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Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices this same period, including 9 actual Supplemental Liquidity Obligations received by NSCC in 2020.
Hypothetical Impact Study. NSCC
also developed several hypothetical liquidity scenarios to assess the proposals impact. When hypothetical Qualifying Liquid Resources available to NSCC are between $17 billion and $22
billion, NSCC would expect between 7
and 36 Supplemental Liquidity Obligations per year, ranging in size between $2.1 billion to $4.6 billion each; and 2 when the hypothetical Qualifying Liquid Resources available to NSCC are $22 billion or above, NSCC
would expect between 1 and 5
Supplemental Liquidity Obligations per year, ranging in size between $2.1
billion to $6.8 billion each.
NSCC has also provided the Commission with details of potential impacts of the proposal on the largest 50
Affiliated Families, a list of the 30
Affiliated Families with the largest liquidity exposures as of December 31, 2020, and the respective Affiliated Families maximum and average NSCC
liquidity needs for each calendar year between 2016 and 2020.

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v Implementation Timeframe NSCC would implement the proposed changes no later than 10 Business Days after the later of the no objection to the advance notice and approval of the related proposed rule change 37 by the Commission. NSCC would announce the effective date of the proposed changes by Important Notice posted to its website.
Anticipated Effect on and Management of Risk NSCC believes that the proposed changes to calculate and collect, when applicable, SLD on both a daily basis and, in some cases, on an intraday basis, and the proposed changes to implement an alternative pro rata calculation of Members SLD obligations in certain circumstances, as described above, would enable NSCC to better limit its liquidity exposures to Members daily settlement activity.
The proposed changes to calculate and collect, when applicable, SLD on a daily basis would improve NSCCs ability to estimate its liquidity exposures in the calculation and collection of SLD by using daily activity, rather than estimating potential exposures based on activity in a lookback period. In this way, the proposed change would improve NSCCs liquidity risk management by supplementing its liquidity resources that are available to
it to complete end-of-day settlement in the event of the default of a Member.
The proposed intraday SLD would allow NSCC to re-calculate its liquidity exposures and collect sufficient liquidity to allow it to complete end-ofday settlement in the event of the default of a Member. The proposed pro rata alternative calculation of SLD
would allow NSCC to opt to collect only the largest Supplemental Liquidity Obligation calculated for that Business Day, while still meeting NSCCs applicable regulatory obligations.
By providing NSCC with a more effective measurement of its liquidity exposures, the proposed changes would also mitigate risk for Members because lowering the risk profile for NSCC
would in turn lower the risk exposure that Members may have with respect to NSCC in its role as a central counterparty.
Consistency With the Clearing Supervision Act Although the Clearing Supervision Act does not specify a standard of review for an advance notice, its stated purpose is instructive: To mitigate systemic risk in the financial system and promote financial stability by, among other things, promoting uniform risk management standards for systemically important financial market utilities and strengthening the liquidity of systemically important financial market utilities.38
NSCC believes that the proposal is consistent with the Clearing Supervision Act, specifically with the risk management objectives and principles of Section 805b, and with certain of the risk management standards adopted by the Commission pursuant to Section 805a2, for the reasons described below.39
i Consistency With Section 805b of the Clearing Supervision Act NSCC believes the proposal is consistent with the objectives and principles of the risk management standards described in Section 805b of the Clearing Supervision Act.40 The proposal would allow NSCC to calculate and collect, when applicable, SLD on a daily basis and would implement an alternative pro rata calculation of Members SLD obligations in certain circumstances, as described above. By using daily activity in these calculations, the proposed change would improve NSCCs ability to estimate its liquidity exposures in the U.S.C. 5461b.
U.S.C. 5464a2 and b.
40 12 U.S.C. 5464b.

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calculation and collection of SLD and, therefore, would improve NSCCs management of the liquidity risks posed to it by its Members daily settlement activity. Additionally, the proposal would establish a monthly intraday SLD
collection in connection with options expiration activity that present heighted liquidity exposures, and an optional intraday SLD that NSCC may collect when it deems appropriate to mitigate any increased liquidity exposures or in light of other circumstances. These proposed intraday SLD would allow NSCC to re-calculate its liquidity exposures and collect sufficient liquidity to allow it to complete end-ofday settlement in the event of the default of a Member. Further, the proposed pro rata alternative calculation of SLD would allow NSCC to opt to collect only the largest Supplemental Liquidity Obligation calculated for that Business Day, while still meeting NSCCs applicable regulatory obligations.
The proposal would strengthen NSCCs ability to maintain sufficient liquidity to complete end-of-day settlement in the event of the default of a Member by allowing NSCC to collect SLD each Business Day from those Members that pose the largest liquidity exposures to NSCC on that day.
Therefore, because the proposed changes are designed to enable NSCC to better limit the liquidity exposures it would face in the event of a Member default, NSCC believes the proposal promotes robust risk management.
As a result, NSCC believes the proposal is consistent with the objectives and principles of Section 805b of the Clearing Supervision Act,41 which specifies the promotion of robust risk management, promotion of safety and soundness, reduction of systemic risks, and support of the stability of the broader financial system by, among other things, strengthening the liquidity of systemically important financial market utilities, such as NSCC.
ii Consistency With Rules 17Ad 22e7i and ii Under the Act NSCC believes the proposed changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, NSCC
believes the proposed changes are consistent with Rules 17Ad22e7i and ii, each promulgated under the Act,42 for the reasons described below.
Rule 17Ad22e7i under the Act requires that NSCC establish,
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