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Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices
would be described as being used to identify Supplemental Liquidity Providers.
Finally, the proposed changes to Section 2 of Rule 4A would remove defined terms that are no longer needed when NSCC calculates SLD
requirements daily. For example, NSCC
would remove defined terms that are related to the Options Expiration Activity Period, including Special Activity Business Day, which is currently defined as a Business Day included in an Options Expiration Activity Period. NSCC would also remove the defined term for Special Activity Prefund Deposit because it would no longer be necessary for Members to prefund their potential SLD
requirement in advance of NSCCs calculations when they are done on a daily basis.
Section 3 Supplemental Liquidity Providers. NSCC is proposing to amend Section 3 to describe how NSCC would identify the Supplemental Liquidity Providers for each Business Day.
Section 3 of the proposed Rule 4A
would state that, each Business Day, NSCC would determine the Peak Liquidity Need of each Member during the Lookback Period, and would identify the Supplemental Liquidity Providers for that Business Day as the 30 or fewer Members with the largest Peak Liquidity Need in that time period.
These changes would implement the proposal described in greater detail above to make this calculation daily and to simplify the calculation used to identify Supplemental Liquidity Providers by using Peak Liquidity Need rather than using the largest exposures of all providers in the Lookback Period.
Section 4 Supplemental Liquidity Obligations; Section 5 Satisfaction of Supplemental Liquidity Obligations;
and Section 6 Notice of Supplemental Liquidity Obligations and Payment of Supplemental Liquidity Deposits.
NSCC would amend Sections 4, 5 and 6 of Rule 4A to describe the simplified calculation of Supplemental Liquidity Obligations, and the process by which Supplemental Liquidity Providers would pay their Supplemental Liquidity Obligations after being notified by NSCC. Proposed changes to Section 4
would implement the revised calculation of Supplemental Liquidity Obligations, described in greater detail above, as the difference between a Supplemental Liquidity Providers Daily Liquidity Need for that Business Day and the Qualifying Liquid Resources available to NSCC on that day. The proposed changes would also create a subsection b. of Section 4 to describe the optional, alternative pro rata
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calculation of Supplemental Liquidity Obligations, as described in greater detail above.
Proposed changes to Sections 5 and 6
of Rule 4A would update the defined terms and the timing by when Supplemental Liquidity Providers must fund their Supplemental Liquidity Obligations to reflect the change of these obligations to daily. Proposed changes to Section 6 of Rule 4A would state that the notice provided to Supplemental Liquidity Providers regarding their Supplemental Liquidity Obligations would state if that amount was calculated pursuant to Section 4b as a pro rata share of the largest Supplemental Liquidity Obligation of that Business Day.
Section 7 Determination of Intraday Supplemental Liquidity Calls and Section 8 Satisfaction of Intraday Supplemental Liquidity Calls. NSCC
would amend Sections 7 and 8 of Rule 4A to reflect the removal of the Special Activity Liquidity Calls and the adoption of the two Intraday Supplemental Liquidity Calls, as described in greater detail above. The proposed changes to these sections would also update defined terms, as appropriate.
Returns of Supplemental Liquidity DepositsSection 9 Deposits Made in Satisfaction of a Supplemental Liquidity Obligation and Section 10 Ceasing to be a Participant. NSCC is proposing to consolidate the current Sections 9 and 10 of Rule 4A into a new Section 9 of Rule 4A, which would address the return of SLD that are made in satisfaction of both Supplemental Liquidity Obligations and Intraday Supplemental Liquidity Calls. The proposed changes would provide that SLD made pursuant to either Supplemental Liquidity Obligations and Intraday Supplemental Liquidity Calls would be returned to Supplemental Liquidity Providers on the next Business Day after the calculation date, unless otherwise notified by NSCC.
NSCC would amend Section 10
currently Section 11 to align the treatment of SLD of a retired Member with the treatment of such firms Required Fund Deposits, as described in greater detail above.
Miscellaneous MattersSection 11
Obligations of Affiliated Families and Supplemental Liquidity Providers, Section 12 Application of Supplemental Liquidity Deposits and Section 13 Information. NSCC would amend Sections 11, 12 and 13 currently Sections 12, 13 and 14 of Rule 4A to update and simplify these provisions.
The proposed amendments would not
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substantially amend the purpose or application of these sections.
Section 11 currently Section 12 of Rule 4A provides that the Supplemental Liquidity Obligations of Affiliated Families are the several obligations of all of the Members of the Affiliated Family ratably in proportion to their applicable Special Activity Peak Liquidity Exposure. NSCC would not change this provision but would update it to use revised defined terms. NSCC
would also amend Section 11 by consolidating two parallel paragraphs into subsection b., which address NSCCs right to collect SLD from Supplemental Liquidity Providers. This proposed change would simplify the provision but would not make substantive changes to NSCCs rights or Members obligations.
Section 12 currently Section 13, which addresses how SLD are treated under Rule 4, would be amended to update defined terms and to clarify that SLD may be held by NSCC as part of Members actual deposits to the Clearing Fund, pursuant to Section 9 of Rule 4.
No substantive changes are proposed to this Section.
Section 13 currently Section 14
describes NSCCs obligation to provide Members with certain information regarding its SLD calculation. NSCC is proposing to amend this section to include updated defined terms and to reflect the daily calculation of SLD.
iv Impact Study Results NSCC has provided the Commission with the results of an impact study that reviewed the proposal against the observed regulatory liquidity needs and NSCCs Qualifying Liquid Resources available during the period from 2016
through 2020 to assess both pro-forma and hypothetical impacts of the proposal under various liquidity scenarios.
Pro-Forma Impact Study. The proforma impact study compared NSCCs regulatory liquidity needs against the Qualifying Liquid Resources that were available between 2016 and 2020. The pro-forma analysis indicated that NSCC
would expect between 1 and 3
Supplemental Liquidity Obligations per year, ranging in size between $1.0
billion to $5.4 billion in 2016 through 2019. In calendar year 2020, the impact study shows that available Qualifying Liquid Resources for each date would have eliminated potential Supplement Liquidity Obligations.
Additionally, this impact study showed between 4 and 27 actual Supplemental Liquidity Obligations were received by NSCC per year, typically averaging $3.6 billion during
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