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Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices
Proposed Rule 56, Section 2 Eligibility for SFT Clearing Service: SFT Member Section 2 of proposed Rule 56 would establish the eligibility requirements for using the proposed SFT Clearing Service.
Under Section 2 of proposed Rule 56, NSCC may permit any Member acting in its principal capacity, Sponsored Member acting in its principal capacity, or Agent Clearing Member acting on behalf of a Customer to be an SFT
Member and participate in the proposed SFT Clearing Service.
Section 2 of proposed Rule 56 would provide that the rights, liabilities and obligations of SFT Members in their capacity as such shall be governed by the proposed Rule 56. References to a Member would not apply to an SFT
Member in its capacity as such, unless specifically noted in the proposed Rule 56 or in such other Rules as applicable to an SFT Member.
Section 2 of proposed Rule 56 would also provide that an SFT Member that participates in NSCC in another capacity pursuant to another Rule, or which has entered into an agreement with NSCC independent from proposed Rule 56, shall continue to have all the rights, liabilities and obligations set forth in such other Rule or pursuant to such agreement, and such rights, liabilities and obligations shall be separate from its rights, liabilities and obligations as an SFT Member, except as contemplated under Sections 15 and 16
of proposed Rule 56, as described below.
Proposed Rule 56, Section 3
Membership Documents Section 3 of proposed Rule 56 would govern the documents that SFT Member applicants would be required to complete and deliver to NSCC.
Specifically, Section 3 of proposed Rule 56 would provide that to become an SFT Member, each applicant shall complete and deliver to NSCC
documents in such forms as may be prescribed by NSCC from time to time and any other information requested by NSCC.

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Proposed Rule 56, Section 4 Securities Financing Transaction Data Submission Section 4 of proposed Rule 56 would govern the submission of transaction data for SFTs into NSCC for novation by Approved SFT Submitters on behalf of Transferors e.g., lenders and Transferees e.g., borrowers.
Section 4a of proposed Rule 56
would provide that in order for an SFT
to be submitted to NSCC, the transaction data for the SFT must be submitted to
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NSCC by an Approved SFT Submitter in accordance with the communication links, formats, timeframes and deadlines established by NSCC for such purpose.
Any such transaction data shall be submitted to NSCC on a locked-in basis.
In determining whether to accept transaction data from an Approved SFT
Submitter, NSCC may require the Approved SFT Submitter to provide a Cybersecurity Confirmation. This is consistent with the existing requirement in Section 6 of Rule 7 Comparison and Trade Recording Operation Including Special Representative/Index Receipt Agent for organizations reporting trade data to NSCC.73
Section 4b of proposed Rule 56
would provide that NSCC would not act upon any instruction received from an Approved SFT Submitter in respect of an SFT unless each SFT Member other than an SFT Member that is a Sponsored Member designated by the Approved SFT Submitter as a party to such SFT has consented, in a writing delivered to NSCC, to the Approved SFT Submitter acting on behalf of the SFT Member in respect of SFTs.
Section 4c of proposed Rule 56
would provide that the obligations reflected in the transaction data on an SFT shall be deemed to have been confirmed and acknowledged by each SFT Member designated by the Approved SFT Submitter as a party thereto and to have been adopted by such SFT Member and, for the purposes of determining the rights and obligations between NSCC and such SFT Member under the proposed Rule 56 and such other Rules applicable to SFTs, shall be valid and binding upon such SFT Member. In addition, Section 4c would provide that an SFT Member which has been so designated by an Approved SFT Submitter shall resolve any differences or claims regarding the rights and obligations reflected in the transaction data submitted by the Approved SFT Submitter with the Approved SFT Submitter, and NSCC
shall have no responsibility in respect thereof or to adjust its records or the accounts of the SFT Member in any way, other than pursuant to the instructions of the Approved SFT
Submitter. Section 4c would also provide that any such adjustment shall be in the sole discretion of NSCC.
Section 4d of proposed Rule 56
would provide that NSCC makes no 73 Section 6 of Rule 7 Comparison and Trade Recording Operation Including Special Representative/Index Receipt Agent provides that NSCC may require organizations that deliver trade data to NSCC as described in that Rule to provide a Cybersecurity Confirmation before agreeing to accept such trade data. Supra note 4.

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representation, whether expressed or implied, as to the complete and timely performance of an Approved SFT
Submitters duties and obligations.
Section 4d would also provide that NSCC assumes no liability to any SFT
Member for any act or failure to act by an Approved SFT Submitter in connection with any information received by NSCC or given to the SFT
Member by NSCC via the Approved SFT
Submitter, as the case may be.
Section 4e of proposed Rule 56
would provide that the submission of each SFT to NSCC and the performance of any obligation under such SFT shall constitute a representation to NSCC and covenant by the Transferor and the Transferee, any Sponsoring Member that is acting on behalf of the Transferor or Transferee and any Agent Clearing Member that is acting on behalf of a Customer in connection with such SFT
that its participation in such SFT is in compliance, and would continue to comply, with all applicable laws and regulations, including without limitation Rule 15c33 and all other applicable rules and regulations of the Commission, any applicable provisions of Regulation T, Regulation U and Regulation X of the Board of Governors of the Federal Reserve System, and the rules of FINRA and any other regulatory or self-regulatory organization to which the Transferor, the Transferee, any Sponsoring Member that is acting on behalf of the Transferor or Transferee or any Agent Clearing Member that is acting on behalf of a Customer is subject.
Section 4f of proposed Rule 56
would provide that the submission of each SFT to NSCC shall constitute an authorization to NSCC by the Transferor, the Transferee and any Agent Clearing Member that is acting on behalf of a Customer for NSCC to give instructions regarding the SFT to DTC
in respect of the relevant accounts of the Transferor, Transferee and Agent Clearing Member at DTC.
Proposed Rule 56, Section 5 Novation of Securities Financing Transactions Section 5 of proposed Rule 56 would govern the nature and timing of the novation to NSCC of obligations related to an SFT.
Section 5a of proposed Rule 56
would provide that NSCC to only novate an SFT if, at the time of novation, the Final Settlement of such transaction is scheduled to occur one Business Day following the Initial Settlement and the SFT Cash is no less than 100% of the Contract Price of the SFT.
Section 5b of proposed Rule 56
would provide that each SFT that is a
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