56
would provide the SFT Deposits for each Agent Clearing Member Customer Omnibus Account shall be calculated separately based on the SFT Positions in such Agent Clearing Member Customer Omnibus Account, and the Agent Clearing Member shall, as principal, be required to satisfy the SFT Deposit for each of Agent Clearing Members Agent Clearing Member Customer Omnibus Accounts.
Proposed Rule 56, Section 17
Corporation Default Section 17 of proposed Rule 56 would govern the close-out netting process that would apply with respect to SFTs that have been novated to NSCC in the event of a default of NSCC.
Section 17a of proposed Rule 56
would provide that if a Corporation Default occurs pursuant to Section 2 of Rule 41 Corporation Default, all SFTs that have been novated to NSCC but not yet settled, and all obligations and rights arising thereunder which have been assumed by NSCC pursuant to proposed Rule 56, shall be immediately terminated, and the Board of Directors shall determine the Aggregate Net SFT
Close-out Value owed by or to each SFT
Member with respect to each of its SFT
Positions.
Section 17b of proposed Rule 56
would provide that for purposes of Section 17 of proposed Rule 56, a Member shall be considered a different SFT Member in respect of each of i its proprietary SFT Positions; ii the SFT
Positions established in its Agent Clearing Member Customer Omnibus Accounts if any; and iii the SFT
Positions established in its Sponsored Member Sub-Accounts if any.
Section 17c of proposed Rule 56
would provide that each SFT Members Aggregate Net SFT Close-out Value shall be netted and offset as described in Section 14biv through Section 14bvi of proposed Rule 56, as though NSCC had ceased to act for each SFT
Member.
Section 17d of proposed Rule 56
would provide that the Board of Directors shall notify each SFT Member of the Aggregate SFT Close-out Value, taking into account the netting and offsetting provided for above. SFT
Members that have been notified that they owe an amount to NSCC shall pay that amount on or prior to the date specified by the Board of Directors, subject to any applicable setoff rights.
SFT Members who have a net claim against NSCC shall be entitled to payment thereof along with other Members and any other creditors claims pursuant to the underlying
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contracts with respect thereto, the Rules and applicable law. Section 17d would further provide that nothing therein shall limit the rights of NSCC upon an SFT Member default including following a Corporation Default, including any rights under any Clearing Agency Cross-Guaranty Agreement or otherwise.
Proposed Rule 56, Section 18 Other Applicable Rules, Procedures, and Addendums Section 18 of proposed Rule 56 would establish certain other Rules as being applicable to SFTs and SFT Members, unless expressly stated otherwise.
Specifically, Section 18 of proposed Rule 56 would provide that Rule 1
Definitions and Descriptions, Rule 2
Members, Limited Members and Sponsored Members, Rule 5 General Provisions, Rule 12 Settlement, Rule 13 Exception Processing, Rule 17 Fine Payments, Rule 19 Miscellaneous Rights of the Corporation, Rule 21
Honest Broker, Rule 22 Suspension of Rules, Rule 23 Action by the Corporation, Rule 24 Charges for Services Rendered, Rule 26 Bills Rendered, Rule 27 Admission to Premises of the CorporationPowers of Attorney, Etc., Rule 28 Forms, Rule 29
Qualified Securities Depositories, Rule 32 Signatures, Rule 33 Procedures, Rule 34 Insurance, Rule 35 Financial Reports, Rule 36 Rule Changes, Rule 37 Hearing Procedures, Rule 38
Governing Law and Captions, Rule 39
Reliance on Instructions, Rule 40
Wind-Down of a Member, Fund Member or Insurance Carrier/Retirement Services Member, Rule 41 Corporation Default, Rule 42 Wind-down of the Corporation, Rule 45 Notice, Rule 47
Interpretation of Rules, Rule 48
Disciplinary Proceedings, Rule 49
Release of Clearing Data and Clearing Fund Data, Rule 55 Settling Banks and AIP Settling Banks, Rule 58
Limitations on Liability, Rule 60
Market Disruption and Force Majeure, Rule 60A Systems Disconnect: Threat of Significant Impact to the Corporations Systems, Rule 63 SRO
Regulatory Reporting, Procedure I
Introduction, Procedure VIII Money Settlement Service, Procedure XII
Time Schedule, Procedure XIII
Definitions, Procedure XIV Forms, Media and Technical Specifications, Procedure XV Clearing Fund Formula and Other Matters, Addendum B
Qualifications and Standards of Financial Responsibility, Operational Capability and Business History, Addendum H Interpretation of the Board of Directors Release of Clearing Data, Addendum L Statement of Policy
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